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Intercede Group PLC (IGP)

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Monday 27 November, 2017

Intercede Group PLC

Half-year Report

RNS Number : 5077X
Intercede Group PLC
27 November 2017
 

 

 

 

27 November 2017

 

INTERCEDE GROUP plc

('Intercede', the 'Company' or the 'Group')

 

Interim Results for the Six Months Ended 30 September 2017

 

 

 

Intercede, the software and service company specializing in identity, credential management and secure mobility, today announces its interim results for the six months ended 30 September 2017.

 

Highlights

                                                                                                                                                                                      

·      Revenues increased by 29% to £3.7m (2016: £2.8m), primarily due to new contract wins; the most notable including MyID license sales to (i) a major US Aerospace & Defence contractor; (ii) the UK Defence Industry, (iii) the largest US military shipbuilding company; and (iv) one of the world's largest diversified natural resource companies.

 

·      Operating expenses marginally increased to £6.7m (2016: £6.4m), reflecting increased investment in sales and marketing.

 

·      Operating loss reduced by 16% to £3.1m (2016: £3.7m).

 

·      Loss for the period fell by 23% to £2.1m (2016: £2.8m) resulting in a basic loss per share of 4.3p (2016: 5.7p).

 

·      Cash balances of £4.8m at 30 September 2017 (30 September 2016: £1.4m).

 

·      Further £0.5m secured from the Convertible Loan Note programme.

 

·     Launch of a cloud-based version of MyID including variants designed to secure employee authentication and consumer facing applications and websites.

 

·     New Sales team in place by the period end following the appointment of Helen Adams as Chief Sales Officer (formerly ARM VP Sales, Europe & Asia Pacific).

 

 

Richard Parris, Chairman & Chief Executive of Intercede, said:

 

 "I am pleased with the progress that Intercede has made in the first half of the current year. The Group has secured important contract extensions and new client wins within its core market. It has successfully brought important evolutions of the core product to address previously unexploited, high volume markets and, critically, the Group has recruited exceptional staff who are expected to generate significant future revenues from these developments.

 

"As announced on 6 November 2017, Intercede is now forecasting revenue growth for the full financial year in the range of 10%-20%. This is based on the timing of receipt of a small number of large orders and Intercede's subsequent ability to deliver and recognise revenues in accordance with the Group's accounting policy.

 

"We look forward to updating the market in due course."

 

 

ENQUIRIES

 

Intercede Group plc                                                             Tel. +44 (0)1455 558 111

Richard Parris, Chairman & Chief Executive

Andrew Walker, Finance Director

 

finnCap                                                                                  Tel. +44 (0)20 7220 0500

Stuart Andrews, Corporate Finance

Simon Hicks, Corporate Finance

 

Capital Access Group                                                          Tel. +44 (0)20 3763 3400

Scott Fulton, Media

Ed Welsby, Investors

 

 

About Intercede

 

Intercede is a cybersecurity company specializing in digital identities, derived credentials and access control, enabling digital trust in a mobile world.

 

Headquartered in the UK, with offices in the US, we believe in a connected world in which people and technology are free to exchange information securely, and complex insecure passwords become a thing of the past.

 

Our vision is to make the highest levels of cybersecurity available to organizations and consumers alike, solving complexity and scalability issues by managing high volumes of digital credentials.

 

We have been delivering trusted solutions to high profile customers for over 20 years. Our team of experts has deployed millions of identities to governments, most of the largest aerospace and defence corporations, and major financial services and healthcare organizations, as well as leading telecommunications, cloud services and information technology firms, providing industry-leading employee and customer credential management systems.

 

For more information visit: www.intercede.com

 

The information communicated in this announcement contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) No. 596/2014.

INTERCEDE GROUP plc

 

('Intercede', 'the Company' or 'the Group')

 

Interim Results for the Six Months Ended 30 September 2017

 

Chairman's Statement

 

Introduction

 

Intercede has made a good start to the year, achieving MyID contract wins from significant new customers, generating a pipeline for newly released products and substantially enhancing its sales and marketing capability. The Group's ability to convert its recent product development into meaningful revenue generation is likely to play an important role in Intercede's short to medium term growth prospects.

 

The on-premise version of MyID continues to appeal to governments, defence contractors and large enterprises as evidenced by contract wins in the first six months of this year. These include:

 

−      The award of a MyID contract from a major US Aerospace & Defence contractor to manage digital identities for 130,000 devices. MyID is now used by five of the seven largest Aerospace & Defence companies.

−      A new MyID license sale to a large UK defence organisation. This customer is expected to generate further significant professional services revenue over the next 12 months.

−      An initial MyID license sale to the largest US military shipbuilding company. A successful implementation is expected to result in a follow-on order for over 20,000 licenses.

−      An initial MyID license sale to one of the world's largest diversified natural resource companies, with the potential rollout to a workforce of more than 100,000 based in 50+ countries.

 

The Group has developed a range of related applications from its core MyID platform. These have been designed to take advantage of the growing awareness of, and requirement for, cyber security. In the last 12 months, Intercede has launched a cloud-based version of MyID, including variants designed to secure employee authentication and consumer facing applications and websites. These additions to the wide-ranging product suite provide the Group with a subscription based service suitable for enterprises and service providers around the world. Aligned to Intercede's enhanced and expanded sales and marketing function, the Group believes that it has positioned itself well to benefit from significant emerging opportunities.

 

The potential for growth in all of the Group's markets reflects the backdrop of a growing number of high profile cyber-attacks. In turn, this has led to an expectation that the global market for cyber security products and services will grow strongly over the medium term with Verizon reporting in their annual Data Breach Investigation Report that 81% of hacking-related breaches in 2016 involved stolen and/or weak passwords, up from 63% in 2015. That situation cannot continue and Intercede believes the world is at a "user authentication tipping point".

 

At the core of Intercede's technology is cryptographic key management, which has been proven to prevent such breaches by only allowing access to verified devices that have been unlocked by verified users. This contrasts with alternatives such as biometric security or SMS one-time passwords, which although having a place, are also open to compromise. Intercede is therefore well placed to benefit from the global investment in cyber security that is expected to grow to $100 billion by 2019. 

Financial Results

 

Revenues in the period totalled £3,651,000, a 29% increase compared to the corresponding period last year. This growth was driven by further contract wins within the Group's core market; on-premise deployment of its MyID product. Intercede is now providing MyID to large enterprises in a wide range of industries. From its core Government Agency customer base, the Group is now working with a considerable proportion of the world's leading Aerospace & Defence contractors and an increasing number of customers from other sectors including Finance, Healthcare and Natural Resources. Intercede remains convinced that Government Agencies and large enterprises represent a significant market place for the Group's products.

 

Compared to the first half of the prior year, operating expenses rose by 4.0% to £6,704,000 (2016: £6,448,000). Costs continue to be tightly managed, but the Group has acted to expand and refresh its sales and marketing activities in recognition of the need to convert product development into meaningful revenue generation.

 

Staff costs continue to represent the main area of expense, representing 75% of total operating costs (2016: 77%). Intercede had 124 employees and contractors as at 30 September 2017 (30 September 2016: 127). The average number of employees and contractors during the period was 123 (2016: 128).

 

A £1,141,000 taxation credit for the period (2016: £898,000 taxation credit) primarily reflects the 2017 Research & Development ("R&D") claim which results from the Group's strategic investment activities. While the 2016 claim was received during October 2016, the 2017 R&D claim was received prior to 30 September 2017. 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 and allowing 14.5% of the lower of R&D losses or taxable losses to be paid as tax credits.

 

A loss for the period of £2,146,000 (2016: loss of £2,773,000) resulted in a basic and a fully diluted loss per share of 4.3p (2016: basic and fully diluted loss per share of 5.7p).

 

Cash balances as at 30 September 2017 totalled £4,818,000 compared to £6,891,000 as at 31 March 2017 and £1,377,000 as at 30 September 2016. Intercede raised £4,623,000 (net of expenses from the issue of Convertible Loan Notes ("CLN") and new equity in January 2017 and a further £485,000 (net of expenses) from the same CLN instruments in August 2017.

 

Product Development and Partnerships

 

Intercede's software and services enable Trusted Digital Identities to be created, deployed and managed securely and at scale.

 

To widen the market into which Intercede can sell its products, MyID can be deployed in various formats to meet the demands of a comprehensive range of authentication use cases:

 

·      On-premise - typically adopted within the most security conscious environments such as the aerospace, defence and government sectors that demand all infrastructure and software is directly under their control. Highly configurable and feature rich.

·      Cloud-based - similar functionality and features as the on-premise solution but designed for widespread deployment in enterprise markets that are increasingly adopting infrastructure, platform and software as a service working models.

·      Mobile and Web - a frictionless, easy to deploy and highly secure two-factor authentication solution for web and mobile applications. Targeted at service providers and application developers that require a highly secure, user friendly and economic means to reliably authenticate their customers and eliminate passwords.

 

Intercede continues to engage under NDA with industry IT majors. While it is premature to predict when and if significant revenue streams will flow from these partnerships, a commercial breakthrough with any one of these partners could create an inflexion point in Intercede sales revenues. The engagements are a recognition of Intercede's world lead in cryptographic key management, authentication expertise and security technologies. Intercede's solutions remain contemporary, relevant and cannot be readily duplicated by industry majors themselves.

 

Intercede is also engaging in Internet of Things (IoT) based proofs-of-concept activity when it makes commercial sense to do so. For example, a MyID solution for smart security cameras was demonstrated at a conference in Washington DC in June in collaboration with a significant industrial partner. This project is expected to generate first revenues in the current financial year as it goes through a pilot stage across a number of secure US Government sites.

 

The Group's ground breaking IoT research capability was highlighted when Imagination Technology and Intercede showcased a solution for enhanced IoT security at BT's bi-annual Innovation 2017 event in June. The demonstration of the 'Trust Continuum' shows how systems-on-chips (SoCs) for home gateway routers can be architected to address the growing security and management challenges presented by the proliferation of IoT devices, services and technologies entering the home. This is the type of innovative exercise into which Intercede reinvests some of its R&D tax credit.

 

Sales and Marketing

 

To better represent the Intercede portfolio to a wider audience, the Group has relaunched its sales and marketing proposition to be more 'customer solutions' oriented. In support of this the Intercede website, www.intercede.com, has been redesigned and refreshed. In addition, the product suite will be unified under one brand name; MyID. MyID is positioned as an enterprise-grade authentication and credentials management solution that enables organizations to replace passwords with trusted digital identities.

 

Intercede's ability to address the widening cyber security market is dependent on a sales team that is focused clearly on its vision, mission and goals. A new team is now in place including the appointments of Helen Adams as Chief Sales Officer and Chuck Pol as Non-Executive Director.

 

Helen Adams joined the Group on 5 June 2017 from ARM Holdings plc, the world's leading semiconductor intellectual property supplier, where she was Vice President of Regional Sales for both Europe and Asia/Pacific.

 

Chuck Pol was appointed with effect from 1 June 2017 as a Non-Executive Director. He recently served as Chairperson of Vodafone Americas, a role in which he led the development of applications for the Internet of Things.

 

In addition, there have been several new hires in the US and RoW sales teams. Due to the long sales cycle for enterprise solutions, it is expected that this refreshed sales team will mainly deliver a sales revenue uplift in the next financial period and beyond.

 

Strategy and Outlook

 

At the core of Intercede's strategy is the MyID platform which has become a benchmark for Digital Trust within government circles and amongst some of the world's largest security sensitive organizations. Over time the Group's products have evolved from providing Digital Trust between connected people to include connectivity between devices, applications and the mass produced electrical goods that will make up the IoT market.

 

Cyber-threats, whether driven by individuals, organisations or nation states are increasing in frequency and sophistication and the economic cost is growing exponentially. Additionally, the threat landscape is expanding with the growth of the IoT and developments such as connected cars. In that environment, the Group is experiencing continuing demand in its traditional markets but, perhaps most importantly, Intercede is seeing opportunities to deliver the power of the MyID platform as a cloud-based service.

 

MyID as a service has the potential to open new and potentially large markets that were not previously accessible. One such example is enabling enterprises to issue digital credentials to mobile devices used by employees to replace usernames and passwords. Another is providing consumers with the ability to authenticate, sign and encrypt digital banking transactions. Pilot implementations with several network operators, banks and application platform providers will continue in the current financial year. Successful implementations will enable commercial activities to start in earnest for target markets for this product, including those that are impacted by new regulations in the financial services and consumer sectors such as Payment Services Directive 2 (PSD2) and the General Data Protection Regulations (GDPR).

 

MyID's evolution into the IoT securely provisions apps to a device and 'binds' them to the secure element of the device's chip so that the app cannot be compromised by cyber attacks. The growth potential of in this market is significant and, by 2020, is estimated to be more than 50 billion devices with each 'thing' needing to validate the trustworthiness of its peers across a network. Each point of trust is an opportunity for Intercede to provide an enabling service.

 

Some opportunities will take time to mature, but the Group's management team continues to be optimistic.

 

 

Richard Parris

Chairman & Chief Executive

27 November 2017

 

 

Consolidated Statement of Comprehensive Income

For the period ended 30 September 2017





6 months ended

30 September 2017

6 months ended

30 September 2016

Year ended 31 March

2017


£'000

£'000

£'000

Continuing operations




Revenue

3,651

2,828

8,286

Cost of sales

(22)

(58)

(116)


__________

__________

__________

Gross profit

3,629

2,770

8,170

Operating expenses

(6,704)

(6,448)

(12,891)


__________

__________

__________

Operating loss

(3,075)

(3,678)

(4,721)

Finance income

5

7

13

Finance costs

(217)

-

(70)


__________

__________

__________

Loss before tax

(3,287)

(3,671)

(4,778)

Taxation

1,141

898

888


__________

__________

__________

Loss for the period

(2,146)

(2,773)

(3,890)


__________

__________

__________

Total comprehensive expense attributable to owners of the parent company

(2,146)

(2,773)

(3,890)


__________

__________

__________

Loss per share (pence)




- basic

(4.3)p

(5.7)p

(8.0)p

- diluted

(4.3)p

(5.7)p

(8.0)p


__________

__________

__________






Consolidated Balance Sheet

As at 30 September 2017





As at

 30 September 2017

As at

30 September 2016

As at

31 March

2017


£'000

£'000

£'000

Non-current assets




Property, plant and equipment

636

822

695


__________

__________

__________





Current assets




Trade and other receivables

1,910

2,718

1,280

Cash and cash equivalents

4,818

1,377

6,891


__________

__________

__________


6,728

4,095

8,171


__________

__________

__________





Total assets

7,364

4,917

8,866


__________

__________

__________





Equity




Share capital

505

491

499

Share premium

673

232

673

Equity reserve

60

-

60

Merger reserve

1,508

1,508

1,508

(Losses)/retained earnings

(4,285)

(1,441)

(2,354)


__________

__________

__________

Total equity

(1,539)

790

386


__________

__________

__________





Non-current liabilities




Convertible loan notes

4,641

-

4,124

Deferred revenue

185

77

141


__________

__________

__________


4,826

77

4,265


__________

__________

__________





Current liabilities




Trade and other payables

1,517

1,745

1,390

Deferred revenue

2,560

2,305

2,825


__________

__________

__________


4,077

4,050

4,215


__________

__________

__________





Total liabilities

8,903

4,127

8,480


__________

__________

__________





Total equity and liabilities

7,364

4,917

8,866


__________

__________

__________

 


Consolidated Statement of Changes in Equity

For the period ended 30 September 2017








Share capital

Share premium

Equity reserve

Merger reserve

(Losses)/ retained earnings

Total


£'000

£'000

£'000

£'000

£'000

£'000








At 1 April 2017

499

673

60

1,508

(2,354)

386

Purchase of own shares

-

-

-

-

(93)

(93)

Re-issuance of treasury shares

-

-

-

-

138

138

Employee share option plan charge

-

-

-

-

8

8

Employee share incentive plan charge

-

-

-

-

162

162

Issue of ordinary shares

6

-

-

-

-

6

Loss for the period and total comprehensive expense

-

-

-

-

(2,146)

(2,146)


________




________

________

________




________




_______

At 30 September 2017

505

673

60

1,508

(4,285)

(1,539)


________





________

________





              





________





_______








At 1 April 2016

487

232

-

1,508

1,131

3,358

Purchase of own shares

-

-

-

-

(68)

(68)

Employee share option plan charge

-

-

-

-

47

47

Employee share incentive plan charge

-

-

-

-

222

222

Issue of ordinary shares

4

-

-

-

-

4

Loss for the period and total comprehensive expense

-

-

-

-

(2,773)

(2,773)


________




________

________

________




________




_______

At 30 September 2016

491

232

-

1,508

(1,441)

790


________





________

________





               





________





_______








At 1 April 2016

487

232

-

1,508

1,131

3,358

Purchase of own shares

-

-

-

-

(143)

(143)

Employee share option plan charge

-

-

-

-

60

60

Employee share incentive plan charge

-

-

-

-

488

488

Issue of ordinary shares

12

441

-

-

-

453

Equity component of convertible loan notes

-

-

60

-

-

60

Loss for the year and total comprehensive expense

-

-

-

-

(3,890)

(3,890)


________




________

________

________




________




_______

At 31 March 2017

499

673

60

1,508

(2,354)

386


________




________

________

________




________




_______


Consolidated Cash Flow Statement

For the period ended 30 September 2017





6 months ended 30 September 2017

6 months ended 30 September 2016

Year ended

31 March 2017


£'000

£'000

£'000

Cash flows from operating activities




Operating loss

(3,075)

(3,678)

(4,721)

Depreciation

82

103

194

Loss on disposal of property, plant and equipment

-

-

48

Employee share option plan charge

8

47

60

Employee share incentive plan charge

162

222

488

Employee unit incentive plan charge/(credit)

7

(4)

(20)

Employee unit incentive plan payment

-

-

(28)

Increase in trade and other receivables

(573)

(821)

(364)

Increase/(decrease) in trade and other payables

85

(46)

(417)

(Decrease)/increase in deferred revenue

(221)

236

820


__________

__________

__________

Cash used in operations

(3,525)

(3,941)

(3,940)

Finance income

4

9

14

Finance costs on convertible loan notes

(150)

-

-

Taxation

1,141

(24)

888


__________

__________

__________

Net cash used in operating activities

(2,530)

(3,956)

(3,038)


__________

__________

__________

Investing activities




Purchases of property, plant and equipment

(23)

(61)

(73)


__________

__________

__________

Cash used in investing activities

(23)

(61)

(73)


__________

__________

__________

Financing activities




Purchase of own shares

(93)

(64)

(143)

Proceeds from re-issuance of treasury shares

138

-

-

Proceeds from issue of ordinary share capital

6

-

453

Proceeds from issue of convertible loan notes

510

-

4,495

Convertible loan note issue costs

(25)

-

(321)


__________

__________

__________

Cash generated from/(used in) financing activities

536

(64)

4,484


__________

__________

__________

Net (decrease)/increase in cash and cash equivalents

(2,017)

(4,081)

1,373

Cash and cash equivalents at the beginning of the period

6,891

5,289

5,289

Exchange (losses)/gains on cash and cash equivalents

(56)

169

229


__________

__________

__________

Cash and cash equivalents at the end of the period

4,818

1,377

6,891


__________

__________

__________


Notes to the Consolidated Accounts

For the period ended 30 September 2017

 

1   Preparation of the interim financial statements

These interim financial statements have been prepared under IFRS as adopted by the European Union and on the basis of the accounting policies set out in the Group's Annual Report for the year ended 31 March 2017.

 

The Group is not required to apply IAS 34 Interim Financial Reporting at this time.

    

These interim financial statements have not been audited and do not constitute statutory accounts as defined in Section 434 of the Companies Act 2006. Statutory accounts for the year ended 31 March 2017 have been delivered to the Registrar of Companies. The Auditors' Report on those accounts was unqualified and did not contain any statement under Section 498 (2) or (3) of the Companies Act 2006.

 

The Interim Report will be mailed to shareholders within the next few weeks 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   Revenue

All of the Group's revenue, operating losses 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:

 

 


6 months ended

30 September 2017

6 months ended

30 September 2016

Year ended 31 March 2017


£'000

£'000

£'000





UK

187

139

403

Rest of Europe

451

461

960

North America

2,774

1,987

6,367

Rest of World

239

241

556


__________

__________

__________


3,651

2,828

8,286


__________

__________

__________

 

 




3   Taxation

Taxation represents the net effect of amounts receivable from HMRC in respect of R&D claims and US corporation tax payable.

 

 

4   Loss per share

The calculations of the loss per ordinary share are based on the loss for the period and the weighted average number of ordinary shares in issue during each period. The basic and diluted loss per share are the same as potential dilution cannot be applied to a loss making period.

 

 


6 months ended

30 September 2017

6 months ended

30 September 2016

Year ended 31 March 2017


£'000

£'000

£'000





Loss for the period

(2,146)

(2,773)

(3,890)


__________

__________

__________






Number

Number

Number

Weighted average number of shares

- basic

49,944,619

48,507,555

48,835,080

- diluted

49,944,619

48,507,555

48,835,080


__________

__________

__________






Pence

Pence

Pence

Loss per share

- basic

(4.3)p

(5.7)p

(8.0)p

- diluted

(4.3)p

(5.7)p

(8.0)p


__________

__________

__________

 

The weighted average number of shares used in the calculation of basic and diluted loss per share for each period were calculated as follows:


6 months ended

30 September 2017

6 months ended

30 September 2016

Year ended 31 March 2017


Number

Number

Number





Issued ordinary shares at start of period

49,903,143

48,735,005

48,735,005

Effect of treasury shares

(189,197)

(294,000)

(294,000)

Effect of issue of ordinary shares

230,673

66,550

394,075


__________

__________

__________

Weighted average number of shares

- basic

49,944,619

48,507,555

48,835,080


__________

__________

__________

 

Add back effect of treasury shares

N/A

N/A

N/A

Effect of share options in issue

N/A

N/A

N/A

Effect of convertible loan notes in issue

N/A

N/A

N/A


__________

__________

__________

Weighted average number of shares

- diluted

49,944,619

48,507,555

48,835,080


__________

__________

__________

 

5   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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