IDEA.L Regulatory News (IDEA)

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION

April 7th 2020

Ideagen PLC

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

COVID-19 Trading Update 

Ideagen PLC (AIM: IDEA), a leading supplier of Integrated Risk Management software to highly regulated industries, provides an update on trading and progress in the year to 30 April 2020 against the backdrop of a rapidly changing economic and public health environment.

Financial year to 30 April 2020

The Group continued its strong first half trading momentum through the third quarter to the end of January 2020. Since then, the Group has won new customers within the Internal Audit, UK Healthcare, Life Sciences and US Federal markets. Conversely, investment decisions and timing of deployments within aviation and manufacturing, particularly automotive and aerospace supply chains, have been significantly impacted by the increasing government restrictions and market dynamics.

Ideagen's software is considered 'business critical' by its customers and as such recurring "Software as a Service" and Support and Maintenance revenues have not been affected. Non-recurring revenue, consisting of perpetual licence and implementation services, has seen some impact. In this light, the Company expects to report revenues for the year of approximately £56m (only slightly below previous expectations of £58.5m). The impact has been partially offset by lower operating expenditure and therefore adjusted EBITDA is expected to be broadly in line with consensus expectations at approximately £18.5m on an IFRS16 basis (this represents an increase of 29% on the last financial year) or approximately £17.5m on a like-for-like IAS17 basis (being a 22% increase on the last financial year). In addition, the Board is considering making a general provision of approximately £2m against receivables given uncertainties in the industries in which some of the Group's clients operate. The need for a provision and its quantum will be determined by the Company's experience over the coming months.

The Group's balance sheet and funding position is strong and the Board has a significant degree of comfort for the next financial year. Cash collection in the second half has remained robust (including March, a month of significant wider disruption) and in line with management expectations. Should this trend continue through to year end, the Board expects gross cash to be approximately £7m and gross bank borrowings (excluding IFRS16 leases) of approximately £25m at that date, with undrawn facilities of approximately a further £15m. Net bank debt at that date would therefore be in line with expectations and be comfortably within the relevant banking covenant.

The Board intends to continue to pay a dividend in line with the Group's progressive dividend policy. The interim dividend for the current financial year was paid as planned in March 2020.

Outlook for year to 30 April 2021

Given the unprecedented economic and social disruption that COVID-19 has created, particularly with respect to March and April (historically the Group's most productive sales months), the Board is pleased with the Company's resilient performance and robust position entering the new financial year. This is testament to the strength of the Group's business model, the defensive markets in which we operate and, of course, the character and determination of our employees.

The Board has taken pragmatic measures to ensure that its cost base is aligned with a cautious outlook in an uncertain economic and social environment. Measures including limited redundancies, salary freezes and operational efficiencies, have been taken to reduce the forecast annual cost base by approximately £4m which, on the basis of an expected run-rate of revenues of £15m per quarter will enable the Group to meet market expectations for adjusted EBITDA for the year to 30 April 2021. The quarterly run-rate revenue assumption of £15m is based on the expected out-turn for the final quarter of the current financial year and includes £12m of recurring revenues. The Group expects to have a run-rate book of annual recurring revenues at 30 April 2020 of approximately £49m.

Employees and stakeholders

The Ideagen team has pulled together in this challenging environment and the health and safety of our employees is our primary concern. All colleagues have moved to a home working environment and all offices across the globe are now closed until further notice. The business continues to operate effectively due to our tight integration and investment in cloud-based IT infrastructure and our business continuity and risk management plan is available to all customers on our customer portal. The Board are tremendously grateful for the efforts of its employees and stakeholders.

Ben Dorks, CEO, commented: ''Whilst our performance in our fourth quarter has been affected by the current crisis our strategy and business model remain robust and I am proud of our execution at this difficult time. We have acted quickly and decisively to realign our 2020/2021 cost model to current trading patterns which we believe will provide the basis for a robust financial performance in our next financial year.

We believe that the Group is now well placed to manage its business risk effectively, emerge from the current environment in good health able to take advantage of business opportunities once the pandemic has subsided. I would like to thank all of our employees, customers and investors for their support during this time as we look forward to the economic and public health environment normalising in the future.''

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