Final Results
Intercede Group PLC
25 May 2007
25 MAY 2007
INTERCEDE GROUP plc
('Intercede', 'the Company' or 'the Group')
Preliminary Results for the Year Ended 31 March 2007
Intercede, one of the world's leading developers and suppliers of smart card and
identity management software, today announces its preliminary results for the
year ended 31 March 2007.
SUMMARY
- Sales increased by 22% from £2.1m to £2.6m, with sales of core MyID
licences up 25%.
- Further improvement in gross margin to 97% (2006: 95%).
- Operating loss held at £0.3m, against a background of increased
investment to exploit the growing US market opportunity.
- Full year cash outflow of £0.5m (2006: cash inflow of £0.4m).
- Cash balances of £0.7m (2006: £1.1m) at financial year end.
- Additional £0.7m subsequently raised through an institutional
placing on 16 May 2007.
- First sales to US Government sector with $1.0m of licence fees
booked from the delivery of products compliant with the US
Government's Homeland Security Presidential Directive- 12
('HSPD- 12').
- More than 85% of licence revenues are now secured through
Intercede's partners including Gemalto, RSA Security, SafeNet,
Thales and VeriSign. This represents a wide and very scalable future
route to market.
Richard Parris, Chairman & Chief Executive of Intercede, said today:
'The last year has seen Intercede move rapidly towards establishing an industry
standard for the management of ID cards. In the key US Federal Government
market, we have been successful in eight out of ten publicly announced awards
arising from HSPD-12. We expect further success as this programme reaches its
critical phase and extends to related initiatives at State and local level.
'In Europe and Asia our partner networks are starting to generate revenues from
a wide range of customers and this is expected to accelerate. Closer to home,
substantial opportunities for Intercede are also likely to emerge to support the
UK National ID Card scheme, as well as to provide security for the construction
and operational phases of the 2012 London Olympic Games.'
About Intercede
Intercede Group plc is a leading developer and supplier of smart card and
identity management software listed on the London Stock Exchange (IGP LN)
(IGP.L). The Group's MyID software manages the secure registration, issuance and
lifecycle of digital identities for a wide range of uses. This requires the
integration of multiple technologies and products from many different vendors,
including smart cards, biometrics, digital certificates, Open Platform applets
and physical access control systems.
Intercede works with a number of market leading OEM, re-seller and technology
partners that supply MyID technology to the global marketplace including: Athena
Smartcard Solutions, Gemalto, RSA Security, SafeNet, Thales, VeriSign and a
variety of systems integrators and other security product and service providers.
Intercede and MyID are registered trademarks or trademarks in the UK, US and/or
other countries.
For more information on Intercede and MyID visit http://www.intercede.com
ENQUIRIES
Intercede Group plc Tel. +44 (0)1455 558111
Richard Parris, Chairman & Chief Executive
Andrew Walker, Finance Director
Pelham Public Relations
Archie Berens Tel. +44 (0)20 7743 6679
KBC Peel Hunt
Julian Blunt Tel. +44 (0)20 7418 8900
INTERCEDE GROUP plc
('Intercede', 'the Company' or 'the Group')
Preliminary Results for the Year Ended 31 March 2007
Chairman's Statement
Introduction
Intercede is one of the world's leading developers and suppliers of software
which supports the issue and management of smart secure devices (e.g. smart
cards containing digital identities). The Board of Intercede is pleased to
report a 22% increase in sales during the year ended 31 March 2007 compared to
the previous period, at an increased gross margin of 97%.
It has been a year of material progress for Intercede, the most significant
development being the widespread adoption of Intercede's MyID technology by the
US Federal Government. This opens up the US market as a significant source of
future licence and maintenance revenues. Equally importantly, it also validates
the applicability and competitive differentiation of Intercede's MyID product
line in this most demanding of markets.
In parallel with its successful penetration of the US market, Intercede has also
worked with its partners to strengthen its customer base at home and in other
overseas territories. In the UK Intercede has completed further deployments at
Barclays Bank, LloydsTSB and the National Health Service. In Europe new sales
have been made to the police forces in Ireland and Denmark, to Swisscom in
Switzerland and to the top two banks in Israel. In the Middle East major new
customers have been secured in Saudi Arabia and the UAE and in the Far East an
order has also been fulfilled with the Royal Army of Thailand.
Intercede continues to lead its sector in terms of thought leadership,
technology adoption, reference sites and overall industry reputation. Through
our focused approach, we have displaced competitors from incumbent positions in
a number of major accounts in the US Government marketplace.
Intercede's strategy of selling through channel partners is starting to generate
scalable revenues. Through the year Athena, Gemalto, RSA Security, SafeNet,
Thales and VeriSign have all started to generate end-user licence sales in a
variety of international markets. Software development, professional service and
training revenues have also been earned in support of production deployments
from BT, Lockheed Martin, RSA Security and Thales. Intercede has continued to
build new partnerships across the industry, in order to secure additional
channels to market and to broaden the interoperability of our solutions.
Results
Year ended 31 March
£000 2007 2006 2005
Turnover 2,620 2,142 1,806
Gross Profit 2,546 2,027 1,693
Operating loss (338) (344) (386)
In the year ended 31 March 2007, turnover increased from £2.1m to £2.6m and
gross margins increased from 95% to 97%. This enhanced gross margin highlights
Intercede's transition to a 'pure play' software company.
Over the past five years, Intercede has significantly reduced operating losses
from £1.1m to £0.3m and the cash outflow before financing from £1.4m to £0.5m.
As at 31 March 2007, the Group had a cash balance of £0.7m. We are pleased to
have subsequently secured new institutional backing with the announcement of a
£0.7m placing on 16 May 2007. The cash raised will provide additional working
capital and will also enable the Group to exploit more fully the various
opportunities around the world that are increasingly presenting themselves.
The Group's strategy of continuing to develop its own products and promote them
internationally has resulted in a 17% increase in headcount and a 22% increase
in operating costs. This accelerated investment, principally to exploit our
early successes in the US, has deferred our expectations of breakeven
performance through the whole year.
As reported in previous periods, the Group's results in the short term continue
to be dependent on the timing of a small number of relatively large prospects.
However, this dependence is starting to reduce and during the period, no one
project or customer accounted for more than 20% of our turnover.
Last year we predicted a step change in demand for smart card management
products over the next two to three years. One year on we stand by this
forecast, particularly given the knowledge that several large scale projects are
in the pipeline. We remain fully committed to exploiting this strong growth
opportunity.
Business and Product Development
The major achievement of the year was our penetration of the US Federal
Government market. In the second half of the financial year, Intercede has
achieved unprecedented success deploying MyID, via our partner network, to US
government customers. At the time of writing our partners have won contracts to
supply MyID to the following agencies:
• Executive Office of the President
• Department of Education
• Department of the Interior (and 19 other US Government Agencies serviced
by DoI)
• Environment Protection Agency
• Federal Trade Commission
• Federal Housing and Finance Board
• Housing and Urban Development
• Social Security Administration
Additionally, Intercede's MyID technology will be used to issue the US Transport
Worker Identity Card (TWIC) under Phase IV of the TWIC programme. Intercede's
OEM partner RSA Security, a division of EMC, announced its participation in this
programme in support of Lockheed Martin on 15 May 2007. TWIC Phase IV has the
potential to deploy to several million transportation and associated employees
throughout the US.
In February 2007, MyID was used to issue ID cards to the First Responder
Community in Maryland and Pennsylvania for use in Operation Winter Storm, an
operational test of First Responder Authentication Credential (FRAC) readiness.
This is a forerunner of every first responder in the US, i.e. police, fire,
paramedic and essential support service officers, receiving a smart identity
card in order to control access to the scene of major disasters, e.g. 9/11,
Hurricane Katrina etc. Intercede and its partners are in a good position to
benefit from this large market.
In the UK, the National Health Service continues to be an important customer
with 500,000 MyID licences having been purchased to date. Barclays Bank and
Lloyds TSB have both taken technical refreshes of systems first delivered by
Intercede more than five years ago. This is a testament to the longevity of both
our products and customer relationships. In other areas we have completed a
major infrastructure delivery to a major US bank and look forward to significant
licence sales in the next year. In the Middle East we have secured a number of
customers some of whom have the potential for high volume deployment in 2008.
I am pleased to report that Intercede has now sold MyID licences to enable the
issuance of more than 2 million smart secure devices. However, the number of
licences sold in the last 12 months is only a small proportion of the licences
that can potentially be purchased by our growing customer base in the coming
years. Along with recurring support and maintenance revenues, Intercede is
building an annuity stream from these additional licences. A number of
Intercede's customers have contracted for a minimum of between 5 and 10 years'
annual support and maintenance, with the potential for additional year on year
licence sales.
The universal applicability of Intercede's business model is demonstrated by its
growing and maturing network of business partners who have now established MyID
as the de facto security industry standard. These different channels offer
Intercede unparalleled access to most of the smart card initiatives currently
emerging around the world.
Strategy
In our statement last year, we highlighted that in the 2006/07 year the Group
would be focusing on executing its strategy to achieve profitability by:
• positioning Intercede's MyID platform as the critical product that enables
convergence of IT and physical security systems;
• consolidating the value of the Intercede technology proposition by helping
its OEM partners to integrate MyID into the core of their product suites;
• exploiting the commercial potential of the MyID offering by enabling
Intercede partners to move a number of key pilot projects into volume
production; and
• delivering the highest quality products and customer support to
Intercede's partners and customers by sustaining and expanding a truly world
class team of software development, testing and support professionals.
After 12 months of further progress the Group has been successful in executing
this strategy as demonstrated by the progress described above.
The success of this strategy is based upon the superiority of Intercede's
products, the dedication and professionalism of its staff, the strength and
position of its partners and the ongoing support of the Group's shareholders. In
all of these respects, Intercede has an impressive track record. Furthermore, a
program of continuous product development and new innovation continues to ensure
that Intercede remains a leader amongst its global competitors.
The Group's business plan in the coming year is now to build on this year's
success by executing the following strategy:
• continue to expand our share of the US Federal market and penetrate the
much larger emerging market at state and local level ;
• increase the number of channel partners to facilitate entry into new
market areas not currently being serviced e.g. pharmaceutical industry;
• expand our revenues from mainland Europe and the Middle East; and
Outlook
EUROSMART, an international association located in Brussels representing the
smart secure technology industry, envisages the number of smart secure devices
in global circulation growing from 4 billion units in 2007 to more than 20
billion units by 2020. Most of this growth will be led by identity centric
applications that require the secure issuance and management of devices. This is
a tremendous opportunity for Intercede to build on our leading technology and
become a significant participant in this growth market.
The outlook for the next two to three years is exciting as we see a number of
large scale Government and private projects being launched in the US, Europe and
other regions. Intercede is well positioned, through its market leading MyID
products and channel partner network to exploit these emerging growth
opportunities. Chief amongst these are the continuing opportunities afforded by
HSPD-12, other US Federal and State Government programmes such as TWIC, FRAC and
the REAL ID Act, the UK National ID Card scheme and the security implications
for the construction and operational phases of the 2012 Olympic Games.
The management team is committed to maintaining the Group on its current,
focused course and delivering an accelerated growth in sales and profitability.
We therefore look forward with confidence to reporting on our progress during
the current year and beyond.
24 May 2007
Richard Parris
Chairman & Chief Executive
Operating and Financial Review
Introduction
We believe that, within the next five to ten years, most of the world's
population will have been issued with at least one 'identity card' by their
government, bank, trading partner or employer. The new identity industry, which
Intercede anticipated some years ago, is now emerging.
Intercede has developed its MyID technology as a world class software platform
for the issuance of smart identity cards to citizens, customers and employees.
Our business model is to deliver this solution to governments, banks, service
providers and corporations via channel partners. Our objective is to establish
and sustain a predominant market position by securing and occupying the majority
of the major channels to market and to earn revenues for each identity card
issued that functions through MyID.
Business Development
Over the last few years, Intercede has established channel partner agreements
with a number of market leading OEM, re-seller and technology partners that
supply MyID technology to the global marketplace. These include Athena Smartcard
Solutions, Gemalto, RSA Security, SafeNet, Thales, VeriSign and a variety of
systems integrators and other security product and service providers.
The US Federal Government's Homeland Security Presidential Directive-12,
(HSPD-12) has acted as a major catalyst for the identity market. This directive
sets out standards of conformity for the effective vetting of Personal Identity
Verification (PIV) for federal employees in response to the ongoing terrorism
threat. Intercede was pleased to announce on 4 October 2006 that it was the
first card management company to achieve compliance with the prescribed
standards.
As outlined in the Chairman's Statement, this announcement was followed by the
announcement of a number of high profile US Federal Government contract wins
during the second half of the financial year. Whilst the timelines for product
procurement and delivery of these and other major contracts we are involved with
have yet to be fully established, these early wins provide strong validation of
Intercede's technology as an industry standard, and hence its business model.
The creation of standards for the US Federal Government is expected to
accelerate the growth of the identity market in the US and beyond. This is
already evidenced by a number of major related federal and state projects such
as TWIC, FRAC and the REAL ID Act. Through its partner network, Intercede is in
an excellent position to exploit this rapid growth as the US becomes the largest
single market for smart card technology.
Financial Results
The financial results outlined below reflect a further year of increased
activity in support of a growing partner list and a widening range of prospects
throughout the world. As more and more projects commence, and move beyond proof
of concept and pilot phases, Intercede's current short term dependency on a
small number of relatively large value projects will disappear.
Year ended Year ended Change
31 March 2007 31 March 2006
£000 £000 %
Sales 2,620 2,142 22.3
Gross margin (%) 2,546 (97%) 2,027 (95%) 25.6
Operating costs (2,884) (2,371) 21.6
Operating loss (338) (344) (1.7)
Loss per share (1.1)p (1.1)p -
Sales have increased by 22% year on year with an underlying 25% increase in MyID
license sales. Gross profit margins have increased from 95% to 97% as the
proportion of own technology related sales has increased from 91% to 96%.
On the cost side of the business, additional staff have been recruited to
support the substantial amount of time and effort involved in supporting an
increasing number of existing and new partners in multiple bids for US Federal
Agencies. That work has typically not been fully chargeable, but is expected to
make a positive revenue contribution though additional license fees in the
future.
As at 31 March 2007, Intercede had 43 employees (2006: 39 employees). The
average number of employees increased from 35 to 41 year on year.
The combined effect of higher sales and margins coupled with continued tight
control over costs has resulted in a further small reduction in full year
operating losses. With the levels of the net interest charge for the period and
R&D tax credits received from HM Revenue remaining similar year on year, the
loss per share is unchanged.
As outlined in note 8, this year's accounts reflect the adoption of FRS 25 which
regards convertible loan stock agreements as compound financial instruments
which consist of a liability component and an equity component. Whilst this has
resulted in a number of changes, the overall impact is not significant; the
primary effect being the creation of an equity component which results in a
corresponding increase in the interest charge each period through to the point
of conversion or repayment on 31 May 2009.
Funding
As at 31 March 2007, the Group had cash balances totalling £653,000 (2006:
£1,112,000). This represents a full year cash outflow of £459,000 (2006:
£440,000 cash inflow).
As reported in the 2006 Annual Report, both of the Group's loan stock agreements
have been extended for a further three years to 31 May 2009. This demonstrates
investor confidence and has avoided the need to repay £1,790,000 including
interest that would otherwise have fallen due for repayment within the current
financial year.
On 16 May 2007, the Group announced an institutional placing of new shares
raising a total of £703,000 (£678,000 net of expenses) at an issue price of 33p
per ordinary share. The proceeds are intended to facilitate the further
exploitation of an increasing number of opportunities both in the US and around
the world, as well as providing general working capital in advance of longer
term revenue streams accruing to the Group as a result of the contracts it has
already won.
Summary
Intercede has established international distribution channels which have already
been deployed to provide identity solutions to blue chip customers around the
world. Penetration of the US Federal Government market to date provides
confidence in the Group's ability to exploit a major market opportunity in the
US and beyond.
The timing of contract commitments and deliveries will continue to be very
important in the short to medium term. Cost and cash control remain critical in
order to ensure that Intercede is able to make the most of the opportunity
presented by the emerging identity market.
Andrew Walker
Finance Director
INTERCEDE GROUP plc
Consolidated Profit and Loss Account for the year ended 31 March 2007
Notes 2007 2006
£'000 £'000
Restated
(Note 8)
Turnover 2,620 2,142
Cost of sales (74) (115)
2,546 2,027
Gross profit
Other operating expenses (2,884) (2,371)
(338) (344)
Operating loss
25 34
Interest receivable and similar income
Interest payable and similar charges (126) (124)
(439) (434)
Loss on ordinary activities before taxation
Taxation 2 71 76
(368) (358)
Retained loss on ordinary activities after taxation and for the year
Basic and diluted loss per ordinary share 3 (1.1)p (1.1)p
All operations of the Group continued throughout both years and no operations
were acquired or discontinued.
Statement of total recognised gains and losses
2007 2006
£'000 £'000
Total recognised gains and losses related to the year as above (368) (358)
Prior year adjustment (Note 8) (160)
_________
Total gains and losses recognised since the last annual report (528)
_________
INTERCEDE GROUP plc
Consolidated Balance Sheet at 31 March 2007
Notes 2007 2006
£'000 £'000
Restated
(Note 8)
Fixed assets
Tangible assets 38 27
Current assets
Debtors 234 317
Cash at bank and in hand 653 1,112
887 1,429
Creditors: Amounts falling due within one year (964) (2,933)
Net current (liabilities)/assets (77) (1,504)
Total assets less current liabilities (39) (1,477)
Creditors: Amounts falling due after more than one year (1,697) -
Net liabilities (1,736) (1,477)
Capital and reserves
Called-up share capital 4,271 4,271
Share premium account 2,107 2,107
Other reserves 1,508 1,508
Equity reserve 109 214
Profit and loss account (9,731) (9,577)
Shareholders' deficit (1,736) (1,477)
INTERCEDE GROUP plc
Consolidated Cash Flow Statement for the year ended 31 March 2007
Notes 2007 2006
£'000 £'000
Net cash (outflow)/inflow from operating activities 5 (529) 347
Returns on investments and servicing of finance
Interest received 25 33
Taxation received 71 76
Capital expenditure (26) (16)
Cash (outflow)/inflow before financing (459) 440
(Decrease)/increase in cash in the year 6 (459) 440
INTERCEDE GROUP plc
Preliminary Results for the Year Ended 31 March 2007
NOTES
1. The financial information set out in this announcement does not
constitute the Group's Statutory Accounts for the years ended 31 March 2006 or
2007, but is derived from those accounts. Statutory Accounts for 2006 have been
delivered to the Registrar of Companies and those for 2007, 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 credit comprises:
Year ended 31 March
2007 2006
£'000 £'000
Current year - UK corporation tax - -
Adjustment in respect of prior periods 71 76
71 76
There is no charge in respect of corporation tax in either year due to the
availability of losses. An adjustment has been made in respect of research and
development claims which 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
2007 2006
£'000 £'000
Restated
(Note 8)
Loss for the year (368) (358)
Number Number
Weighted average number of shares 33,963,438 33,963,438
Pence Pence
Basic and diluted loss per ordinary share (1.1) (1.1)
4. DIVIDEND
The Directors do not recommend the payment of a dividend.
5. RECONCILIATION OF OPERATING LOSS TO OPERATING CASH FLOW
2007 2006
£'000 £'000
Operating loss (338) (344)
Depreciation charge 15 13
Decrease in debtors 82 64
(Decrease)/increase in creditors (288) 614
Net cash (outflow)/inflow from operating activities (529) 347
6. ANALYSIS AND RECONCILIATION OF NET DEBT
2006 Cash flow Non-cash movement 2007
£'000 £'000 £'000 £'000
Restated
(Note 8)
Cash at bank and in hand 1,112 (459) - 653
Debt due within one year (1,679) - 1,679 -
Debt due after one year - - (1,697) (1,697)
(1,679) - (18) (1,697)
Net debt (567) (459) (18) (1,044)
On 31 May 2006, a variation of terms was agreed with the loan stockholders. The
loan periods were both extended through to 31 May 2009 and interest chargeable
was increased to 6% per annum with effect from 1 April 2006. As a result, all of
the convertible debt and associated interest will now fall due after one year.
The loan stockholders are now able to convert the loans and associated interest
outstanding at prices of 20p and 15p per ordinary share for the original
£982,000 and £450,000 loans respectively. The loans and associated interest
totalling £2,005,000 will be repayable as at 31 May 2009 if they choose not to
convert.
The reconciliation of net cash flow to the movement in net debt is as follows:
2007 2006
£'000 £'000
Restated
(Note 8)
(Decrease)/increase in cash in the year (459) 440
Non-cash movement (Note 8) (18) -
Net debt at beginning of year (567) (1,007)
Net debt at end of year (1,044) (567)
7. SUBSEQUENT EVENT
On 16 May 2007, as noted in the Operating & Finance Review, a placing was agreed
which will raise £703,000 of additional funding (£678,000 net of expenses) at an
issue price of 33p per ordinary share.
8. PRIOR YEAR ADJUSTMENT
FRS 25 regards convertible loan stock agreements as compound financial
instruments which consist of a liability component and an equity component.
Adjustments have been made to adopt this standard in the current year and the
comparative figures have also been restated as if the standard had been adopted
in the previous year.
9. ANNUAL GENERAL MEETING
The Annual General Meeting of the Company will be held at 11.00 am on Wednesday
4 July 2007 at Lutterworth Hall.
10. 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
The company news service from the London Stock Exchange
Wednesday, 15th May 2024
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