Interim Results
Intercede Group PLC
20 November 2003
INTERCEDE GROUP plc
('Intercede', 'the Company' or 'the Group')
Interim Results for the Six Months Ended 30 September 2003
Intercede, a leading developer of electronic identity management software, today
announces its interim results for the six months ended 30 September 2003.
SUMMARY
* Further progress towards break-even as pre-tax losses are reduced from
£0.6 million to £0.2 million.
* Gross profit margins increase from 72% to 82% as the proportion of
edeficeTM related sales rises from 52% to 62%.
* Intercede is now established as one of the leaders in smart card and
identity management software, based on both the excellence of its
edefice technology and the penetration of key channels to market.
* Contract wins during the period with a major UK Clearing Bank and the
Academic Medical Centre, Amsterdam.
* Good progress made in developing relationships with a number of major
industry players, notably Northrop Grumman, Thales and Gemplus.
* The level of cash outflow pre financing is reduced from £1.0 million to
£0.3 million.
* Period end cash balances total £1.3 million.
* Mario Houthooft, formerly CEO of NASDAQ listed Vasco, joins the
management team to strengthen sales and business development activities.
Richard Parris, Chairman & Chief Executive of Intercede, said today:
'The momentum continues to build with the number of requests for tender, and
pre-sales activities in general, at an all time high. This is a very strong
indicator of future sales growth and increasing opportunity for the Group.'
20 November 2003
ENQUIRIES:
Intercede Group plc Tel. 01455 558111
Richard Parris, Chairman & Chief Executive
Andrew Walker, Finance Director
Chairman's Statement
Results
The Group has produced a solid operating result in the first half of this year,
which supports our plans for the full year. During the period the management
team focused on delivering an improved performance across all aspects of our
business. I am pleased to report that for the fifth consecutive half year period
we have made excellent progress towards sustainable profitable operations
through the development and resale of our own software products. Whilst it is
disappointing that delays in contract awards have resulted in sales remaining
flat compared to the same period last year, the proportion of sales attributable
to edefice has increased from 52% to 62%. It is also encouraging that the number
of requests for tender, along with general pre-sales activities, are at an all
time high. This is a very strong indicator of future sales growth and increasing
opportunity for the Group.
6 months ended 6 months ended Year to
30 September 30 September 31 March
2003 2002 2003
£'000 £'000 £'000
Sales 878 876 1,819
----- ----- -------
Gross profit 717 630 1,291
Operating
costs (963) (1,277) (2,365)
------- --------- ---------
Operating loss (246) (647) (1,074)
------- ------- ---------
Loss per share (0.1)p (3.4)p (5.6)p
-------- -------- --------
Cash outflow
before
financing (274) (988) (1,421)
------- ------- ---------
Cash balances 1,303* 768 317
-------- ----- -----
* Includes £1,270,000 cash raised via a Placing in July 2003
Business and Product Development
Good progress has been made in developing our capability to deliver smart card
and identity management software solutions based upon edefice to partners in
Europe and the United States. Our increasing international reach and the quality
of our offering ensure that we remain well positioned to capitalise on future
growth in the IT security and citizen card markets.
Although innovative in the market, edefice is now a mature technology platform
that is progressively evolving according to customer needs. The Group is using
this common platform to build a number of product offerings targeted at
different vertical markets ie the MyID range of solutions which currently
includes MyID Corporate, MyID Citizen and MyID Campus. This will diversify our
channels to market and widen our product set without diluting the focus on our
core technology. Furthermore, edefice is also being licensed on a service
provider basis to a number of large European telecommunication companies and
service providers. These organisations plan to develop their own service
delivery platforms based on our edefice technology.
Since the start of this financial period, Intercede has entered into a strategic
alliance with Northrop Grumman in North America, completed product integration
with Thales e-Security and incorporated edefice into the Gemplus product line.
Edefice technology has been installed in an increasing number of end-user pilot
sites in North America, Belgium, Germany, Holland, Italy, Japan, Switzerland and
the UK, amongst others. As these pilots move into production over the coming
months, and start to consume an increasing number of licences, we expect to see
a corresponding growth in sales revenues.
In September, we announced that a major UK Clearing Bank had signed a contract
to use Intercede's edefice smart card and identity management system to manage
the issuance of Identrus enabled smart cards and associated digital certificates
to selected customers. Under this contract, edefice will be integrated with both
a third-party smart card bureau and a third-party managed service provider to
provide a highly scalable and robust smart card deployment platform. This Bank
is an important new addition to our customer list and a valuable reference site
which was won by Intercede after fierce competition from a number of
international industry majors. Our success was based on the overall strength of
our technology and the high quality of our service delivery.
To strengthen our sales capabilities in Europe and beyond, I am pleased to
welcome Mario Houthooft, formerly CEO of Vasco, a NASDAQ listed IT security
products business, to the management team. Mario, who is highly respected within
the IT security industry, is tasked with accelerating revenue growth by opening
up the markets across continental Europe.
Finance
As at 30 September 2003, the Group had net cash balances totalling £1,303,000.
During the six months ended 30 September 2003, the cash outflow before financing
was £274,000 compared with £988,000 during the comparative period.
The cash position also reflects the Placing of ordinary shares which took place
on 1 July 2003 raising net funds totalling £1,270,000. It is pleasing to note
that, with the period end cash balance remaining higher than the funds raised,
these funds remain fully available to provide the Group with the flexibility to
pursue its growth strategy through to cash generation.
Outlook
Looking forward we anticipate a continuing trend towards break-even, pending an
anticipated step change in sales during 2004, as the rising level of pre-sales
activity begins to bear fruit.
Richard Parris
Chairman & Chief Executive
20 November 2003
Consolidated Profit and Loss Account
6 months 6 months Year ended
ended ended
30 30 31 March
September September
2003 2002 2003
£'000 £'000 £'000
Turnover 878 876 1,819
Cost of sales (161) (246) (528)
---------- ---------- ----------
Gross profit 717 630 1,291
Other operating expenses (963) (1,277) (2,365)
---------- ---------- ----------
Operating loss (246) (647) (1,074)
Interest receivable and similar
income 14 22 29
Interest payable and similar
charges (37) (39) (78)
---------- ---------- ----------
Loss on ordinary activities
before taxation (269) (664) (1,123)
Tax on loss on ordinary
activities 78 115 212
---------- ---------- ----------
Loss on ordinary activities after
taxation and
retained loss for the period (191) (549) (911)
========== ========== ==========
Basic and diluted loss per
ordinary share (0.1)p (3.4)p (5.6)p
========== ========== ==========
Consolidated Balance Sheet
As at As at As at
30 30 31 March
September September
2003 2002 2003
£'000 £'000 £'000
Fixed assets
Tangible assets 53 94 70
---------- ---------- ----------
Current Assets
Stocks - 6 2
Debtors 415 220 544
Cash at bank and in hand 1,303 768 317
---------- ---------- ----------
1,718 994 863
Creditors: Amounts falling due
within (648) (674) (887)
one year ---------- ---------- ----------
Net current assets/(liabilities) 1,070 320 (24)
---------- ---------- ----------
Total assets less current 1,123 414 46
liabilities ---------- ---------- ----------
Creditors: Amounts falling due after
more than one year
Convertible debt (1,432) (1,432) (1,432)
Other creditors - (8) (2)
---------- ---------- ----------
(1,432) (1,440) (1,434)
---------- ---------- ----------
Net liabilities (309) (1,026) (1,388)
========== ========== ==========
Capital and reserves
Called-up share capital 4,271 4,095 4,095
Share premium account 2,107 1,013 1,013
Other reserves 1,508 1,508 1,508
Profit and loss account (8,195) (7,642) (8,004)
---------- ---------- ----------
Shareholders' deficit - all equity (309) (1,026) (1,388)
========== ========== ==========
Consolidated Cash Flow Statement
6 months 6 months Year ended
ended ended
30 30 31 March
September September
2003 2002 2003
£'000 £'000 £'000
Net cash outflow from operating
activities (284) (1,176) (1,608)
---------- ---------- ----------
Returns on investments and servicing
of finance
Interest received 13 22 30
Interest paid - (12) (17)
Interest element of finance
lease rentals (1) (3) (5)
---------- ---------- ----------
Net cash inflow from returns on
investments and servicing of
finance 12 7 8
---------- ---------- ----------
Taxation received - 190 190
---------- ---------- ----------
Capital expenditure
Purchase of tangible fixed
assets (2) (9) (11)
---------- ---------- ----------
Net cash outflow on capital
expenditure (2) (9) (11)
---------- ---------- ----------
Cash outflow before financing (274) (988) (1,421)
Financing
Issue of ordinary share capital 1,270 7 7
Repayment of secured loan (5) (5) (10)
Capital element of finance
lease rentals (5) (18) (31)
---------- ---------- ----------
Net cash inflow/(outflow) from
financing 1,260 (16) (34)
---------- ---------- ----------
Increase/(Decrease) in cash in
the period 986 (1,004) (1,455)
========== ========== ==========
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 2003 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 2003 are an abridged version of the Group's statutory
accounts for that year which have been filed with the Registrar of Companies.
The audit opinion on those statutory accounts was unqualified and did not
include a statement under Section 237(2) or (3) of the Companies Act 1985.
The Interim Report will be mailed to shareholders and copies will be available
on the website (www.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 March
September September
2003 2002 2003
£'000 £'000 £'000
Loss for the period (191) (549) (911)
---------- ---------- ----------
Number Number Number
Weighted average number of
shares 25,220,142 16,365,140 16,372,931
---------- ---------- ----------
Pence Pence Pence
Basic and diluted loss per
ordinary share (0.1) (3.4) (5.6)
========== ========== ==========
The increase in the weighted average number of shares reflects the Placing of
17,582,672 ordinary shares which took place on 1 July 2003.
3. Reconciliation of movement in shareholders' funds
6 months 6 months Year ended
ended ended
30 30 31 March
September September
2002 2002 2003
£'000 £'000 £'000
Opening shareholders' deficit (1,388) (484) (484)
Loss for the period (191) (549) (911)
Issue of shares 1,270 7 7
---------- ---------- ----------
Closing shareholders' deficit (309) (1,026) (1,388)
========== ========== ==========
4. Reconciliation of operating loss to operating cash flow
6 months 6 months Year ended
ended ended
30 30 31 March
September September
2003 2002 2003
£'000 £'000 £'000
Operating loss (246) (647) (1,074)
Depreciation charge 18 26 51
Decrease in stock 2 2 6
Decrease/(increase) in debtors 208 110 (119)
Decrease in creditors (266) (667) (472)
---------- ---------- ----------
Net cash outflow from operating
activities (284) (1,176) (1,608)
========== ========== ==========
5. Analysis and reconciliation of net debt
As at As at
31 March 30
September
2003 Cash Flow 2003
£'000 £'000 £'000
Cash at bank and in hand 317 986 1,303
---------- ---------- ----------
Debt due within one year (10) 3 (7)
Debt due after one year (1,434) 2 (1,432)
Finance leases (6) 5 (1)
---------- ---------- ----------
(1,450) 10 (1,440)
---------- ---------- ----------
Net debt (1,133) 996 (137)
========== ========== ==========
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 March
September September
2003 2002 2003
£'000 £'000 £'000
Increase/(decrease) in cash in
the period 986 (1,004) (1,455)
Cash outflow from decrease in
debt and lease financing 10 23 41
---------- ---------- ----------
Change in net debt resulting
from cash flows 996 (981) (1,414)
Net (debt)/cash at the
beginning of the period (1,133) 281 281
---------- ---------- ----------
Net debt at the end of the
period (137) (700) (1,133)
========== ========== ==========
6. Creditors: Amounts falling due after more than one year
The convertible debt totalling £1,432,000 represents two issues of convertible
loan stock, both carrying an interest coupon of 5%. The first issue totalling
£982,000 is convertible at the option of the holder into fully paid ordinary
shares of the Company at 60.0p per ordinary share (up to a maximum of 1,636,048
shares) at any time prior to 11 December 2006. The second issue totalling
£450,000 is convertible at the option of the holder into fully paid ordinary
shares of the Company at 41.4p per ordinary share (up to a maximum of 1,086,800
shares) at any time prior to 31 March 2007. Unless previously redeemed or
converted, the debt will be redeemed at par on 11 December 2006 and 31 March
2007 respectively.
In recognition of the dilution to be faced by the loan stockholders following
the Placing on 1 July 2003, they were granted warrants to subscribe for up to
2,982,919 ordinary shares at the Placing Price of 7.8p at any time up to the
existing conversion dates referred to above.
7. Dividend
The Directors do not recommend the payment of a dividend.
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