REG - Intercede Group PLC - Half-year Report
21/11/2023 07:00
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RNS Number : 0563U Intercede Group PLC 21 November 2023
21 November 2023
INTERCEDE GROUP plc
('Intercede', the 'Company' or the 'Group')
Interim Results for the Six Months Ended 30 September 2023
Record financial performance in H1 and results for the year ending 31 March
2024 are now expected to be ahead of previous market expectations
Intercede, the leading specialist in digital identity, credential management
and secure mobility, today announces its interim results for the six months
ended 30 September 2023.
Financial Highlights
H1 FY24 H1 FY23 % Change
£ million £ million
Revenue 7.0 6.1 15%
Gross profit 6.9 5.6 23%
Profit before Tax 1.1 0.6 83%
Net Profit 1.6 1.2 33%
EPS - basic 2.7p 2.1p 29%
EPS - diluted 2.5p 2.0p 25%
Gross Margin 99% 92% 7%
Net Margin 22% 20% 10%
Cash and cash equivalents 9.7 10.0 -3%
Deferred revenue 5.4 4.4 23%
Total Assets 16.8 14.0 20%
Total Equity 8.7 6.9 26%
Adjusted EBITDA 1.5 1.0 50%
Less:
Amortisation of intangibles 0.1 -
Right of use depreciation 0.1 0.1
Acquisition costs 0.1 0.3
Employee Share/Unit incentive & option plan charges/(credits) 0.1 -
Exceptional costs 0.1 -
Operating Profit 1.0 0.6 67%
Revenue highlights for the period include:
· Record revenues for the six months ended 30 September 2023 (H1)
totalling £7.0 million are 15% higher on a reported basis (2022: £6.1
million). On a constant currency basis revenue was up by 10%
· Multiple MyID PIV licence orders including from the US Department of
State (DoS) for its Identity Management System (IDMS) solution totalling $0.9
million. A large north American telecommunications company increased its
licence deployment, including an upgrade
· Several major customers have chosen to upgrade their existing MyID
deployments including, but not limited to, a major global aerospace and
defence manufacturer, a large north American telecommunications company, a key
US government agency and US Department of Transportation
· New 3- year licence order for MyID MFA from a global aluminium
producer in the Middle East as well as key subscription renewals for MyID PSM
and MyID MFA
· Professional services continue to grow and embeds the symbiotic
relationship with our clients and cadence of upgrades and new deployments. The
Group will maintain the high quality service we provide by increasing
investment and training as and when required
Operating Highlights
· Increased adjusted EBITDA margin for the period of 21% (2022: 16%) as
a result of continued tight cost control in conjunction with targeted project
expenditure to support revenue growth and internal infrastructure upgrade
· The integration of Authlogics Ltd continues across the Group with the
launch of Multi Factor Authentication (MFA) and Password Security Management
(PSM) capabilities with MyID CMS, and to be showcased in Q4 FY24
· The M&A programme continues, focussed on targets that add
substantial recurring revenues, compliment or is adjacent to current product
portfolio and reasonably priced
· Performance to date across the Group has been very encouraging and we
continue to win prestigious new clients
· The Group's strong balance sheet (with no debt) and good cash
generation enables it to invest further both in the existing business and in
M&A to accelerate its longer-term growth ambitions
Board Changes
During the period Chuck Pol retired from the Board and John Linwood was
appointed as a Non-Executive Director. After the period end Dan O'Brien was
also appointed as a Non-Executive Director and as Audit Chair with immediate
effect, with Tina Whitley moving to the Remuneration Chair and John Linwood as
Nominations Chair.
Royston Hoggarth, Chairman, said:
"The Group has continued to deliver on its stated goals of double-digit
growth, continued strategic investment internally and the expansion of the
MyID product portfolio.
Building on the growth in 2023, the Board is pleased to see such a focused
approach to Phase 2 in the first half. As always, our colleagues in the Group
have continued to maintain the momentum which we, as a Board, are grateful
for.
The strong performance we achieved in the first half of 2023 has continued.
The benefit of tight cost controls and a strong pipeline of future
opportunities means that I am pleased to report that we now expect the Group
to achieve financial performance for FY2024 ahead of previous market
expectations*. Whilst the volatility in the global macroeconomic environment
has increased in the last few weeks, with our strong pipeline and balance
sheet we remain well positioned for the future."
* The current market forecast for the year ended 31 March 2024 is revenue of
£13.3m and adjusted EBITDA of £1.0m
ENQUIRIES
Intercede Group plc
Tel. +44 (0)1455 558 111
Klaas van der Leest, CEO
Nitil Patel, CFO
Cavendish Capital Markets
Limited
Tel. +44 (0)20 7220 0500
Simon Hicks/Fergus Sullivan, Corporate Finance
Tim Redfern/Charlotte Sutcliffe, ECM
About Intercede
Intercede is a cybersecurity software company specialising in digital
identities, and its innovative solutions enable organisations to protect
themselves against the number one cause of data breach: compromised user
credentials.
The Intercede suite of products allows customers to choose the level of
security that best fits their needs, from Secure Registration and ID
Verification to Password Security Management, One-Time Passwords, FIDO and
PKI. Uniquely, Intercede provides the entire set of authentication options
from Passwords to PKI, supporting customers on their journey to passwordless
and stronger authentication environments. In addition to developing and
supporting Intercede software, the Group offers professional services and
custom development capabilities as well as managing the world's largest
password breach database.
For over 20 years, global customers in government, aerospace and defence,
financial services, healthcare, telecommunications, cloud services and
information technology have trusted Intercede solutions and expertise in
protecting their mission critical data and systems at the highest level of
assurance.
For more information visit: www.intercede.com (http://www.intercede.com)
The information communicated in this announcement contains inside information
for the purposes of Article 7 of the Market Abuse Regulation (EU) 596/2014 as
it forms part of UK domestic law by virtue of the European Union (Withdrawal)
Act 2018 ("MAR"), and is disclosed in accordance with the company's
obligations under Article 17 of MAR.
The period in review
The Group entered FY24 with the clear goals of double-digit growth and to
maintain the momentum from FY23, to invest internally in our colleagues,
infrastructure, sales and marketing functions and to refresh the Board. H1 has
shown that the Group is delivering on all these aims and will continue to do
so in H2.
Market Opportunity and Growth Strategy
Following the initial turn around in Phase 1, the Group is now well placed in
Phase 2 with the overarching goal of continued double-digit growth, both
organic and inorganic. Good progress has been made across both strategies as
outlined below.
Intercede's MyID CMS platform is the leading credential management system
(CMS) and identification and verification (ID&V) solution that integrates
and manages a broad range of PKI (Public Key Infrastructure) and FIDO (Faster
Identity Online) technologies.
MyID CMS meets the needs of large organisations, from public sector such as
government agencies or departments to private sector corporates like the
Aerospace & Defence conglomerates who are prepared to invest in military
grade security and cope with the more complex infrastructure required.
The Group has traditionally offered a perpetual licence model, often as
requested by its client base. For the growth to be sustained over a longer
period, Intercede has selectively introduced subscription licence pricing for
specific opportunities. This will be extended across the entire client base in
the coming months. For the foreseeable future, both a perpetual as well as a
subscription pricing model will be maintained for MyID CMS.
Since the acquisition of Authlogics in October 2022, the Group has expanded
and broadened MyID's functionality as it moves down the authentication pyramid
and increase its addressable market. This lies at the heart of the growth
plans of the Group and enables it to offer customers and prospects solutions
that span the entire authentication pyramid, as shown in Diagram 1 below. MyID
PSM and MyID MFA are exclusively offered through a subscription licence model.
Phase 1 was all about the business turn around (e.g. product repositioning and
investment, go-to-market model, profitability and cash generation). Phase 2
now focuses on sustainable growth, addressable market, enhanced distribution,
a strong balance sheet, and continuing inorganic growth following the
successful maiden acquisition of Authlogics.
The ambition over the next 3-4 years is to double revenues with resilient cash
generation and further entrenching Intercede as the leading digital identity
specialist in the authentication space. The steps taken in the prior years
have provided a solid foundation and the business KPIs underpin these
ambitions.
Diagram 1 -Authentication Pyramid resulting in increased product portfolio
& addressable market
M&A
Intercede continues to pursue its corporate development program and during the
period has had in depth discussions with more than twenty possible acquisition
targets. Many of these targets are focused on the zero trust and access
management sector, and their addition would form a natural extension to our
existing MyID product portfolio.
The Group has a healthy revenue pipeline in these product areas but has also
turned its attention to larger targets that would help extend the business on
both a geographic and sector basis.
The new EU cybersecurity NIS2 (Network and Information Security) regulation is
being passed into statute in several EU countries and will form a key catalyst
on cybersecurity purchasing patterns across the EU in the years ahead,
particularly for the small and medium business market.
This new regulation is intended to reduce cybersecurity risk in certain areas
and has aspects in common with the US NIST zero trust regulations (and
associated Presidential Executive Order).
During the period, the Group was engaged in discussions with a zero trust
acquisition target based in North America. Following detailed due diligence
Intercede decided not to pursue the opportunity.
Financial Review - Income Statement
Revenue and operating results
The Group's revenue from continuing operations increased by 15% to £7.0
million (2022: £6.1 million) and gross profit increased by 23% to £6.9
million (2022: £5.6 million). Gross margin increased from 92% to 99% as
license sales in the prior period included third party product.
The Group's operating profit was £1.0 million (2022: £0.6 million), after
non-cash depreciation charge for property, plant and equipment in the period
of £0.04 million (2022: £0.03 million) and a right-of-use depreciation
charge of £0.1 million (2022: £0.1 million). Acquisition costs for the
period were £0.1 million (2022: £0.3 million). During the period, no
acquisitions were completed, and the Group continues to pursue a disciplined
approach to deal pricing, due diligence and in taking the time to ensure the
right strategic fit(s) to ensure continued scalability and accelerated revenue
growth. Operating expenses increased by 18% to £6.0m (2022: £5.1m). Tight
cost control continues to be a focus for the Group in conjunction with
considered project expenditure and new hires to support revenue growth.
Staff costs continue to represent the main area of expense representing 79% of
total operating costs (2022: 86%). Intercede had 99 employees and contractors
as at 30 September 2023 (94 as at 31 March 2023). The average number of
employees and contractors during the period was 96 (2022: 85).
The statutory profit before tax for the period was £1.1 million (2022: £0.6
million) and profit for the period was £1.6 million (2022: £1.2 million).
Taxation
The Group has a tax credit of £0.5 million for the period due to amounts
receivable from HMRC in respect of R&D claims and US corporation tax
payable (2022: tax credit of £0.6 million). The Group brought forward unused
tax losses of £7.0 million (2022: £6.4 million). The Group assessed the
deferred tax impact in the period and did not recognise any assets or
liabilities.
Earnings per share
Earnings per share from continuing operations in the period was 2.7 pence for
basic and 2.5 pence for diluted (2022: 2.1 pence for basic and 2.0 pence for
diluted) and were based on the profit for the period of £1.6 million (2022:
£1.2 million) with a basic weighted average number of shares in issue during
the period of 58,231,712 (2022: 57,648,980 shares). For diluted the weighted
average number was 62,429,062 (2022: 58,943,357).
Adjusted earnings per share from continuing operations in the period was 2.6
pence for basic and 2.5 pence for diluted (2022: basic and diluted of 1.7
pence) and were based on an Adjusted EBITDA for the period of £1.5 million
(2022: £1.0 million).
Dividend
The Board is not proposing a dividend (2022: £nil).
Financial Position
Assets
Non-current assets of £3.4 million (2022: £0.4 million) mainly comprise
goodwill arising on acquisition of £2.4 million (2022: £nil) and other
intangible assets of £0.7 million (2022: £nil) both arising from the
acquisition of Authlogics Limited ("Authlogics") in early October 2022. There
is also property, plant and equipment of £0.2 million (2022: £0.1 million)
and IFRS 16 right of use assets of £0.1 million (2022: £0.3 million).
Trade and other receivables of £3.6 million is very comparable to the prior
period (2022: £3.6 million) reflecting the seasonality that Intercede tends
to experience as US Federal customers get to the end of their fiscal year on
30 September.
Liabilities
Current liabilities increased by £0.3 million to £7.1 million (2022: £6.8
million) reflecting contingent consideration (created on the acquisition of
Authlogics) and increased deferred revenue at the period end.
Non-current liabilities rose by £0.6 million to £1.0 million (2022: £0.4
million), which also reflects contingent consideration from the Authlogics
acquisition and increased deferred revenue at the period end. Some larger
customers prefer to contract their support and maintenance renewal for terms
longer than 12 months which creates spikes in non-current liabilities.
Deferred Consideration Change
After the period end, the Group agreed with the vendors of Authlogics to
extend the earnout by an additional year with the targets and thresholds
remaining intact. By doing so the amount due currently for earnout year ending
30 June 2024 will now be assessed in the year ending 30 June 2025 and 2025
earnout is deferred to 2026. No deferred consideration is due now for year
ending 30 June 2024.
Capital and Reserves
Total equity increased by £1.8 million to £8.7 million (2022: £6.9
million), reflecting the profit for the period.
Liquidity and capital resources
The Group remains in a good financial position, with gross cash balances of
£9.7 million as at 30 September 2023 compared to £8.3 million held at 31
March 2023 and £9.9 million held at 30 September 2022. This is after a cash
outflow following the acquisition of Authlogics in October 2022 for an initial
consideration of £2.0 million and related acquisition costs expensed to the
Income Statement of £0.2 million. The Group had no debt at the period end
(2022: £nil).
During the period there has been a net cash inflow from operating activities
of £1.7 million (2022: £2.1 million) which reflects continued good
management of working capital and the receipt of the FY23 R&D claims.
Outlook
The integration of Authlogics continues and has expanded the product portfolio
has been expanded, a key reason for the acquisition. Intercede is encouraged
with the performance to date and with the recently announced new clients wins
in the US, EMEA and APAC regions.
This strong performance means the Group now expects to achieve financial
performance for FY2024 ahead of previous market expectations.
The Group's financial position and cash generation is a solid foundation for
it to maintain and fund its internal investment plans and M&A
opportunities to accelerate the delivery on the medium and long term aims.
By order of the Board
Klaas van der
Leest
Nitil Patel
Chief Executive
Officer
Chief Financial Officer
21 November
2023
Consolidated Statement of Comprehensive Income- unaudited
6 months ended 6 months ended Year ended
30 September 2023 30 September 2022 31 March
2023
£'000 £'000 £'000
Continuing operations
Revenue 6,993 6,065 12,110
Cost of sales (66) (417) (403)
__________ __________ __________
Gross profit 6,927 5,648 11,707
Operating expenses (5,967) (5,051) (11,136)
__________ __________ __________
Operating profit 960 597 571
Finance income 149 41 130
Finance costs (12) (21) (75)
__________ __________ __________
Profit before tax 1,097 617 626
Taxation 453 590 685
__________ __________ __________
Profit for the period 1,550 1,207 1,311
__________ __________ __________
Total comprehensive income attributable to owners of the parent company 1,550 1,207 1,311
__________ __________ __________
Earnings per share (pence)
- basic 2.7p 2.1p 2.3p
- diluted 2.5p 2.0p 2.2p
__________ __________ __________
Consolidated Financial Position - unaudited
As at As at As at
30 September 2023 30 September 2022 31 March
2023
£'000 £'000 £'000
Non-current assets
Goodwill arising on acquisition 2,442 - 2,442
Other intangible assets 698 - 785
Property, plant and equipment 190 98 125
Right of use assets 144 309 262
___________ ___________ __________
3,474 407 3,614
___________ ___________ __________
Current assets
Trade and other receivables 3,600 3,609 5,489
Cash and cash equivalents 9,724 9,999 8,334
___________ ___________ __________
13,324 13,608 13,823
___________ ___________ __________
Total assets 16,798 14,015 17,437
___________ ___________ __________
Equity
Share capital 584 584 584
Share premium 5,430 5,430 5,430
Merger reserve 1,508 1,508 1,508
Accumulated profit/(deficit) 1,149 (640) (492)
___________ ___________ __________
Total equity 8,671 6,882 7,030
___________ ___________ __________
Non-current liabilities
Lease liabilities 143 278 204
Contingent consideration 151 - 174
Deferred revenue 703 121 550
___________ ___________ __________
997 399 928
___________ ___________ __________
Current liabilities
Lease liabilities 121 336 261
Contingent consideration 282 - 313
Trade and other payables 2,007 2,166 1,918
Deferred revenue 4,720 4,232 6,987
___________ ___________ __________
7,130 6,734 9,479
___________ ___________ __________
Total liabilities 8,127 7,133 10,407
___________ ___________ __________
Total equity and liabilities 16,798 14,015 17,437
___________ ___________ __________
Consolidated Statement of Changes in Equity- unaudited
Share capital Share premium Merger reserve Accumulated (deficit)/profit Total equity
£'000 £'000 £'000 £'000 £'000
At 1 April 2023 584 5,430 1,508 (492) 7,030
Purchase of own shares (27) (27)
Employee share option plan charge - - - 95 95
Employee share incentive plan charge - - - 23 23
Profit for the period and total comprehensive income - - - 1,550 1,550
________ ________ ________ __________ _______
At 30 September 2023 584 5,430 1,508 1,149 8,671
________ ________ ________ __________ _______
At 1 April 2022 577 5,268 1,508 (1,842) 5,511
Purchase of own shares (27) (27)
Issue of new shares 7 162 - - 169
Employee share incentive plan charge - - - 22 22
Profit for the period and total comprehensive income - - - 1,207 1,207
________ ________ ________ __________ _______
At 30 September 2022 584 5,430 1,508 (640) 6,882
________ ________ ________ __________ _______
At 1 April 2022 577 5,268 1,508 (1,842) 5,511
Purchase of own shares - - - (54) (54)
Issue of new shares 7 62 - - 169
Employee share option plan charge - - - 50 50
Employee share incentive plan charge - - - 43 43
Profit for the period and total comprehensive income - - - 1,311 1,311
________ ________ ________ __________ _______
At 31 March 2023 584 5,430 1,508 (492) 7,030
________ ________ ________ __________ _______
Consolidated Cash Flow Statement- unaudited
6 months ended 30 September 2023 6 months ended 30 September 2022 Year ended
31 March
2023
£'000 £'000 £'000
Cash flows from operating activities
Profit for the period 1,550 1,207 1,311
Taxation (453) (590) (685)
Finance income (149) (41) (130)
Finance costs 12 21 75
Depreciation of property, plant & equipment 38 31 66
Depreciation of right of use assets 118 122 246
Amortisation 87 - 83
Exchange (profits) / losses on foreign currency lease liabilities (1) 59 40
Employee share option plan charge 95 - 50
Employee share incentive plan charge 23 22 43
Employee unit incentive plan charge (5) (60) (51)
Employee unit incentive plan payment - - (3)
Decrease / (increase) in trade and other receivables 1,882 1,439 (831)
Increase in trade and other payables 41 762 334
(Decrease) / increase in deferred revenue (2,114) (849) 1,668
____________ ____________ __________
Cash generated from operations 1,124 2,123 2,216
Finance income 145 30 116
Finance costs on leases (18) (21) (44)
Tax received / (paid) 453 (14) 574
____________ ____________ __________
Net cash generated from operating activities 1,704 2,118 2,862
____________ ____________ __________
Investing activities
Purchases of property, plant and equipment (102) (12) (70)
Purchase of business (net of cash acquired) - - (2,079)
____________ ____________ __________
Cash used in from investing activities (102) (12) (2,079)
____________ ____________ __________
Financing activities
Purchase of own shares (27) (27) (54)
Proceeds from issue of ordinary share capital - 169 169
Principal elements of lease payments (199) (201) (409)
____________ ____________ __________
Cash used in financing activities (226) (59) (294)
____________ ____________ __________
Net increase / (decrease) in cash and cash equivalents 1,376 2,047 489
Cash and cash equivalents at the beginning of the period 8,334 7,787 7,787
Exchange gain / (loss) on cash and cash equivalents 14 165 58
____________ ____________ __________
Cash and cash equivalents at the end of the period 9,724 9,999 8,334
____________ ____________ __________
Notes to the Consolidated Accounts
For the period ended 30 September 2023
1 Preparation of the interim financial statements
These interim financial statements have been prepared in accordance with
International Accounting Standards in conformity with the requirements of the
Companies Act 2006 and with those parts of the Companies Act 2006 applicable
to companies reporting under International Financial Reporting Standards
(IFRS).
The basis of preparation and accounting policies used in preparation of these
interim financial statements have been prepared in accordance with the same
accounting policies set out in the Group's Annual Report for the year ended 31
March 2023, which provides full details of significant judgements and
estimates used in the application of the Group's accounting policies. There
have been no significant changes to these judgements and estimates during the
period which included an assessment that the going concern basis continues to
be appropriate in preparing the interim financial statements.
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 2023 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.
This Interim Report is 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 6 months ended Year ended
30 September 2023 30 September 2022 31 March
2023
£'000 £'000 £'000
UK 181 95 539
Rest of Europe 601 414 906
Americas 5,752 5,221 9,879
Rest of World 459 335 786
___________ ___________ __________
6,993 6,065 12,110
___________ ____________ __________
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 per share
The calculations of earnings per ordinary share are based on the profit for
the period and the weighted average number of ordinary shares in issue during
each period.
6 months ended 6 months ended Year ended
30 September 2023 30 September 2022 31 March
2023
£'000 £'000 £'000
Profit for the period 1,550 1,207 1,311
___________ ___________ __________
Number Number Number
Weighted average number of shares 58,231,712 57,648,980 57,939,548
- basic
- diluted 62,429,062 58,943,357 60,595,485
___________ ___________ __________
Pence Pence Pence
Earnings per share 2.7p 2.1p 2.3p
- basic
- diluted 2.5p 2.0p 2.2p
___________ ___________ __________
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 6 months ended Year ended
30 September 2023 30 September 2022 31 March
2023
Number Number Number
Issued ordinary shares at start of period 58,363,357 57,743,357 57,743,357
Effect of treasury shares (131,645) (131,645) (131,645)
Effect of issue of ordinary share capital - 37,268 327,836
___________ ___________ __________
Weighted average number of shares 58,231,712 57,648,980 57,939,548
- basic
___________ ___________ __________
131,645 131,645 131,645
Add back effect of treasury shares
Effect of share options in issue 4,065,705 1,162,732 2,524,292
___________ ___________ __________
Weighted average number of shares 62,429,062 58,943,357 60,595,485
- diluted
___________ ___________ __________
5 Dividend
The Directors do not recommend the payment of a dividend.
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