Interim Results

Intercede Group PLC 7 December 2001 INTERCEDE GROUP plc ('Intercede' or 'the Group') Interim Results for the Six Months Ended 30 September 2001 Intercede (AIM: IGP), a leading developer of security management software, today announces its interim results for the six months ended 30 September 2001. KEY POINTS - Turnover of £471,000 (H1 2000: £1,140,000 which included £664,000 from a single major contract with Lloyds TSB) - Loss before tax of £1,190,000 (H1 2000: £313,000) - Technical resource focused exclusively on development of proprietary edefice(TM) product for the smart card and PKI market - Edefice(TM) version 6.0 successfully developed and launched on time and within budget - OEM agreement signed with Oberthur Card Systems in September 2001 - New OEM agreement with another major smart card industry player announced today which includes a commitment to purchase an initial number of licences worth US$800,000 - Edefice(TM) successfully installed with a major European bank - Considerable scope to grow revenue streams through enlarged edefice(TM) sales channel Richard Parris, Chairman & CEO of Intercede, said today: 'Our transformation from a third party systems integrator into a proprietary software developer is complete. Although this has had an inevitable impact on revenues in the short term, we are now more strongly placed to enter the next phase of our growth. The establishment of OEM agreements with market leaders, in addition to our other sales channels, provides us with every reason to be confident.' 7 December 2001 ENQUIRIES: Intercede Group plc Tel. 01455 558111 Richard Parris, Chairman & Chief Executive Andrew Walker, Finance Director College Hill Tel. 020 7457 2020 Archie Berens Clare Warren INTERCEDE GROUP plc Interim Results for Six Months Ended 30 September 2001 CHAIRMAN'S STATEMENT Introduction Following our listing on the Alternative Investment Market at the start of 2001, Intercede has taken a number of significant steps towards achieving its ambition of becoming a significant player in the global IT security management market. During the course of our development, we have made no secret of our intention to transform ourselves from being a supplier and integrator of third party security products to becoming a supplier and licensor of proprietary software. I am pleased to report that, following the launch of the two latest versions of our proprietary edefice(TM) product, this transformation is now complete. Moreover, the development of our own product has been underpinned by important agreements with two major smart card industry players, through which edefice(TM) will be incorporated into those companies' core product lines thereby offering considerable scope for the generation of significant future revenues. Results The overriding need to develop and release further versions of edefice(TM) and to link up with key OEM's in the smart card management market has seen Intercede focusing its technical resources almost entirely to this end. The Group has neither sought nor undertaken new project work during the six months ended 30 September 2001. Revenues for the period therefore related primarily to the servicing of existing customers through the resale of additional software licences and associated third party hardware and maintenance services. Revenues for the period were £471,000, compared with £1,140,000 for the six months ended 30 September 2000. It should be noted that the previous period benefited from a single large project with Lloyds TSB. Excluding this project, revenue for the comparable period would have been £476,000. The loss before tax for the period was £1,190,000 (2000: £313,000) resulting in a loss per share of 7.3p (2000: 2.9p). Business and Product Development In the period following listing, the Group has taken steps to position itself as a global business, able to earn long term revenues from its proprietary product, edefice(TM). A great deal of time and resource has been devoted to this purpose, culminating in the release of edefice(TM) 6.0, as announced on 16 October 2001. Edefice(TM) 6.0 is a smart card and Public Key Infrastructure ('PKI') security management solution for corporate enterprises and government customers. It is designed to enable business managers to administer the life cycle of smart cards and associated PKI credentials through a distributed web based management system. Its competitive advantage lies in its product independence. It can simultaneously support multiple smart card manufacturers and PKI products within a single fully distributed network environment. It was because of this technical superiority that edefice(TM) was selected by Oberthur Card Systems, under a global OEM licence, as the smart card management system for their AuthentIC family of security solutions. The relationship with Oberthur provides the opportunity to earn license royalties from the lucrative Identrus market. A further contract award, initially resulting in a pilot installation, has also already been secured from a major European bank. Most recently, we have today announced the signing of an agreement with another major industry player to embed elements of the edefice(TM) distributed security management system across their range of products. As a global provider of digital identity solutions, our new Partner has wide access to a number of significant international channel partners including security service companies, computer hardware manufacturers, operating systems developers and systems integrators. Under the terms of the agreement, the Partner has committed to purchase licences to the value of US$800,000 against a series of development milestones which are scheduled for completion by March 2002. In addition to the opportunities for growth afforded by the OEM agreements outlined above, Intercede has a number of other important channel relationships. This currently includes, amongst others, Compaq and ICL in the UK and, more recently, the development of new channel opportunities overseas. Each of these channels are already engaged on at least one major prospect for edefice(TM), giving us good grounds to be optimistic of revenue generation during the next six to nine months and beyond. Finance As at 30 September 2001, the Group had cash balances totalling £1,071,000 remaining out of the £2,185,000 raised at the time of the listing. The cash position has been consistently higher than budgeted throughout the year to date reflecting the Group's commitment to strong financial control. On 6 December 2001, the Group obtained further funding totalling £981,629 in the form of a 5% convertible unsecured loan, which is convertible at a price of 60p per share (up to a maximum of 1,636,048 shares) on or prior to the fifth anniversary of the drawdown of the funds. To the extent that the loan has not been converted, it shall be repaid on such fifth anniversary. The loan, which was arranged by Credo Corporate Finance Limited, the Group's corporate finance advisers, will provide the Group with additional flexibility to make the most of the opportunities provided by both current and potential future channel partner relationships. Associated costs total £50,000. In addition Credo Corporate Finance Limited have been granted a warrant, subject to shareholder approval, to subscribe for 0.5% of the fully diluted share capital at a subscription price of 60p per share. The warrant must be exercised by 7 December 2004. Current Trading and Outlook Although the downturn in the world economy has created difficult trading conditions for the IT sector, we nevertheless anticipate an acceleration in smart card related business for the second half of the current financial year and beyond. The unfortunate events of 11 September 2001 can only increase the likelihood that growing volumes of smart cards will need to be deployed for security purposes. Our business goal is to earn a license fee on each card issued and managed. Given our success to date in bringing edeficeO to market and the agreements we have entered into, we believe that we are in an excellent position to capitalize on the undoubted opportunities that exist in this area. Richard Parris Chairman & Chief Executive 7 December 2001 INTERCEDE GROUP plc Consolidated Profit and Loss Account 6 months 6 months Year ended ended ended 30 30 31 September September March 2001 2000 2001 £'000 £'000 £'000 Turnover 471 1,140 2,014 Cost of sales (260) (542) (945) Gross profit 211 598 1,069 Other operating expenses (1,419) (894) (2,188) Operating loss (1,208) (296) (1,119) Interest receivable and similar income 41 7 48 Interest payable and similar charges (23) (24) (54) Loss on ordinary activities before taxation, (1,190) (313) (1,125) being retained loss on ordinary activities after taxation and for the period Basic and diluted loss per ordinary share (7.3)p (2.9)p (8.8)p INTERCEDE GROUP plc Consolidated Balance Sheet As at As at As at 30 30 31 September September March 2001 2000 2001 £'000 £'000 £'000 Fixed assets Tangible assets 128 110 119 Current Assets Stocks 5 17 8 Debtors 184 1,427 663 Cash at bank and in hand 1,071 688 2,042 1,260 2,132 2,713 Creditors: Amounts falling due within one (1,110) (1,658) (1,341) year Net current assets 150 474 1,372 Total assets less current liabilities 278 584 1,491 Creditors: Amounts falling due after more (36) (525) (59) than one year Net Assets 242 59 1,432 Capital and reserves Called-up share capital 4,090 2,916 4,090 Share premium account 1,011 - 1,011 Other reserves 1,508 1,508 1,508 Profit and loss account (6,367) (4,365) (5,177) Shareholders' funds - all equity 242 59 1,432 INTERCEDE GROUP plc Consolidated Cash Flow Statement 6 months 6 months Year ended ended ended 30 30 31 September September March 2001 2000 2001 £'000 £'000 £'000 Net cash outflow from operating activities (940) (715) (1,093) Returns on investments and servicing of finance Interest received 44 7 42 Interest paid (18) (4) (27) Interest element of finance lease rentals (5) (5) (12) Net cash inflow/(outflow) from returns on 21 (2) 3 investments and servicing of finance Capital expenditure Purchase of tangible fixed assets (32) (60) (80) Sale of tangible fixed assets - 1 1 Net cash outflow on capital expenditure (32) (59) (79) Cash outflow before financing (951) (776) (1,169) Financing Issue of ordinary share capital - By Intercede Limited - 750 990 - By Intercede Group plc in connection with - - 2,185 admission to AIM Repayment of secured loan (5) (5) (10) Repayment of directors' loans - (8) (8) Capital element of finance lease rentals (15) (11) (24) Receipts from sale and lease back of assets - 26 26 Income from invoice discounting - 660 - Net cash (outflow)/inflow from financing (20) 1,412 3,159 (Decrease)/increase in cash in the period (971) 636 1,990 INTERCEDE GROUP plc 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 2001 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 2001 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. Copies will be available on the website (www.intercedegroup.com) and at the registered office: Intercede Group plc, Lutterworth Hall, St Mary's Road, Lutterworth, Leicestershire, LE17 4PS. 2. Basic and diluted loss per ordinary share The calculations of 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. 6 months 6 months Year ended ended ended 30 30 31 September September March 2001 2000 2001 £'000 £'000 £'000 Loss for the period (1,190) (313) (1,125) Number Number Number Weighted average number of shares 16,360,485 10,868,550 12,771,716 Pence Pence Pence Basic and diluted loss per ordinary (7.3) (2.9) (8.8) share 3. Reconciliation of movement in 6 months 6 months Year shareholders' funds ended ended ended 30 30 31 March September September 2001 2000 2001 £'000 £'000 £'000 Opening shareholders' funds 1,432 372 372 Loss for the period (1,190) (313) (1,125) Issue of shares - - 2,185 Closing shareholders' funds 242 59 1,432 4. Reconciliation of operating loss to 6 months 6 months Year operating cash flow ended ended ended 30 30 31 March September September 2001 2000 2001 £'000 £'000 £'000 Operating loss (1,208) (296) (1,119) Depreciation charge 23 14 34 Profit on sale of tangible fixed assets - 1 - Decrease/(increase) in stock 3 (9) - Decrease/(increase) in debtors 477 (1,079) (549) (Decrease)/increase in creditors (235) 654 541 Net cash outflow from operating activities (940) (715) (1,093) As at As at 5. Analysis and reconciliation of net debt 31 March 30 September 2001 Cash Flow 2001 £'000 £'000 £'000 Cash at bank and in hand 2,042 (971) 1,071 Debt due within one year (460) - (460) Debt due after one year (22) 5 (17) Finance leases (68) 15 (53) (550) 20 (530) Net cash 1,492 (951) 541 The reconciliation of net cash flow to the movement in net debt is as follows: 6 months 6 months Year ended ended ended 30 30 31 September September March 2001 2000 2001 £'000 £'000 £'000 (Decrease)/increase in cash in the period (971) 636 1,990 Cash outflow/(inflow) from decrease/ 20 (668) 17 (increase) in debt and lease financing Change in net debt resulting from cash flows (951) (32) 2,007 New finance leases - - (14) Movement in net debt in the period (951) (32) 1,993 Net cash/(debt) at the beginning of the 1,492 (501) (501) period Net cash/(debt) at the end of the period 541 (533) 1,492 6. Creditors: Amounts falling due within one year Creditors falling due within one year includes 7% convertible unsecured loan stock totalling £450,000. This loan stock is convertible at the option of the holder into fully paid ordinary shares of the Company at 41.4p per ordinary share (up to 1,086,800) at any time prior to 31 March 2002. Unless previously redeemed or converted, the debt will be redeemed at par on 31 March 2002. 7. Dividend The Directors do not recommend the payment of a dividend.

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