INTERCEDE GROUP PLC

Earnings Release • Nov 3, 2015

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RNS Number : 2902E

Intercede Group PLC

03 November 2015

3 November 2015

INTERCEDE GROUP plc

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

Interim Results for the Six Months Ended 30 September 2015

Intercede, the software and service company specialising in identity, credential management and secure mobility, today announces its interim results for the six months ended 30 September 2015.

Highlights

·      Revenues of £5.5m (2014: £4.0m), an increase of 37%.

·      Operating expenses increased to £5.7m (2014: £4.9m), as a result of continuing investment in infrastructure, technology development and sales capacity.

·      Headcount increased to 125 at 30 September 2015 (30 September 2014: 116).

·      Operating loss of £0.4m (2014: £1.1m).

·      Profit for the period of £0.5m (2014: loss of £0.7m).

·      Basic earnings per share 1.0p (2014: basic loss per share 1.4p).

·      Cash balances of £5.8m remain strong at 30 September 2015 (30 September 2014: £6.3m).

·     Four new contracts signed during period, which will all contribute to revenues during the current financial year and beyond:

−      Enterprise-wide contract with one of the largest US healthcare corporations.

−      Mobile Derived Credential solution sold to a major US Federal Agency.

−      New agreement with a US West Coast bank.

−      First sale following the announcement of the Partner Agreement with Citrix on 13 May 2015.

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

"We continue to execute our strategy of attacking multiple markets within the broader spectrum of identity and credential management. The more mature market is where our MyID product has entrenched itself as the industry standard, based on a high margin and strongly cash generative business model. This in turn provides the financial stability to invest in the second strand of our strategy, which is to use our technical knowledge and industry network to exploit newer opportunities based on the convergence of mobile data, cybersecurity and the Internet of Things. While we must be mindful of the fact that because they are new, the timing of the conversion of these opportunities into committed orders is harder to predict, we are increasingly confident that the success we have enjoyed in delivering the first part of our strategy will be replicated."

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

Joanna Weaving, Corporate Broking

Bell Pottinger                                                                        Tel. +44 (0)7802 442486

Archie Berens

About Intercede

Intercede is a software and service company specialising in identity, credential management and secure mobility. Its solutions create a foundation of trust between connected people, devices and apps and combine expertise with innovation to provide world-class cybersecurity.

Intercede has been delivering solutions to high profile customers, from the US and UK governments to some of the world's largest corporations, telecommunications providers and information technology firms, for over 20 years.

Intercede's MyID software is an identity and credential management system that enables organisations to create and assign trusted digital identities to employees, citizens and machines and in turn allows secure access to services, facilities, information and networks. MyID adheres to international standards, while remaining simple enough to be deployed onto consumer devices such as smartphones, tablets and other devices in the Internet of Things.

In 2015 Intercede launched MyTAM; enabling trusted applications to be loaded into a mobile device's Trusted Execution Environment (TEE), providing hardware-level security for Android apps. The cloud-based service provides a cost-effective and convenient way for developers and corporations to protect their apps and users' sensitive data.

For more information visit: www.intercede.com

INTERCEDE GROUP plc

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

Interim Results for the Six Months Ended 30 September 2015

Chairman's Statement

Introduction

Intercede has enjoyed a successful first half of the current financial year. We have grown revenues and maintained a strong financial position, whilst also making good progress in the newer markets where we believe there is significant scope for our latest suite of products to secure a leading position.

The Group's short to medium term financial target is to deliver accelerated revenue growth by investing in people and resources to take advantage of the opportunities provided by the impact of smart phones and global cybersecurity concerns. This strategic investment has been funded organically to date.

Financial Results

As previously stated, Intercede has achieved strong revenue growth during the first half of the financial year. This is in line with market expectations and reflects continued progress with existing customers and a number of new contract wins.

Revenues in the period totaled £5,547,000, a 37% increase compared to £4,045,000 in the corresponding period last year. Existing and new products have gained traction in target markets with significant revenues expected in future periods.

Planned investment in additional resources as outlined above has resulted in a 16% increase in operating expenses from £4,868,000 to £5,670,000. The combined effect of increased revenues and planned investment has resulted in a substantial reduction in operating losses from £1,119,000 to £447,000.

Staff costs continue to represent the main area of expense, representing 78% of total operating costs (2014: 77%). Intercede had 125 employees and contractors as at 30 September 2015 (30 September 2014: 116). The average number of employees and contractors during the period increased from 110 to 121 year on year.

A £912,000 taxation credit for the period (2014: £383,000 taxation credit) primarily reflects cash received following the 2015 Research & Development ("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 125% of qualifying R&D expenditure to be offset against taxable profits and allowing 14.5% (2014: 11.0%) of the lower of R&D losses or taxable losses to be paid as tax credits.

A profit for the period of £480,000 (2014: loss of £705,000) resulted in a basic earnings per share of 1.0p and a fully diluted earnings per share of 0.9p (2014: basic and fully diluted loss per share 1.4p).

The Group has no debt and continues to fund its growth through existing cash resources. Cash balances as at 30 September 2015 totaled £5,767,000 compared to £5,895,000 as at 31 March 2015 and £6,301,000 as at 30 September 2014.

Operational Highlights

This has been a very busy period in terms of product development and customer engagement. The following additional contract wins were added to the order book during the period, all of which will contribute to revenues in the current financial year and beyond:

·      Enterprise-wide contract with one of the largest US healthcare corporations.

·      Mobile Derived Credential solution sold to a major US Federal Agency.

·      New agreement with a US West Coast bank.

·      First sale following the announcement of the Partner Agreement with Citrix on 13 May 2015.

Strategy and Outlook

Intercede's strategy is to grow its digital trust service and software business from a core of existing high value reference customers to a much broader range of industry sectors and customer size.

Intercede plans to achieve this by continuing to generate revenues in its historically strong markets and to reinvest in the significantly higher growth opportunity that is anticipated in the Cloud-enabled, application service centric, mobile and Internet of Things markets. For example, in the next few weeks Intercede will announce details of a new business unit to be headquartered in California. This new team will focus on creating disruptive opportunities by exploiting the value of digital trust in both the consumer and general enterprise markets.

Intercede has already developed much of the required core technology, such as the MyID and MyTAM platforms. The strategic focus is now moving to packaging Intercede's portfolio of IP assets into new combinations to provide innovative solutions to some of the most intractable challenges of the digital economy. In doing so there is the potential for a step change in revenue and strategic value. To deliver this Intercede has streamlined its development processes, enlarged its sales team, expanded its geographical footprint and invested in new business development functions.

We believe the upside of success is huge. For example, trusted applications on mobile devices will increase convenience, privacy and security for everyday consumer and business applications and, by 2020, the Internet of Things market is estimated to be in excess of 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.

Our expectations are for accelerating year on year growth. In the longer term it has become clear that Intercede is exceptionally well placed to capitalise on the market for digital trust services.

Richard Parris

Chairman & Chief Executive

3 November 2015

Consolidated Statement of Comprehensive Income For the period ended 30 September 2015
	6 months ended 30 September 2015	6 months ended 30 September 2014	Year ended 31 March 2015
	£'000	£'000	£'000
Continuing operations
Revenue	5,547	4,045	8,819
Cost of sales	(324)	(296)	(344)
	__________	__________	__________
Gross profit	5,223	3,749	8,475
Operating expenses	(5,670)	(4,868)	(10,215)
	__________	__________	__________
Operating loss	(447)	(1,119)	(1,740)
Finance income	15	31	68
	__________	__________	__________
Loss before tax	(432)	(1,088)	(1,672)
Taxation	912	383	363
	__________	__________	__________
Profit/(loss) for the period	480	(705)	(1,309)
	__________	__________	__________
Total comprehensive income/(expense) attributable to owners of the parent company	480	(705)	(1,309)
	__________	__________	__________
Earnings/(loss) per share (pence)
- basic	1.0p	(1.4)p	(2.7)p
- diluted	0.9p	(1.4)p	(2.7)p
	__________	__________	__________

Consolidated Balance Sheet As at 30 September 2015
	As at  30 September 2015	As at 30 September 2014	As at 31 March 2015
	£'000	£'000	£'000
Non-current assets
Property, plant and equipment	835	786	853
	__________	__________	__________
Current assets
Trade and other receivables	1,812	1,744	1,074
Cash and cash equivalents	5,767	6,301	5,895
	__________	__________	__________
	7,579	8,045	6,969
	__________	__________	__________
Total assets	8,414	8,831	7,822
	__________	__________	__________
Equity
Share capital	487	487	487
Share premium account	232	232	232
Other reserves	1,508	1,508	1,508
Retained earnings	2,453	3,010	2,257
	__________	__________	__________
Total equity attributable to owners of the parent company	4,680	5,237	4,484
	__________	__________	__________
Non-current liabilities
Deferred revenue	210	48	229
	__________	__________	__________
Current liabilities
Trade and other payables	1,109	1,396	1,126
Deferred revenue	2,415	2,150	1,983
	__________	__________	__________
	3,524	3,546	3,109
	__________	__________	__________
Total liabilities	3,734	3,594	3,338
	__________	__________	__________
Total equity and liabilities	8,414	8,831	7,822
	__________	__________	__________

Consolidated Statement of Changes in Equity For the period ended 30 September 2015
	Share capital	Share premium	Other reserves	Retained earnings	Total
	£'000	£'000	£'000	£'000	£'000
At 1 April 2015	487	232	1,508	2,257	4,484
Purchase of own shares	-	-	-	(488)	(488)
Employee share option plan charge	-	-	-	57	57
Employee share incentive plan charge	-	-	-	147	147
Profit for the period and total comprehensive income	-	-	-	480	480
	________	________	________	________	_______
At 30 September 2015	487	232	1,508	2,453	4,680
	________	________	________	___________	_______
At 1 April 2014	487	232	1,508	3,972	6,199
Purchase of own shares	-	-	-	(379)	(379)
Employee share option plan charge	-	-	-	62	62
Employee share incentive plan charge	-	-	-	60	60
Loss for the period and total comprehensive expense	-	-	-	(705)	(705)
	________	________	________	________	_______
At 30 September 2014	487	232	1,508	3,010	5,237
	________	________	________	___________	_______
At 1 April 2014	487	232	1,508	3,972	6,199
Purchase of own shares	-	-	-	(688)	(688)
Employee share option plan charge	-	-	-	118	118
Employee share incentive plan charge	-	-	-	164	164
Loss for the year and total comprehensive expense	-	-	-	(1,309)	(1,309)
	________	________	________	________	_______
At 31 March 2015	487	232	1,508	2,257	4,484
	________	________	________	___________	_______

Consolidated Cash Flow Statement For the period ended 30 September 2015
	6 months ended 30 September 2015	6 months ended 30 September 2014	Year ended 31 March 2015
	£'000	£'000	£'000
Cash flows from operating activities
Operating loss	(447)	(1,119)	(1,740)
Depreciation	89	72	153
Employee share option plan charge	57	62	118
Employee share incentive plan charge	147	60	164
(Increase)/decrease in trade and other receivables	(742)	41	709
(Decrease) in trade and other payables	(17)	(323)	(593)
Increase in deferred revenue	413	327	341
Interest received	19	31	70
	__________	__________	__________
Cash used in operations	(481)	(849)	(778)
Taxation	912	383	363
	__________	__________	__________
Net cash generated from/(used in) operating activities	431	(466)	(415)
	__________	__________	__________
Investing activities
Purchases of property, plant and equipment	(71)	(101)	(249)
	__________	__________	__________
Cash used in investing activities	(71)	(101)	(249)
	__________	__________	__________
Financing activities
Purchase of own shares	(488)	(379)	(688)
	__________	__________	__________
Cash used in financing activities	(488)	(379)	(688)
	__________	__________	__________
Net decrease in cash and cash equivalents	(128)	(946)	(1,352)
Cash and cash equivalents at the beginning of the period	5,895	7,247	7,247
	__________	__________	__________
Cash and cash equivalents at the end of the period	5,767	6,301	5,895
	__________	__________	__________

Notes to the Consolidated Accounts

For the period ended 30 September 2015

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 2015.

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 2015 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 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:

	6 months ended 30 September 2015	6 months ended 30 September 2014	Year ended 31 March 2015
	£'000	£'000	£'000
UK	313	746	1,301
Rest of Europe	570	815	1,848
North America	4,410	1,628	4,493
Rest of World	254	856	1,177
	__________	__________	__________
	5,547	4,045	8,819
	__________	__________	__________

3   Taxation

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

4   Earnings/(loss) per share

The calculations of the earnings/(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. 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 2015	6 months ended 30 September 2014	Year ended 31 March 2015
	£'000	£'000	£'000
Profit/(loss) for the period	480	(705)	(1,309)
	__________	__________	__________
	Number	Number	Number
Weighted average number of shares - basic	48,426,005	48,571,005	48,526,457
- diluted	50,517,373	48,571,005	48,526,457
	__________	__________	__________
	Pence	Pence	Pence
Earnings/(loss) per share - basic	1.0p	(1.4)p	(2.7)p
- diluted	0.9p	(1.4)p	(2.7)p
	__________	__________	__________

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

	6 months ended 30 September 2015	6 months ended 30 September 2014	Year ended 31 March 2015
	Number	Number	Number
Issued ordinary shares at start of period	48,735,005	48,735,005	48,735,005
Effect of purchase of treasury shares	(309,000)	(164,000)	(208,548)
	__________	__________	__________
Weighted average number of shares - basic	48,426,005	48,571,005	48,526,457
	__________	__________	__________
Add back effect of purchase of treasury shares	309,000	N/A	N/A
Effect of share options in issue	2,016,683	N/A	N/A
	__________	__________	__________
Weighted average number of shares - diluted	50,751,688	48,571,005	48,526,457
	__________	__________	__________

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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