Intercede Share Discussion Threads

[yump] 06/12/2011 12:43

In his position, would I have said I could leave and get a higher paid job in the US ? No, but perhaps that's just me.

The issue has clearly been broached at the Remuneration meetings, its not just a passing comment.

[somerset lad] 06/12/2011 12:36

If the LTIP was intended to "encourage investment in the company", then the options would be exercisable if two conditions were met: (a) a short term condition based on bringing new products to market (OTA etc.) or something similar; and (b) a longer term condition (3-5) years based on aggressive share price or EPS targets (£1.75 / 10p). The LTIP isn't structured in this way and therefore doesn't encourage investment. But the company has invested, in my view wisely, so IMHO the commercial strategy is fine even though the justification given for the terms of the LTIP does not stack up.

If Mr Parris "would" leave in the absence of the LTIP and get a better paid job in the US, then -- as a matter of fact -- the LTIP was necessary to retain him (and posters would be perfectly entitled to question his commitment to the IGP cause). But, judging from the note, this is not what he said and, indeed, it would be very surprising if he is willing to leave "his company" to become an employee in the US. He said he "could" leave. This really boils down to an argument about fairness and parity of treatment and not one about retention. IMO, we should not confuse Mr Parris's attempts to justify the LTIP -- which is probably not a particularly pleasant experience and so credit to him for attending the meeting -- with his commitment to the company.

I expect that Mr Parris sees the endgame as being a bid in 3-5 years when the investments have taken the company well beyond the kink on his "hockey stick" revenue curve and am sure a bid is the last thing he wants at the moment. (I also don't think that the LTIP would facilitate an MBO -- there's a marginal dilution effect, but management would still need to find finance and persuade shareholders to sell.)

IMO the real rationale for Mr Parris's inclusion in the LTIP is that it is an assured way of increasing Mr Parris's shareholding, which increases his incentive to position the company for, and ultimately negotiate, the best sale terms (particularly given the tax advice he has received). It is relatively generous, but in the context that IGP has not operated an LTIP in recent years. I am (moderately) happy with this: it is not a true performance-based incentive plan, but it does further incentivise Mr Parris to promote the interests of long term holders.

[aphrodites] 06/12/2011 10:56

ianhamo

If as Chairman and CEO he is playing that game he will find he will be in confrontation with the FSA for not making an announcement that they have been approached and are in discussions which might lead to a bid.

[ianhamo] 05/12/2011 22:17

Could the board be trying to get as many shares before they launch a MBO? or could they be trying to get enough shares to push through a buy-out from a third party. This stock is very tightly held, if a third party makes a bid the Sp would rocket. IMHO the board are shaping up for a friendly take-over from a partner and RP will get his cake and eat it. i.e, his job in the US with the take-over third party. AIMHO

[igoe104] 05/12/2011 14:55

sorry gents off topic.

aphro

NO mate not tipped opg before, reason being ive going just got into the company. and i dont tip companies unless im just about fully invested myself in the company.

ps think ive tipped spl before.

[shanklin] 05/12/2011 14:16

If Parris thinks he can earn more elsewhere, he should get on his bike and go and do it. Not stay with IGP, steal money from shareholders (IMHO!!) and spend his time getting resentful.

If the new incentive scheme rewarded company success that would be fine but it seems to just be a tool for transferring money from shareholders to management.

Still glad I sold as a result of this (IMHO) bungled scheme.

[roger-lawson] 05/12/2011 13:12

Probably wouldn't want to do it that way because he has a desire to increase his share stake - he stated at the AGM for example that he is concerned about dilution below a level at which he would lose entrepreneur's relief (if there was a further fund raising).

The Rem Comm's implementation of the LTIP is therefore probably more driven by the CEO's tax position (at least his view of it) than anything else. Not much "independence" there perhaps?

[julianc35] 05/12/2011 13:05

Aphrodites

What was the answer? And if they didn't want to do it,why?

[aphrodites] 05/12/2011 12:35

IGOE

Thanks. Haven't you mentioned that stock before?

JULIAN

Do you not think that suggestion has not already been put to Parish?

[julianc35] 05/12/2011 12:03

I would just like to add my thoughts. Disclosure I am a LTH of IGP and am also a Director/founder of a software company (although not as successful as IGP!)

Everybody wants to be rewarded for success and Mr Parris is no exception. The fact that he could get a job elsewhere is no surprise and I don't see why everyone is so upset. He is just stating the obvious.

However since he has managed to get IGP to this stage, he should be rewarded but this can be achieved by respecting the shareholders.

Very simply the company is acheiving substantial cash inflows and the chances of them using the cash to fund an acquisition is very limited.

Why don't IGP declare a dividend of say 4p a share costing £2m and giving Mr Parris a £200,000 dividend. (approx figs). This dividend will not only benefit shareholders but should also attract income seeking instantiations which is exactly what this company needs.

Everyone should then be happy!

[igoe104] 05/12/2011 11:13

Aphro.

im still holding my full stake in igp, but ive not added for a couple of years now. over the last month ive been buying opg, 33k worth.

if you want a good investment take a look at opg, they are building electricity plants in india (who are well sort of power and need it)and will go from 130mw plants to 6000mw by 2020. big gains over the coming years in my eyes for those who get in at the current level.

[aphrodites] 05/12/2011 10:41

YUMP

I totally concur with the comments made in your first post.

Parish could quit and get a better paid post in the USA!!! Well best he gets his spurs on and departs now. That is not the sort of comment I want to hear from a CEO and Chairman of a company in which I have funds invested.

He is supposed to be working to create shareholder value and that is what we are paying him as shareholders to do. Not just to line his and his wife's own pockets. They will achieve that if they allow the share price to rise.

I have halved the substantial holding which I hold personally and in managed funds, since I was informed that Parish had contacted some shareholders and advised them that if they wanted to sell to contact the company broker where there was a large buyer looking for stock and also since the option announcement was made.

Parish and his team have successfully turned the business around and it is about time they rewarded shareholders as well as themselves for their success.

But what we are seeing now is a share price being suppressed by a set of deliberate corporate actions which in my opinion stink.

Time to move on to better investments of which there are a host in the market at the present time.

In those wise old words: "Do not fall in love with an investment"!!!!!!

[fft] 05/12/2011 08:40

If RP was going out and cutting the kind of deals that the new boss and sales team at LOQ are doing (after a couple of years of effective stagnation under the old guard) then we could have no complaints.

But when you see the difference a proper sales input makes (no sales director on any IGP board), you do start to think that maybe Richard is part of the problem and not part of the solution. He does seem to be trying to feather his nest without shareholders having any of the benefits.

[roger-lawson] 05/12/2011 08:22

I tried to give only a factual report of what was said, leaving others to comment. But I have always believed that what motivates most people is not pay but other things, and it's certainly hogwash in my opinion. But when folks are trying to defend an indefensible proposition, they often come up with some peculiar arguments.

I have pointed out to Mr Parris that this is what the Association of British Insurers (ABI) say on this issue: "Experience has shown that retention awards for main board directors rarely work. Retention concerns on their own are not sufficient grounds for remuneration to increase".

[felix99] 05/12/2011 08:20

At the end of the day he is I expect trying to maximise his wealth - which should benefit shareholders and is what most people try to do.

I would be less thrilled if he was doing it for the love cos then you get a boffin who is tinkering with their baby and profit targets etc just become secondary as they plough every £ into devloping the best product ever which may not be commercial.

I am actually quite happy he said that. It means that when the right deal comes along it will be taken and Mr Parris can then go off to US to get his high paid job and have some money in the bank- and hopefully shareholders likewise.

[yump] 04/12/2011 23:22

Thanks for posting that, although the content is a surprise.....

"As far as "retention" went, Parris claimed he could quit and get a much better paid job working in the USA, so one of the key reasons for the LTIP award to him was to retain him."

F.....g unbelievable if that's what he said. Copying the bankers eh ?
If you don't pay us, we'll leave.
Then sod off to Spain, Italy or Greece then (or the US - let them have all the greedy people)

So, nice to know that its not the challenge or the entrepreneurial excitement that keeps him at IGP to build a world beating company, its the money.

Although I guess if he went for an interview somewhere it would be the challenge of new entrepreneurial ventures that would be emphasised to the headhunters.

Is my cynicism justified, or have I misinterpreted that ?

If I have, then apologies.
If I haven't then I'm probably going to sell my entire holding in the next few months as I don't have to support that sort of b.....ks.

Bit by bit people are getting really hacked off with this sort of disingenous rubbish.

[roger-lawson] 03/12/2011 15:45

Note that on the 1st December I and a number of other individual investors in Intercede met with Richard Parris (Exec Chairman) and Royston Hoggarth (head of Rem Comm) at the offices of Finncap where Intercede were presenting at a Mello Central event along with three other companies. This is a brief note on the discussions and the subsequent presentation. A much fuller and more detailed note is present on the ShareSoc Members Network.

The discussion commenced with me clarifying what the terms of the LTIP were – namely the performance target is an accumulated eps growth in excess of R.P.I. over 3 years.

Hoggarth emphasised the reason for the LTIP was to "retain and attract" senior executives. The hurdle was set low so as to encourage investment in the company, i.e. a focus not on short term profit maximisation but long term growth. I suggested some other alternative scheme might have been preferable, and both D.S. and I emphasised that we had no problem with LTIPs to other executives, but major grants to existing large shareholders such as Parris or his wife made little sense. They provided no real extra incentive.

As far as "retention" went, Parris claimed he could quit and get a much better paid job working in the USA, so one of the key reasons for the LTIP award to him was to retain him. Parris also claims he was and is underpaid in terms of base salary. The company had obtained a Remuneration Consultants report (from PWC, their auditors), and they suggested that based on comparators that he was underpaid. I think I said I thought this might not be a totally fair comparison based on the existing size and profitability of the company.

We then got on to the subject of the "Executive Chairman" situation and the merit of splitting those roles. Parris said the board were considering board composition at their next meeting already. I asked them to consider the appointment of a non-exec Chairman, and to let me know their decision.

I mentioned that Shareholder Committees were possibly a way to avoid conflicts between shareholders and boards on pay, and there was some more general discussion on pay, remuneration committees, etc. I promised to send Parris our note on Shareholder Committees.

We then joined the main meeting for presentations. Note that Richard Parris is quite a good presenter, but it is clear he is still personally dashing around the world making sales calls.

He disclosed a bit more about their competitive position. It is clear they have a few competitors for "PIV" identity products (the US Government mandated standard) but have good relationships with Microsoft and H/P. The wider "identity" software market has much more competitors though. They are working on PIV identity (which currently requires a smart-card to be carried) for mobile phones.

I have subsequently sent a note to Richard Parris, and one thing I pointed out was a comparison between the situation at Dunelm and Intercede – the former company has also recently issued an LTIP that includes an award to a director who already holds more than 30% of the company. This is part of what it said:
"Incidentally I had a very interesting conversation this morning with the head of the Remuneration Committee at Dunelm. They also have a situation where they issued some LTIP awards which appeared quite generous (although their performance conditions are quite tough), and which included an award to one of the executives (Will Adderley). She admitted that this situation had already caused the A.B.I. to issue a "red-top" warning to their members and another one was also likely. In other words, it is obviously something that responsible investors see as prejudicial. But she also said that in Dunelm (and you can see this written in their annual report) that base salary is set 'to at or below median market salary for the individual and their role'. In other words, not only did they recognise that Mr Adderley had probably been underpaid in terms of base salary in the past, but he is likely to continue to be so going forward, and the same applies to other executives. So their policy is quite clear – generous LTIPs that depend on out-performance are OK, but only if base salaries are below median.

The big difference between the Intercede LTIP award and the one at Dunelm is the value of the awards and the relative dilution (based on total shares potentially awarded under the recent LTIP announcements). These are the comparative figures:

Intercede:
1.24m shares in total which represents 2.5% of the issued shares.
The value of those shares at the current market price is £756,000 representing 37% of the last annual pre-tax profits.

Dunelm:
0.92m shares in total which represents 0.45% of the issued shares.
The value of those shares at the current markets is £4.2m representing 5% of the last annual pre-tax profits.

Obviously the overall value in Dunelm is larger (potentially as they have high performance conditions) but it is a much larger company. But otherwise you will see there is a significant difference in the percentage dilution and proportion of profits being diverted to the directors."

I also pointed out that the LTIP at Intercede was contrary to A.B.I. guidelines.

Roger Lawson, ShareSoc

[iicb] 01/12/2011 22:43

Yup, the flat call was good. IGP's prospects looking promising however, still not enough for me to re-invest as yet. Sadly the recent director LTIP keeps popping into my mind.

Well, at least it didn't plummet like more shares seem to nowadays, be thankful for that!!

[yump] 01/12/2011 12:13

WJCCGHCC

I agree SRT IGP very different and IGP more secure as a business.
I just like to see some sort of market potential numbers coming from companies, even if there's a big variation range.

Estimates have been posted here in the past I think, I'd just like to hear it from the company.

[davidosh] 01/12/2011 11:22

Anyone coming to the presentation tonight ? A first chance opportunity for private investors to ask questions about this mornings results and be ahead of the institutions.

[wjccghcc] 01/12/2011 11:06

Results better than I expected with the cash pile increasing again. It's nice to see underlying revenue growth of 25% when there were no major contract wins in the period. Last year, they had a $2mm upfront Boeing licence payment and around £500k from the NHS, neither of which were repeated this year. It shows the broadening of the customer base and I'd expect recurring revenues have increased to 35-40%.

yump, the increased sales and marketing is a consequence of their success - they are now invited to bid for almost every high-end ID project and often they are part of several bids for the same contract but with different partners. Each of these bids will need a different IGP team (chinese wall) supporting their partner. Hence the required increase in sales & marketing.

Regarding R&D, you need to remember that the timeframe from being first invited to bid on a contract to actually getting the bulk of the revenues is often 4-5 years. Add in the fact that they are usually 10 year contracts and receive 20% support and maintenance every year, you'll see that their target of covering costs with recurring income should be achievable in the next 5 years. If they can combine MyID's market leadership in the high-end security space with the requirement for encryption in the mobile space, they'll be opening up a market 50 times the size of the smart card space. IMHO it's worth a few years of increased R&D to get there. They view MyID as a platform much like SAP - once it's in place it's unusual for the customer to replace it and it gives them the opportunity to add further modules (such as mobile).

I disagree regarding potential - the main difference with SRT is that they know how many vessels are mandated for AIS whereas the cybersecurity space is still evolving so you can't put numbers on it. All I know is that they'll be disappointed if revenues in 5 years time aren't greater than 20mm

Regarding expectations, I actually think IGP's are a lot more certain because most of it comes from contracts they've already won. While they're still dependent on the lumpy contracts over which they have no timing control, I'm confident FY profit will be 20% either side of expectations whereas SRT has a a 2-5mm range with little visibility.

IGP also has much higher barriers to entry than SRT who could be stomped on in 12 months if one of the big boys decided to enter the AIS space. No-one is going to invest in building an IDCMS from scratch - even Microsoft have given up and now partner IGP.

I hold both IGP and SRT but for different reasons - I'm pretty certain IGP will be dominating their space in 5 years time whereas SRT for me is a shorter term bet on some big mandate wins but I have no idea if they'll even have a business in 5 years time.

[pyman] 01/12/2011 08:58

more patience required. Cor. this is hard work.Results are ok and balance sheet strong with £6.53m cash. Lack of news of sales is hard to bare. The tie ups with HP and microsoft and the hope that mobile will provide revenue is exciting but its sales figures I would like to see. Holding..as ever.

[yump] 01/12/2011 08:33

I'm reasonably happy to hold, having sliced some off near the top, but increasingly wondering what is it that we are waiting for ? ie. how many step-changing sales could there be, or is it actually a case of gradual growth ?

Given the number of awards and partnerships that have been in place for quite a while now, I'm also curious as to the increased effort in sales and marketing. Because the implication is that the previous levels of it have not delivered as much as expected / hoped for.

Also, I know product development is essential, but increasing that spend when the existing products haven't yet started reaping generous rewards is a slight worry.

ie. if in the worst case its (only) going to deliver 25% revenue growth, is that constantly going be hacked at by more sales/marketing and R&D spend.

Just feeling that there is a slight lack of clarity now, particularly with forward expectations.

I'm partly comparing with SRT, where there have been very clear statements about market potential in terms of possible revenues. I don't remember having that from IGP.

[2vdm] 01/12/2011 08:08

Good set of solid interims results out today. The drop in profits has been well explained, through an increased cost in sales development and does not include the 1M Boeing contract they had last year. Cash at 30 Sept up to 6.5 and strategy seems to be working by partnership with global IT players HP/Msoft etc. I hope the mkt will see this positively, although suspect that we may hear from the "jam tomorrow" players. Must be a buy at this level.