Intercede Share Discussion Threads

[aphrodites] 07/6/2011 16:45

Having been at meetings all morning I have now had the opportunity to read and digest the full set of results. What a pity Mr Parris's abbreviated early comments did not match the quality of the full and enlightening statement which followed later.

I apologize to him for my comments this morning but with such a good set of results behind him I believe his advisors could have chosen better words to emphasise the success of these results.

The full Chairman's statement really does highlight the potential of the company's future prospects. More importantly it sets out quite concisely the business plans for the coming year against which its success can be measured. So many Chairmen these days do not like to provide information upon which they can be held accountable. Well done Mr Parris.

As can be seen from item 2 SEGMENTAL REPORTING over 57% of the present revenue comes from the USA and only 13.5% from Europe and 8.8% from the Rest of the World. As has been highlighted, the growth trend in the USA across the sector is likely to continue and with both sizable Government and corporate customers having been captured, many more are likely to follow in their footsteps. Reputation in the USA is one of the driving factors for success. Therefore, their investment there has been fully justified and will assist to support the growth they anticipate. I believe this is likely to continue at a pace which is far faster than Parris wishes to acknowledge at this time. But just as importantly the opportunity to attract business globally is likely to feature more prominently in the next trading year. I would not be surprised to see the announcement of several large contracts from the southern hemisphere.I believe if Parris had been more upbeat with his forecast he could have been accused of being OTT!

What a pity the figures had to support the legal costs of £747k. Just think what a profit of nearly £3m would have looked like in the headlines. But to my mind the most important factor is the potential to widen and diversify their markets on a global basis. And the statement by Parris that IGP is one of the world's leading developers and suppliers of identity management software highlights the advantage they have in marketing their wares and achieving that success.

To my mind a 160p take out price would discredit the potential value of this company. IGP is going to be worth a lot more 12 months down the road. But I would not be surprised to see an announcement in the next 2/3 months that they have received an approach from a USA based company. Companies like this do not grow on trees. Anyone in this business with a few spare bob in their coffers would be well advised to buy them now. They will cost a lot more down the road.

And there is the added attraction under the Funding section of the hint of a potential dividend down the road when the Board considers it appropriate.

All good stuff to take this share price higher and to challenge the £1 barrier.

I put a bid in this afternoon to buy 50k at sub 80p but was unsuccessful.

[igoe104] 07/6/2011 15:36

LETS hope for some positive contract news flow, to push the price up.

ps
ive just started a brazil investment trust thread, if anyone is interested in way of investing into brazil put jpb into your favorites.

[rambutan2] 07/6/2011 15:20

Nice set of results.

Yes, go for it Mr Parry, the risk/reward for investing in the next step up for the company is well worth taking. Downside is small but upside is v substantial imho.

[boadicea] 07/6/2011 14:59

In present markets, a well balanced share price without a pre-result spike up inevitably followed by a sell-off-on-news is probably a bonus. Volatility attracts traders and repels investors.
I have always hoped for a long term investment here, possibly until an offer for the company, or else for steady organic growth. Management of expectations so that the results generally meet or just exceed consensus is part of the steadying process.

Nothing for me to worry about in these results, but the transition to greater partnership/customer support with an increase in personnel investment is a necessary and expensive process requiring careful management. That should prove a better use of funds than paying out a dividend at this stage imho.

[wjccghcc] 07/6/2011 14:56

Latest Finncap forecasts are for FY revenue growth of 11%, accelerating to 23% the year after. Increased investment (all expensed) gives EPS of 3.0p this year rising to 5.2p in 2012.

They also mention that if IGP were bought in the meantime, using US sales multiples for comparable transactions would give a takeout price of over 160p.

[awilson] 07/6/2011 14:49

Looby Loo

Point taken but perhaps I should have made it clear that short termism is the ethos of a large number of fund managers across all sectors. Thankyou for clarifying the HH situation which effectively removes the risk of a potential overhang. The HRI share price has virtually the same pattern as that of IGP since early January but that is surely coincidental.

[looby loo] 07/6/2011 14:19

AWilson,

No worries about "short termism attitude of many fund managers". ;o)

There are only two fund managers of any significance:

1. Katie Potts of Herald Investment Trust. She had been waiting ever since the company first floated on AIM to buy in. But had to wait until March 2010 for Richard Parris to give up 1,000,000 of his own personal shares to get her on board. So Herald won't be selling.

2. Giles Hargreaves of Hargreaves Hale Aim VCT1. I had the pleasure of chatting to Giles after a presentation that he gave to a Motley Fool meeting a couple of months ago. Contrary to speculation on this BB, Hargreaves Hale have never sold a single share. Neither do they have any intention of selling. They are in for the duration. Intercede is their 2nd largest share holding. (Abcam their largest.)

[awilson] 07/6/2011 13:56

Yump

You are spot on.
The statement underlines how serious a company IGP is in investing for the
future. Yes, we would have liked a dividend but some long term holders are prepared to wait a little longer in anticipation of much greater rewards.... one problem for the share price is the short termism attitude of many fund managers.

[looby loo] 07/6/2011 13:53

NOMAD and broker finnCap sees some upside in the share price, albeit quite small for the time being. I guess their 100p target takes us up to the next trading update. (They issued one in September last year but usually October.) But news of any new contracts before then could change all that. Over the longer term, Intercede has all the signs of becoming a massive company, providing it can stay independent.




"Finncap raises smart card technology developer Intercede (IGP.L) target price to 100p from 90p."

[yump] 07/6/2011 13:07

Given that they have a growing sales pipeline and a strong market position, to conclude that they are ex-growth is a bit of a wild jump imo and making assumptions when there simply isn't enough information to go on.

Also, as long as I have been invested, they haven't flagged forthcoming possible contracts in any sort of rampy way. If there's nothing to announce, they've announced nothing.

I hope we don't do a good job of demonstrating the true colours of many UK investors in UK companies, as in: "oh you're investing in the business, some profits might be used, I'm afraid we don't like that".

[fft] 07/6/2011 13:00

rather than MS, maqybe someone like Gemalto would be a more likely buyer. MS gold partner, FIM integrated and 10,000 employees with a multi billion dollar business. lots of doors already opened by them that IGP could drop into. MS use gemalto embedded into all employee cards worldwide for authorization.



If MS bought IGP it might make some existing MS partners not so happy.

[wjccghcc] 07/6/2011 12:39

Not ex-growth as far as revenues are concerned. In fact, I'd expect FY revenue growth to accelerate this year (although as igoe points out - it may not seem so for H1 due to the NHS boost last year).

Profits-wise, yes, I expect them to be reasonably static as the headcount costs ramp up.

But, if it moves them from a market-leader in the high-end smart card niche to a market leader in the global ID assurance space (and they have a good headstart in the UK/US), then what value do you assign to that?

[archa] 07/6/2011 12:10

Ex-growth now for a while. Not really a surprise.

[igoe104] 07/6/2011 12:08

wjcc

The challenge for igp is will they be able to match last years interims, without them nhs funds ? which ramped them up last year. if they fall short you know what markets can be like. so igp need to be busy over the next months.

[igoe104] 07/6/2011 11:48

Heres a project worth keeping a tabs on.

[wjccghcc] 07/6/2011 11:47

They do hint that they expect quite a few more government/National ID contracts over the next 12 months, though as ever, timing on these is unpredictable. I think today is more about moving the company to the next stage of growth beyond the high end smart card space.

I agree that no divi is a bit dissappointing but clearly they believe they can get a better return with the increased investment. Time will tell.

[igoe104] 07/6/2011 11:15

IM not rose-tinted i take things as i see them. i expected little more, regarding more hints of contracts in the pipeline and a divi annoucement.
still it doesnt mean i dislike the company.

[dyd] 07/6/2011 11:11

igoe104 this is the first time i have known you have a 'downer' on this company.

[igoe104] 07/6/2011 11:08

im with aphro on this one.

total lack of excitement in these results, nothing new that we know about, and no divi.

[yump] 07/6/2011 09:23

I don't think profitability is necessarily affected. It depends entirely on the timing of revenue in relation to expenditure. Hopefully they know their market well enough by now to not increase headcount dramatically without secure and significant contract revenue flow signed up. I certainly wouldn't want to see them responding to "increase your resources and we'll think about increasing our contract level" type negotiations by larger customers. Especially as IGP should have significant leverage from their leading position.

So the cash is important to fund working capital in the gap between expenditure and revenue flow.

Maybe the mention of cash implies capex anyway ?

(Aside from that a p/e of 20 seems pretty modest for the prospects)

[wjccghcc] 07/6/2011 09:00

It means their market is expanding exponentially and they're going to increase investment to take advantage of it.

Currently MyID is used primarily to manage the lifecycle of ID's on smart cards. However, it is really a platform to manage ID's over any products e.g. smart cards, tokens, e-ID's etc.. It already does this with Swisscom.

Their existing corporate customers such as Lockheed, Boeing want them to expand the platform to manage the ID assurance of their employees beyond the existing logical/physical access on their existing premises to mobile, tablet, third-party access points from anywhere. Hence the partnership with Microsoft.

The US and UK governments want them to provide the technology for ID Service providers who will provide ID assurance to citizens for any access to governmental cyber services. Where the UK and US lead, the rest of the world will follow.

In order to take advantage of this, they have to increase their headcount considerably.

In the meantime existing business will continue to grow as the increasing bids for national ID programs demonstrates.

If they succeed in leading the ID assurance space as they have for smart cards, then you're looking at a company with a market cap a multiple of today. The short-term cost for this is increased expenditure and probably static profitability for a couple of years.

Of course, assuming Microsoft doesn't buy them...

[felix99] 07/6/2011 08:42

"We also need to secure the requisite levels of scalability within our organisational structure to meet the demands of a growing number of customers".


Translated as our customers increasingly want us to manage mor easpects of their buisness than we do - so need lots of staff but opportunity to further expand our offering and increase profitability. Not sure what the risk and reward on that exercise would be though. If do go for it then that will need hiring and cash I guess.

[fft] 07/6/2011 08:11

interesting set of results. disappointed that profit (pre-exceptionals) was down from last year. But good solid cash generation.

[archa] 06/6/2011 07:16

The article in Shares magazine is somewhat misleading. The £1.5m hit was dealt with in the accounts for the year to 31st March 2010. The article rather implies that this year's results will deliver pre-tax profits of £2 million even after having suffered the £1.5m hit. Not so.