Interim Results

23 January 2018

Ideagen PLC

("Ideagen" or the "Group")

Unaudited Interim Results for the six months ended 31 October 2017

Ideagen PLC (AIM: IDEA), a leading supplier of Information Management software to highly regulated industries, announces its unaudited interim results for the six months ended 31 October 2017.

Financial Highlights

· Revenue increased by 43% to £17.2 million (2016: £12.0 million)

o Underlying organic revenue growth of 13%

o New bookings increased by 78% to £10.8m (2016 : £6.1m)

· Recurring revenues increased by 60% to £10.8 million (2016 : £6.7 million)

· SaaS revenues increased by 122% to £3.9m (2016 : £1.7m)

· Recurring revenues represent 63% of total revenue (2016: 56%)

· Adjusted diluted EPS** increased by 38% to 1.73p (2016: 1.25p)

· Adjusted EBITDA* increased by 52% to £4.7 million (2016: £3.1 million)

· Adjusted PBT** increased by 56% to £4.1 million (2016: £2.6 million)

· Cash generated by operations of £3.7 million (2016: £3.0 million) before a payment to HMRC of £0.8 million received from option holders in the prior year for taxes on options exercised

· Net cash of £5.9 million (30 April 2017: £4.2 million; 31 October 2016: £4.8 million)

· 15% increase in interim dividend to 0.078p (2016: 0.068p)

*Before share based payments and exceptional items

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

Operational Highlights

· Robust growth across all GRC product areas

· Acquisitions made in 2016-17 fully integrated and meeting expectations

· Strong momentum in sales in the USA, Europe and Asia-Pacific Regions

· 112 new logo customer wins - 70% outside of the UK

· Further progress within cloud business 

o 66 new logo SaaS customer wins

o Wins include Boston Scientific, Dun and Bradstreet, Roche and RATP Group

· 46 new logo on premise customer wins including Verizon, Hiscox, Siemens and US Navy

· Strong customer retention - 96% maintenance and support contract renewal rate

· Significant new business from the existing customer base including BAE, Danone and BDO

· Expansion of Malaysian and Bulgarian R&D resources

David Hornsby, CEO of Ideagen, commented: "We are delighted to report on another strong performance from the Group across all of our vertical markets and geographies during the first half of the year.

The Group has achieved growth both organically and from the acquisitions made in the previous year as we continue to execute against our proven strategy. We are particularly pleased with the strong growth in our SaaS revenues and our sales execution and momentum in the USA, Europe and Asia-Pacific regions.

Current trading remains robust and in line with management expectations. The Board remain confident in the outlook for this year and beyond

Enquiries:

About Ideagen plc

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

Ideagen is a supplier of Information Management software with operations in the UK, the United States and the Middle East. The Company specialises in GRC (Governance, Risk and Compliance) and Content and Clinical solutions with a primary focus on organisations operating within highly regulated industries. With an excellent portfolio of software products, Ideagen can provide complete information lifecycle solutions that enable organisations to reduce risk, meet their regulatory and compliance standards, helping them to reduce costs and improve efficiency

The Group has a customer base of over 3,000 organisations using the Ideagen of products, including many blue chip names such as BAE Systems, Emirates, Shell and the European Central Bank as well as 150 hospitals in the UK and US.

For further information please visit www.ideagen.com

CHIEF EXECUTIVE'S REVIEW

Business Review

I am pleased to report on another excellent performance for the six months ended 31 October 2017 combining overall organic revenue growth of 13% together with a full period's contribution from the acquisitions of Logen, Covalent, IPI and Pleasetech which were made in the previous year. Our Governance Risk and Compliance (GRC) business representing over 90% of Group revenue performed strongly with 20% organic growth. The Content and Clinical business declined by 29% driven by our decision to no longer bid for low margin service based contracts within the UK Public Sector.

The Board believes the long term prospects for the Group are positive. The Governance, Risk and Compliance (GRC) market representing over 90% of Group revenue was, according to Gartner, worth $4.4 billion globally in 2016 and is estimated to be growing at 13% per annum. The Group's core expertise is in the development and implementation of software tools that enable customers to identify, assess and prioritise risk and to manage information in line with rigorous regulations. Our customers are increasingly required to take a holistic view of risk management, internal audit and compliance, with many organisations at the beginning of the adoption phase of high value enterprise-wide solutions.

The Group has a clear and proven strategy to grow the business organically whilst continuing to identify and acquire businesses that offer strong synergies in terms of product, customers and geographical reach. The Board believes that the successful execution on that strategy will continue to bring value to our shareholders, employees and customers. The Group remains committed to increasing its revenue and earnings visibility through the transition to a SaaS and subscription based licence model and the development of international markets, particularly the USA and Asia Pacific.

Demand from all of the Group's key GRC verticals continues to be robust, with new customer wins achieved across a range of industries. The Group is focused on several key vertical markets which are primarily Transport, Banking and Finance, Life Sciences, Healthcare and Advanced Manufacturing. Each of our vertical areas has performed well both in terms of winning new logos and expanding the existing customer footprint through 'cross sell' and 'up sell'. This has resulted in organic growth across our GRC business of 20%. New customer wins in the period include Commerzbank, Dun and Bradstreet, Siemens Transmission, Kerry Foods, mBank, Spirit of Texas Bank, Verizon, RATP Group and Hong Kong Express. New contracts from existing customers include BDO, PWC, Danone, Bae Systems and Lockheed Martin.

The Group continues to benefit from a strong and growing base of recurring revenues, which now represent 63% of total revenue (2016: 56%). Most of this growth is in respect of recurring SaaS revenues which represented 22% (2016: 14%) of total revenues.

The Group has increased it's investment to accelerate a number of product development and global sales initiatives in line with our strong organic revenue growth. We view such investment as important to the sustainable long term growth of the business.

Markets and Product Strategy

GRC

We have subject matter expertise and decades of experience in our vertical markets and in our technology domains. These are as follows:

GRC Domains:

· Quality Management

· Safety Management

· Risk Management

· Audit Management

· Performance Management

Vertical markets:

· Transport

· Advanced Manufacturing

· Life Sciences

· Government

· Healthcare

· Financial Services

We develop and sell software products that satisfy our customers' critical needs at the intersection of these domains and markets. Thus, we primarily provide risk based quality and safety management software to the transport, manufacturing, life sciences and healthcare markets and risk based audit and performance software to financial services, accounting firms and the public sector.

Due to the horizontal nature of GRC, the Group can also supply to other vertical markets, for example Oil and Gas and Construction and it is likely that additional key vertical markets will evolve over time.

Clinical Workflow

Ideagen also provides clinical workflow software solutions to the UK NHS where trusts are seeking to modernise and transform processes by digitising medical records. The primary goal of this transformation is to improve patient outcomes and care quality while also generating efficiency savings. The NHS is aiming to implement widespread modernisation and digitisation of working practices. Ideagen clinical workflow and hospital information management solutions have been designed in close collaboration with NHS customers to deliver innovation and improvements in quality, performance and productivity. New business opportunities within the NHS have been limited due to budget constraints which has resulted in a decline in revenues over the past 3 years. 

Acquisition Strategy

The Group made 4 acquisitions in the previous year each of which are fully integrated into the Group and are performing well by adding intellectual property, recurring revenues, vertical market consolidation and technical expertise to the Group. They now form part of our enlarged GRC business and now fit into the Group as follows:

· Covalent, a supplier of risk assurance and performance management software to the Public Sector and Financial Services has now been integrated with Pentana Audit and rebranded as Pentana Performance providing a broader solution for Enterprise Risk Management

· IPI, a supplier of quality reporting software to the Aerospace and Defence Industry has been rebranded and is now marketed as a module within the Q-Pulse product range

· Pleasetech's Document Review and Co-authoring software PleaseReview remains a strong brand within the Group. PleaseReview can be sold independently to enhance a prospective customer's existing Information Management capability or as part of a broader Ideagen GRC solution.

· Logen, a reseller of ''Ideagen Pentana'' is now Ideagen Bulgaria and providing a platform for the expansion of the Group's Research and Development and Sales capability in Eastern Europe.

The Group continues to be committed to a 'buy and build' strategy and is in discussion with a number of potential acquisition targets which the Board believe would enhance the Group and support our ongoing growth strategy.

Current Trading & Outlook

The market for GRC management solutions remains fragmented and the drivers are long term and highly strategic. Trading continues to remain robust while a healthy pipeline reinforces confidence in our forecasts.

We have been aware of the economic and political conditions in the UK for some time and the Group has responded by developing a strong and growing presence in a number of global markets. Our success in winning new business together with our increasing levels of recurring revenue and repeat business from our 3,000 strong customer base, provides us with confidence in the future prospects of the Group.

David Hornsby

Chief Executive Officer

FINANCIAL REVIEW

Revenue for the 6 months ended 31 October 2017 increased by 43% to £17.2 million (2016: £12.0 million) which included strong pro-forma organic revenue growth of 13%. This is calculated based on a comparison with pro-forma revenue for 2016 of £15.2 million which includes revenues for Covalent, IPI, PleaseTech and Logen as if those businesses had been owned by the Group for the whole of the comparative period.

New sales bookings increased by 78% to £10.8 million (2016: £6.1 million). For SaaS based contracts, a booking includes 3 years of SaaS subscriptions and associated professional services revenues. For on-premise based contracts, a booking includes a perpetual licence, 1 year of maintenance and associated professional services revenues.

Recurring revenues have grown strongly because of both the continuing focus on our SaaS/Subscription-based products and the acquisitions of businesses with high levels of recurring revenues. In the 6 months to 31 October 2017, SaaS revenues were £3.9 million (2016: £1.7 million) representing 22% (2016: 14%) of Group revenue. Total recurring revenues increased by 60% to £10.8 million (2016: £6.7 million) representing 63% (2016: 56%) of overall revenues. Revenues are analysed by revenue stream in note 2.

The group provides software solutions in two areas; GRC and Content and Clinical, although the Group is now almost entirely focused on GRC products after further resources were re-deployed from Content and Clinical to GRC to address the wider and more profitable opportunities available in the GRC market. Revenues from GRC products increased to 91% (2016: 82%) of Group revenue in the 6 months to 31 October 2017 as a result of both the acquisitions of GRC businesses in the prior year and strong pro-forma organic GRC revenue growth of 20% in the period. As a result of the Group's increased concentration of its resources on GRC products, Content and Clinical revenues declined in the period to £1.6 million (2016: £2.2 million) representing only 9% (2016: 82%) of total Group revenue in the first half. The majority of this decline is due to the Group's decision to no longer bid for contracts for the design and build of web sites for the UK public sector which represented lower margin, service based business for the Group.

Adjusted EBITDA increased by 52% to £4.7 million (2016: £3.1 million). The adjusted EBITDA margin improved to 27.5% (2016: 25.8%) resulting from the gearing effect of strongly growing revenues while maintaining control of costs. Revenues are seasonally biased towards the second half of the year thereby resulting in higher adjusted EBITDA margins in the second half and for the year as a whole.

The Group has significant intangible assets from the acquisitions it has made. The amortisation of these acquired intangibles of £2.9 million (2016: £2.0 million) represents the majority of the total depreciation and amortisation charge for the period of £3.5 million (2016: £2.4 million). The amortisation of development costs amounted to £0.5 million (2016: £0.4 million). The share-based payment charge of £0.4 million (2016: £0.5 million) relates to the group's equity-settled share option schemes including the group's Long Term Incentive Plan and the Group's share incentive plan for employees.

The adjusted group tax charge was £0.5 million (2016: £0.3 million) and is analysed in note 5. This has been adjusted to exclude the deferred taxation credits associated with the amortisation of acquired intangibles and share-based payment charges. The adjusted group tax charge represents 12% (2016: 12%) of adjusted PBT of £4.1 million (2016: £2.6 million) which is also analysed in note 5. The Group continues to benefit from the availability of R&D taxation credits.

As a result of the above, adjusted diluted earnings per share increased by 38% to 1.73p (2016: 1.25p). Details of the calculation of adjusted earnings per share are provided in note 3.

The Group's financial position has continued to strengthen with net assets increasing to £48.0 million (30 April 2017: £46.4 million; 31 October 2016: £34.7 million). Net current liabilities were reduced to £1.6m (30 April 2017: £5.2 million) due to the generation of cash which was largely utilised to repay short-term bank borrowings and some trade and other payables. Current liabilities includes £11.2 million (30 April 2017: £11.6 million) in respect of revenue invoiced on maintenance and support and SaaS contracts which has been deferred to future periods in accordance with the group's accounting policies. This is not a cash liability.

The level of intangible assets decreased to £54.1 million (30 April 2017: £56.4 million) mainly through the effects of amortisation and the capitalisation of £1.1 million (2016: £0.93 million) of R&D development costs during the period which represented 6.4% (2016: 7.7%) of total revenues.

Cash generated by operations was £3.7 million (2016: £3.0 million) before taking into account a payment to HMRC of £0.8 million which had been received from option holders in the prior year to cover their payroll taxes on options exercised by them close to the end of the financial year, as previously noted in our 2017 preliminary announcement. This represents 79% (2016: 96%) of adjusted EBITDA and follows a very strong cash generation metric of over 100% for the year to April 2017 and an unusually high metric in the first half of 2016. Cash generation in the Group is slightly biased towards the second half due to the renewal pattern of our recurring revenue contracts. Free cash flow adjusted for the £0.8 million payment noted above, amounted to £2.0 million (2016: £1.8 million) representing 43% (2016: 59%) of adjusted EBITDA. The group ended the period with net cash balances of £5.9 million (30 April 2017: £4.2m).

Dividend

The Board proposes to increase the interim dividend by 15% to 0.078 pence per share (2016: 0.068 pence per share) payable on 20th March 2018 to shareholders on the register on 2nd March 2018. The corresponding ex-dividend date is 1st March 2018.

Graeme Spenceley

Chief Financial Officer

Ideagen plc

Group Statement of Comprehensive Income for the six months ended 31 October 2017

Ideagen plc

Group Statement of Financial Position at 31 October 2017

Ideagen plc

Group Statement of Financial Position at 31 October 2017 (continued)

Ideagen plc

Group Statement of Cash Flows for the six months ended 31 October 2017

Ideagen plc: Group Statement of Changes in Equity for the six months ended 31 October 2017

Ideagen plc: Group Statement of Changes in Equity for the six months ended 31 October 2016

Ideagen plc: Group Statement of Changes in Equity for the year ended 30 April 2017

Ideagen plc

Notes to the interim financial information

1 Basis of information

The interim financial information for the 6 months ended 31 October 2017 and the six months ended 31 October 2016 included in this announcement is unaudited. The financial information for the year ended 30 April 2017 included in this announcement does not constitute the annual report and accounts of the Company for the year ended 30 April 2017 within the meaning of section 434 of the Companies Act 2006. The audited annual report and financial statements of the Company for the year ended 30 April 2017 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. Consistent accounting policies have been applied in the preparation of this information.

2 Revenue

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

3 Earnings per share information

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

In order to better demonstrate the performance of the Company, 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.

4 Taxation

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

5 Adjusted profit before taxation and adjusted taxation charge