INTERCEDE GROUP plc. ('Intercede', 'the Company' or 'the Group') Interim Results for the Six Months Ended 30 September 2011

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Intercede's interim results show that its financial position is strong, with no debt and cash balances up almost 50% year on year. Collaborations with Microsoft and the development of NFC-related technologies demonstrate the company's commercial success in recent months.

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By focusing on major industry players as channel partners, Intercede has continued to punch above its weight

Intercede™ (AIM: IGP.L) is a leading producer of identity and credential management software, called Intercede MyID®, which manages the secure registration, issuance and life cycle of digital identities for a wide range of uses.

SUMMARY

  •     Sales of £3,528,000 (2010: £3,506,000);
  •     Underlying revenues have increased by 25%, excluding the Boeing contract which was worth more than £1m in H1 2010;
  •     Operating profit of £617,000 (2010: £1,204,000);
  •     23% increase in cost base reflects planned investment in business expansion, principally sales and product development;
  •     Basic and fully diluted earnings per share of 1.4p (2010: 2.5p);
  •     Cash balances of £6,563,000 at 30 September 2011 (30 September 2010: £4,470,000);
  •     Significant endorsement of Intercede’s proprietary MyID identity and credential management system as an industry standard;
  •     Increasing collaboration with Microsoft in the US;
  •     New partnership agreement with Hewlett Packard in support of the HP Assured Identity Product Suite;
  •     Winning new contracts to supply MyID to government ministries, banks and business corporations around the world.

Richard Parris, Chairman and Chief Executive of Intercede, said today: “There have been a number of notable commercial successes during the period demonstrating the fundamental strength and growth trajectory of the business. Our financial position remains strong, with no debt and cash balances up almost 50% year on year.

“We have also invested heavily in sales and product development in order to pursue a greater number of opportunities. Our own sales efforts are complemented by partnerships with some of the largest IT industry players in the world, enabling us to punch above our weight.

“We believe that this period's results provide further evidence of our ability to execute to plan. The Board remains confident in its long term growth strategy to create significant shareholder value through continuing global market penetration and technology excellence in the burgeoning cyber security industry.”

Chairman’s Statement:

" In the period ended 30 September 2011, revenues totaled £3.53m compared to £3.51m in the previous year. However, it should be noted that the previous period included a single contract of more than £1m from Boeing, whereas there was no equivalent contract in the first half of the current financial year. If revenues from the Boeing contract are excluded from both periods, there has been a 25% underlying increase in revenues year on year, demonstrating the fundamental strength of the business and its ongoing growth trajectory.

Profit for the period is £0.7m compared to £1.2m in the prior year. This reduction reflects planned investment to accelerate the growth of the business. As previously reported, the goals for the current financial period are to increase sales and marketing efforts in promoting MyID and to extend product development in areas such as mobile devices and further collaboration with Microsoft. The average number of employees and contractors increased from 56 to 67 year on year in support of these goals. Staff costs continue to represent the main area of expense totaling 79% of the total operating costs during the period (2010: 81%).

The Company continues to be cash generative. Through careful cash management, the cash balance at the end of September was £6.56m compared to £6.05m at the end of March 2011 and £4.47m at the end of September 2010; a year on year increase of over £2m.

There have been a number of commercial successes and industry milestones achieved in the period, including the following:

  •     Continuing implementation of large scale corporate identity card projects in ANZ Bank, Booz Allen Hamilton, BASF, Boeing, HealthSmart Australia, Lockheed Martin and Swedbank;
  •     Delivery of services to support major MyID system upgrades in US Federal Aviation Authority, Kuwait Public Authority for Civil Information, Road Safety Authority Ireland;
  •     Deployment of MyID to issue ID cards to members of the newly elected Portuguese Parliament;
  •     The securing of a large scale border security project with an initial value in excess of £0.6m;
  •     Increasing collaboration with Microsoft in the US and the first confirmed sale to a corporate customer of the Intercede MyID connector for Forefront Identity Manager;
  •     Teaming with Atos, Verisec, the Post Office and Thales to win the London Identity Provider framework contract;
  •     Collaboration with major systems integrators on multiple tender responses for large scale US Federal identity programs requiring PIV and PIV-I solutions;
  •     The development of a new technology to enable the over-the-air (OTA) provisioning of digital certificates to mobile devices;
  •     The development of a new technology to support the use of mobile devices containing Near Field Communications (NFC) for personal identity verification purposed;
  •     The continuous improvement of the core MyID platform including the release of MyID v8 Enterprise SP2 and MyID v9 PIV Service Pack 1; and
  •     The award of ISO9001 and TickIT certification to Intercede, as announced on 14 September 2011.

We were also delighted to announce on 14 November 2011 that an agreement has been entered into with Hewlett Packard (“HP”), whereby the HP Global Identity Practice can now deliver MyID as a component of their Assured Identity Plus solutions. Under the agreement, Intercede and HP will target large scale Federal, state and local government agencies and major enterprise customers.

The progress outlined above demonstrates the effectiveness of Intercede's sales strategy. By focusing on major industry players as channel partners, Intercede has continued to punch above its weight in a way that would not be possible with a more conventional direct sales structure. Intercede has significantly multiplied its future revenue potential by accessing the sales teams and sales infrastructure of partners such as Microsoft, HP, multiple US systems integrators, Atos, Gemalto, Oberthur, Swisscom, Symantec and Thales. Each channel will need continuing sales and technical account management to maximise the return on investment.

This channel strategy has enabled Intercede to compete in new territories during the period in a way we could not have reached with a direct team.

Our commercial model continues to be market tested through competition with industry rivals. To date, the evidence is that we win most opportunities on technical merit, even though we are not usually the lowest cost bidder. Customer feedback is that we consistently represent the 'best value' supplier.

I am pleased that we continue to grow underlying new software license revenues at a healthy rate. Annuity revenue from existing customers as a percentage of total sales is also increasing towards the long term goal of being able to support the cost of our operations from recurring income. It is a characteristic of the business that every £1 of new customer license revenue in a period typically generates a further £2 from associated maintenance plus additional fees from professional services and development activities over future periods. This means that Intercede has already locked in significant future value beyond that disclosed in the current period’s accounts.

Our research activities in the mobile communications sector have spawned product line extensions that open new markets in the telecommunications market with potential uses for identity verification in the citizen and consumer spaces. This also serves to protect our existing market position should mobile devices overtake smart cards as the principal means of asserting strong identity.

We believe that this period's results are evidence of our ability to execute to plan. The Board remains confident in its long term growth strategy to create significant shareholder value through continuing global market penetration and technology excellence in the burgeoning cyber security industry. "

Richard Parris
Chairman and Chief Executive
1 December 2011

ENQUIRIES
Intercede Group plc                 Tel. +44 (0)1455 558 111
Richard Parris, Chairman & Chief Executive
Andrew Walker, Finance Director

FinnCap                Tel. +44 (0)20 7600 1658
Charles Cunningham, Corporate Finance
Rose Herbert, Corporate Finance
Joanna Weaving, Corporate Broking

Pelham Bell Pottinger                 Tel. +44 (0)20 7861 3112
Archie Berens
Clare Gilbey

About Intercede
Intercede is the producer of the Intercede MyID® identity and credential management system (IDCMS).

Intercede MyID® technology is being used around the world by large corporations, governments and banks to manage millions of identities for employees, citizens and customers. Notable deployments in the US include 14 federal agencies, two million smart cards in support of the US Transportation Worker Identity Credential program (TWIC), four US financial institutions and 320,000 smart corporate identity badges for Boeing, Booz Allen Hamilton and Lockheed Martin. In Europe, Australasia and the Middle East, Intercede MyID® is being deployed in support of government identity, financial services, health and corporate employee ID security projects.

Intercede MyID® is the only IDCMS software product that enables organizations to easily and securely manage the identities of people and their associated identity credentials within a single, integrated, workflow driven platform. This includes enabling and managing secure registration, biometric capture, application vetting and approval through to smart card personalization, issuance and management.

Intercede MyID® was the first electronic personalization product to achieve compliance with the US FIPS-201 Personal Identity Verification (PIV) standard and is widely deployed by federal agencies, government contractors and other commercial entities. In particular, it supports the latest standards applicable for all PIV, PIV-Interoperable and PIV-Compatible deployments.

It can issue and manage a wide variety of identities and credentials, providing customers with a platform that can meet their needs now and in the future. It is a fully supported commercial off-the-shelf product that can be quickly deployed for thousands or millions of users.

For more information visit http://www.intercede.com

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