Intercede Share Discussion Threads

[yump] 18/10/2011 16:11

Well I hope the scale of the issue is not exaggerated on here, as that will have the same effect as the issue itself. Be interesting to see what other explanations are forthcoming, although it sounds like a mixture of lack of investor relations experience + bad advice from external sources.

Hopefully this issue will be differentiated from those like that of MUBL and/or fat cat directors who have spent years trousering money.

I'd be surprised to find any experienced investors selling just because of the share issue - it would be jumping the gun a bit, especially with what is expected to be a strong growth company.

I hope we get more in the way of sales impetus and news - that's the driver - without that the other issues are a bit irrelevant.

[davidosh] 18/10/2011 15:26

Yump...I am sure we all want the same things but how we get there may differ !

I like Intercede and I have no problem with the directors so long as they communicate with shareholders and are aligned with them. Recent events have clearly been a shock to many long termers here. The chairman of the Remcom is prepared to meet with shareholders and help with communications...that will not distract the executives and will hopefully get the marriage back to being a happy one.

If the minority holders here just keep quiet and let their concerns fester and outside investors do not see a happy ship or think directors are not aligned then that will not be good for shareholders as new money and investment may not come in to replace old money. I know some investors have sold their holdings recently so it will and does happen in small caps especially where trust breaks down. There are too many horror stories on AIM and although certain this is not one I am afraid that I am not responsible for RNSs or investor relations !

[yump] 18/10/2011 14:46

Hopefully, the board will still feel motivated to concentrate on the business and delivering shareholder value and not get too distracted by any shareholders that take any sort of inquisitorial 'activist' line.

That is not an excuse for odd share option decisions, but we do seem to have a culture in the UK where a minority can easily cause a majority to become constrained unnecessarily.

ie. the minority of small companies who fleece their investors, cause a knock on suspicion effect for the rest.

Or a minority of cyclists who turn up at planning meetings, genuinely expecting a 15mph limit all over a city and actually getting in the way completely of the more practical matters of just moving cycling forwards... while giving cycling a bad name with 'opponents' on the committees who can then point and say "look, half of you are nuts and living in another world, why should we take any notice".

Er... if you get my drift.

I want IGP to concentrate on making lots of profit. Simple as that.

[looby loo] 18/10/2011 12:54

Pyman,

Its only Autonomy's share price chart that Richard Parris wants to replicate. ;o)

[roger-lawson] 18/10/2011 10:07

We are putting together a contact list of Intercede shareholders with a view to tackling the board on the issues of the LTIP and lack of independent chairman, including arranging a meeting with them. If you wish to be included in our contact list, please send an email to me at [e-mail] or telephone [phone]. I am of course a shareholder also in this company.
Roger Lawson, Chairman, ShareSoc (see www.sharesoc.org).

[pyman] 18/10/2011 09:48

hmm. Autonomy is an interesting analogy. What they do was clever 5 years ago but I m told these days its not so cutting edge. They sold out at the top before they got overtaken perhaps? I was a holder and happy at the price. IGP have a cutting edge tech now: thye need to grab share fast if they are to grow like Autonomy did - and constantly inovate to keep ahead of the pack.The pace needs to be picked up dramtically. Sales -as some one said earlier is key.

[fft] 17/10/2011 13:16

Outstanding report. Bought back memories of many things i had missed out.

btw, in my agm report, where i mentioned LNG, i, of course, meant LOQ. LNG cost me too much time and money :-(

[looby loo] 17/10/2011 03:28

FFT, 'Sorry to hear about your back problem.


Davidosh & All,

Roger and FFT have pretty much covered in their excellent reports, most of the LTIP issues that were discussed at the AGM. Hopefully, Royston Hoggarth has accepted your invitation to Mello this evening.

I've made a few notes from the AGM as I've got some points that might be useful for the meeting with Royston this evening.


1) 4 years of debate

NED Jacques Tredoux represents the largest shareholder, Azalia Trust (22.9%). Jacques explained that the LTIP wasn't something that had happened overnight. It had been raised and debated by the RemCom for the past 4 years. He said that they'd really applied their minds to it, working really hard, with many hours of debate.

Jacques talked for quite a while, mainly in response to Roger's questions. He accepted that all Roger's objections were real objections and that everything he said was correct. He was sorry if the LTIP hadn't worked out the way it should have but they had tried their best.

Richard Parris explained that they would have liked to have had options awarded every year, for the last 10 years. But if they had done that, there would have been costs going out at a time when the company couldn't afford it. That's why the LTIP's been deferred until now. So the reason so many shares are being awarded is because they have had to make up for the past delay. In addition, they also want shares to be awarded to other staff members.


2) RPI + 5%

It was Royston Hoggarth who just came out with this ludicrous target, totally out of the blue! I think everyone in the audience was basically, just stunned! He seemed to just state the target was going to be RPI + 5% in a way, as if we were all supposed to know about it. He gave no explanation of how they'd come up with this figure.

Hopefully, it should all become totally irrelevant because RP thinks the upside for the company is much, much, greater than the current share price and was talking about Intercede having the potential of becoming the next UK Autonomy. He's not especially interested in relatively short-term targets. He said that if he only grows the company by RPI + 5% in the next year or 3, he would consider himself to have grossly failed.


3) Investor Relations

I have to say, I've never previously had much cause to complain about the way Intercede announces its news. They're generally, very good. But what these guys don't seem to realise is that the only information we got about the LTIP was that RNS of 17 August 2011. When you consider that RNS was the culmination of 4 years of debate, it was not very good from an Investor Relations perspective, was it!

When Andrew Walker was at Mello last autumn, I suggested they could do with someone to take care of Investor Relations. But he said for a company with just 55 staff, he couldn't justify it. Well it looks like false economy to me.

I think it's quite surprising they have failed here because on compliance issues, Intercede is run like a large corporation. Jacques talked about how so much detail goes into every single decision and how well everything is run. RP explained that when Intercede had the auditors in recently to check their business processes, they found NO non-conformities. The auditors told them that it was an extremely unusual and rare event. So when they put so much effort into all these things, I really think it should not be too much to ask for some effort to go into improving Investor Relations.

We get precious few RNSs from the company. Something I meant to mention to RP or AW but forgot was the fact that they seem to always come out with their press releases on days when the FTSE's getting hammered! And it just seems to me, from the way the board talk, that they are basically inexperienced in matters related to stock market investment.


4) Exercise price of 1p

Whilst WJCC has pointed out that it seems to be symptomatic of the wider software sector for options to be vested at nil cost, no one has yet come up with an explanation of why this goes on. It was not explained at the AGM.

If the options had been priced at say around the 60p level (which in my opinion is still way to low. 150p would have been a fair hurdle); RP said he would not have been able to afford to buy the shares.

RP did say that if he'd realized the degree of conversation the RNS of 17 August 2011 would stimulate, they might have put out a slightly different RNS. But they did go to their advisors, finnCap to tell them what the company was doing. They sought finnCap's advice on how to announce it and followed their guidance. He said that in future, if they're in a similar situation, they'll be more comprehensive.

Anyway, we're all here criticising the whole way this LTIP has been handled. I think when Royston comes to see us this evening, the line he might take is that they just acted on finnCap's advice.

Davidosh, I know it's very short notice but do you think there's any chance of getting a finnCap representative along to Mello this evening to accompany Royston?


5) Further Fund Raisings?

RP said that he could not rule out the need to maybe raise more funds at some stage in the future, perhaps for an acquisition, resulting in dilution that could drop him below 10%.


6) The figure of "10%"

I'm afraid I suffer a bit from tinnitus and I had trouble following some of the things Royston was talking about. He was softly spoken but fast. I also had some trouble hearing everything of RPs'.

So I have to confess, I got a bit confused with the figure of 10% being used for 2 different things, quite often in the same sentence!

1. Entrepreneurs' Relief being chargeable at a rate of Capital Gains Tax of 10%.
2. RP wanting to ensure that his family's share holding did not fall below 10%.

RP is very keen to keep the size of his family's shareholding above 10%. He is currently at 11% which he described as a "pretty magic number" because of the entrepreneurs' tax relief.

Roger has raised a point on ShareSoc:



"The Intercede Chairman appears to be misinformed - Entrepreneurs Relief applies so long as you hold more than 5% of the shares."

I'm not sure if RP has been misinformed. I'm pretty sure he said at the AGM, exactly what Roger says. ie: Entrepreneurs' Relief applies so long as you hold more than 5% of the shares.

When RP explained his desire to maintain his holding above 10%, I think he was referring to the family's share holding. He's got 2 people in the family working in the business and between them, they currently hold 11% of the shares.

So I'm assuming the reason he talked about getting Entrepreneurs' Relief on a 10% share holding is because as a family, they must both be entitled to the Entrepreneurs' Relief. Is that correct? I'm not sure.


7) All Major Shareholders are in favour of the LTIP

Jacques said that he went to all the larger shareholders (ie: everyone with more than 2%) to seek their approval for the LTIP. So Hargreave Hale (3.9%) and Herald Inv Trust (3.9%) should have been consulted.

Davidosh, You did say to me at the last Mello that you thought Hargreave Hale and Herald hadn't been consulted. I think this should be checked as it could be yet another issue that needs to be addressed.


8) General comments

I bought my first IGP shares in September 2005. So I've stuck with this company for 6 years now and one of the main reasons I've continued to stick with them is because I've really trusted these guys. I am a proverbial cynic and don't get sucked in by all the board members being extremely pleasant gentlemen. But they do all come across as totally honest and I really do believe that in the next 2 or 3 years, they are going to deliver.

I don't have any problem at all with a LTIP. I think RP and AW thoroughly deserve it. These guys are indispensible. If it wasn't for them, Intercede wouldn't exist.

The official meeting lasted around 1½ hours, with some time afterwards to chat to the directors. The attendance at the meeting was pretty poor, with about 12 private share holders. I told Jayne that quite a few Mello guys bought their shares after RP and AW presented at Mello last autumn. If Intercede were to hold its AGM in London, they would probably get much better attendance. Jayne agreed. So I think in future, there's a good chance the AGM will be held in London.

There's been a few concerns on this thread about a MBO. You really needed to be at the AGM to hear RP talking about his ambitions, as you would then appreciate that a MBO is certainly not on the agenda! RP hopes that ultimately, he'll be measured by the returns he makes for investors.

RP chatted about Intercede having fantastic world class technology with very little competition, in a market that is set to grow very rapidly over the next few years. And I totally agree, this is a fantastic little company.

[wjccghcc] 14/10/2011 11:24

I've taken a look at my other software holdings and unfortunately, I think IGP's LTIP is symptomatic of the wider software sector.

Even fully listed companies which require approval at the AGM do it.

e.g. Aveva and Kewill

"Kewill plc (LSE: KWL) (the "Company"), the provider of software and solutions that simplify global trade and logistics, announces that on 08 August 2011 the following persons, being Persons Discharging Managerial Responsibilities ("PDMR") were granted awards of ordinary shares of 1p each in the Company ("Shares") under the Kewill Performance Share Plan ("PSP"), which was approved by shareholders at the Company's AGM on 28 July 2011, as follows:

Name Award (Shares)

Paul Nichols 276,832

David Gibbon 199,413

Jacquie Boast 131,378

Evan Puzey 87,976

Mike Dolan 131,378

Brian Hodgson 87,976

The PSP awards shall vest for nil cost on the third anniversary of grant, subject to continued employment and certain performance criteria relating to the Company's adjusted earnings per share as described in the Notice of AGM. A total of 1,348,963 awards have been granted under this PSP. "

If we can get the larger fully listed companies to stop doing it, then I suspect the smaller AIM ones like IGP will copy them.

[davidosh] 14/10/2011 11:15

IGP will be the hot topic on Monday evening



I have invited the head of the Remuneration Committee along to give the official line on this appallingly bad investor relations disaster.

[wjccghcc] 13/10/2011 11:01

I understand that HID may have approached them prior to buying AI but were only willing to pay lock company multiples (which is what they ended up paying for AI who were significantly lossmaking).

Clearly, if HID throws a lot of money at AI then the competitive threat will increase. Having said that, HID competes directly with many of the security companies such as Gemalto/Oberthur whereas IGP has been careful to expand its niche without threatening its partners. Is it likely that the HID competitors will recommend an AI solution unless it is technologically more advanced (which it isn't)?

It will be interesting to see which gets the upper hand - HID who have the largest installed base of physical access systems are are seeking to integrate that with logical access through the AI acquisition, or Lockheed/Thales/Gemalto who dominate the high-end logical access market and are seeking to integrate that with physical access through enablers like MyID.

[pyman] 13/10/2011 10:33

Being an aquisitive lot it would make sense for HID to bid for IGP? vertical intergration for them ?

[pyman] 13/10/2011 10:31

Thanks WJCCGHCC. reassuring, and informed as ever.

[pyman] 13/10/2011 09:40

check at assa abloy the swedish parent of HID. 39000 employees. HID grew 25% or 19% organically last quater. They are all about access systems and security and seem to be bulding the HID business via aquisition over the last few years .They make firedoors /security doors as well. 19billion swedish Krona sales in the first half. Seems IGP have a very large competitor in HID.

[wjccghcc] 13/10/2011 09:40

pyman, they're for different uses.

The HID global solution will allow enabled Blackberry phones to be waved in front of the HID door reader to open the door as opposed to using a door access card.

The MyID solution enables Blackberry phones to be PIV credentialed i.e. become part of the secure PIV network for secure email, signing and authentication. This would include door access to federal facilities once the authorities allow it.

The MyID solution is much higher security and so will be very useful for any company using PIV, PIV-I or PIV-C. The HID solution does not meet PIV standards and is designed for the mass market who use HID door access solutions.

[pyman] 13/10/2011 09:11

HID global - active identity parent co now - 15 sept announced they have secured contract with Blackberry for NFC digital access to buildings and networks. How does IGP fit in if there competitor seems to have already secured the contract with Balckberry for secure access via NFC???

[wjccghcc] 12/10/2011 18:38

fft

To give an accurate picture, your new sales figure needs to be divided between license revenues and professional services/custom development revenues. As MyID has become more established and the rollouts bigger, the professional services/custom development revenues have declined since the PIV standards mean it's more an off the shelf product rather than bespoke for each project. Of course, as more National ID projects come on line, that my reverse as each will have its own bespoke requirements.

I don't have the figures for 2009, but for 2010 and 2011, the breakdown is

2010 2011 Change
Maintenance 1,486 1,993 +34%
Licences 2,044 2,543 +24%
Prof Services 2,664 2,336 -12%

So actual new licence sales grew at 24% last year.

[yump] 12/10/2011 15:04

What we actually need is a few guidelines as to the market potential from IGP themselves really. I know various posters have done estimates before, but some sort of realistic market size would be handy.

At the moment its not that clear where the step-changing revenues are going to come from. Doesn't mean they won't come, but a demonstration would be nice.

At this level, I'm quite prepared to wait, given the market they're in and their apparent position within it, but I can't see it getting past previous highs without some substantial surprises. Perhaps they're in the pipeline, but I'd rather be told a bit more than guess. The market must be growing after all ?

[fft] 12/10/2011 14:02

wjcc,

Excluding the maintenance side, sales growth has been non-existent over the last 2 years. Not what i would expect from a global leader with only 6m or so in sales. Unless the market is a lot smaller than we have been led to believe.

[jailbird] 12/10/2011 10:54

i think mobile security is the next most important phase going forward...with tablets and smartphones becoming the new desktops.

The thing about Blackberry..it is now in decline...with Apple and Android taking an increasing larger market share.

[pyman] 12/10/2011 10:50

good posts folks . Balckberry need competative advantage right now - especially since they crash the last few days: not good at all! I d have thought that everyone is security consious- even my daughters would love to think their warblings are kept most secret! Blackberry ,I hope will push this fact and fast.

[wjccghcc] 12/10/2011 10:36

One thing to bear in mind regarding sales is that they make very few sales to end users. Their customers are the card and security companies like Gemalto, Thales, Lockheed and Verisign, all of whom know IGP and MyID very well. Together they form teams which bid for projects - IGP will very rarely be the point of first contact.

IMHO what is most important is a relationship manager for these partners and bid teams who ensures IGP are the best to work with as well as having the best product.

There isn't a lot of competition out there - there's a huge barriers to entry and the returns for developing a competing product from scratch just aren't there.

If MyID maintains its technological advantage and ease of deployment together with IGP listening to the customer requirements and being ahead of the curve in development, then the contracts will come (though with lumpy timing as fft pointed out).

They've come from being unknown outside the UK 5 years ago to being global leader in their space today so they must be doing something right :-)

[shanklin] 12/10/2011 09:36

fft

Following posts from you and and Roger Lawson, the LTIP seems to me to be the first case of unknowing management corruption I have ever seen. At least most dodgy AIM management teams are well aware they're shafting other shareholders.

Whilst I like the business, I sold my holding as I didn't like to be involved in this sort of situation.

Sadly the share price has gone up since.

[yump] 12/10/2011 09:18

Yes, having someone with ultimate sales responsibility to drive it at IGP end is crucial.

Whether they need the correct badge or not I guess depends on who the decision makers are to some extent. If the buyers are tech. and in jeans, the suit status/badge thing probably won't matter, but if they're selling to 'bought-into-mission-statement corporate guys, the badge matters - even nowadays its still a role playing game.