Share Name Share Symbol Market Type Share ISIN Share Description
Ideagen Plc LSE:IDEA London Ordinary Share GB00B0CM0C50 ORD 1P
  Price Change % Change Share Price Bid Price Offer Price High Price Low Price Open Price Shares Traded Last Trade
  +0.00p +0.00% 145.50p 144.00p 147.00p 145.50p 145.50p 145.50p 0 08:00:00
Industry Sector Turnover (m) Profit (m) EPS - Basic PE Ratio Market Cap (m)
Software & Computer Services 36.1 1.4 0.8 189.0 320

Ideagen PLC Preliminary Results

17/07/2019 7:00am

UK Regulatory (RNS & others)


Ideagen (LSE:IDEA)
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RNS Number : 7530F

Ideagen PLC

17 July 2019

Ideagen PLC

("Ideagen" the "Company" or the "Group")

Preliminary Results

Ideagen PLC (AIM: IDEA), a leading supplier of Integrated Risk Management software to highly regulated industries, announces its unaudited preliminary results for the year ended 30 April 2019.

Financial Highlights

   --      Revenue increased 29% to GBP46.7 million (FY2018: GBP36.1 million) 

o Recurring revenues represented 67% (FY2018: 62%) of total revenues

o SaaS revenues increased by 63% to GBP13.7 million (FY2018: GBP8.4 million)

o Underlying organic revenue growth* of 8% (FY2018: 11%)

-- Annual Recurring Revenue book (ARR) was up 44% at approximately GBP36.4 million (FY2018: GBP25.3 million)

   --      Adjusted diluted EPS*** increased by 15% to 4.8 pence (FY2018:4.19 pence) 
   --      Adjusted EBITDA** increased by 30% to GBP14.3 million (FY2018: GBP11.0 million) 
   --      Adjusted PBT*** increased by 26% to GBP12.2 million (FY2018: GBP9.7 million) 

-- Cash generated from operations of GBP13.4 million (FY2018: GBP9.1 million) representing 94% (FY2018: 83%) of adjusted EBITDA** before a net payment of GBP1.1 million (FY2018: GBP0.3 million net receipt) received from option holders in the prior year for taxes on options exercised

   --      Net debt as at 30 April 2019 was GBP1.3 million (FY2018: net cash of GBP0.8million) 

-- Proposed final dividend of 0.188 pence per share - Making a total dividend of 0.278 pence per share for the year which represents a 15% increase over the FY2018 dividend of 0.241 pence per share

Operational Highlights

-- Acquisition of InspectionXpert Inc adding 900 US manufacturing customers, IP, growing SAAS recurring revenues and a platform for further growth in North America

-- Acquisition of Morgan Kai adding 400 Internal audit customers, doubling the size of our internal audit business

-- Acquisition of Scannell Solutions a Software as a Service (SaaS) company that has developed a functionally rich content enabled Environmental, Health, and Safety platform

   --      77% increase in SaaS bookings (FY2018: 174%) 

-- Strong international growth with 87% (FY2018: 78%) of all new SaaS logo wins outside of the UK

-- 273 new logo SaaS customer wins including Glaxo SmithKline, Keolis, Green Climate Fund, Boston Biomedical, Fidelity National Finance, Air Nostrum, Immunomedics Inc

-- 140 new logo on-premise customer wins including Transport For London, Cancer Research UK, Thompson Aero Seating, Addiko Bank, TP Aerospace, SAMREF

-- Strong account management with significant contract extensions from Triumph Group, Pfizer, Regeneron Pharmaceuticals, Meggitt PLC, Thales Group, International Energy Agency

-- Continued high levels of customer retention with support and maintenance contract renewal rate of 95% (FY2018: 96%)

   --      Ongoing product innovation and investment across all products with strong emphasis on cloud 

* Comparison calculated on a pro-forma basis as if acquisitions had been in the Group for the same period in the previous year

   **      Before share-based payments and exceptional items 
   ***    Before share-based payments, amortisation of acquisition intangibles and exceptional items 

Ben Dorks, Chief Executive of Ideagen, commented: "The Group's focus this year was on the execution and delivery of our growth strategy, both organically and through acquisitions, whilst continuing the transition to a SaaS based business model. We are pleased to report that we have achieved our objectives this year, significantly increasing the Group's global footprint, particularly in the US, and delivered another year of strong revenue and profit growth, underpinned by excellent cash generation.

Trading since the year end has remained robust and we continue to see strong demand for our products from new potential customers. The acquisition of Redland post the period end has further enhanced the Group's portfolio of products and growing recurring revenues. Furthermore, the repeat business derived from more than 4,000 customers, provides the Board with confidence in the prospects for the Group for the current year and beyond."

The information communicated in this announcement includes inside information for the purposes of Article 7 of Regulation 596/2014

Enquiries:

 
 Ideagen plc                                  01629 699100 
 David Hornsby, Executive Chairman 
  Ben Dorks, Chief Executive 
 Graeme Spenceley, Chief Financial Officer 
  Joe O'Brien, Investor Relations 
 
 finnCap Limited                              020 7220 0500 
 Henrik Persson, James Thompson (Corporate 
  Finance) 
 Alice Lane (ECM) 
 
 Canaccord Genuity Limited                    020 7523 8000 
 Simon Bridges 
 Richard Andrews 
 

About Ideagen plc

Ideagen is a UK-headquartered, global technology company quoted on the London Stock Exchange AIM market (Ticker: IDEA.L).

The Group provides software and services to organisations operating within highly regulated industries such as aviation, banking and finance and life science, with operational premises spread throughout the UK, EU, US, Middle East and SE Asia.

With an excellent portfolio of software products including Q-Pulse, Coruson, Pentana Audit, Pentana Risk and PleaseReview, Ideagen helps its clients reduce costs, improve operational efficiency, strengthen compliance and oversight and anticipate and manage every detail of risk.

Currently, more than 4,700 organisations use Ideagen's products including seven of the top 10 UK accounting firms, all of the top aerospace and defence companies and 75% of the world's leading pharmaceutical firms.

Ideagen's diverse and varied customer base includes many well-known, global brands such as British Airways, Aggreko, BAE, Ryanair, US Navy, KLM, BBVA, Bank of New York, Commerzbank, Meggitt, Heineken, Johnson Matthey, Haeco Group and European Central Bank. As well as this, Ideagen counts 250 hospitals across the UK and US amongst its client base.

Ideagen directly employs over 500 members of staff and is present in every continent globally.

CHAIRMAN'S STATEMENT

I am pleased to report on another strong performance for the year to 30 April 2019, representing Ideagen's 10(th) consecutive year of revenue and EBITDA growth. The Group met or exceeded all key financial and operational objectives for the year including targets for revenue, profitability, organic growth, cash generation and customer retention.

These results are underpinned by Ideagen's world class customer base, strong global reach, outstanding product set and proven and effective management team. These are the first set of results that we have announced following the appointment of Ben Dorks as Chief Executive in May 2018 and the board are delighted with the progress made under Ben's leadership.

The Group continues to source and execute acquisitions and has an extensive pipeline of opportunities that would increase our product capability, scale and recurring revenues, which the Board expect would further enhance shareholder value for the long term.

The Group has a clear vision for the future and has a number of growth and financial objectives for the coming years. These are based on achieving a targeted GBP100 million in run rate revenue by 2022, with recurring revenues representing a minimum of 75%, EBITDA margins at 30% and operating cash collection in excess of 90% of EBITDA. The Board believes that approximately GBP70 million in revenue will be achieved from our current business through organic growth with GBP30 million being generated through acquisitions.

'C Level' Management

In May 2018, Ben Dorks was appointed as Chief Executive to provide the necessary operational leadership for the Group. I moved from Chief Executive to Executive Chairman, to focus on M&A activities and the 3 year strategic plan.

Over the past 12 months, the Group has also recruited and promoted a number of key individuals to provide the necessary depth and breadth of senior management to support our continued growth. During the year Ian Hepworth, formerly Divisional CTO at Thompson Reuters was appointed as Chief Technical Officer and Arun Varma, formerly Global Vice President of Marketing at Kaspersky as Chief Marketing Officer. Both Ian and Arun have an excellent pedigree having worked at a senior level with global innovators and leaders such as RAC, Nokia, Cambridge University Press and Segura Systems during their careers. In April 2019, Paul Marshall was promoted to Chief Customer Officer as the Group continues to drive customer success and the ongoing expansion of its products within the customer base. Paul is an Ideagen veteran of over 10 years, having served as a Project Consultant, Sales Manager and Head of Sales and is a trusted advisor to many of Ideagen's most strategic customers. They join Alex Hewitt (Chief Legal Officer), Barnaby Kent (Chief Operating Officer) and Graeme Spenceley (Chief Financial Officer) to make up Ben's senior leadership team.

Market Opportunity

The Board is confident in the long-term prospects of the Group. The Integrated Risk Management market was, according to Gartner, worth $5.4 billion globally in 2018 and is estimated to be growing at 13% per annum. We believe we have a compelling business platform that has been significantly enhanced over the past year through the acquisitions of InspectionXpert, Morgan Kai and Scannell Solutions and the acquisition of Redland in the current year.

Highly regulated organisations require the tools we provide to help them identify, assess and manage corporate risk while complying with international industry standards. Many of these organisations are only in the early stages of adopting an enterprise-wide approach. The Board believes that the Group's cloud solutions will be a particular growth area for the Group which will increase the percentage of total revenues derived from recurring contracts providing further visibility of earnings.

Dividend

In line with our progressive dividend policy and reflecting our continued confidence in the prospects for the Group, the Board is pleased to propose a final dividend of 0.188 pence per share making a total dividend of 0.278 pence for the year (FY2018: 0.241 pence) an increase of 15%. Subject to approval at the forthcoming AGM, the final dividend will be payable on 26 November 2019 to shareholders on the register on 8 November 2019. The corresponding ex-dividend date is 7 November 2019.

The success of Ideagen is the result of the excellence and dedication of our employees and on behalf of the Board, I would like to thank all of them for their continued hard work. The new financial year has started well and I look forward to continuing our track record of growth and delivering on our strategic objectives.

David Hornsby

Executive Chairman

CHIEF EXECUTIVE'S REVIEW

I am delighted to report that 2019 has been another successful year for Ideagen. We have reported another year of solid financial performance during which our organic revenue growth was approximately 8% and ARR grew 44%. I am encouraged by the success in our priority international markets which continue to form a significant expansion opportunity.

Excellent strategic progress has been made, in particular with the three acquisitions completed during the year. This has strengthened our product range and keeps us well-placed to support our customers and capitalise on the significant market opportunities ahead.

Total revenue of GBP46.7 million (FY2018: GBP36.1 million), represented overall growth of 29% and adjusted EBITDA grew 30% to GBP14.3 million (FY2018: GBP11.0 million). A key financial metric for the Group continues to be adjusted EPS and I am pleased to report an increase in adjusted diluted EPS of 15% to 4.8 pence for the year (FY2018: 4.19 pence).

Market drivers and growth opportunities

Ideagen operates in a global market with a number of drivers for structural growth. Businesses around the world need innovative solutions to help them meet increasingly stringent compliance, quality, safety, and regulatory risk requirements.

Ideagen's product-market strategy is focussed in two areas:

QHSE - Quality, Health & Safety and Environmental Management - covering:

   --      Compliance with existing and new standards, laws and regulations 

-- Conformance with customer requirements, including, for example, new pressures for risk-based shop floor quality management in manufacturing supply chains

-- Efficiency and productivity in quality, safety and environmental management; for example, being able to comply with new or more stringent requirements without increasing headcount in the compliance team

-- Improving performance in these areas, for example by reducing the number of safety incidents in which employees are harmed, ensuring that important quality audits are passed successfully

ARC - Audit, Risk and Compliance Management - covering:

   --      Pursuit of sustainable competitive advantage through risk-based compliance and oversight 

-- Establishing a strong governance model to deliver resilience, compliance and strategic goals

   --      Productivity of internal audit teams through automation of their business processes 
   --      Compliance with laws and regulations such as SOX, UK Companies Act, SM&CR or ASC 275 
   --      Stewardship of brand and reputation 

These key market opportunities overlaid with vertical concentration in aviation, aerospace, automotive and defence manufacturing, life sciences, healthcare, financial services and banking; provides global opportunity for growth with the accelerating shift towards a cloud economy.

Overview

Following another strong financial performance in 2019, Ideagen has the capability and resources to continue to make important investments across the Group. These investments will support further growth in line with our People, Products and Customers. Organic investment will be directed at developing and launching additional world-class products, improving the value-based outcomes for our customer, and recruiting and developing the very best people. We intend to support this organic investment by considering acquisitions that broaden our geographic reach and strengthen our product capabilities.

Strategic focus areas

In the past year we have increased our focus on our three core business areas that underpin our strategy: People, Products, Customers. This has not only contributed to the strong performance in the period but in a complex and rapidly changing environment, this approach allows us to prioritise and align our resource and developments with customer demand and capitalise on market trends.

We have strengthened the capabilities of all our teams, particularly in development, marketing and sales. With the creation of 4 centres of excellence in Nottingham, Glasgow, Kuala Lumpur and Raleigh (North Carolina). This investment will provide resource, technology and infrastructure to further support the Group's growth strategy.

Our customer strategy continues to mature with the introduction of new customer success profiling, people, and systems. We are pleased with the progress we have made during the period which is demonstrated by the industry high retention rate of 95% of recurring revenue. We had a 30% increase in customer engagement for our Net Promoter Score (NPS) which is a customer loyalty metric measured on a scale of -100 to +100, where NPS of greater than Zero (0) is considered good within the enterprise software space. During the year we established that our overall NPS score is +12 (2018:23). The reduction in score was due to a lower NPS from the acquisitions made in year, like many small businesses, our acquired businesses whilst successful, did not proactively and scientifically manage customer success but are now benefitting from Ideagen's dedicated resource in this area.

This year we have significantly advanced the technology that underpins our customer propositions. The shift to a cloud operational model is a strategic priority, which will continue to evolve through our partnerships with Amazon Web Services and Azure. This innovation means the business is able to scale faster and can continue to support our evolving customer requirements in the UK and international markets.

Corporate Transactions

Ideagen has a strong track record of acquiring companies. During the year we completed three further acquisitions to strengthen our product and technology capabilities, broaden our international reach and customer base, and take us closer to our strategic goal of being global leader in our chosen markets.

The first of these was InspectionXpert (IX) in Raleigh, North Carolina, USA. IX is a profitable and growing Software as a Service (SaaS) company that has developed a digital Quality Inspection solution for the advanced engineering and manufacturing sector. Increasingly OEM's are driving automated inspection initiatives through their supply chains in order to reduce costs and improve product quality. This acquisition further consolidated our position within the fast-growing Quality market and strengthened our US presence.

This was followed by our largest transaction to date, the acquisition of Morgan Kai, a profitable and growing software company that has developed a leading Internal Audit Management product 'MKinsight'. Customers include the UK's National Audit Office, the Federal Reserve, Investec, the New York Stock Exchange, Shell, Bombardier and Blue Cross Blue Shield; with 77% of them being international and 28% in the US. The addition of MKinsight to the Group doubles the existing Ideagen Internal Audit business providing scale, enhanced technology, and a strong competitive position.

Our third acquisition was Scannell Solutions a SaaS company that has developed a functionally rich content enabled Environmental, Health, and Safety platform. This acquisition supports the Group's product roadmap providing the technology and content to accelerate our market leading QHSE strategy.

Together, these acquisitions mean that we now have businesses of genuine scale and ability to execute on the market opportunity.

The Board remains committed to our ongoing buy and build strategy and expect to complete further acquisitions in the future. Our acquisition strategy focusses on recurring revenues and compelling product offerings, and we apply strict criteria to ensure that acquisitions represent value for shareholders.

Operational

Cash generated by operations remained strong in the year at over 90% of EBITDA on an adjusted basis. Net debt as at 30 April 2019 was GBP1.3 million (30 April 2018: net cash of GBP0.8million) having raised GBP19.4 million in September 2018 through a share placing and having paid a total of GBP28.2 million in consideration and costs for the acquisitions of InspectionXpert, Morgan Kai, Scannell Solutions and IPI (deferred) and GBP0.6 million in dividend.

The Group continues to benefit from a strong and growing base of recurring revenues, which represented 67% of total revenue in the year (FY2018: 62%). The Group is committed to increasing the percentage of total revenue derived from recurring contracts through the medium-term transition from a traditional licence model to a SaaS subscription-based model. This transition is well underway and recurring SaaS revenues increased by 63% to GBP13.7 million (FY2018: GBP8.4 million) with 25% organic SaaS revenue growth.

The Medforce acquisition from FY2018 has been successfully integrated using our mature integration framework which provided the delivery of true synergies and enabled an acceleration of sales execution. The acquisition broadened Ideagen's relationships in our existing core sector of healthcare and provides an additional source of recurring revenue.

Growth: Sales and Marketing

We have seen good performance in terms of new business and customer retention. This includes key wins across all our core markets and geographies within each of our solution areas.

We have invested into our marketing teams to generate qualified sales leads and to enhance the global recognition and reputation of our brand and solutions. This is achieved through content driven product and vertical marketing covering blogs, white papers, webinars, a dedicated digital team and over 50 global events per year. We have increased the number of marketing qualified leads significantly and also introduced a new Sales Development team to support lead generation and qualification.

We sell our products primarily through a direct sales force which generates 97 percent (FY2018 - 95%) of Group revenue. Our sales force operates globally with a focus on UK, Europe, North America, and Asia. The team is organized by both vertical market and product focus area and includes 57 'quota carrying' sales executives and account managers supported by technical sales and domain experts.

We generate revenues from sales to new customers and through repeat licence and services sales to our existing customers. Key highlights of the year have been the success of the Ideagen Sales Excellence Academy and continued growth of our geographical expansion in Asia and the US.

In order to drive growth, we have successfully added new customers to the Group across all of our key verticals, with aviation, financial services and life sciences providing particularly notable success in the year. We also continue to maintain a strong focus on customer success with continuous investment in customer teams, technology, and product enhancement. This has resulted in significant revenues from strong retention of recurring contracts and new projects from our extensive customer base.

People

At 30 April 2019 Ideagen had 442 (2018: 423) employees based across its UK and international office network, with the majority located at our Centres of Excellence: Nottingham HQ (UK), Glasgow (UK), Kuala Lumpur (Malaysia), Raleigh (US). A combined total of 120 (2018: 57) people are based internationally.

The organisation is committed to significant investment within our development teams, with 35% of resource dedicated to this area, primarily based in Nottingham and Malaysia. Ideagen maintains its focus upon building domain expertise within core markets and delivering excellence across the customer base. As a result, the Group has 21% within Sales & Marketing, and 31% in Customer Delivery, Support and Success

Ideagen continues to believe a broad talent pool across the company is the best way to ensure sustainable growth, as such it is pleased to confirm 48% of employees have been with the Group for 3 or more years, and 31% have been with the company 6 years or more. The Group is delighted that this traditionally male dominated sector continues to see strong growth in female applications, resulting in an improved ratio of 64% (2018: 67) male to 36% (2018: 33) female.

I am immensely proud to work every day with such a committed and talented team and delighted to see it reflected in positive feedback from customers.

Current Trading & Outlook

Trading since the year end has remained robust and we continue to see strong demand for our products from new potential customers. With acquisitions made during the previous year performing well, and with a base of over 4,700 customers generating growing recurring revenues and repeat business the Board has every confidence in the continued prospects for the Group.

Ben Dorks

Chief Executive Officer

Case Study - Cadence Bank

A subsidiary of Cadence Bancorporation, Cadence Bank N.A. is a regional bank with $17.6 billion in assets. Cadence operates 98 branch locations in Alabama, Florida, Georgia, Mississippi, Tennessee and Texas, and provides corporations, middle-market companies, small businesses and consumers with a full range of innovative banking and financial solutions.

Like many businesses today, Cadence Bank recognised a need for their audit and risk functions to be as integrated as possible in order to remain agile in a volatile, uncertain and increasingly complex business risk environment. This led to the audit group looking for a software solution that allowed them to work fluidly with the rest of the business and provide the Enterprise Risk Management group with a complete view of their collective risks in a single, easy-to-access system.

"We pride ourselves on being very resourceful and responsive to our clients so that we can build long lasting relationships," says Lana Blackmon, Vice President and Audit Group Manager at Cadence Bank. "To do this, every arm of the bank needs to be aware of their existing and emerging risks. We have utilised Pentana Audit as a complete GRC tool. Our Enterprise Risk Management Group collects risk and control assessments from the different lines of business, and we utilize those risk and control self-assessments to test and assess the controls, ensuring they are operating just as they are designed to."

Lana explains that with the use of Pentana, the risk culture within Cadence has evolved into something much more proactive and constructive:

"It's been an incredibly effective way for us to build the risk culture within the organization. Our lines of business are now accustomed to seeing their risks and controls regularly, they are used to being tested on them, and can see how the conversation really flows.

Cadence have come to release a wealth of time and cost savings since implementing Pentana Audit, especially in their communication channels.

"With Pentana, we can communicate very well with our other second and third line of defence functions, as well as our CRM group and our lines of business. With everything in the system paperless, with this baseline understanding from all the different groups that use it, we avoid a lot of time wasting trying to translate from one system to another. Everyone understands when we say we're looking at the entity risk, or we're looking at a review risk."

"Pentana Audit has given us a level of discipline and consistency that has led to us getting some really satisfactory reviews from regulators. In future, we want to do more on risk assessments, and build the product out more to other lines of business. We are also looking for ways to leverage the information in Pentana to produce some advanced reports that incorporates all the key information management need to make decisions."

Case Study Wales Research and Diagnostic PET Imaging Centre

Wales Research and Diagnostic PET Imaging Centre is a major facility which is part of Cardiff University, and was a result of a GBP16.5 million investment by the Welsh Government. It provides researchers and doctors with a far greater ability to detect malignant tissue and track the effects of drugs in incredible detail.

In highly regulated environments such as the pharmaceutical sector, where not only is there pharmaceutical legislation to deal with but radiation legislation among others, it is essential to have a good quality management system in place to ensure regulator requirements are met consistently. In previous roles within other organisations Professor Marshall has seen the use of paper-based documentation systems, however these were incredibly time consuming and managing change proved difficult with draft versions spending time on different desks waiting for review and sign off. Although risk assessments have always been controlled documents the continued adoption of quality risk management approaches in pharmaceutical manufacturing meant that this paper-based risk assessment approach was no longer appropriate.

Q Pulse is widely known in the Medical Physics industry and is broadly used across the fields of Radiotherapy and Nuclear Medicine where a strong quality management system is essential to meet the stringent regulatory requirements.

Professor Marshall said: "Given the key role that quality management and risk management play in complying with regulations such as the Environmental Permitting Regulations (2010), Ionising Radiation (Medical Exposure) Regulations (2017), The Carriage of Dangerous Goods and Use of Transportable Pressure Equipment Regulations 2009, Good Manufacturing Practice and many more, a robust electronic risk management system is essential to ensure compliance. The introduction of Q-Pulse Risk has been beneficial in ensuring we increase our compliance in an efficient manner."

"During the training and installation of Q-Pulse Risk, it became apparent that we were underutilising the Incident and Occurrence modules, which are key to unlocking the potential of the system. As a result, we transferred numerous papers forms into electronic forms where data can be captured using the Q-Pulse iPad app now. As a result, we now have access to more data in an electronic format." In addition, the installation of Q-Pulse Risk has also enabled the migration to a paper free clean room, reducing the risk of contamination of the facility. The team now has visibility of the effectiveness of their controls and risks to patients, staff and the business which enables them to better manage their business as well as ensuring the safety of patients and staff. The goal is to migrate all risk assessments to Q-Pulse Risk and complete the migration of paper-based forms to the Occurrences and Incidents module. A significant part of the business process has already been transferred, and it is clear to see that the work involved in completing this migration will significantly improve the management of the facility and processes.

FINANCIAL AND OPERATIONAL REVIEW

Financial Review

Revenue for the year ended 30 April 2019 increased by 29% to GBP46.7 million (FY2018: GBP36.1 million). Within this, pro-forma organic revenue growth was 8% (FY2018: 11%). This is calculated based on a comparison with pro-forma revenue for FY2018 of GBP43.3 million which includes revenues for Medforce Technologies, InspectionXpert, Morgan Kai and Scannell for the equivalent period that they were owned by the Group in FY2019.

Revenues are analysed by revenue type in note 2.

Recurring revenues are a key strategic focus and they have grown strongly because of both the continuing emphasis on growing sales of our SaaS/Subscription-based products and the acquisitions of businesses with high levels of recurring revenues. The Annualised Recurring Revenue (ARR) book amounted to GBP36.4million at April 2019, an increase of 44%.

Total recurring revenues increased by 40% to GBP31.2 million (FY2018: GBP22.2 million) representing 67% (FY2018: 62%) of overall revenues. This proportion has improved consistently since 2016 when recurring revenues represented only 53% of total revenues.

SaaS revenues increased by 63% to GBP13.7million (FY2018: GBP8.4 million) representing 29% (FY2018: 23%) of Group revenue. Support & Maintenance revenues continued to grow both through new perpetual licence sales and through the acquisitions of Medforce and Morgan Kai where significant proportions of recurring revenues have historically come from the perpetual licence model. Support & Maintenance revenues increased by 27% to GBP17.5 million (FY2018: GBP13.8 million) but represented a slightly reduced proportion of total revenues at 37% (FY2018: 38%) due to the focus on SaaS growth.

Professional services revenues represented 11% (FY2018: 14%) of total revenues. This decline is due to a lower proportion of professional services revenues inherent within the businesses acquired over the last two years and the increasing proportion of SaaS sales which require less configuration work.

Licence & Software development kit sales, increased to GBP9.7 million (FY2018: GBP8.3 million) representing 21% (FY2018: 23%) of total revenue in line with the increasing emphasis on SaaS sales.

Adjusted EBITDA increased by 30% to GBP14.3 million (FY2018: GBP11.0 million) and the adjusted EBITDA margin remained stable at 30.6% (FY2018: 30.5%). Gross margin improved slightly to 91.6% (FY2018: 91.2%). Operating costs continue to be tightly controlled representing 61.1% (FY2018: 60.7%) of revenue, however we recognise the need to continue targeting investment in our staff and the operational systems of the business to support continued organic growth and to provide a strong, scalable platform for the integration of future acquisitions.

The Group has significant intangible assets, primarily from the acquisitions that it has made. Amortisation of acquisition intangibles of GBP7.5 million (FY2018: GBP5.8 million) represents the majority of the total depreciation and amortisation charge of GBP9.4 million (FY2018: GBP7.1 million). Amortisation of development costs amounted to GBP1.4 million (FY2018: GBP1.0 million).

The share-based payment charge of GBP1.5 million (FY2018: GBP1.9 million) relates to the Group's equity-settled share option schemes including the Long-Term Incentive Plan and the Share Incentive Scheme for employees. The charge included GBP0.4 million (FY2018: GBP0.3 million) of national insurance costs on the exercise of non-tax efficient options. The remainder of the share-based payment charge does not represent a cash cost to the Group.

The Group incurred costs of GBP1.3 million (FY2018: GBP0.4 million) in acquiring the businesses of InspectionXpert, Morgan Kai and Scannell during the year. Only Medforce was acquired in the previous financial year. During the year we have significantly restructured the Group's development function and reduced the number of offices we operate which has resulted in a restructuring cost of GBP0.5 million (FY2018: GBP0.2 million).

The adjusted Group tax charge is analysed in note 5 and amounted to GBP1.5 million (FY2018: GBP1.0 million). This has been adjusted to exclude the deferred tax effects associated with the amortisation of acquisition intangibles and share based payment charges. The adjusted Group tax charge represents 12% (FY2018: 10%) of adjusted profit before tax of GBP12.2 million (FY2018: GBP9.7 million). The increased tax rate is largely due to the increased level of profits earned in the United States which attract higher rates of tax than in the UK. The Group's use of R&D tax credit claims and tax deductions linked to the exercises of share options in particular have significantly reduced the Group's liability to UK corporation tax on FY2019 profits.

As a result of the above, adjusted diluted earnings per share increased by 15% to 4.80 pence (FY2018: 4.19 pence).

The Group's financial position has continued to strengthen during the year with net assets increasing to GBP73.7 million (FY2018: GBP50.5 million).

The value of intangible assets increased to GBP90.7 million (FY2018: GBP60.3 million) mainly as a result of the three acquisitions completed during the year. The Group capitalised GBP2.7 million (FY2018: GBP2.2 million) of R&D development costs during the year which represented 5.75% (FY2018: 6.2%) of total revenues. The increase is mainly due to costs capitalised in respect of the products being developed by the businesses acquired during the year and the prior year.

Starting with the purchase of Medforce in April 2018, the Group's approach to the funding of acquisitions has been more evenly balanced between using debt and equity together with the Group's own cash generation. The strong cash flow and recurring revenue profile of the business mean that the Group has been able to secure relatively inexpensive debt funding. The acquisitions of Medforce, InspectionXpert and Scannell were funded through increases in the Group's Revolving Credit Facility and the acquisition of Morgan Kai was primarily funded through a heavily oversubscribed share placing which raised GBP19.4 million net of costs.

Cash generated by operations during the year amounted to GBP12.3 million (FY2018: GBP9.4 million) representing cash conversion of approximately 86% (FY2018: 85%) of adjusted EBITDA. However, this cash conversion figure was impacted by the receipt, prior to the FY2018 year-end, of GBP1.1 million of cash from option holders to cover payroll taxes arising on the exercise. The subsequent payment of this GBP1.1 million of taxes has therefore negatively impacted cash generated by operations during the year to 30 April 2019. Excluding this, cash generated by operations would have represented approximately 94% (FY2018: 83%) of adjusted EBITDA.

Working capital increased by GBP0.9 million after adjusting for the GBP1.1 million of payroll tax liabilities on share options at 30 April 2018. Within this, receivables increased by GBP3.9 million due to significant organic growth in SaaS billings and increased organic growth in the wider business together with an increased bias of recurring billings in the final quarter on the acquired businesses and in the wider business as a whole. There was also a GBP2.4 million increase in the deferred revenue creditor as a result of the strong growth in recurring revenues and the additional bias towards final quarter billings.

Free Cash Flow in the year amounted to GBP6.3 million (FY2018: GBP6.1 million) representing 44% (FY2018: 55%) of adjusted EBITDA or 13.5% of Revenue. However, adjusting for the cash outflow of payroll taxes on share options referred to above, adjusted Free Cash Flow would have been GBP7.3 million representing 51% of adjusted EBITDA or 15.7% of Revenue. Adjusted Free Cash Flow before payments of acquisition costs of GBP0.9 million was GBP8.2 million representing 58% of adjusted EBITDA or 17.7% of Revenue.

The Group ended the year with net debt of GBP1.3 million (FY2018: net cash balances of GBP0.8 million).

Operational Review

Ideagen continues to make strong progress in its drive towards operational excellence, with a core focus on its people, processes, systems and facilities. At 30 April 2019, Ideagen had 442 (2018: 423) employees based across its UK and international office network, with over 50% of these located at the 2 core UK offices of Nottingham and Glasgow. Ideagen maintains an international office presence in the US, Dubai, Bulgaria, and Malaysia; along with a new office in Ireland following the acquisition of Scannell Solutions. A combined total of 120 (2018: 57) people are based internationally.

In order to facilitate the growth, Ideagen has invested heavily in 'best of breed' cloud systems that have scalability, functionality and reporting at their core. Salesforce.com remains the number one system for the organisation, providing the internal platform for sales and marketing, but is supported by NetSuite in the Accounts function, and then several functionally specific cloud solutions such as Zendesk, Natero, Peakon, Krow, and Jira. These packages are collectively used to provide analytics and Management Information (MI) in support of strategic decision making across Ideagen.

As Ideagen develops, significant resource is invested in benchmarking processes and systems to ensure best practice is standard and that Ideagen remains fit for growth. Ideagen remains committed to relevant accreditations and currently holds Microsoft Gold Partner status, ISO 9001, ISO 27001, and ISO 14001. The Group has membership of a significant number of leading bodies including the Chartered Quality Institute (CQI), Institute of Internal Auditors (IIA), Flight Safety Foundation, and the Institute of Biomedical Science (IBMS).

Graeme Spenceley

Chief Financial Officer

Ideagen plc

Group Statement of Comprehensive Income for the year ended 30 April 2019

 
                                               Note    2019      2018 
                                                     GBP'000   GBP'000 
Revenue                                         2      46,667    36,120 
Cost of sales                                         (3,900)   (3,166) 
Gross profit                                           42,767    32,954 
Operating costs                                      (28,494)  (21,936) 
                                                     --------  -------- 
Profit from operating activities before 
 depreciation, amortisation, share-based 
 payment charges and exceptional items                 14,273    11,018 
 
Depreciation and amortisation                         (9,391)   (7,122) 
Costs of acquiring businesses                         (1,268)     (426) 
Restructuring costs                                     (479)     (151) 
Share-based payment charges                           (1,491)   (1,880) 
Profit from operating activities                        1,644     1,439 
 
Net finance costs                                       (263)      (40) 
                                                     --------  -------- 
Profit before taxation                                  1,381     1,399 
Taxation                                        4           4       130 
                                                     --------  -------- 
Profit for the year                                     1,385     1,529 
 
Other comprehensive income 
Items that may be subsequently reclassified 
 to profit or loss: 
Exchange differences on translating overseas 
 operations                                               641     (133) 
Corporation tax on exercise of options                    537       325 
 
Total comprehensive income for the year 
 attributable to the owners of the parent 
 company                                                2,563     1,721 
                                                     ========  ======== 
 
Unadjusted earnings per share                   3       Pence     Pence 
Basic                                                    0.65      0.77 
Diluted                                                  0.62      0.74 
 
Adjusted earnings per share                     3       Pence     Pence 
Basic                                                    5.01      4.35 
Diluted                                                  4.80      4.19 
 

Ideagen plc

Group Statement of Financial Position at 30 April 2019

 
                                           2019      2018 
                                          GBP'000   GBP'000 
 Assets and liabilities 
 Non-current assets 
 Intangible assets                         90,749    60,289 
 Property, plant and equipment              1,069       787 
                                           91,818    61,076 
                                         --------  -------- 
 Current assets 
 Trade and other receivables               17,547    12,482 
 Cash and cash equivalents                  6,199     5,532 
                                         --------  -------- 
                                           23,746    18,014 
                                         --------  -------- 
 Current liabilities 
 Trade and other payables                   6,043     5,400 
 Current income tax liabilities               387       147 
 Short-term borrowings                      7,500     4,750 
 Deferred revenue                          18,570    12,527 
 Contingent consideration on business         769         - 
  combinations 
 Deferred consideration on business 
  combinations                              1,269       460 
                                         --------  -------- 
                                           34,538    23,284 
                                         --------  -------- 
 Non-current liabilities 
 Deferred income tax liabilities            7,344     5,322 
 
 Net assets                                73,682    50,484 
                                         ========  ======== 
 

Ideagen plc

Group Statement of Financial Position at 30 April 2019 (continued)

 
                                           2019      2018 
                                          GBP'000   GBP'000 
 
 Equity 
 
 Issued share capital                       2,198     2,027 
 Share premium account                     53,948    34,257 
 Merger reserve                             1,658     1,658 
 Share-based payments reserve               1,440     1,148 
 Retained earnings                         13,597    11,194 
 Foreign currency translation reserve         841       200 
 
 Equity attributable to the owners 
  of the parent                            73,682    50,484 
                                         ========  ======== 
 

Ideagen plc

Group Statement of Cash Flows for the year ended 30 April 2019

 
                                                           2019                 2018 
                                                          GBP'000             GBP'000 
Cash flows from operating 
 activities 
Profit for the year                                         1,385               1,529 
Depreciation of property, plant and 
 equipment                                                    463                 320 
Amortisation of intangible non-current 
 assets                                                     8,928               6,802 
Profit on disposal of property, plant 
 and equipment                                                (7)                 (6) 
Share-based payment charges                                 1,491               1,880 
Finance costs recognised in profit 
 or loss                                                      263                  40 
Taxation credit recognised in profit 
 or loss                                                      (4)               (130) 
Business acquisition costs in profit 
 or loss                                                    1,268                 426 
Restructuring costs in profit or loss                         479                   - 
Decrease in inventories                                         -                  10 
Increase in trade and other receivables                   (3,914)             (1,447) 
Decrease in trade and other payables                        (444)               (259) 
Increase in deferred revenue liability                      2,438                 255 
                                               ------------------  ------------------ 
Cash generated by operations                               12,346               9,420 
Finance costs paid                                          (323)                (99) 
Income tax paid                                             (248)                (21) 
Business acquisition costs paid                             (915)               (204) 
Restructuring costs paid                                    (479)                   - 
Employer's national insurance paid 
 on share-based payments                                    (730)               (253) 
Net cash generated by operating activities                  9,651               8,843 
                                               ------------------  ------------------ 
 
Cash flows from investing 
 activities 
Net cash outflow on acquisition of 
 businesses net of cash acquired                         (27,252)             (6,225) 
Payments of deferred consideration 
 on business combinations                                   (460)             (1,640) 
Payments of contingent consideration 
 on business combinations                                       -             (2,057) 
Payments for development costs                            (2,683)             (2,246) 
Payments for property, plant and equipment                  (679)               (517) 
Proceeds of disposal of property, plant 
 and equipment                                                  7                   6 
Net cash used in investing activities                    (31,067)            (12,679) 
                                               ------------------  ------------------ 
 
Cash flows from financing activities 
Proceeds from placing of equity shares                     20,000                   - 
Payments for share issue costs                              (625)                   - 
Proceeds from issue of shares under 
 the share option schemes                                     397                 833 
Proceeds from issue of shares under 
 the share incentive scheme                                    90                  65 
Cost of free shares purchased under 
 the share incentive scheme                                   (3)                 (6) 
New short-term borrowings                                   5,250               4,750 
Repayment of short term borrowings                        (2,500)             (2,000) 
Equity dividends paid                                       (555)               (440) 
Net cash generated by financing activities                 22,054               3,202 
                                               ------------------  ------------------ 
 
Net increase/ (decrease) in cash and cash 
 equivalents during the year                                  638               (634) 
Cash and cash equivalents at the beginning 
 of the year                                                5,532               6,205 
Effect of exchange rate changes on 
 cash balances held in 
 foreign currencies                                            29                (39) 
                                               ------------------  ------------------ 
Cash and cash equivalents at the end 
 of the year                                                6,199               5,532 
                                               ------------------  ------------------ 
 

Ideagen plc

Group Statement of Changes in Equity for the year ended 30 April 2019

 
                          Share     Share     Merger   Share-based  Retained     Foreign         Total 
                          capital   Premium   reserve    payments    earnings    currency     attributable 
                                    account              reserve                translation    to owners 
                                                                                  reserve        of the 
                                                                                                 parent 
                         --------  --------  --------  -----------  ---------  ------------  ------------- 
 
                         GBP'000   GBP'000    GBP'000    GBP'000     GBP'000      GBP'000       GBP'000 
 
Balance at 1 May 2018       2,027    34,257     1,658        1,148     11,194           200         50,484 
 
Share placing                 141    19,859         -            -          -             -         20,000 
Share placing issue 
 costs                          -     (625)         -            -          -             -          (625) 
Shares issued under 
 share option 
 schemes                       27       370         -            -          -             -            397 
Shares issued under the 
 share incentive 
 scheme                         3        87         -            -          -             -             90 
Share-based payments            -         -         -        1,081          -             -          1,081 
Shares purchased under 
 the share 
 incentive scheme               -         -         -          (3)          -             -            (3) 
Transfer on exercise of 
 share options                  -         -         -        (722)        722             -              - 
Transfer in respect of 
 share incentive 
 scheme                         -         -         -         (64)         64             -              - 
Taxation on share-based 
 payments 
 in equity                      -         -         -            -        250             -            250 
Equity dividends paid           -         -         -            -      (555)             -          (555) 
                         --------  --------  --------  -----------  ---------  ------------  ------------- 
Total transactions with 
 owners recognised 
 directly in equity           171    19,691         -          292        481             -         20,635 
                         --------  --------  --------  -----------  ---------  ------------  ------------- 
 
Profit for the year             -         -         -            -      1,385             -          1,385 
Other comprehensive 
 income for the 
 year                           -         -         -            -        537           641          1,178 
                         --------  --------  --------  -----------  ---------  ------------  ------------- 
Total comprehensive 
 income for the 
 year                           -         -         -            -      1,922           641          2,563 
                         --------  --------  --------  -----------  ---------  ------------  ------------- 
 
Balance at 30 April 
 2019                       2,198    53,948     1,658        1,440     13,597           841         73,682 
                         ========  ========  ========  ===========  =========  ============  ============= 
 

Ideagen plc

Group Statement of Changes in Equity for the year ended 30 April 2018

 
                          Share     Share     Merger   Share-based  Retained     Foreign         Total 
                          capital   Premium   reserve    payments    earnings    currency     attributable 
                                    account              reserve                translation    to owners 
                                                                                  reserve        of the 
                                                                                                 parent 
                         --------  --------  --------  -----------  ---------  ------------  ------------- 
 
                         GBP'000   GBP'000    GBP'000    GBP'000     GBP'000      GBP'000       GBP'000 
 
Balance at 1 May 2017       1,981    33,405     1,658          961      8,081           333         46,419 
 
Shares issued under 
 share option 
 schemes                       40       793         -            -          -             -            833 
Shares issued under the 
 share incentive 
 scheme                         6        59         -            -          -             -             65 
Share-based payments            -         -         -        1,545          -             -          1,545 
Shares purchased under 
 the share 
 incentive scheme               -         -         -          (6)          -             -            (6) 
Transfer on exercise of 
 share options                  -         -         -      (1,337)      1,337             -              - 
Transfer in respect of 
 share incentive 
 scheme                         -         -         -         (15)         15             -              - 
Taxation on share-based 
 payments 
 in equity                      -         -         -            -        347             -            347 
Equity dividends paid           -         -         -            -      (440)             -          (440) 
                         --------  --------  --------  -----------  ---------  ------------  ------------- 
Total transactions with 
 owners recognised 
 directly in equity            46       852         -          187      1,259             -          2,344 
                         --------  --------  --------  -----------  ---------  ------------  ------------- 
 
Profit for the year             -         -         -            -      1,529             -          1,529 
Other comprehensive 
 income for the 
 year                           -         -         -            -        325         (133)            192 
                         --------  --------  --------  -----------  ---------  ------------  ------------- 
Total comprehensive 
 income for the 
 year                           -         -         -            -      1,854         (133)          1,721 
                         --------  --------  --------  -----------  ---------  ------------  ------------- 
 
Balance at 30 April 
 2018                       2,027    34,257     1,658        1,148     11,194           200         50,484 
                         ========  ========  ========  ===========  =========  ============  ============= 
 

Notes

   1       Basis of information 

The financial information included in this preliminary announcement is unaudited. This information does not constitute the annual report and accounts of the Group for the year ended 30 April 2019 within the meaning of section 434 of the Companies Act 2006. This will be available from www.ideagen.com in due course. The audited annual report and accounts of the Group for the year ended 30 April 2018 has been filed with the Registrar of Companies. The auditor's report on those financial statements was unqualified and did not contain any statement under section 498 (2) or (3) of the Companies Act 2006 and did not include references to any matters to which the auditor drew attention by way of emphasis. The accounting policies applied are consistent with those included in the Group accounts for the year ended 30 April 2018 with the exception of IFRS 9 "Financial Instruments" and IFRS 15 "Revenue from contracts with customers" which the Group has adopted in the year. There was impact on the reported results in the current or previous years as a result of the adoption of IFRS 9 and IFRS 15.

   2       Revenue 

An analysis of the Group's revenue is given below.

 
                                          2019      2018 
                                         GBP'000   GBP'000 
 
 Recurring software SaaS/subscription     13,727     8,442 
 Recurring support & maintenance          17,452    13,793 
                                        --------  -------- 
 Total recurring revenues                 31,179    22,235 
 Software licence & development kit 
  revenues                                 9,694     8,339 
 Professional services                     5,307     5,052 
 Other                                       487       494 
 
 Total revenue                            46,667    36,120 
                                        --------  -------- 
 
   3       Earnings per share information 

Basic earnings per share is calculated by dividing the profit for the year attributable to the owners of the Group ('Earnings') by the weighted average number of ordinary shares outstanding during the year. Diluted earnings per share is calculated by dividing Earnings by the weighted-average number of ordinary shares outstanding during the year as adjusted for the effect of all potentially dilutive shares, including share options.

In order to better demonstrate the performance of the Group, adjusted earnings per share calculations have also been presented which take into account items typically adjusted for by users of financial statements. The adjusted earnings and earnings per share information are shown below.

 
                                                2019          2018 
                                               GBP'000       GBP'000 
 
 Profit for the year (Earnings)                    1,385         1,529 
 Adjustments: 
 Costs of acquiring businesses                     1,268           426 
 Restructuring costs                                 479           151 
 Share-based payment charges                       1,491         1,880 
 Deferred taxation on share-based payment 
  charges                                              1          (14) 
 Amortisation of acquired intangibles              7,548         5,819 
 Deferred taxation on amortisation 
  of acquired intangibles                        (1,500)       (1,109) 
 Adjusted earnings                                10,672         8,682 
                                            ------------  ------------ 
 
 Weighted average number of shares           212,825,943   199,462,389 
 Diluted weighted average number of 
  shares                                     222,473,572   207,133,981 
 Basic earnings per share                     0.65 pence    0.77 pence 
 Diluted earnings per share                   0.62 pence    0.74 pence 
 Adjusted basic earnings per share            5.01 pence    4.35 pence 
 Adjusted diluted earnings per share          4.80 pence    4.19 pence 
 
   4       Taxation 

Further information on the taxation credit in the Group Statement of Comprehensive Income is as follows:

 
                                                         2019      2018 
                                                        GBP'000   GBP'000 
 
Income taxation charge                                      987       523 
 
Deferred tax credit on amortisation of acquisition 
 intangibles                                            (1,500)   (1,109) 
Deferred tax charge / (credit) on share-based 
 payment charges                                              1      (14) 
Deferred tax charge on development costs                    216       227 
Other deferred tax charges                                  292       243 
Total deferred taxation credit                            (991)     (653) 
 
Total taxation credit                                       (4)     (130) 
                                                       --------  -------- 
 
   5       Adjusted profit before taxation and adjusted taxation charge in the Income Statement 
 
                                                        2019      2018 
                                                       GBP'000   GBP'000 
 
Adjusted earnings (note 3)                              10,672     8,682 
Adjusted taxation charge (below)                         1,495       993 
                                                      --------  -------- 
Adjusted profit before taxation                         12,167     9,675 
                                                      --------  -------- 
 
Taxation credit in the Statement of Comprehensive 
 Income                                                    (4)     (130) 
Add back: 
Deferred tax credit on amortisation of acquisition 
 intangibles (note 3)                                    1,500     1,109 
Deferred tax (charge)/credit on share-based 
 payment charges (note 3)                                  (1)        14 
                                                      --------  -------- 
Adjusted taxation charge                                 1,495       993 
                                                      --------  -------- 
 
Adjusted taxation charge based on adjusted 
 profit before taxation                                    12%       10% 
                                                      --------  -------- 
 

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.

END

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