Interim Results

Intercede Group PLC 15 December 2005 INTERCEDE GROUP plc Interim Results for the Six months Ended 30 September 2005 Chairman's Statement Business and Product Development I am pleased to report that the Group has achieved a very strong six month period in terms of year on year revenue growth and partnership development. The Group has now been profitable and cash generating for two consecutive half year periods. From a business development perspective this has been a transformational period, as our technology and business model have proven themselves around the world. Intercede has succeeded in signing new OEM licence contracts with both RSA Security and Verisign, arguably the largest and most influential security software and service vendors in the world. These industry majors, along with our existing partners, are rapidly establishing Intercede's MyID smart card management system as the global de facto standard for interoperable smart card management across the smart card and IT security industries. Major sales successes during the period include: UK 1. Gemplus have now delivered 300,000 MyID licences to a major European customer. 2. Siemens have sold 200,000 MyID licences to a leading UK retailer. 3. Oberthur Card Systems have collaborated with Intercede to build a UK National ID demonstrator in their Tewkesbury facility. Intercede and Oberthur will jointly market the demonstrator to UK Government and major integrators. USA 1. RSA Security - Intercede has concluded an OEM licence agreement valued at a minimum of $2m over the next three years. The first $500,000 has already been received and a further $500,000 is due to be received prior to the end of the financial year. Under this agreement, RSA have launched the RSA Card Management solution based on Intercede's MyID technology. 2. Verisign - Following a competitive RFP process, Intercede has entered into a global OEM licensing agreement with Verisign. Under this agreement, Verisign will pay Intercede to produce a custom version of MyID to closely integrate with the Verisign Managed PKI environment and reimburse Intercede a percentage of all its associated service fees. 3. Major US Aerospace Contractor - Following a competitive procurement process, Intercede and a US partner secured a contract to install a pilot deployment of MyID within a major US aerospace contractor. This pilot has been successfully completed during the period and production roll-out is anticipated within the next 12-18 months. 4. Major US Bank - An order has been received for the first stage of a MyID deployment within a major US bank in partnership with a major US computer manufacturer. 5. SafeNet - Intercede has activated a further 20,000 MyID licences for a major SafeNet banking customer. Europe 1. Thales e-Security have secured their first contract in the Middle East for their OEM version of MyID. 2. Siemens are supplying a major European telecoms company with MyID to issue smart cards loaded with qualified certificates. Results Sales during the period totalled £1,241,000 which, at a gross margin of 96%, resulted in an operating profit of £2,000. This compares to prior year comparative period sales of £535,000 at a gross margin of 87% and an operating loss of £538k. The increase in gross margin reflects an increase in the proportion of own technology sales from 76% to 92%. The main sales during the period related to the completion of prior year commitments i.e. DoT Ireland, European Notaries and RSA European aerospace contractor along with the impact of the new licensing deal with RSA Security, a further significant order from Gemplus for a major UK customer and orders from the Met Police and Siemens. As at 30 September 2005, the Group had net cash balances totalling £1,030,000. During the six months ended 30 September 2005, the cash inflow before financing was £358,000 which compares with a cash outflow of £451,000 during the comparative period. Outlook The Company expects to see continued strong growth in our market sector and in our share of this market over the coming months. We anticipate that our new and existing distribution partners will start to generate recurring revenues as they respond to increasing demand for identity cards for corporate and governmental applications around the World. Richard Parris Chairman & Chief Executive 15 December 2005 Enquiries: Intercede Group plc Tel. +44 (0) 1455 558111 Richard Parris - Chairman & Chief Executive Andrew Walker - Finance Director Consolidated Profit and Loss 6 months ended 6 months ended Year ended Account 30 September 30 September 31 March 2005 2004 2005 £'000 £'000 £'000 Turnover 1,241 535 1,806 Cost of sales (50) (71) (113) ----------- ---------- ---------- Gross profit 1,191 464 1,693 Other operating expenses (1,189) (1,002) (2,079) ----------- ---------- ---------- Operating profit/(loss) 2 (538) (386) Interest receivable and similar income 12 16 32 Interest payable and similar charges (62) (36) (72) ----------- ---------- ---------- Loss on ordinary activities before taxation (48) (558) (426) Tax on loss on ordinary activities 76 182 182 ----------- ---------- ---------- Profit/(loss) on ordinary activities after taxation and retained profit/(loss) for the period 28 (376) (244) =========== ========== ========== Basic and diluted profit/(loss) per ordinary share 0.1p (1.1)p (0.7)p =========== ========== ========== Consolidated Balance Sheet As at As at As at 30 September 30 September 31 March 2005 2004 2005 £'000 £'000 £'000 Fixed assets Tangible assets 22 30 25 ----------- ---------- ---------- Current Assets Debtors 280 138 379 Cash at bank and in hand 1,030 615 672 ----------- ---------- ---------- 1,310 753 1,051 Creditors: Amounts falling due within one year (1,097) (708) (869) ----------- ---------- ---------- Net current assets 213 45 182 ----------- ---------- ---------- Total assets less current liabilities 235 75 207 ----------- ---------- ---------- Creditors: Amounts falling due after more than one year Convertible debt (1,432) (1,432) (1,432) ----------- ---------- ---------- Net liabilities (1,197) (1,357) (1,225) =========== ========== ========== Capital and reserves Called-up share capital 4,271 4,271 4,271 Share premium account 2,107 2,107 2,107 Other reserves 1,508 1,508 1,508 Profit and loss account (9,083) (9,243) (9,111) ----------- ---------- ---------- Shareholders' deficit - all equity (1,197) (1,357) (1,225) =========== ========== ========== Consolidated Cash Flow Statement 6 months ended 6 months ended Year ended 30 September 30 September 31 March 2005 2004 2005 £'000 £'000 £'000 Net cash inflow/(outflow) from operating activities 274 (649) (604) ----------- ---------- ---------- Returns on investments and servicing of finance Interest received 12 18 35 ----------- ---------- ---------- Net cash inflow from returns on investments and servicing of finance 12 18 35 ----------- ---------- ---------- Taxation received 76 182 182 ----------- ---------- ---------- Capital expenditure (4) (2) (7) ----------- ---------- ---------- Cash inflow/(outflow) before financing 358 (451) (394) Financing Repayment of secured loan - (2) (2) ----------- ---------- ---------- Net cash outflow from financing - (2) (2) ----------- ---------- ---------- Increase/(decrease) in cash in the period 358 (453) (396) =========== ========== ========== Notes to the Accounts 1. Preparation of the interim financial statements The interim financial statements have been prepared on the basis of the accounting policies set out in the Group's 2005 statutory accounts. The interim financial statements are unaudited and do not constitute statutory accounts as defined in Section 240 of the Companies Act 1985. The figures for the year ended 31 March 2005 are an abridged version of the Group's statutory accounts for that year which have been filed with the Registrar of Companies. The audit opinion on those statutory accounts was unqualified and did not include a statement under Section 237(2) or (3) of the Companies Act 1985. The Interim Report will be mailed to shareholders and copies will be available on the website (www.intercede.com) and at the registered office: Intercede Group plc, Lutterworth Hall, St Mary's Road, Lutterworth, Leicestershire, LE17 4PS. 2. Basic and diluted profit/(loss) per ordinary share The calculations of profit/(loss) per ordinary share are based on the profit/ (loss) for the period and the weighted average number of ordinary shares in issue during each period. 6 months ended 6 months ended Year ended 30 September 30 September 31 March 2005 2004 2005 £'000 £'000 £'000 Profit/(loss) for the period 28 (376) (244) ----------- ---------- ---------- Number Number Number Weighted average number of shares 33,963,438 33,963,438 33,963,438 ----------- ---------- ---------- Pence Pence Pence Basic and diluted profit/(loss) per ordinary share 0.1 (1.1) (0.7) =========== ========== ========== 3. Reconciliation of movement in shareholders' deficit 6 months ended 6 months ended Year ended 30 September 30 September 31 March 2005 2004 2005 £'000 £'000 £'000 Opening shareholders' deficit (1,225) (981) (981) Profit/(loss) for the period 28 (376) (244) ----------- ---------- ---------- Closing shareholders' deficit (1,197) (1,357) (1,225) =========== ========== ========== 4. Reconciliation of operating loss to operating cash flow 6 months ended 6 months ended Year ended 30 September 30 September 31 March 2005 2004 2005 £'000 £'000 £'000 Operating profit/(loss) 2 (538) (386) Depreciation charge 7 13 24 Decrease/(increase) in debtors 99 (20) (263) Increase/(decrease) in creditors 166 (104) 21 ----------- ---------- ---------- Net cash inflow/(outflow) from operating activities 274 (649) (604) =========== ========== ========== 5. Analysis and reconciliation of net debt As at As at 31 March 30 September 2005 Cash Flow 2005 £'000 £'000 £'000 Cash at bank and in hand 672 358 1,030 ----------- ---------- ---------- Debt due after one year (1,432) - (1,432) ----------- ---------- ---------- Net debt (760) 358 (402) =========== ========== ========== The reconciliation of net cash flow to the movement in net debt is as follows: 6 months ended 6 months ended Year ended 30 September 30 September 31 March 2005 2004 2005 £'000 £'000 £'000 Increase/(decrease) in cash in the period 358 (453) (396) Cash outflow from decrease in debt and lease financing - 2 2 ----------- ---------- ---------- Change in net debt resulting from cash flows 358 (451) (394) Net debt at the beginning of the period (760) (366) (366) ----------- ---------- ---------- Net debt at the end of the period (402) (817) (760) =========== ========== ========== 6. Creditors: Amounts falling due after more than one year The convertible debt totalling £1,432,000 represents two issues of convertible loan stock, both carrying an interest coupon of 5%. The first issue totalling £982,000 is convertible at the option of the holder into fully paid ordinary shares of the Company at 60.0p per ordinary share (up to a maximum of 1,636,048 shares) at any time prior to 11 December 2006. The second issue totalling £450,000 is convertible at the option of the holder into fully paid ordinary shares of the Company at 41.4p per ordinary share (up to a maximum of 1,086,800 shares) at any time prior to 31 March 2007. Unless previously redeemed or converted, the debt will be redeemed at par on 11 December 2006 and 31 March 2007 respectively. In recognition of the dilution to be faced by the loan stockholders following the Placing on 1 July 2003, they were granted warrants to subscribe for up to 2,982,919 ordinary shares at the Placing Price of 7.8p at any time up to the existing conversion dates referred to above. 7. Dividend The Directors do not recommend the payment of a dividend. This information is provided by RNS The company news service from the London Stock Exchange

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