This is a pretty hefty profit warning from personnel identity (ID) management software supplier Intercede (IGP:AIM), illustrating the guessing game investors and City analysts are asked to play in predicting new business. This stems from a particularly slow start to the year to 31 March 2017, with new business through April to August way behind plan.

It is not just contracts from new customers either, which might be expected by degrees to be a little more careful in committing cash to projects. There's also a slump in demand for extra work from existing clients too, whom are presumably more familiar with Intercede's MyID platform. That would appear to imply that macroeconomic issues are at least partly to blame.

MyID band 2

But the end result not only means missing consensus revenue estimates of £14.3 million this year, management doesn't even think they'll match last year's £11 million figure. That knocks on to projected EBITDA, Intercede now staring at a £2.4 million loss versus previously anticipated break-even, although FinnCap's Andrew Darley still believes 2018's £300,000 positive EBITDA is safe. For now anyway.

At least cash shouldn't be a problem in the short-term, although the analyst does point out that the £5.3 million with which the company started the year will likely be nearer £2 million come the close.


The worrying wider message is that despite record results in the March 2016 full year after a couple of years of deployment delays struggle, uncomfortable uncertainties have returned. Sceptics will ponder if 2016 was a plus-side blip rather than the hoped-for longer-run trend turn.

Today's 33% share price smash (the stock initially lost more than 40% in early trading) is only to be expected given the deep cuts to forecasts and management have their work cut out to prove their execution. Rebuilding the faith of investors could be a long and draining exercise.

Issue Date: 16 Sep 2016