TIDMIGP
RNS Number : 5686Q
Intercede Group PLC
07 June 2018
7 June 2018
INTERCEDE GROUP plc
("Intercede", the "Group" or the "Company")
Preliminary Results for the Year Ended 31 March 2018
Intercede, the leading specialist in digital identity,
credential management and secure mobility, today announces its
preliminary results for the year ended 31 March 2018.
Financial Highlights
-- Revenues of GBP9.2m (2017: GBP8.3m), an 11% increase compared
to last year. This reflects a strong end to the year and growth in
Intercede's core markets of government, defence contractors and
large, highly secure corporate enterprises.
-- Loss for the year of GBP3.8m (2017: loss of GBP3.9m).
-- A cost-cutting exercise removed significant costs from the
business without impacting operational capability. Intercede
started the new financial year with an operating cost run rate that
is more than 20% lower (approximately GBP3m per annum) than at this
point last year.
-- Gross cash balances of GBP2.3m at 31 March 2018 (2017:
GBP6.9m). The impact of significant orders received in the last two
months of the year resulted in increased gross cash balances of
GBP4.7m as at 30 April 2018.
Operating Highlights
-- Significant first half contract wins include an award from a
major US Aerospace & Defence contractor and a sale to a large
UK defence organization. In additional there were initial MyID
license sales to the largest US military shipbuilding company and
to one of the world's largest diversified natural resource
companies.
-- The second half of the year saw the sale of a mobile national
identity solution to a Middle Eastern country and a license order
from another major US healthcare provider.
-- The mobile national identity solution sale incorporates
Intercede's MyID mobile authentication technology to allow citizens
to generate a digital identity on their smart phone via a
government app. Intercede's accredited technology, and continued
work with a range of Mobile Device Managers (MDMs), means it is
well placed to meet the markets' demand for mobile authentication
solutions.
-- Following second half cost reductions, the number of
employees and contractors as at 31 March 2018 has been reduced to
98 (2017: 121).
-- New Chief Executive and reorganized management team appointed
to return Intercede to profitability.
Chuck Pol, Chairman, said:
"The new leadership team are fully focused on building on recent
successes and are committed to improving standards, enhanced
operating performance and the conversion of recent product
development into meaningful revenue generation and growth.
The investment in the MyID platform puts Intercede in a strong
position to provide the market with reliable Digital Trust. This is
demonstrated by the large orders that were received in the last two
months of the year. Following the second half restructuring, the
cost base has been brought back in line with future revenue
forecasts and the Board are confident that Intercede will grow and
return to profit within the next two years."
Contact
Intercede Group plc Tel. + 44 (0)1455 558111
Klaas van der Leest Chief Executive
Andrew Walker Finance Director
FinnCap Tel. + 44 (0)20 7220 0500
Stuart Andrews Corporate Finance
Simon Hicks Corporate Finance
About Intercede
Intercede is a cybersecurity company specialising 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.
The following sections are extracted from the Company's
forthcoming Annual Report and contain graphics to support the
commentary. These graphics can only be viewed by reading a PDF
version of this announcement, which can be accessed by clicking
here.
http://www.rns-pdf.londonstockexchange.com/rns/5686Q_1-2018-6-6.pdf
For those unable to access the PDF, the data represented
graphically is instead set out in tabular format below.
INTERCEDE GROUP plc
Preliminary Results for the Year Ended 31 March 2018
CHAIRMAN'S STATEMENT
The last financial year was another difficult period for
Intercede, following a challenging 2016/2017. The Board remains
confident in the Company, its products and the potential to be a
leading player in the fast-evolving cybersecurity market.
Following review, the Board agreed to make several changes and
brought in a new Chief Executive and reorganized the management
team. The new leadership team are fully focused on building on
recent successes and are committed to improving standards, enhanced
operating performance and the conversion of recent product
development into meaningful revenue generation and growth.
Strategy & Partnerships
At the heart of Intercede's strategy remains its market leading
product MyID. With over 80 blue chip deployments worldwide and a
number of important contract wins that have been added in the last
12 months, MyID continues to be the solution of choice for major
public key infrastructure (PKI) system deployments. Intercede is
working closely with some of the leading industry IT majors and
looking to form more partnerships, from which a commercial
relationship could result in a significant increase in sales
revenues.
Results
Revenue for the year was GBP9.2m (2017: GBP8.3m), which
represents an 11% increase on the previous year. This revenue
generation has predominantly come from existing customers in
Intercede's core markets of government, defence contractors and
large, highly secure corporate enterprises. Against a backdrop of
continued investment in technology, the Group made a loss for the
year of GBP3.8m in the year ended 31 March 2018 (2017:
GBP3.9m).
In the second half of the year, a cost-cutting review removed
significant costs from the business without impacting our
operational capability. The Group has started the new financial
year with an operating cost run rate that is more than 20% lower
(approximately GBP3m per annum) than at this point last year.
Board Changes
The founder of Intercede, Richard Parris, ceased his roles as
Chairman & Chief Executive and became a Non-Executive Director
of the Company on 28 March 2018. I would like to thank Richard for
his many years of service to Intercede. His vision and hard work
have helped make the Company what it is today.
Jayne Murphy ceased her role as Operations Director on 19 April
2018. I thank Jayne for her professionalism and hard work during
her many years of service to Intercede.
I was appointed as Non-Executive Chairman on 28 March 2018 and
Klaas van der Leest was appointed as Chief Executive on 10 April
2018.
I have been on the Intercede Board since 1 June 2017 as the
Company's Senior Independent Non-Executive Director. Prior to this
I was Chairperson of Vodafone Americas, a role held since 2013 and
in which I led the development of applications for the Internet of
Things ("IoT"). I joined Vodafone Americas as President of its
Global Enterprise division where I built a US-wide mobile business
focused exclusively on Enterprises. I have also held senior roles
at BT Americas including Chief Operating Officer and President. On
leaving BT in 2008, I was President of BT Global Financial Services
and was responsible for BT's relationships with the top 40 global
investment banks.
Klaas is an experienced executive with extensive sales,
marketing, business development and general management experience
in IT and IT services. He has significant international knowledge
and experience as a result of various roles with remits across
EMEA, Asia-Pac and North America. Klaas has worked for a number of
large and small, quoted and privately owned organizations in market
leading and turnaround situations including CA Technologies,
Intelecom UK, Amulet Hotkey, Global Crossing, Attenda and Logica.
He has proven expertise in the development and execution of
national and international sales growth, 'go to market' initiatives
and customer focused expansion strategies.
Outlook
Cyber-threats, whether driven by individuals, organizations or
nation states are increasing in sophistication and the economic and
reputational cost is growing exponentially. Intercede's MyID
continues to enable our customers to eliminate reliance on the use
of potentially insecure passwords for secure authentication. In
doing so, they become increasingly resistant to social engineering
and other cyber-attacks based on compromising employee (or end
customer) login details.
The investment in new formats and components of MyID puts
Intercede in a strong position to provide the market with reliable
Digital Trust. Intercede experienced a strong end to the financial
year which included the receipt of a large US Federal Government
license order on 28 March 2018. License orders relating to this
deployment have historically been received every 12 months or so
and therefore the revenue for the years ending 31 March 2019 and
2020 is particularly sensitive to the timing of future orders.
Following reviews, the cost base has been brought back in line with
future revenue forecasts and the Board are confident that Intercede
will grow and return to profit within the next two years.
Chuck Pol
Chairman
7 June 2018
INTERCEDE GROUP plc
Preliminary Results for the Year Ended 31 March 2018
STRATEGIC REPORT
Introduction
Intercede is a cybersecurity software and services company
specialising in digital trust for a hyper-connected, increasingly
mobile world.
The Group's vision is a world without passwords and its mission
is to provide the enabling technology and services to make this
possible for people and things. Intercede's core pillars of
strength can be outlined as follows:
-- For over 20 years, Intercede has been providing trusted
identities to people, devices and apps for some of the world's
largest corporations and government agencies.
-- Intercede's product innovation roadmap leverages over 1,000
man years of internal expertise and is underpinned by strong
customer demand and a committed set of international partners.
-- New solutions can be engineered at high speed by a specialist
team with longevity of employment. Product design is also informed
by major customers and interoperability partners.
-- Software is US and UK Government accredited, which secures
access to regulated markets. Traditionally it was delivered as an
on-premise solution but it can now be delivered via the Cloud,
mobile and web applications to make it a scalable solution with the
potential for exponential growth.
These core strengths mean that Intercede is well placed to take
advantage of opportunities in the market, in particular:
-- Passwords are universally recognised as being insecure and
inconvenient by organizations and end users.
-- A growing number of governments and industry bodies are
enacting legislation to mandate enhanced levels of security by
removing passwords. This increased regulation covers a wide range
of activities including banking & finance, general data
protection and critical national infrastructure.
-- In-house cybersecurity skills are in short supply creating an
increased demand for outsourced security solutions.
-- There is a growing demand for cloud-based identity as a
service (IDaaS) solutions to meet the scalability requirements of
large end user populations, particularly in the consumer and IoT
markets.
Intercede has the heritage, skills and technology platform to
deliver digital identity solutions across a wide range of market
sectors and geographical regions, meeting the growing demand for a
secure and convenient alternative to passwords.
Operational Review
It has been a year of major change. As well as the Board and
senior management changes already highlighted in the Chairman's
Statement, actions have been taken to reduce the cost base and
there is a renewed focus on the MyID platform at the core of
Intercede's strategy.
Customers and partners recognize Intercede's leading expertise
in cryptographic key management, which form market leading
solutions that cannot be readily duplicated by the industry majors
themselves. To widen the market into which Intercede can sell its
products MyID can be deployed in various formats; namely
on-premise, cloud-based and via web and mobile applications. One of
the cornerstones of the Group's strategy is to utilize the various
formats and components of our MyID technology to provide a solution
tailored to the user; be they a government, an employee or the
enterprise's end customer.
An exciting example of this in action is the recent sale of a
MyID solution to a Middle Eastern country to issue mobile
government identities to its citizens. This solution incorporates
Intercede's mobile application authentication technology to allow
citizens to easily and securely generate a digital identity on
their smart phone via a government app. Using Intercede's MyID
software, the digital identity can then be used for accessing a
mobile eco-system of government services, healthcare, banking and
e-commerce. This solution catapults them to being a world-leading
nation for the mobile-first delivery of digital services.
There is also demand for Intercede's mobile authentication
technology from existing US Federal agency customers. Intercede
continues to work with a range of Mobile Device Managers (MDMs),
including AirWatch, MobileIron, Citrix and Blackberry to extend the
PIV program to issue derived credentials to a federal user's
smartphone, tablet or laptop. Intercede's MyID was the first
derived PIV Credential solution to receive an Authority to Operate
(ATO) for a US Federal agency. It is pleasing to note that the
pipeline for the next financial year contains a number of derived
proof of concept opportunities for various US Federal agencies.
Markets and Products
Intercede's solutions are deployed in many market sectors for a
variety of customers from governments to defence contractors and
large enterprises. MyID is particularly well known within US
Federal agencies as Intercede were one of the first to issue and
manage FIPS-201 compliant PIV credentials to cards and derived PIV
credentials to mobile devices.
Intercede works with some of the largest organizations in the
world; both as customers or as partners.
Intercede's customer base includes:
US Department of Homeland Security, Kuwait National ID, US
Federal Aviation Administration, US Nuclear Regulatory Commission,
US Social Security Administration, HM Government (UK), RDW, Airbus,
Boeing, Lockheed Martin, Northrop Grumman, Australian Government
Department of Defence, Booz Allen Hamilton, Deutsche Telekom, BASF,
REWE, Telus, United Health Group, Wells Fargo, Handelsbanken,
Coutts, Barclays, Swedbank, ANZ.
Intercede's Technology Partners include:
Devices - AET, Athena (NXP), Gemalto, Giesecke & Devrient,
IDEMIA (Oberthur), SafeNet, SafeNet AT, TCOS, TicTok, Yubico
PKI - DigiCert (Symantec), EJBCA (PrimeKey), Entrust, Microsoft,
Verizon (Unicert)
Mobile - Google/Android, Apple/iOS, AirWatch, Citrix,
MobileIron, Blackberry, Certrify
Card Printers - DataCard (Entrust), DIGID, Fargo (HID), Get
Group, Magicard, Zebra
Customers and partners value MyID because it is highly
configurable and feature-rich and interfaces with a broad range of
third party technologies that make up a PKI infrastructure.
Intercede's product strategy continues to be working with partners
where possible to sell MyID to an end user as part of an end-to-end
PKI solution. The Group sells its products through a global network
of authorised partners. They vary in size from large international
consultancies and cybersecurity companies to local system
integrators and value added resellers.
It is important to make MyID customisable so it can be easily
integrated into a partner's solution but this can be achieved by
giving the partner the toolkit to do it themselves, rather than
Intercede continually changing the core MyID product to address
each individual solution. This modular approach means Intercede
only produces core formats of MyID (on-premise, Cloud, mobile etc),
which become modules around which a partner can customise their
solution using either a simple API (Application Programming
Interface) or an SDK (Software Development Kit).
Trading Results
Revenues for the year ended 31 March 2018 totalled GBP9,204,000,
an 11% increase on the previous year's revenues of GBP8,286,000.
Although orders from US Federal agencies have been slower than
expected, it is pleasing to see growth in newer markets and
revenues generated in the second half of the year represent a high
for the Group.
As previous reported, the first half of the year saw significant
contract wins including an award from a major US Aerospace &
Defence contractor, to manage digital identities for 130,000
devices, and a sale to a large UK defence organization. In
additional there were initial MyID license sales to the largest US
military shipbuilding company and to one of the world's largest
diversified natural resource companies. Although both of these
initial sales were small, they will help to drive future revenue
growth as successful implementation should lead to follow-on orders
for tens of thousands of licenses.
The second half of the year saw improvement, with significant
revenue generated from existing customers as well as new customers.
This includes the aforementioned sale to allow a Middle Eastern
country to issue mobile national identities to its citizens. For
Intercede, this is a strategically important project that exploits
many of the new technologies Intercede has developed over the past
few years. This Middle Eastern country is a top tier reference
customer for other nations to follow and, through Intercede's
network of partners, the target is to replicate this solution in
multiple geographic territories. In additional to this win,
Intercede secured a license order with another major healthcare
provider, converted a pilot deployment with a large European bank
into a full deployment and secured an initial proof of concept sale
in respect of the 2020 US Census. All of these wins are expected to
generate incremental revenue in the next financial year.
Regional Sales
GBPm North America Rest of World
2014 6.0 3.8
2015 4.5 4.3
2016 8.7 2.3
2017 6.4 1.9
2018 6.5 2.7
The US represents Intercede's largest market with
sales to North America making up 71% of total
sales during FY 2018.
Revenue Breakdown
Professional Software
GBPm S&M Services Licenses Other
2014 2.8 2.1 4.6 0.3
2015 3.1 2.5 2.6 0.6
2016 3.5 2.6 4.8 0.1
2017 4.0 1.7 2.6 0.0
2018 4.4 1.4 3.4 0.0
The last five years has seen progressive growth
in recurring Support & Maintenance (S&M) revenues
due to a cumulative increase in customers. Software
license revenues from the traditional MyID business
tend to be lumpy. Professional services is slightly
down on last year partly due to large license
orders received in the second half of the year
that are expected to be implemented in the next
financial year. Intercede is also encouraging
new customers to stick to core product configurations,
thereby reducing the need to implement costly
customisations.
In the second half of the year, a cost-cutting review removed
significant costs from the business without impacting our
operational capability. This year contains exceptional one-off
costs connected with the savings, such as Settlement Agreement
costs, which are primarily responsible for a 6% increase in
operating expenses from GBP12,891,000 to GBP13,669,000. The Group
has started the new financial year with an operating cost run rate
that is more than 20% lower (approximately GBP3m per annum) than at
this point last year.
The increase in revenues is largely offset by the increase in
operating expenses, leading to a GBP4,506,000 operating loss (2017:
GBP4,721,000 operating loss).
Revenue, Opex, Profit/Loss & Cash
GBPm Revenue OpEx Profit/Loss Cash
2014 9.8 9.4 0.8 7.2
2015 8.8 10.2 -1.3 5.9
2016 11.0 12.5 -1.0 5.3
2017 8.3 12.9 -3.9 6.9
2018 9.2 13.7 -3.8 2.3
The substantial increase in operating expenses
(OpEx) over the last five years primarily reflects
high levels of strategic investment to exploit
new market opportunities. This investment is expected
to result in increased revenue and cash flow generation
in future periods. The 2018 year end cash does
not include the impact of significant orders received
in the last two months of the year with gross
cash balances as at 30 April 2018 increasing to
GBP4.7m.
Staff costs continue to represent the main area of expense,
representing 76% of total operating expenses (2017: 78%). The
average number of employees and contractors was 119, down from the
previous year's average of 125. However, as a result of the second
half cost reductions referred to above, the number of employees and
contractors as at 31 March 2018 had been reduced to 98 (2017:
121).
Employees
Average Employees Year end Employees
2014 90 103
2015 113 119
2016 125 126
2017 125 121
2018 119 98
Intercede employ one of the largest teams with
cryptographic key management experience and expertise
anywhere in the world.
Expenditure on research and development (R&D) activities
totaled GBP3,736,000 (2017: GBP3,994,000), approximately 57% of
which related to the areas of strategic investment outlined above
(2017: 62%). In accordance with the IFRS recognition criteria, the
Board has continued to determine that all internal R&D costs
incurred in the year are expensed. No development expenditure has
been capitalised as at 31 March 2018 (2017: GBPnil).
Research & Development (R&D)
R&D Tax Credit (in
GBPm R&D Expenditure arrears)
2014 2.9 0.4
2015 3.6 0.4
2016 3.9 0.9
2017 4.0 0.9
2018 3.7 1.1
Research and development (R&D) is an important
part of Intercede's investment strategy. Money
spent on people qualifies, in arrears, for UK
government tax credits which are paid in cash
in the following year.
The net finance cost for the year was GBP442,000 (2017:
GBP57,000). This reflects a full year of interest payable on the
convertible loan notes that were issued in January 2017 and a
partial year of interest payable on the additional GBP510,000
convertible loan notes that were issued, under the same instrument,
on 25 August 2017.
A GBP1,118,000 taxation credit in the period (2017: GBP888,000
taxation credit) primarily reflects cash received following the
2017 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 130% of qualifying
R&D expenditure to be offset against taxable profits.
A loss for the year of GBP3,830,000 (2017: loss of GBP3,890,000)
resulted in a basic and fully diluted loss per share of 7.6p (2016:
loss per share 8.0p).
Financial Position
The Group's cash position at 31 March 2018 was GBP2,272,000
(2017: GBP6,891,000), but it is worth noting that the year end cash
position does not include the impact of significant orders received
in the last two months of the year. As at 30 April 2018, gross cash
balances totalled GBP4.7m.
The cost-cutting review has enabled the Group to exit one of its
UK properties, which has been put up for sale and is expected to
realise a net receipt of GBP0.4m during the new financial year.
The Group has no plans to commence the payment of dividends and
will do so when the Board considers this to be appropriate.
Treasury
The Group manages its treasury function as part of the finance
department. Whilst the Group's operations are primarily based in
the UK it has successfully exported its technology throughout the
world for many years. This results in invoices being raised in
currencies other than sterling; the most notable being US dollars
and euros. A number of suppliers also invoice the Group in US
dollars and euros. The Group's current policy is not to hedge these
exposures and the exchange differences are recognised in the
statement of comprehensive income in the year in which they
arise.
Key Performance Indicators (KPIs)
2014 2015 2016 2017 2018
Sales growth 45% (10%) 25% (25%) 11%
Export sales 91% 85% 96% 95% 94%
North American
sales 61% 51% 79% 77% 71%
New deployments
with revenues over
GBP20,000 10 6 6 8 10
Principal Risks and Uncertainties
The principal risks and uncertainties facing the Group are as
follows:
-- The Group operates in a complex and competitive technological
environment so the business will be negatively affected if the
Group does not enhance its product offerings and/or respond
effectively to technological change. This risk is mitigated by
ongoing investment in research and development.
-- The Group operates in multiple markets, both geographically
and by sector, so there is a risk that territory and global
macro-economic conditions may result in one or more of these
markets being adversely affected and the revenues of the business
impacted accordingly. This risk is mitigated to an extent, both
through the long term nature of customer relationships and the
diversification that results from operating in multiple
markets.
-- Technology companies are exposed to intellectual property
infringement and piracy. The Group rigorously defends its
intellectual property in the primary jurisdictions within which it
operates.
-- The Group's performance is largely dependent on the
experience and expertise of its employees. The loss or lack of key
personnel is likely to adversely impact the Group's results. To
mitigate this risk, the Group aims to put in place appropriate
management structures and to provide competitive remuneration
packages to retain and attract key personnel.
By order of the Board
Klaas van der Leest Andrew Walker
Chief Executive Finance Director
7 June 2018 7 June 2018
Consolidated Statement of Comprehensive Income for the year
ended 31 March 2018
2018 2017
GBP'000 GBP'000
Continuing operations
Revenue 9,204 8,286
Cost of sales (41) (116)
-------- --------
Gross profit 9,163 8,170
Operating expenses (13,669) (12,891)
-------- --------
Operating loss (4,506) (4,721)
Finance income 10 13
Finance costs (452) (70)
-------- --------
Loss before tax (4,948) (4,778)
Taxation 1,118 888
-------- --------
Loss for the year (3,830) (3,890)
-------- --------
Total comprehensive expense attributable
to owners of the parent company (3,830) (3,890)
-------- --------
Loss per share (pence)
- basic (7.6)p (8.0)p
- diluted (7.6)p (8.0)p
-------- --------
Consolidated Balance Sheet as at 31 March 2018
2018 2017
GBP'000 GBP'000
Non-current assets
Property, plant and equipment 195 695
------- -------
Current assets
Assets held for sale 373 -
Trade and other receivables 4,709 1,280
Cash and cash equivalents 2,272 6,891
------- -------
7,354 8,171
------- -------
Total assets 7,549 8,866
------- -------
Equity
Share capital 505 499
Share premium 673 673
Equity reserve 66 60
Merger reserve 1,508 1,508
Accumulated deficit (5,719) (2,354)
------- -------
Total equity (2,967) 386
------- -------
Non-current liabilities
Convertible loan notes 4,670 4,124
Deferred revenue 324 141
4,994 4,265
Current liabilities
Trade and other payables 1,857 1,390
Deferred revenue 3,665 2,825
------- -------
5,522 4,215
------- -------
Total liabilities 10,516 8,480
------- -------
Total equity and liabilities 7,549 8,866
------- -------
Consolidated Statement of Changes in Equity for the year ended
31 March 2018
Share Share Equity Merger Accumulated Total
capital premium reserve reserve deficit equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
As 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 new shares 12 441 - - - 453
Equity component of convertible
loan notes - - 60 - - 60
Loss for the year and
total comprehensive expense - - - - (3,890) (3,890)
------- ------- ------- ----------- -------
As at 31 March 2017 499 673 60 1,508 (2,354) 386
Purchase of own shares - - - - (147) (147)
Employee share option
plan charge - - - - (19) (19)
Employee share incentive
plan charge - - - - 493 493
Issue of new shares 6 - - - - 6
Re-issuance of treasury
shares - - - - 138 138
Equity component of convertible
loan notes - - 6 - - 6
Loss for the year and
total comprehensive expense - - - - (3,830) (3,830)
------- ------- ------- ------- ----------- -------
As at 31 March 2018 505 673 66 1,508 (5,719) (2,967)
------- ------- ------- ------- ----------- -------
All amounts included in the table above are attributable to
owners of the parent company.
Consolidated Cash Flow Statement for the year ended 31 March
2018
2018 2017
GBP'000 GBP'000
Cash flows from operating activities
Operating loss (4,506) (4,721)
Depreciation 156 194
Loss on disposal of property, plant and
equipment - 48
Employee share option plan (credit)/charge (19) 60
Employee share incentive plan charge 493 488
Employee unit incentive plan charge/(credit) 2 (20)
Employee unit incentive plan payment (8) (28)
Increase in trade and other receivables (3,340) (364)
Increase/(decrease) in trade and other payables 434 (417)
Increase in deferred revenue 1,023 820
Cash used in operations (5,765) (3,940)
Finance income 13 14
Finance costs on convertible loan notes (344) -
Taxation 1,118 888
------- -------
Net cash used in operating activities (4,978) (3,038)
------- -------
Investing activities
Purchases of property, plant and equipment (29) (73)
------- -------
Cash used in investing activities (29) (73)
------- -------
Financing activities
Purchase of own shares (141) (143)
Proceeds from issue of ordinary share capital - 453
Proceeds from re-issuance of treasury shares 138 -
Proceeds from issue of convertible loan
notes 510 4,495
Convertible loan note issue costs (27) (321)
------- -------
Cash generated from financing activities 480 4,484
------- -------
Net (decrease)/increase in cash and cash
equivalents (4,527) 1,373
Cash and cash equivalents at the beginning
of the year 6,891 5,289
Exchange (losses)/gains on cash and cash
equivalents (92) 229
------- -------
Cash and cash equivalents at the end of
the year 2,272 6,891
------- -------
Preliminary Results for the Year Ended 31 March 2018
NOTES
1. The financial information set out in this announcement does
not constitute the Group's Statutory Accounts for the years ended
31 March 2018 or 2017, but is derived from those accounts.
Statutory Accounts for 2017 have been delivered to the Registrar of
Companies and those for 2018, which have been approved by the Board
of Directors, will be delivered following the Group's Annual
General Meeting. The Company's auditors have reported on those
accounts; their reports were unqualified and did not contain
statements under Section 498 of the Companies Act 2006.
The Annual General Meeting will be held at 2.00 pm on Wednesday
19 September 2018 at the registered office of the Company. Copies
of the full Statutory Accounts and the Notice of Annual General
Meeting 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.
2. SEGMENTAL REPORTING
All of the Group's revenue, operating losses and net liabilities
originate from operations in the United Kingdom. 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:
2018 2017
GBP'000 GBP'000
UK 533 403
Rest of Europe 963 960
North America 6,506 6,367
Rest of World 1,202 556
------- -------
9,204 8,286
------- -------
3. OPERATING LOSS
Operating loss is stated after charging/(crediting):
2018 2017
GBP'000 GBP'000
Staff costs 9,868 10,049
Settlement Agreement costs 190 -
Compensation for loss of office paid to
directors and key management 334 -
Foreign exchange loss/(gain) 155 (165)
Depreciation of property, plant and equipment 156 194
Operating lease rentals 397 390
Cost of sales 41 116
Other expenses 2,569 2,423
------- -------
13,710 13,007
------- -------
Included in the costs above is research and development
expenditure totalling GBP3,736,000 (2017: GBP3,994,000).
4. TAXATION
The tax credit comprises: 2018 2017
GBP'000 GBP'000
Current year - UK corporation tax - -
Current year - US corporation tax (30) (34)
Research and development tax credits relating
to prior years 1,148 922
------- -------
Taxation 1,118 888
------- -------
The Group has unused tax losses of GBP13,854,000 (2017:
GBP11,773,000) and unrecognised deferred tax assets of GBP2,355,000
(2017: GBP2,001,000) calculated at the UK corporation tax rate of
17% (2017: 17%).
5. LOSS PER 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. Basic and diluted loss
per share are the same as potential dilution cannot be applied to a
loss making year.
2018 2017
GBP'000 GBP'000
Loss for the year (3,830) (3,890)
---------- ----------
Number Number
Weighted average number of shares - basic 50,212,714 48,835,080
- diluted 50,212,714 48,835,080
---------- ----------
Pence Pence
Loss per share - basic (7.6)p (8.0)p
- diluted (7.6)p (8.0)p
---------- ----------
The weighted average number of shares used in the calculation of
basic and diluted earnings per share for each year were calculated
as follows:
2018 2017
Number Number
Issued ordinary shares at start of year 49,903,143 48,735,005
Effect of treasury shares (115,623) (294,000)
Effect of issue of ordinary share capital 425,194 394,075
---------- ----------
Weighted average number of shares - basic 50,212,714 48,835,080
---------- ----------
Add back effect of treasury shares N/A N/A
Effect of share options in issue N/A N/A
Effect of convertible loan notes in issue N/A N/A
---------- ----------
Weighted average number of shares - diluted 50,212,714 48,835,080
---------- ----------
6. DIVIDEND
The Directors do not recommend the payment of a dividend.
7. ASSETS HELD FOR SALE
An office based in the UK is presented as an asset held for sale
following the commitment of the Group, on 23 February 2018, to a
plan to sell the property. Efforts to sell the asset have commenced
and a sale is anticipated within the next 12 months.
The asset has been reclassified from Property, plant and
equipment into Current assets at its carrying value of GBP373,000.
This is estimated to be lower than its fair value less costs to
sell, so no impairment loss is required.
8. SHARE CAPITAL
2018 2017
GBP'000 GBP'000
Authorised
481,861,616 ordinary shares of 1p each (2017:
481,861,616) 4,819 4,819
------- -------
Issued and fully paid
50,523,926 ordinary shares of 1p each (2017:
49,903,143) 505 499
------- -------
The increase in issued and fully paid ordinary shares of 1p each
represents the issue of 620,783 shares on 25 July 2017 to
facilitate the July 2017 Free Share award.
As at 31 March 2018, the Company had 41,645 ordinary shares held
in treasury (2017: 294,000). During the year, the Company re-issued
252,355 treasury shares to a director and a senior manager.
9. Convertible loan notes
2018 2017
GBP'000 GBP'000
Non-current
8% Convertible loan notes (29 December 2021) 4,670 4,124
------- -------
Borrowings are repayable as follows:
2018 2017
GBP'000 GBP'000
Between two and five years 4,670 4,124
------- -------
On 30 January 2017 the Company issued GBP4,495,000 convertible
loan notes that carry an interest coupon of 8.0% pa payable
quarterly. The Company has granted security by way of a composite
guarantee and debenture in favour of Welbeck Capital Partners LLP
to secure the repayment of principal and interest due on the
convertible loan notes to the holders. Holders of the convertible
loan notes may convert into ordinary shares, at a conversion price
of 68.8125 pence per ordinary share, at any time until the final
redemption date of 29 December 2021.
On 25 August 2017 the Company issued GBP510,000 convertible loan
notes under the same convertible loan note instrument.
The amount recognised in the balance sheet in relation to the
convertible loan notes is as follows:
2018 2017
GBP'000 GBP'000
Nominal value of convertible loan note issue 5,005 4,495
Issue costs (348) (321)
Equity component at date of issue (66) (60)
------- -------
Liability component at date of issue 4,591 4,114
Effective interest rate adjustment 79 10
------- -------
Liability component at 31 March 4,670 4,124
------- -------
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR FKADKOBKDPAK
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