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Intercede – from “confidence that we will experience a strong second half” to “material” warning in 1 month… & why not until 1:58pm?

By Steve Moore | Monday 6 November 2017

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.

A 5th October trading statement saw Intercede Group (IGP) Chairman & CEO Richard Parris conclude with “confidence that we will experience a strong second half to the financial year, notwithstanding likely budget difficulties in our traditionally large US government customer base”. Now another “Trading Update”?

The opening sentence includes “Intercede has experienced a slower market than expected and a number of large enterprise awards anticipated for this quarter have so far failed to materialise in spite of customer commitments to the contrary”. Uh oh. The announcement further details;

“Specifically, Intercede was informed in writing on 3 November 2017 that a significant order of over $2m from an existing customer that was forecast to be received in the current financial year ending 31 March 2018, will not now be raised until the first quarter of the next financial year. This deferral of sales revenue will have a material impact on the Group's ability to meet market expectations.”

But it taking until 1:58pm today for the profit warning announcement?!? The company states it “is now forecasting revenue growth for the current financial year in the range of 10%-20%” and that “these orders are expected to be awarded eventually”, but the noted revenue compares to house broker finnCap previously forecasting more than 50% growth – and that from a prior year £8.3 million, with £11 million having been achieved the year before that. It is also added “customer delays are making accurate forecasting for the financial year extremely challenging”.

The announcement also includes “cash balances of £4.2m as at 31 October 2017” and Richard Parris arguing “the market has never been in more need of the solutions we provide, we have recently invested in a world-class sales team and we have migrated our platform to also operate in the Cloud on a subscription based model. We are poised for take-off in new mid-market enterprise and consumer oriented markets”.

Hmmm. I though note this follows me previously updating on this company in March – stating that though a trading update then tried to mitigate that in the next year European and US regulation would require a range of agencies and organisations to put in place higher levels of cybersecurity and that the company “is already well advanced in its plans to benefit from this trend”, a current clear lack of visibility and cash burn ahoy saw me retain my prior stance here which has served well; sell. I certainly continue to avoid.

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