Ideagen Share Discussion Threads

[woodcutter] 22/1/2013 09:07

Couldn't agree with you more steg. I only had a small holding from about 15p but the valuation is very toppy and having read the results a few times i'm inclined to think it's a little overvalued now. Should've sold first thing but wanted to be certain, anyway made a decent return 40%+ so can't complain.

Very good business as you say and will keep an eye on it for the future. Any share price weakness and as they say i'll be back.

Woody

[nw99] 22/1/2013 08:42

Just bought in on the dip here after a strong opening Shs magazine bullish on this

[stegrego] 22/1/2013 08:09

Had a good run on these from 15 and have exited over the last 2 days.

Very good company but valuation is getting a bit rich, especially with all the shares recently issued.

I will monitor to see how they spend all that cash they have and hopefully return in the future.

Good luck all holders.

[glasshalfull] 18/1/2013 18:24

Still not much traffic here despite further news of contract wins. Well done again to the IDEA team.

As a courtesy to holders, I've used the opportunity of positive press & contract wins to sell a few bought at 14p. While I still retain a modest amount for the longer term I have recently taken profits on a few stocks that have seen significant price appreciation & taken positions in a few that remain under the radar.

Regards,
GHF

[nw99] 17/1/2013 09:18

Nice pos update in shs mag this am

[lanzarote666] 09/1/2013 17:29

""It was clear that we need a strong partner in order to continue our growth and development. We are delighted that we have found a dynamic, forward thinking, and financially strong organisation in Ideagen" - Ben Dorks, Group Director of Plumtree.

[stegrego] 08/1/2013 14:01

Pretty big move here over last few days on no news. Im assuming its new year tips like DOTD had the other day.

Still, wont complain, although these sort of spikes rarely hold.

[glasshalfull] 08/1/2013 12:45

Another share making new highs without any froth.

Best wishes to the IDEA team for 2013!

Regards
GHF

[adamb1978] 17/12/2012 09:55

Themachine99 - I do know how to model acquisitions! Its part of my job (I work in M&A). In looking at whether they've generates any growth, I went back to the statutory accounts for each company and the IPO prospectus which has figures for 2009-11 and built the turnover up piece by piece

INteresting deal this morning - placing price looks superb for the company and makes sense to take some money whilst the multiple is relatively high. Aquisition doesnt look particuarly cheap though and fuels my conern about them having to buy growth rather than generate growth themselves

[glasshalfull] 17/12/2012 08:53

Thought the placing price gave an insight into the positive view of IDEA by the city. Placing at a slight premium to prevailing share price a big plus.

As Steg says, they require to spend the money wisely otherwise it'll adversely affect EPS...and given previous form I happen to think they will!

Regards
GHF

[lanzarote666] 17/12/2012 08:16

This is the acquisition;

[stegrego] 17/12/2012 07:37

Hmmm placing for 6 million....

They need to spend that wisely as its massive dilution of eps currently.
Clearly demand for the shares though and price isn't bad considering the general market.

[themachine99] 11/12/2012 10:03

Adam - a couple of points I think you need to consider.

The revenues of Datum April 2009,Ideagen Software July 2011 and Proquis Jan 2012 were COMBINED at 2.25m when the current management took charge/acquired and have grown to a forecast in excess of 5.5m...that is significant organic growth.

The VA contract was always going to be $1.65m for year 2.......it will grow significantly from here to over 2.7m in year 5.

[glasshalfull] 07/12/2012 15:46

Thanks for the post Adam. I'd caught sight of it over on TMF but never got round to responding.

Can't knock your decision. I'm in here from 14p so looks like we grabbed stock at a similar time. I was reassured by the trading update while realising that the budget impasse of the US may have a short term affect to the VHA deal.

Thought it worthwhile to update the thread in light of your post to the level of deferred consideration over the next few years, which as you indicate is fairly considerable.

Per the 2012 Annual Report (note 18)

In respect of Proquis:


The fair value of the consideration payable at the date of acquisition was £3.24million consisting of cash of £300,000 and 28 million ordinary shares in Ideagen plc at 10.5 pence per share. The initial consideration on the date of acquisition was 8 million ordinary shares in Ideagen plc issued at 10.5 pence per share together with cash consideration of £200,000 payable on 1 May 2012.

In addition, contingent consideration of up to 20 million ordinary shares in Ideagen plc at 10.5 pence per share plus further cash consideration of £100,000 may become payable as set out below. This contingent consideration is subject to the level of future revenue from a major customer in the United States in the first twelve months after acquisition and also on the annual renewal of an option by that major customer to continue with a particular contract. The maximum contingent consideration may become payable as follows:

- 10 January 2013: the issue of up to 7,275,270 ordinary shares in Ideagen plc
- 10 January 2014: the issue of up to 5,775,060 ordinary shares in Ideagen plc
- 10 January 2015: the issue of up to 6,949,670 ordinary shares in Ideagen plc

- from 10 January 2016: four cash payments of £25,000 payable on a quarterly basis

Of the 7,275,270 shares contingently issuable on 10 January 2013, 4,000,000 are contingent on the level of revenue from a major US customer in the twelve months following acquisition. The remaining 3,275,270 shares are contingent on the renewal of an option by the same major US customer in November 2012 to continue with a particular contract.

All of the remaining issues of shares and cash payments noted above from 2014 onwards are contingent on the renewal of annual options by the same customer on the same contract. If the option is renewed each year, the above amounts will be payable in full. If the option is not taken up then none of the contingent consideration linked to the contract for subsequent years will become payable."

So, as Adam indicates, potential for 25.6% dilution if full consideration provided & worth bearing in mind for anyone considering an investment in IDEA.

Regards,
GHF


EDIT - I've made the move onto Twitter & pleased to meet any investor/ lurkers over there.

Twitter @Glasshalfull1

[adamb1978] 07/12/2012 12:08

Hi

As posted on TMF last weekend, I sold out of IDEA recently. Main reason being the lack of growth in the company - if oyu strip out the acquired businesses then there has been pretty much zero organic growth in the company for 2-3 years. Question is therefore whether you think that they can continue to make bolt-on acquisitions for attractive prices and take cost out, as they have done in the past. If they can then you can see them growing EPS however I prefer to see a company being able to generate organic growth as well as M&A lead growth.

Given that they're now trading at something like 11x PE, I think thats looking toppy for a no-growth company, particularly when there's the huge risk from the VHA contract not being renewed each year (and which incidentally was for a smaller amount this year - 1.6m vs the 2.1m which it was meant to be). There's also the 25% or so dilution from all the deferred shares which are being issued to Proquis' former owners....which means that even if the VHA contract is renewed each year (and which is needed obviously to maintain the same level of turnover as the prior year), then EPS comes under pressure.

Hope this continues to perform for all you holders however I didnt see the risk/reward balance as sensible any more given the multiple. Happier to bank a 25% or so profit and move on to other things.

All the best,

Adam

[lanzarote666] 01/12/2012 10:43

Have taken my first interest in this tiddler following the trading update this week.

It looks a slow and steady grower, with potential to scale up if they get it right in the US.

Loving the operational cash generation - with 90% of next years revenue already lined up from ongoing contracts. Beyond that it's just a question of how blue the blue sky is from the new business.

The Company are clearly focussed on cash generation with an improvement in the debtor management (are they exposed to bad debts?)

Contracts are usually five years, and recent announcements talk of other one year contracts being renewed for longer periods. 95% of customers are renewing. Suggests they have the product right and are delivering. That tie up with EC Harris supports this.

They are looking to expand into North America, and whilst the US Healthcare market is full of bureaucracy which may delay expansion, I am hoping that they can knock down a few barriers and open up some new contracts.

DYOR

[glasshalfull] 29/11/2012 21:06

TechMarketView agree:

Ideagen on track

John O'Brien, 08:41, 29 November 2012

So far so good for compliance-based information management supplier Ideagen, which provided its first update since listing on AIM in July (see Ideagen joins AIM). Trading in the six months to 31 October was 'comfortably in line' with expectations and management are confident in meeting their FY targets.

At the end of October, Ideagen had net cash of £1.2m after paying down the costs of admission to AIM and deferred payments on acquisitions (see Ideagen acquires Proctis – and a hefty US contract). Since then, it has also signed off on year two of its contract with the US Department of Veterans Affairs worth $1.65m (c£1m) – 70% of which is to be recognised in the current year.

Ideagen's focus on the capture, storage, retrieval and distribution of unstructured information is proving popular with investors. Its shares have risen c20% since their July launch.

Regards,
GHF

[glasshalfull] 29/11/2012 21:03

Not many visitors to this lonely thread, even after release of a trading a update today.



Appears that all is well with IDEA trading comfortably in line while they delivered strong operating cashflow during the period.

Also noted that the CEOs comment that they have confidence in the outrun for the full year, which is a further positive at the half year stage & suggests that they are on a prospective PER of 11 which is inexpensive for a company with net cash that is generating strong cashflow & operating in a growth niche IMHO.

Well done DH and the team!

Regards,
GHF

[glasshalfull] 12/11/2012 21:43

Before I sign off for the night, discovered a recent Partnership between Ideagen and EC Harris targeting a solution to improve asset info for the water industry.

Quite a coup for IDEA as selected partner. EC Harris are a very prestigious company.




EC Harris and Ideagen Launch New Solution to Help Water Companies Address Asset Information Challenge

Poor asset information identified as major threat to water companies' future performance

November 6th 2012

EC Harris and Ideagen have today launched a new 'Asset Information System' solution, a combination of software and consultancy services, which has been designed to help water companies improve the accessibility and quality of all the information they currently hold on their wider asset portfolio. 

The ability to access accurate asset information is vital to the whole 'call to fix' process and the speed at which water companies can resolve customer complaints. This is becoming increasingly important as the new SIM approach and the move to introduce more risk-based regulation within the upcoming PR14 price review period, will see water companies judged on how well they have delivered better customer outcomes. 

The size of the challenge was emphasized in the Consumer Council for Water's most recent annual Complaints Report, where the industry body outlined significant room for improvement around the speed at which water companies were resolving non-complex issues. The directive within the final report stated that 'straight-forward referrals' should be fixed within twelve working days however over the previous year, only 47% of the complaints the Council referred to water companies were resolved within that timeframe.

Mike Nugent, Global Account Leader within EC Harris' Water team said: "Poor access to asset information has been identified as one of the main factors currently encumbering water companies from dealing with customer issues. This is an area where utilities have historically struggled, however new regulation means this is a problem that must be addressed now. Any perceived sluggishness or inability to address customer issues could see water companies facing potentially heavy fines and a more challenging determination." 

David Hornsby, Chief Executive of Ideagen added: "The primary issue facing water companies is that often, they find themselves with multiple and conflicting versions of key documents including standard operational procedures, materials and maintenance procedures and compliance information. As a result, companies, their contracting partners and in-house field force, can waste significant amounts of trying to get accurate information on the assets they need to repair, which ultimately delays issue resolution and their ability to address customer problems".

To help address this specific issue, EC Harris and Ideagen have launched a new offering that will help water companies achieve a fully unified source of asset information that is correct, and accessible to in-house teams and contractors within just four clicks of a mouse.

The four key stages involved in building the 'Asset Information System' include:

• Analysis – define the scale of the challenge by reviewing the size of the asset portfolio, the current state of the asset information and the existing governance structures in place

• Design – develop a clear view on the future design of the Asset Information System including the target data and governance structures and the approach needed to embed these new process and ways of working

• Collation – collate the data to bridge the gap between current state and future design and develop into a fully loaded pilot system that can be tested within each particular organization

• Implementation – manage the implementation of the new solution within the wider firm and monitor to ensure that it delivers the key benefits that were established in the initial business case

"Those companies that take concerted steps to address their asset information challenge now will not only be reducing the risks associated with non-compliance, but will also be empowering their organizations by bringing crucial knowledge back into the business. The nature of the regulatory cycle within the sector means that those firms who act now could be placing themselves at a competitive advantage in PR14 and beyond" added Nugent.

- Ends -

About EC Harris:
EC Harris is a leading global built asset consultancy. As an ARCADIS company, we have access to approximately 22,000 professionals worldwide operating in over 70 countries, 300 offices and generating in excess of €2.4 billion in revenue. Working across a wide range of market sectors, we help our clients make the most from the money they spend on their built assets.  For more information visit

About Ideagen:
Ideagen Software specialise in the development of software solutions for document control, compliance and standards management. Their powerful and secure solutions have helped a wide range of customers save time and money, promote ownership, ensure traceability and manage distribution. For more information visit


Regards,
GHF

[glasshalfull] 12/11/2012 15:54

...and another 25k slightly lower again.

Hopefully this let's investors/ lurkers see that you shouldn't pay too much attention to trade data. 50k of trades that would look like sells at a glance.

Regards,
GHF

[glasshalfull] 12/11/2012 15:32

You're welcome welsheagle.

You may be interested to find another AGM write-up available on the "Sharesoc" web-site, written by the esteemed Roger Lawson. Free to register.



FWIW I've just topped up with another 25k...bought them at 19.12 while bid/ offer spread is sitting at 19 vs 19.5p...so it's showing as a sell.

Regards,
GHF

[welsheagle] 10/11/2012 22:04

Thanks for the last post, Glasshalfull - very informative.
Would value any future reports.

[glasshalfull] 05/11/2012 20:25

Balanced AGM write-up by Dinocras over on TMF. Many thanks Terry.

From the tone it appears that it's a case of "steady as she goes" at the present time, with progress being maintained & the company managing expectations of reasonable growth.

I had hoped for a trading update to coincide with the AGM statement, especially as the last trading update was in July & end of the interim period was 31st Oct.

---



Back in April PLUS listed Ideagen (IDEA) put in an appearance at a Mello and yours truly did a write-up (see OP on this thread) which, amongst other things, provides an overview of the business. As a result of David Hornsby's (CEO) presentation and a bit more research I decided to purchase a few for one of the Dinocras funds. Yesterday was the AGM – the first since becoming listed on AIM – and I decided to go along and meet with a few more members of management and find out a bit more about how things had been going. Results for the YE April 2012 have been published and can be found here

Some Numbers and Background

Since July, when the company was listed on AIM, the share price has risen 33% to 20p and the market cap to £15.7m. The adjusted EPS (fully diluted) has increased 36% year-on-year to 1.2p giving a PE of 16.7; the forecast PE is 11.9 (this last figure from Stockopedia). Revenues are up 78% to £4.0m and net cash (no debt) has almost doubled to £1.5m.

So far so good but, as outlined in my OP, a lot depends on the success of their most recent acquisition - Proquis - and the associated 5 year, $10m+ contract (expected value) with the United States Department of Veterans Affairs (VA). Amongst other things the VA runs 152 hospitals and the Ideagen contract is to implement ISO standards and the associated quality management processes, along with the supporting software, across 2 hospital departments (Sterile Processing and Reusable Medical Equipment).

The AGM

Held at the FinnCap offices near Liverpool Street Station (the same place where Mello Centrals are held) attendance was a little thin, more like anorexic actually; there were about 12 people of which at least half were from Ideagen and a further 3 were advisors leaving just 3 shareholders, one of whom was TrafficCop (of ShareSoc fame) who, during the very brief formal part of the meeting, pointed out a number of potential procedural improvements that could usefully be implemented e.g. actually announcing the votes for and against each resolution. Part of the problem was that the chair of the meeting was the Company Secretary and not the Company Chairman; this was the first time he had chaired an AGM and he seemed a little uncertain of procedural etiquette. No reason was given for the Chairman's absence other than the fact that he was in S Africa – apparently he'd never missed an AGM before – shame as this was the first AGM on the more rigorously regulated AIM market (more rigorous being a purely relative term, I wouldn't want anyone to get the idea that AIM is rigorously regulated ;-))

What did I learn?

After the brief formalities questions were invited from the floor. Well I'm pleased to say that all 3 shareholders asked a number of questions, all of which were answered fully. At the end the Ideagen people made themselves available for further questioning, an opportunity TrafficCop and I took advantage of. So what did I learn?

Proquis and the VA contract

The first question on my list was to probe how well the VA contract was going, what the challenges have been and how much management time is being spent on it. It was also obviously the first question on TrafficCop's list too as he got in first. The general feedback from the team was that the project was progressing well and was on target. Further questioning (during and after the meeting) revealed that the VA is a highly bureaucratic organisation and moves at a glacial pace (it is a government body so I guess that's not really a surprise). The Ideagen project is being driven by Robert L. Jesse who was appointed Principal Deputy Under Secretary for Health in the VA in July 2010 i.e. the numero uno. In political terms he ranks about 3 levels from President Obama, so a numero uno with a large hairpiece. This of course makes him difficult to get to and Ideagen have never met him, although that is an objective. But the support of such a powerful individual helps explain why the VA has gone outside the organisation for a solution when in the past similar IT solutions have always been designed, built and maintained internally: in fact the IT Dept is actually called the Product Development Dept. There are clearly some political issues with said department but nothing major and the Ideagen products and tools are gradually getting implemented and embedding themselves in the organisation. The contract is in effect a pilot and, if successful, should lead to significant additional projects as other key business areas are addressed. Already additional (small) contracts have been won in other areas of the organisation.

One advantage of attending the AGM is that the previous owners of Proquis were both in attendance and I got the chance to quiz them directly about the VA and the project. They have been working on/with the VA for the best part of 20 years now and appear to have embedded themselves and seem to be regarded more as colleagues than suppliers. I got a nice warm feeling from them about the VA contract and its potential and I was satisfied that the risks, although not insignificant, are being well managed.

In response to my question on the amount of senior management time being spent on the VA the answer was a lot (any other answer would have worried me) both David Hornsby and Graham Harrop (ex NED and current COO) cross the Atlantic frequently to initiate and build senior level relationships. Although this is undoubtedly necessary if the most is to be made of the VA potential it does mean that limited management time is split between the US and the UK. I feel the priority should be the VA, which means the UK probably gets less management attention than is ideal. This is in my view the right balance and the bias towards the US and the VA opportunity is the correct focus. But this does raise a possible issue that does concern me.

Organic growth and acquisitions

Clearly there is huge potential for organic growth in the US; in the short to medium term within the VA and in the medium to longer term in the rest of the US Health sector. In the UK the strategy is biased more towards acquisition. The UK market is fragmented and there are a large number of potential acquisition targets. Ideagen aim to consolidate some of these smaller companies and become the major player in the UK in their market. This strikes me as an excellent strategy especially as David intends to pay largely with paper, avoiding debt as far as possible. The target rate of acquisition is roughly one per year, dependent of course on finding the right company at the right price. This is a fairly high rate of acquisition, albeit one that should be manageable, but it will inevitably absorb significant amounts of management time. Should this divert necessary attention from ensuring the success of the VA I would be worried. Let's hope that the management team doesn't over-stretch itself.

I did question Graeme Spenceley (FD) about whether they had a good standardised (quality assured) acquisition process. Being the FD he focused on the analysis of potential candidates but I was more concerned about the post-acquisition integration and ensuring that the key assets don't walk. Here the team seem clear of the importance of integrating in a way that doesn't alienate key people but we didn't discuss the process they follow or how well thought out it was – so a bit of unknown - but on the positive side the Proquis guys seemed happy enough.

David talked of achieving a growth by acquisition of 10-15% pa or about £500,000 revenue at current levels of turnover. If we assume a target revenue growth of 40-60% that means about 25% of the target will come from acquisition and 75% from organic growth, which sounds about right to me. But in the short-term I believe it is critical that management keep their primary focus on the VA.

The UK

But let's not forget the UK as there is plenty of potential here too. Aerospace is an important sector for Ideagen with BAe, Airbus and the MoD important customers. This area was seen as the 3rd best opportunity by David (after the VA and US Health Care markets) for the current FY.

So was it worth going?

Undoubtedly worth going. Unlike some others I like to eyeball management and ask direct questions. I think you learn as much from the way the questions are answered as what is said. My impression of the Ideagen management was that they are a good team, know their business and have a good strategy that, if successful, should see them grow rapidly. I see the main challenges as:


1. Developing the VA and
2. Managing the cultural and geographic UK/US split
3. Sharing time effectively between managing the VA and UK acquisitions. For a small company this is a big challenge and I do worry about over-stretch.

Overall I was reassured about the progress of the VA contract and believe that the team have a good chance of delivering on their objectives, and so I bought some more tripling up my current (small) stake. One to watch closely though.


Happy investing

Terry

---

Regards,
GHF

[welsheagle] 05/11/2012 20:15

Techinvest positive on Ideagen, highlighting the growth prospects, relatively low PE ratio, good recent results, and cash in bank.