Next Generation Security

Transcription

1 Next Generation Security Interim Results for the six month period ended e 2013

2 Corero Network Security plc, the AIM listed US-based network security company, announces its half yearly report for the six month period ended e Corero Network Security is an international network security company and the leading provider of Distributed Denial of Service (DDoS) and cyberattack defence solutions. As the First Line of Defense, Corero s products and services stop DDoS attacks, protect IT infrastructure and eliminate downtime. Customers include enterprises, service providers and government organisations worldwide. Corero s appliance-based solutions are dynamic and automatically respond to evolving cyber attacks, known and unknown, allowing existing IT infrastructure such as firewalls to perform their intended purposes. Corero s products are transparent, highly scalable and feature the lowest latency and highest reliability in the industry. Contents 01 Highlights 02 Interim Review 02 Interim results for the six month period ended e Financial Statements 04 Consolidated Interim Statement of Comprehensive Income 05 Consolidated Interim Statement of Financial Position 06 Consolidated Interim Statement of Cash Flows 07 Consolidated Interim Statement of Changes in Equity 08 Notes to the Interim Financial Statements 12 Corporate Directory Interim results for the six month period ended e 2013

3 Highlights Group Financial highlights Revenues of $9.5 million (H1 : revenue $10.8 million) Operating loss* $1.5 million (H1 : loss $1.5 million) Adjusted loss before tax** $1.7 million (H1 : $1.7 million) Loss per share 4.8 cents (H1 : 4.9 cents) Cash of $5.3 million at e 2013 (e : $9.2 million) * before depreciation, amortisation and financing costs ** before depreciation and amortisation Post Balance Sheet Event: Completed sale of Corero Business Systems Limited on 1 August 2013 Net consideration* to the Company $16.5 million Profit on sale of approximately $15.0 million Gross cash on a pro-forma basis** at e 2013 $21.2 million and net cash $15.2 million * net of debt repayment ** including the net consideration from the sale Operating Highlights: Corero Network Security ( CNS ) continues to win new customers, 28 in the H period New business and renewals won in core verticals of gaming (including Camelot), e-betting and e-retail (including leading price comparison web site) Appointment of David Ahee as Senior Vice President Global Sales Next generation product development ready for initial customer deployments by end of 2013 Developed DDoS protection as-a-service offering Highlights Interim Review Financial Statements Corporate Directory The Corero Network Security division has made solid progress in the first half of 2013 developing the global sales team and our next generation product. We remain excited about the market opportunity for protection against DDoS and cyber attacks and believe we have a strong product offering today which we expect will deliver revenue growth in the second half of 2013, with a growing pipeline of opportunities, and beyond. The development of our next generation product has progressed according to plan and we see a significant opportunity to increase the addressable market for the business in 2014 with the goal to further accelerate revenue growth. Ashley Stephenson CEO of Corero Corero Network Security plc Interim results for the six month period ended e

4 Interim Review Interim results for the six month period ended e 2013 Group summary In the six months to e 2013 the Group reported revenues of $9.5 million (H1 : $10.8 million) and an operating loss before depreciation, amortisation and financing costs of $1.5 million in line with the comparative period (H1 : loss $1.5 million). This included an unrealised exchange gain of $0.5 million (H1 : loss $0.1 million) arising on an intercompany loan. The reported Group loss before taxation was $3.0 million (H1 : loss $2.8 million) with a reported loss per share of 4.8 cents (H1 : 4.9 cents). The Group had cash balances of $5.3 million at e 2013 (: $9.2 million). The net reduction in cash from operating activities in the 6 months ended e 2013 was $3.4 million (H1 : $2.6 million). In March 2013, the Company raised $5.9 million net of expenses in a share placing to fund organic growth. Corero Network Security ( CNS ) Revenues in the first half of 2013 were $4.9 million (H1 : $6.7 million). CNS reported an operating loss before depreciation, amortisation and financing costs in the six months to e 2013 of $2.3 million (H1 : loss $2.1 million). Highlights in the first half of 2013 include: Appointment of David Ahee, who has extensive experience in establishing enterprise and channel sales strategies internationally, as Senior Vice President Global Sales Growing pipeline of opportunities going into the second half of 2013 Next generation product development ready for initial customer deployments by end of 2013 Developed DDoS protection as-a-service offering to be launched in the second half of 2013 Best IT Products & Services for Finance, Banking & Insurance by Network Product s Guide New customer wins included significant orders from a US energy utility, a leading telecommunications service provider in Brazil, two US regional banks, an Asian based provider of on-line games, a web hosting company, a provider of real estate and mortgage portfolio management information services, a large US city corporation. Material orders (upgrades and support contract renewals) from existing customers included a leading industrial group, a leading price comparison web site, Camelot (the UK Lottery operator), two US university colleges, a satellite operator, a Middle East based investment services firm, a global electronics manufacturing services and a European telecommunications service provider. Further information on the CNS next generation product and strategy The CNS next generation offering is intended to add support for deployment in cloud infrastructure, virtual environments, and larger scale networks enabling access to new global markets. An increasing number of online providers, enterprises and data centres are actively upgrading their network designs to include a traffic inspection, monitoring and control layer at their points of connectivity to the Internet. This additional layer of security protection has become increasingly important to combat the growing variety and frequency of Internet-borne cyber threats including DDoS attacks, bot-net operations, competitive abuse and server intrusion. During and 2013, CNS has invested in the development of a next generation First Line of Defense product which expands both the feature set and market reach of its solutions for this growing market segment. The first release of this next generation product is expected to be deployed in customer networks at the end of 2013, with further releases to follow in the course of Corero Business Systems ( CBS ) Revenues in the first half of were $4.6 million (H1 : $4.1 million). CBS reported an operating profit before depreciation, amortisation, and financing costs in the six months to e 2013 of $1.4 million (H1 : profit $1.2 million). Key achievements in the first half of 2013 include: 158 new academy and school customers Sales to 18 academy groups 02 Corero Network Security plc Interim results for the six month period ended e 2013

5 Sale of CBS The Company s interest in CBS was sold on 1 August The total aggregate cash consideration was $19.7 million, subject to the repayment of the CBS debt of $1.8 million. The Company had a legal and beneficial holding of 92% of the issued share capital of CBS, with the remainder held by management employees of CBS. The proceeds of the sale received by the Company after repayment of the CBS debt were $16.5 million. On a pro-forma basis to illustrate the effect on the net cash position of the Group that the sale of CBS would have had if it had occurred on e 2013 and including the net consideration received by the Company from the sale (after repayment of the CBS debt), the Group would have had net cash at e 2013 of $15.2 million. The aggregate valuation of CBS of $19.7 million on a debt free basis represents: a multiple in excess of 8.0 times the CBS earnings before development costs capitalised, depreciation, amortisation and financing for the year ended 31 December ; and in excess of 2.2 times the CBS revenues for the year ended 31 December. The sale has generated a profit on disposal, to be reported for the year ending 31 December 2013, of approximately $15.0 million. Central costs Central costs for the the six months to e 2013 were $0.7 million (H1 : $0.6 million) which relate to the Group s finance and administration functions as well as the costs associated with the Company s listing on AIM. Board changes On 6 September 2013 Ashley Stephenson was appointed Chief Executive Officer and Andrew Miller was appointed Chief Financial Officer and Chief Operating Officer, having previously been Group Chief Operating Officer. Outlook The sale of the CBS business has resulted in the Company becoming exclusively focused in the network security market and has provided the Company with the cash resources to fund the organic development of the network security business. The Board believes that the network security market remains highly attractive. Specifically, the DDoS prevention market is forecast by Infonetics to grow by over 25% CAGR in the period to 2017 and IDC forecast the market will be worth $870 million in For the year ending 31 December 2013 the CNS division expects to report revenue similar to that for the year ended 31 December. The Board remains confident in the Group s prospects. Highlights Interim Review Financial Statements Corporate Directory Corero Network Security plc Interim results for the six month period ended e

6 Financial Statements Consolidated Interim Statement of Comprehensive Income for the six month period ended e 2013 Unaudited six months ended e 2013 Unaudited six months ended e Audited year ended 31 December Revenue 9,495 10,757 20,565 Cost of sales (2,397) (2,634) (5,116) Gross profit 7,098 8,123 15,449 Operating expenses before highlighted item (8,598) (9,618) (18,554) Depreciation and amortisation of intangible assets (1,264) (1,107) (2,767) Operating expenses (9,862) (10,725) (21,321) Operating loss (2,764) (2,602) (5,872) Finance income Finance costs (260) (246) (507) Loss before taxation (3,013) (2,792) (6,260) Taxation Loss for the period (2,827) (2,606) (5,889) Other comprehensive (expense)/income Difference on translation of GBP functional currency entities (661) (5) 537 Total comprehensive expense for the period (3,488) (2,611) (5,352) Total (loss)/profit for the period attributable to: Equity holders of the parent (2,903) (2,660) (6,055) Non-controlling interest (2,827) (2,606) (5,889) Total comprehensive (expense)/income for the period attributable to: Equity holders of the parent (3,565) (2,650) (5,495) Non-controlling interest Total (3,488) (2,611) (5,352) e 2013 Cents e Cents 31 December Cents Basic and diluted loss per share (4.8) (4.9) (9.7) 04 Corero Network Security plc Interim results for the six month period ended e 2013

7 Consolidated Interim Statement of Financial Position as at e 2013 Unaudited six months ended e 2013 Unaudited six months ended e Audited year ended 31 December Assets Non-current assets Goodwill 18,758 18,778 18,811 Acquired intangible assets 3,174 4,225 3,739 Capitalised development expenditure 6,336 3,512 4,528 Property, plant and equipment 1, ,241 29,847 27,510 28,319 Current assets Inventories Trade and other receivables 6,554 6,338 5,565 Cash and cash equivalents 5,321 9,217 4,861 12,493 16,124 11,048 Liabilities Current Liabilities Trade and other payables (3,664) (3,921) (3,972) Borrowings (6,653) (235) (182) Deferred income (6,512) (8,466) (7,592) (16,829) (12,622) (11,746) Net current (liabilities)/assets (4,336) 3,502 (698) Non-current liabilities Borrowings (1,426) (5,840) (5,984) Deferred income (1,400) (1,740) (1,146) Deferred taxation (1,010) (1,382) (1,196) (3,836) (8,962) (8,326) Net assets 21,675 22,050 19,295 Highlights Interim Review Financial Statements Corporate Directory Equity Ordinary share capital 1, Deferred share capital 7,051 7,051 7,051 Shares to be issued 124 Share premium 43,507 37,928 38,046 Share options reserve Translation reserve (451) (339) 211 Retained earnings (30,298) (24,000) (27,395) 21,410 21,975 19,106 Non-controlling interest Total equity 21,675 22,050 19,295 Corero Network Security plc Interim results for the six month period ended e

8 Financial Statements Consolidated Interim Statement of Cash Flows for the six month period ended e 2013 Cash flows from operating activities Unaudited six months ended e 2013 Unaudited six months ended e Audited year ended 31 December Loss before taxation (3,013) (2,792) (6,260) Adjustments for: Amortisation of acquired intangible assets ,157 Amortisation of capitalised development expenditure ,044 Depreciation Finance income (11) (56) (119) Finance expense Share-based payment charge 32 9 Changes in working capital Decrease/(increase) in inventories 5 (196) (233) Increase in trade and other receivables (1,184) (899) Decrease in payables (770) (54) (1,802) Net cash from operating activities (3,449) (2,612) (5,131) Cash flows from investing activities Purchase of intangible assets (36) (135) (237) Capitalised development expenditure (2,195) (1,472) (3,174) Purchase of property, plant and equipment (734) (225) (802) Net cash used in investing activities (2,965) (1,832) (4,213) Cash flows from financing activities Net proceeds from issue of ordinary share capital 5,869 6,868 6,989 Term loan received 1, Finance income Finance expense (27) (68) (64) Repayment of term loans (379) (121) Capital element of finance lease repayments (13) (13) (27) Increase/(repayment) of credit facility 158 (136) (189) Net cash from financing activities 7,512 6,957 6,957 Effects of exchange rates on cash and cash equivalents (638) Net increase/(decrease) in cash and cash equivalents 460 2,537 (1,819) Cash and cash equivalents at 1 January 4,861 6,680 6,680 Cash and cash equivalents at balance sheet dates 5,321 9,217 4, Corero Network Security plc Interim results for the six month period ended e 2013

9 Consolidated Interim Statement of Changes in Equity for the six month period ended e 2013 Share capital Shares to be issued Share premium account Share options Translation reserve reserve Retained earnings Total attributable to equity Noncontrolling holders of the parent interest 1 January 7, , (349) (21,340) 17, ,761 Loss for the period (2,660) (2,660) 54 (2,606) Other comprehensive income (15) (5) Total comprehensive expense for the period 10 (2,660) (2,650) 39 (2,611) Contributions by and distributions to owners Total equity Share-based payments Issue of share capital 168 6,700 6,868 6,868 Total contributions by and distributions to owners 168 6, ,900 6,900 e 7, , (339) (24,000) 21, ,050 Loss for the period (3,395) (3,395) 112 (3,283) Other comprehensive income (8) 542 Total comprehensive expense for the period 550 (3,395) (2,845) 104 (2,741) Contributions by and distributions to owners Share-based payments (23) (23) (23) Issue of share capital 5 (124) 118 (1) (1) Dilution of ownership of subsidiary Total contributions by and distributions to owners 5 (124) 118 (23) (24) 10 (14) 31 December 7,976 38, (27,395) 19, ,295 Loss for the period (2,903) (2,903) 76 (2,827) Other comprehensive income (662) (662) 1 (661) Total comprehensive expense for the period (662) (2,903) (3,565) 77 (3,488) Contributions by and distributions to owners Highlights Interim Review Financial Statements Corporate Directory Issue of share capital 408 5,461 5,869 5,869 Total contributions by and distributions to owners 408 5,461 5,869 5,869 e ,384 43, (451) (30,298) 21, ,675 Corero Network Security plc Interim results for the six month period ended e

10 Financial Statements Notes to the Interim Financial Statements 1. General information and basis of preparation Corero Network Security plc (the Company ) is a company domiciled in England. The condensed consolidated interim financial statements of the Company for the six months ended e 2013 comprise the Company and its subsidiaries (together referred to as the Group ). These condensed consolidated financial statements have been prepared in accordance with IAS 34, Interim Financial Reporting, as adopted by the European Union. They do not include all disclosures that would otherwise be required in a complete set of financial statements and should be read in conjunction with the Annual Report. The financial information for the half years ended e 2013 and e does not constitute statutory accounts within the meaning of Section 434(3) of the Companies Act 2006 and is unaudited. The annual financial statements of Corero Network Security plc are prepared in accordance with IFRSs as adopted by the European Union. The comparative financial information for the year ended 31 December included within this report does not constitute the full statutory accounts for that period. The statutory Annual Report and Financial Statements for have been filed with the Registrar of Companies. The Independent Auditors Report on that Annual Report and Financial Statement for was unqualified, did not draw attention to any matters by way of emphasis, and did not contain a statement under 498(2) or 498(3) of the Companies Act The consolidated financial statements have been prepared on a going concern basis as the Directors believe that the current sales prospects combined with existing working capital resources and proceeds from the sale of CBS should ensure that the Group has adequate working capital to service its existing business for the foreseeable future. The directors have made this assessment based on internal forecasts and cash flow projections. These consolidated interim financial statements were approved by the Board on 16 September 2013 and approved for issue on 17 September Corero Network Security plc Interim results for the six month period ended e 2013

11 2. Segment reporting Business segments The Group is managed according to two business units which make up the Group s two reportable operating segments: Corero Network Security and Corero Business Systems. These divisions are the basis on which the Group reports its primary segment information to the Board, which management consider to be the Chief Operating Decision maker for the purposes of IFRS 8 Operating Segments. The principal activity of Corero Network Security is the design, development and delivery of network security products. The principal activity of Corero Business Systems is the design, development and delivery of finance and management information software to the school, further education and commercial sectors. Corero Network Security Corero Business Systems Central Costs Total 6m m 12m 31 Dec 6m m 12m 31 Dec 6m m 12m 31 Dec 6m m 12m 31 Dec Revenue to external customers Product and licence 1,830 3,109 4,437 1,694 1,343 3,207 3,524 4,452 7,644 Professional services ,180 1,132 2,545 1,329 1,214 2,760 Support 2,890 3,467 6,726 1,752 1,624 3,435 4,642 5,091 10,161 Total 4,869 6,658 11,378 4,626 4,099 9,187 9,495 10,757 20,565 Cost of sales (1,509) (1,667) (3,171) (888) (967) (1,945) (2,397) (2,634) (5,116) Gross profit 3,360 4,991 8,207 3,738 3,132 7,242 7,098 8,123 15,449 Operating expenses before depreciation and amortisation costs (5,617) (7,071) (13,190) (2,315) (1,950) (4,125) (666) (597) (1,239) (8,598) (9,618) (18,554) Depreciation and amortisation of intangible assets (1,070) (934) (2,399) (194) (173) (368) (1,264) (1,107) (2,767) Operating expenses (6,687) (8,005) (15,589) (2,509) (2,123) (4,493) (666) (597) (1,239) (9,862) (10,725) (21,321) Highlights Interim Review Financial Statements Corporate Directory Operating (loss)/profit (3,327) (3,014) (7,382) 1,229 1,009 2,749 (666) (597) (1,239) (2,764) (2,602) (5,872) Finance income Finance costs (245) (246) (507) (15) (260) (246) (507) (Loss)/profit before taxation (3,572) (3,260) (7,889) 1,217 1,010 2,752 (658) (542) (1,123) (3,013) (2,792) (6,260) Corero Network Security plc Interim results for the six month period ended e

12 Financial Statements Notes to the Interim Financial Statements continued 2. Segment reporting continued Corero Network Security Corero Business Systems Central Costs Total Dec Dec Dec Dec Non-current assets Goodwill 17,983 17,983 17, ,758 18,778 18,811 Acquired intangible assets 3,174 4,218 3, ,174 4,225 3,739 Capitalised development expenditure 4,384 1,858 2,662 1,952 1,654 1,866 6,336 3,512 4,528 Property, plant & equipment 1, , , ,241 Current assets 26,895 24,933 25,474 2,952 2,577 2,845 29,847 27,510 28,319 Inventories Trade and other receivables 2,026 3,149 2,354 4,405 3,020 3, ,554 6,338 5,565 Cash and cash equivalents ,107 4,351 7,885 3,065 5,321 9,217 4,861 3,169 4,564 3,665 4,850 3,506 4,190 4,474 8,054 3,193 12,493 16,124 11,048 Current liabilities Trade, other payables and provisions (1,669) (2,184) (1,853) (1,765) (1,583) (1,787) (230) (154) (332) (3,664) (3,921) (3,972) Borrowings (6,178) (235) (182) (475) (6,653) (235) (182) Deferred income (3,043) (4,753) (4,057) (3,469) (3,713) (3,535) (6,512) (8,466) (7,592) (10,890) (7,172) (6,092) (5,709) (5,296) (5,322) (230) (154) (332) (16,829) (12,622) (11,746) Net current (liabilities)/assets (7,721) (2,608) (2,427) (859) (1,790) (1,132) 4,244 7,900 2,861 (4,336) 3,502 (698) Non-current liabilities Borrowings (5,840) (5,984) (1,426) (1,426) (5,840) (5,984) Deferred income (1,400) (1,740) (1,146) (1,400) (1,740) (1,146) Deferred taxation (1,010) (1,382) (1,196) (1,010) (1,382) (1,196) (2,410) (8,962) (8,326) (1,426) (3,836) (8,962) (8,326) Net assets 16,764 13,363 14, ,713 4,244 7,900 2,861 21,675 22,050 19, Corero Network Security plc Interim results for the six month period ended e 2013

13 3. Loss per share Loss per share is calculated by dividing the earnings attributable to ordinary shareholders by the weighted average number of ordinary shares in issue during the period. At the reporting dates there were no potentially dilutive ordinary shares. Therefore the diluted loss per share is equal to the loss per share. e 2013 Loss $'000 e 2013 Weighted average number of shares Thousand e 2013 Loss per share Cents e Loss $'000 e Weighted average number of shares Thousand e Loss per share Cents Basic and diluted loss per share (3,565) 73,769 (4.83) (2,650) 54,363 (4.87) 31 Dec Loss 31 Dec Weighted average number of shares Thousand 31 Dec Loss per share Cents Basic and diluted loss per share (5,495) 56,426 (9.74) 4. Post balance sheet event The Company s interest in Corero Business Systems Limited ( CBS ) was sold on 1 August The total aggregate cash consideration was $19.7 million, subject to the repayment of the CBS debt of $1.8 million. The Company had a legal and beneficial holding of 92% of the issued share capital of CBS, with the remainder held by management employees of CBS. The proceeds of the sale received by the Company after repayment of the CBS debt was $16.5 million ( 10.9 million). The sale has generated a profit on disposal, to be reported for the year ending 31 December 2013, of approximately $15.0 million. Highlights Interim Review Financial Statements Corporate Directory Corero Network Security plc Interim results for the six month period ended e

14 Corporate Directory Corporate Directory Directors Jens Montanana (Non- executive Chairman) Ashley Stephenson (CEO) Andrew Miller (CFO and COO) Richard Last (Non- executive Director) Andrew Lloyd (Non- executive Director) Secretary and Registered Office Duncan Swallow Highbridge Oxford Road Uxbridge Middlesex UB8 1HR Nominated Adviser and Broker FinnCap 60 New Broad Street London EC2M 1JJ Auditor BDO LLP Clarendon House Clarendon Road Cambridge CB2 8FH Bankers Silicon Valley Bank 3003 Tasman Drive Santa Clara California USA Santander 2 The Forbury Reading RG1 3EU Registrars Capita Registrars Limited Northern House Woodsome Park Fenay Bridge Huddersfield HD8 OLA Website address Solicitors Dorsey and Whitney LLP 21 Wilson Street London EC2M 2TD 12 Corero Network Security plc Interim results for the six month period ended e 2013

15 Corero Network Security plc Interim results for the six month period ended e Highlights Interim Review Financial Statements Corporate Directory

16 Corero Network Security plc Highbridge Oxford Road Uxbridge Middlesex UB8 1HR T +44 (0) Corero Network Security, Inc 1 Cabot Road Hudson MA