Unaudited Interim Results

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

26th January 2021

Ideagen PLC

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

Unaudited Interim Results for the six months ended 31 October 2020

Ideagen PLC (AIM: IDEA), a leading supplier of regulatory and compliance software announces its unaudited interim results for the six months ended 31 October 2020.

Financial Highlights

Operational Highlights

Post-period highlights

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

** Before share-based payments and exceptional items

The Company will be providing a presentation to investors and analysts regarding the interim results at 9am today through the below link: 

https://www.lsegissuerservices.com/spark/Ideagen/events/9999d1f2-4e47-4bf6-8c9a-f127830d1b9b  

A recording of the presentation and a copy of the materials will be available after the event at www.ideagenplc.com

Ben Dorks, Chief Executive of Ideagen, commented: 

"That the business has continued to progress so strongly against our business objectives in the first six months is testament to the hardworking team at Ideagen.

We focus on ARR as our key growth metric. I am delighted that this continues to show excellent progress. This was driven by a strong organic performance, further acquisitions and ongoing investment to support our product development. It is also pleasing that we continue to achieve organic ARR growth across each of our key vertical markets. This is being complemented and strengthened by the successful integrations of acquired companies such as WorkRite (acquired late in our previous financial year) and Qualsys.

The second half of the year has begun in line with our expectations and with the proceeds of our recent fundraise being swiftly and effectively deployed in the acquisition of Huddle. We continue to assess further opportunities within the acquisition pipeline. The 270 new customers and the continued expansion of our geographic presence, coupled together with repeat business derived from more than 5,700 customers and our strong ARR base gives the Board confidence in the prospects for the Group for the current year and beyond."

Enquiries:

About Ideagen plc

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

A global supplier of regulatory and compliance solutions, Ideagen provides a common software platform and an integrated risk- based approach to meet multi-industry standards, enabling compliance with relevant laws, policies, and regulations.

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

Currently, more than 5,700 organisations use Ideagen's products including nine of the top 10 UK accounting firms, all of the top aerospace and defence companies globally 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. For further information please visit www.ideagen.com .

Ideagen directly employs over 600 members of staff and is present in every continent globally.

CHIEF EXECUTIVE'S REVIEW

I am delighted to report that, against a challenging and turbulent macro economic backdrop, the first six months has seen continued success for Ideagen based on the execution of our strategic objectives with robust new customer acquisition, organic ARR growth and the acquisition of Qualsys. In the period we have achieved a strong performance across our key metrics, high levels of recurring revenue, strong margins and excellent cash conversion.

The board now considers the most relevant growth metric as being Annual Recurring Revenue ("ARR") which  increased approximately 13% from £48.7 million on 30 April 2020 to £54.8 million on 31 October 2020. This is comprised of acquisition-led growth of £2.9 million combined with organic growth of £3.2 million, equating to in excess of 13% annualised.

The Group has made excellent progress in implementing its strategy of generating organic and acquisitive growth in recurring revenue and we are excited to see that continue. We have completed one acquisition during the period, bringing Qualsys into the Group. The transaction has significantly strengthened our product portfolio and provides further consolidation opportunities and capability to support our customer base. We also continue to grow geographically with 60% of all customer bookings outside the UK.

Total revenue of £29.2 million (H1 2019: £27.3 million), represents overall growth of 7%. Recurring revenue increased to £24.3 million (H1 2019: £20.3 million), representing growth of 20% in this key segment. Adjusted EBITDA grew 25% to £10.0 million (H1 2019: £8.0 million). A further key financial metric for the Group that continues to be important is EPS and I am pleased to report an increase in adjusted diluted EPS of 13% to 2.60 pence (H1 2019: 2.31 pence).

Market drivers and growth opportunities

Ideagen operates in a global market and is fuelled by several drivers that propel us to achieve our goal of strong structural growth. Businesses around the world continue to need innovative solutions to help them meet increasingly stringent compliance, quality, safety, and regulatory risk requirements.

Ideagen's product-market strategy is focused in three areas:

Assurance:-

Compliance:-

Collaboration:-

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

Overview

Following continued strong financial performance, Ideagen has the capability and resources 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 customers, as well as recruiting and developing the very best people into Ideagen. We intend to support this organic investment by considering acquisitions that broaden our geographic reach, strengthen our product capabilities and drive upsell / cross sell opportunities within our customer base.

Corporate Transactions

Ideagen has a strong track record of successfully executing strategic acquisitions. During the period we completed the acquisition of Qualsys to strengthen our product and technology capabilities and broaden our customer base, which in turn brings us closer to our strategic goal of being a global leader in our chosen markets.

The acquisition of Qualsys for cash consideration of £15.6 million (of which £1.6 million is deferred for 12 months) was completed in August 2020. Qualsys is a fast-growing supplier of EQMS to a number of highly regulated industries such as pharmaceutical, healthcare, complex manufacturing and food and drink. Their EQMS is used by over 150 customers including Diageo, Unilever, Honeywell, BT, FujiChem and IQE. Shortly prior to the acquisition by Ideagen, Qualsys launched EQMS 7 - a SaaS-native cloud QMS platform which has been extremely well received by the market and provides Ideagen with a strong growth opportunity accelerating the existing development roadmap of Ideagen's Q-Pulse product. Current run-rate revenues are approximately £3.5 million while ARR is approximately £2.9 million.

Post Period in December 2020 we acquired Huddle for a gross consideration of £28.1m payable in cash on completion to be funded by existing resources and the proceeds from our recent placing. Huddle's current annualised run rate revenues are approximately £10.5m of which in excess of 99% is recurring.

Huddle is a leading provider of SaaS based secure content collaboration and workflow solutions to a number of highly regulated sectors including UK and US Government, Healthcare and Accountancy. The acquisition of Huddle marks a step change within our Collaboration segment.

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

Operational

At the end of the period the Group had net debt of £27.9 million (30 April 2020: net debt of £16.8 million) after spending £14.5 million on acquisitions, including settlement of deferred consideration. Operating cash generation in the period was strong at 99% (H1 2019: 74%).

The Group continues to benefit from a strong and growing base of recurring revenues, which represented 83% of total revenue in the period (H1 2019: 74%). The Group is committed to increasing the percentage of total revenue derived from recurring contracts through the transition from a traditional licence-based model to a SaaS subscription model. This transition is now well underway and recurring SaaS revenues have increased by 38% to £13.4 million (H1 2019: £9.7 million) representing 46% of total revenues.

The Redland, Optima and WorkRite acquisitions from FY20 have been successfully integrated using our mature 72 point integration framework.

People

The whole Ideagen team has worked exceptionally well during the COVID-19 crisis. I want to extend my thanks and that of the Board to our talented and enthusiastic team members for their sterling efforts and continued dedication.

At 31 October 2020 Ideagen counted 576 employees across its UK and international office network, with the majority located within our office hub network: Nottingham HQ (UK), Glasgow (UK), Kuala Lumpur (Malaysia), Raleigh (US). A combined total of 135 people are situated internationally.

The organisation continues its significant investment within our Technology teams, adding depth, breadth, and technology innovation. Approximately 33% of resource is 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 25% within Sales & Marketing, and 29% in Customer Delivery, Support and Success.

Ideagen has continued to recruit selectively across all key departments of technology, sales and marketing and customer success as well as further hires in our senior management team. We continue to believe a broad talent pool across the company is the best way to ensure sustainable growth. As such it is pleasing to confirm that 40% of employees have been with the Group for 3 or more years, and 25% have been with the Group 6 years or more. Although we acknowledge this is a traditionally male dominated sector, we are delighted to see strong growth in female applications.

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

Current Trading & Outlook

Trading since the period end has remained robust and we continue to see strong demand for our products from new potential customers. We continue to be supported by our base of over 5,700 customers who continue to generate growth through recurring revenues and repeat business. The previous acquisitions are integrating and performing well and the Board has every confidence in the continued prospects for the Group.

Ben Dorks

Chief Executive Officer 

FINANCIAL AND OPERATIONAL REVIEW

Revenue for the six months ended 31 October 2020 increased by 7% to £29.2 million (H1 2019: £27.3 million). Revenues are analysed by revenue type in note 2.

Recurring revenues are a key strategic focus and they have grown strongly due to an emphasis on sales of our SaaS/Subscription-based products and the acquisition of businesses with high levels of recurring revenues. The Group's Annualised Recurring Revenue (ARR) book has grown by approximately 13% from £48.7 million on 30 April 2020 to £54.8 million on 31 October 2020. This comprises acquisition-led growth of £2.9 million combined with organic growth of £3.2 million within the period.

Total recurring revenues recognised in the period increased by 20% to £24.3 million (H1 2019: £20.3 million) representing 83% (H1 2019: 74%) of overall revenues. This proportion has improved consistently since 2016 when recurring revenues represented only 53% of total revenues.

Within the recurring revenues, SaaS increased by 38% to £13.4 million (H1 2019: £9.7 million) representing 46% (H1 2019: 35%) of Group revenue. Support & Maintenance revenues grew by 2% to £10.8 million (H1 2019: £10.6 million) representing 37% of total revenues (H1 2019: 39%).

Professional Services revenues represented 7% (H1 2019: 11%) of total revenues. This reduction is consistent with the increase in SaaS orders that typically require a lower level of configuration work, and also a reduction in the professional services revenues from the businesses acquired during 2019/20 as the level of customisation is actively reduced under Ideagen ownership.

Licence & Software Development revenues decreased to £3.0 million (H1 2019: £3.8 million) representing 10% (H1 2019: 14%) of total revenue in line with the increasing emphasis on SaaS sales.

Adjusted EBITDA for H1 2020/21 increased by 25% to £10.0 million (H1 2019: £8.0 million). The adjusted EBITDA margin increased to 34.5% (H1 2019: 29.4%). Gross margin improved to 92.0% (H1 2019: 91.4%). Operating costs continue to be tightly controlled representing 57.5% (H1 2019: 62.1%) of revenue with some benefit from Covid on areas such as travel costs. 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 £4.8 million (H1 2019: £4.8 million) represents the majority of the total depreciation and amortisation charge of £7.0 million (H1 2019: £6.5 million). Amortisation of development costs amounted to £1.1 million (H1 2019: £0.9 million).

The share-based payment charge of £0.7 million (H1 2019: £0.8 million) relates to the Group's equity-settled share option schemes including the Share Incentive Scheme for employees.

The Group incurred costs of £0.4 million (H1 2019: £0.2 million) in relation to acquiring the businesses during the period. Restructuring charges of £0.2 million were incurred in the period (H1 2019: £0) driven by regional office closures and acquisition integrations.

The adjusted Group tax charge is analysed in note 5 and amounted to £1.4 million (H1 2019: £0.8 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 18.7% (H1 2019: 12.6%) of adjusted profit before tax of £7.4 million (H1 2019: £6.0 million). The increased tax rate is due to the higher level of profits earned in the United States which attract higher rates of tax than in the UK and the transition onto the large company R&D tax credit scheme. By virtue of its size, the Group no longer qualifies for the SME R&D scheme meaning that from 2020/21 it will receive a lower level of tax benefit on qualifying expenditure. The exercise of share options continues to significantly reduce the Group's liability to UK corporation tax.

As a result of the above, adjusted diluted earnings per share increased by 13% to 2.60 pence (H1 2019: 2.31 pence).

The Group's financial position has continued to strengthen during the period with net assets increasing to £78.4 million (30 April 2020: £76.9 million; 31 October 2019 £75.2 million).

The value of intangible assets increased to £128.0 million (30 April 2020: £113.8 million) mainly as a result of the acquisition of Qualsys during the period. The Group capitalised £1.8 million (H1 2019: £1.9 million) of R&D development costs during the period which represented 6.0% (H1 2019: 7.1%) of total revenues. This reduction reflects completion of significant projects on the development of Q-Pulse, which saw a new, cloud-based version released during the period.

The Group's approach to the funding of acquisitions has continued to evolve with debt and free cash being utilised alongside equity. The strong cash flow and recurring revenue profile of the business mean that the Group has been able to secure relatively inexpensive debt funding. In September 2020 the Group's Revolving Credit Facility was extended from £40 million to £50 million giving further headroom to fund acquisitions and the Board continues to regularly review its financing facilities to ensure an effective and optimal capital structure, and will continue to do so as the business evolves both organically and inorganically.

The acquisition of Qualsys in August 2020 was funded from the Revolving Credit Facility. As a result, net bank debt (excluding finance lease liabilities under IFRS16) increased to £27.9 million at 31 October 2020 (30 April 2020: £16.8 million) which represented 1.2x the adjusted EBITDA forecast for the current financial year.

Cash generated by operations during the period amounted to £10.0 million (H1 2019: £5.9 million) representing cash conversion of approximately 99% (H1 2019: 74%) of adjusted EBITDA. In H1 2019/20 this cash conversion metric was affected to some extent by seasonal billings in Redland (acquired in June 2019). This has normalised in H1 2020/21 leading cash conversion to be more in line with the standard profile.

Working capital, as recorded in the cash flow statement, remained consistent between 30 April 2020 and 31 October 2020. Receivables reduced slightly by £0.2 million, reflecting the Group's seasonal billing profile, which is weighted towards the second half of the year. Cash collections have remained robust and are a key operational metric for the business. Days Sales Outstanding at 31 October 2020 are 76 (30 April 2020: 76) based on a count-back methodology calculated by reference to invoiced sales.

Free Cash Flow, defined as net cash generated by operating activities less capital expenditure, amounted to £3.7 million (H1 2019: £2.2 million) representing 37% (H1 2019: 28%) of adjusted EBITDA or 13% (H1 2019: 8%) of Revenue. Free Cash Flow in the period was impacted by £2.1 million of capital expenditure in relation to the Group's new head office facility in Nottingham. Excluding this one-off expenditure, Free Cash Flow in the period was £5.8 million, 58% of adjusted EBITDA.

Operational Review

In order to facilitate growth, Ideagen invests heavily in 'best of breed' cloud systems that have scalability, functionality and reporting at their core. Salesforce and NetSuite remain the primary operating systems for the organisation, providing the internal platform for sales, marketing and finance. They are supported by several functionally specific cloud solutions such as Zendesk, WalkMe, Full Story, Natero, Peakon, Krow, and Jira. This system output including usage telemetry is used by our customer success teams to provide focussed planning for revenue protection and through our customer account management function to drive upsell / cross-sell.

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, ISO45001, 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).

Dividend

The Board proposes to increase the interim dividend by 15.4% to 0.120 pence per share (2019/20: 0.104 pence per share) payable on 17th March 2021 to shareholders on the register on 26th February 2021. The corresponding ex-dividend date is 25th February 2021.

Emma Hayes

Chief Financial Officer

Ideagen plc

Group Statement of Comprehensive Income for the six months ended 31 October 2020

Ideagen plc

Group Statement of Financial Position at 31 October 2020

Ideagen plc

Group Statement of Financial Position at 31 October 2020 (continued)

Ideagen plc

Group Statement of Cash Flows for the six months ended 31 October 2020

Ideagen plc: Group Statement of Changes in Equity for the six months ended 31 October 2020

Ideagen plc: Group Statement of Changes in Equity for the year ended 30 April 2020

Ideagen plc: Group Statement of Changes in Equity for the six months ended 31 October 2019

Ideagen plc

Notes to the interim financial information

1 Basis of information

The interim financial information for the 6 months ended 31 October 2020 and the six months ended 31 October 2019 included in this announcement is unaudited. The financial information for the year ended 30 April 2020 included in this announcement does not constitute the annual report and accounts of the Company for the year ended 30 April 2020 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 2020 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 for the 6 months to 31 October 2020 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