Ideagen : Unaudited Preliminary Results

Ideagen PLC - IDEA Preliminary Results

Released 07:00 17-Jul-2019

RNS Number : 7530F

Ideagen PLC

17 July 2019

Ideagen PLC

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

Preliminary Results

Ideagen PLC (AIM: IDEA), a leading supplier of Integrated Risk Management software to highly regulated industries, announces its unaudited preliminary results for the year ended 30 April 2019.

Financial Highlights

• Revenue increased 29% to £46.7 million (FY2018: £36.1 million)

• 1. Recurring revenues represented 67% (FY2018: 62%) of total revenues o SaaS revenues increased by 63% to £13.7 million (FY2018: £8.4 million) o Underlying organic revenue growth* of 8% (FY2018: 11%)
• Annual Recurring Revenue book (ARR) was up 44% at approximately £36.4 million (FY2018: £25.3 million)
• Adjusted diluted EPS*** increased by 15% to 4.8 pence (FY2018:4.19 pence)
• Adjusted EBITDA** increased by 30% to £14.3 million (FY2018: £11.0 million)
• Adjusted PBT*** increased by 26% to £12.2 million (FY2018: £9.7 million)
• Cash generated from operations of £13.4 million (FY2018: £9.1 million) representing 94% (FY2018: 83%) of adjusted EBITDA** before a net payment of £1.1 million (FY2018: £0.3 million net receipt) received from option holders in the prior year for taxes on options exercised
• Net debt as at 30 April 2019 was £1.3 million (FY2018: net cash of £0.8million)
• Proposed final dividend of 0.188 pence per share - Making a total dividend of 0.278 pence per share for the year which represents a 15% increase over the FY2018 dividend of 0.241 pence per share

Operational Highlights

• Acquisition of InspectionXpert Inc adding 900 US manufacturing customers, IP, growing SAAS recurring revenues and a platform for further growth in North America
• Acquisition of Morgan Kai adding 400 Internal audit customers, doubling the size of our internal audit business

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• • Acquisition of Scannell Solutions a Software as a Service (SaaS) company that has developed a functionally rich content enabled Environmental, Health, and Safety platform
  • 77% increase in SaaS bookings (FY2018: 174%)
  • Strong international growth with 87% (FY2018: 78%) of all new SaaS logo wins outside of the
    UK
  • 273 new logo SaaS customer wins including Glaxo SmithKline, Keolis, Green Climate Fund, Boston Biomedical, Fidelity National Finance, Air Nostrum, Immunomedics Inc
  • 140 new logo on-premise customer wins including Transport For London, Cancer Research UK, Thompson Aero Seating, Addiko Bank, TP Aerospace, SAMREF
  • Strong account management with significant contract extensions from Triumph Group, Pfizer, Regeneron Pharmaceuticals, Meggitt PLC, Thales Group, International Energy Agency
  • Continued high levels of customer retention with support and maintenance contract renewal rate of 95% (FY2018: 96%)
  • Ongoing product innovation and investment across all products with strong emphasis on cloud
• Comparison calculated on a pro-forma basis as if acquisitions had been in the Group for the same period in the previous year
• Before share-based payments and exceptional items
• Before share-based payments, amortisation of acquisition intangibles and exceptional items

Ben Dorks, Chief Executive of Ideagen, commented: "The Group's focus this year was on the execution and delivery of our growth strategy, both organically and through acquisitions, whilst continuing the transition to a SaaS based business model. We are pleased to report that we have achieved our objectives this year, significantly increasing the Group's global footprint, particularly in the US, and delivered another year of strong revenue and profit growth, underpinned by excellent cash generation.

Trading since the year end has remained robust and we continue to see strong demand for our products from new potential customers. The acquisition of Redland post the period end has further enhanced the Group's portfolio of products and growing recurring revenues. Furthermore, the repeat business derived from more than 4,000 customers, provides the Board with confidence in the prospects for the Group for the current year and beyond."

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

Enquiries:

Ideagen plc

01629 699100

David Hornsby, Executive Chairman

Ben Dorks, Chief Executive

Graeme Spenceley, Chief Financial Officer

Joe O'Brien, Investor Relations

finnCap Limited

020 7220 0500

Henrik Persson, James Thompson (Corporate Finance)

Alice Lane (ECM)

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Canaccord Genuity Limited

020 7523 8000

Simon Bridges

Richard Andrews

About Ideagen plc

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

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

With an excellent portfolio of software products including Q-Pulse, Coruson, Pentana Audit, Pentana Risk and PleaseReview, Ideagen helps its clients reduce costs, improve operational efficiency, strengthen compliance and oversight and anticipate and manage every detail of risk.

Currently, more than 4,700 organisations use Ideagen's products including seven of the top 10 UK accounting firms, all of the top aerospace and defence companies 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.

Ideagen directly employs over 500 members of staff and is present in every continent globally.

CHAIRMAN'S STATEMENT

I am pleased to report on another strong performance for the year to 30 April 2019, representing Ideagen's 10th consecutive year of revenue and EBITDA growth. The Group met or exceeded all key financial and operational objectives for the year including targets for revenue, profitability, organic growth, cash generation and customer retention.

These results are underpinned by Ideagen's world class customer base, strong global reach, outstanding product set and proven and effective management team. These are the first set of results that we have announced following the appointment of Ben Dorks as Chief Executive in May 2018 and the board are delighted with the progress made under Ben's leadership.

The Group continues to source and execute acquisitions and has an extensive pipeline of opportunities that would increase our product capability, scale and recurring revenues, which the Board expect would further enhance shareholder value for the long term.

The Group has a clear vision for the future and has a number of growth and financial objectives for the coming years. These are based on achieving a targeted £100 million in run rate revenue by 2022, with recurring revenues representing a minimum of 75%, EBITDA margins at 30% and operating cash collection in excess of 90% of EBITDA. The Board believes that approximately £70 million in revenue will be achieved from our current business through organic growth with £30 million being generated through acquisitions.

'C Level' Management

In May 2018, Ben Dorks was appointed as Chief Executive to provide the necessary operational leadership for the Group. I moved from Chief Executive to Executive Chairman, to focus on M&A activities and the 3 year strategic plan.

Over the past 12 months, the Group has also recruited and promoted a number of key individuals to provide the necessary depth and breadth of senior management to support our continued growth. During the year Ian Hepworth, formerly Divisional CTO at Thompson Reuters was appointed as Chief Technical Officer and Arun Varma, formerly Global Vice President of Marketing at Kaspersky as Chief Marketing Officer. Both Ian and Arun have an excellent pedigree having worked at a senior level with global innovators and leaders such as RAC, Nokia, Cambridge University Press and

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Segura Systems during their careers. In April 2019, Paul Marshall was promoted to Chief Customer Officer as the Group continues to drive customer success and the ongoing expansion of its products within the customer base. Paul is an Ideagen veteran of over 10 years, having served as a Project Consultant, Sales Manager and Head of Sales and is a trusted advisor to many of Ideagen's most strategic customers. They join Alex Hewitt (Chief Legal Officer), Barnaby Kent (Chief Operating Officer) and Graeme Spenceley (Chief Financial Officer) to make up Ben's senior leadership team.

Market Opportunity

The Board is confident in the long-term prospects of the Group. The Integrated Risk Management market was, according to Gartner, worth $5.4 billion globally in 2018 and is estimated to be growing at 13% per annum. We believe we have a compelling business platform that has been significantly enhanced over the past year through the acquisitions of InspectionXpert, Morgan Kai and Scannell Solutions and the acquisition of Redland in the current year.

Highly regulated organisations require the tools we provide to help them identify, assess and manage corporate risk while complying with international industry standards. Many of these organisations are only in the early stages of adopting an enterprise-wide approach. The Board believes that the Group's cloud solutions will be a particular growth area for the Group which will increase the percentage of total revenues derived from recurring contracts providing further visibility of earnings.

Dividend

In line with our progressive dividend policy and reflecting our continued confidence in the prospects for the Group, the Board is pleased to propose a final dividend of 0.188 pence per share making a total dividend of 0.278 pence for the year (FY2018: 0.241 pence) an increase of 15%. Subject to approval at the forthcoming AGM, the final dividend will be payable on 26 November 2019 to shareholders on the register on 8 November 2019. The corresponding ex-dividend date is 7 November 2019.

The success of Ideagen is the result of the excellence and dedication of our employees and on behalf of the Board, I would like to thank all of them for their continued hard work. The new financial year has started well and I look forward to continuing our track record of growth and delivering on our strategic objectives.

David Hornsby

Executive Chairman

CHIEF EXECUTIVE'S REVIEW

I am delighted to report that 2019 has been another successful year for Ideagen. We have reported another year of solid financial performance during which our organic revenue growth was approximately 8% and ARR grew 44%. I am encouraged by the success in our priority international markets which continue to form a significant expansion opportunity.

Excellent strategic progress has been made, in particular with the three acquisitions completed during the year. This has strengthened our product range and keeps us well-placed to support our customers and capitalise on the significant market opportunities ahead.

Total revenue of £46.7 million (FY2018: £36.1 million), represented overall growth of 29% and adjusted EBITDA grew

30% to £14.3 million (FY2018: £11.0 million). A key financial metric for the Group continues to be adjusted EPS and I am

pleased to report an increase in adjusted diluted EPS of 15% to 4.8 pence for the year (FY2018: 4.19 pence).

Market drivers and growth opportunities

Ideagen operates in a global market with a number of drivers for structural growth. Businesses around the world need innovative solutions to help them meet increasingly stringent compliance, quality, safety, and regulatory risk requirements.

Ideagen's product-market strategy is focussed in two areas:

QHSE - Quality, Health & Safety and Environmental Management - covering:

• Compliance with existing and new standards, laws and regulations
• Conformance with customer requirements, including, for example, new pressures for risk-based shop floor quality management in manufacturing supply chains

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• Efficiency and productivity in quality, safety and environmental management; for example, being able to comply with new or more stringent requirements without increasing headcount in the compliance team
• Improving performance in these areas, for example by reducing the number of safety incidents in which employees are harmed, ensuring that important quality audits are passed successfully

ARC - Audit, Risk and Compliance Management - covering:

• Pursuit of sustainable competitive advantage through risk-based compliance and oversight
• Establishing a strong governance model to deliver resilience, compliance and strategic goals
• Productivity of internal audit teams through automation of their business processes
• Compliance with laws and regulations such as SOX, UK Companies Act, SM&CR or ASC 275
• Stewardship of brand and reputation

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

Overview

Following another strong financial performance in 2019, Ideagen has the capability and resources to continue 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 customer, and recruiting and developing the very best people. We intend to support this organic investment by considering acquisitions that broaden our geographic reach and strengthen our product capabilities.

Strategic focus areas

In the past year we have increased our focus on our three core business areas that underpin our strategy: People, Products, Customers. This has not only contributed to the strong performance in the period but in a complex and rapidly changing environment, this approach allows us to prioritise and align our resource and developments with customer demand and capitalise on market trends.

We have strengthened the capabilities of all our teams, particularly in development, marketing and sales. With the creation of 4 centres of excellence in Nottingham, Glasgow, Kuala Lumpur and Raleigh (North Carolina). This investment will provide resource, technology and infrastructure to further support the Group's growth strategy.

Our customer strategy continues to mature with the introduction of new customer success profiling, people, and systems. We are pleased with the progress we have made during the period which is demonstrated by the industry high retention rate of 95% of recurring revenue. We had a 30% increase in customer engagement for our Net Promoter Score (NPS) which is a customer loyalty metric measured on a scale of -100 to +100, where NPS of greater than Zero (0) is considered good within the enterprise software space. During the year we established that our overall NPS score is +12 (2018:23). The reduction in score was due to a lower NPS from the acquisitions made in year, like many small businesses, our acquired businesses whilst successful, did not proactively and scientifically manage customer success but are now benefitting from Ideagen's dedicated resource in this area.

This year we have significantly advanced the technology that underpins our customer propositions. The shift to a cloud operational model is a strategic priority, which will continue to evolve through our partnerships with Amazon Web Services and Azure. This innovation means the business is able to scale faster and can continue to support our evolving customer requirements in the UK and international markets.

Corporate Transactions

Ideagen has a strong track record of acquiring companies. During the year we completed three further acquisitions to strengthen our product and technology capabilities, broaden our international reach and customer base, and take us closer to our strategic goal of being global leader in our chosen markets.

The first of these was InspectionXpert (IX) in Raleigh, North Carolina, USA. IX is a profitable and growing Software as a Service (SaaS) company that has developed a digital Quality Inspection solution for the advanced engineering and

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