TIDMCNS
RNS Number : 7393N
Corero Network Security PLC
07 September 2011
7 September 2011
Corero Network Security plc (AIM: CNS)
("Corero", the "Group" or the "Company")
Interim results for the six month period ended 30 June 2011
Corero Network Security plc, the AIM listed network security and
business software provider, announces its half yearly report for
the six month period ended 30 June 2011.
Financial Highlights:
-- Revenues of GBP4.6 million (H1 2010: revenue GBP1.4
million)
-- Operating profit* of GBP138,000 (H1 2010: GBP306,000)
-- Adjusted loss before tax of GBP51,000** (H1 2010: profit
before tax GBP48,000)
-- Loss per share 2.05p (H1 2010: earnings per share 1.38p)
-- Strong cash position of GBP5.3 million at 30 June 2011 (30
June 2010: GBP621,000)
* before depreciation, amortisation, exceptional costs and
financing
** excluding exceptional acquisition and restructuring costs and
amortisation of acquired intangible assets
Operating Highlights:
-- Acquired Top Layer Networks since rebranded Corero Network
Security ("CNS")
-- Group holding company renamed Corero Network Security plc
-- Launch of industry first network-layer and application-layer
DDoS defence system
-- CNS management reshaped and sales teams recruited across
Europe and Asia
-- Since acquisition CNS secured 40 new customers
-- Corero Business Systems ("CBS") performed strongly; 114
academy contracts won
Jens Montanana, Corero Chairman said: "The first six months of
2011 have been transformational for Corero with the acquisition of
Top Layer and successful integration of that business coupled with
the continuing growth of Corero Business Systems.
"The network security market is forecast to grow strongly,
fuelled by an escalating number of cyber crime attacks, associated
economic disruption and costs, and increasing security compliance
and business continuity requirements. Corero is well placed to
capitalise on this market trend with an increasing pipeline of
opportunities.
"The increased investment in CNS and CBS in the second half of
2011 will create businesses with greater scale and better longer
term profitable growth. The benefit of this investment in CNS
marketing, sales and product development, the launch of the DDoS
defence product, and accelerating revenue growth from CBS, is
expected to be seen in the second half of 2011 and 2012."
Enquiries:
Corero Network Security
plc
Andrew Miller, Chief Operating Tel: 01923 897 333
Officer
finnCap
Clive Carver/Henrik Persson Tel: 020 7600 1658
Walbrook PR Tel: 020 7933 8780
Bob Huxford (Media Relations) bob.huxford@walbrookpr.com
Paul Cornelius (Investor paul.cornelius@walbrookir.com
Relations)
About Corero Network Security
Corero Network Security is an international network security
business, and innovator in Intrusion Prevention Systems and leader
in DDoS defence solutions.
Corero Business Systems serves the education and business
sectors in the UK by delivering powerful, dynamic modular
accounting and business management software and services.
Overview
The first six months of 2011 have been transformational for
Corero with the acquisition of Top Layer Networks, Inc. ("Top
Layer") which closed on 2 March 2011 and successful integration of
that business coupled with the continuing growth of Corero Business
Systems. Top Layer was rebranded "Corero Network Security" in June
2011.
On 29 June 2011, Corero plc was renamed Corero Network Security
plc in order that the Company name is more closely aligned to its
principal trading subsidiary.
In the six months to 30 June 2011 the Group reported revenues of
GBP4,587,000 (H1 2010: GBP1,384,000) and operating profit before
depreciation, amortisation, exceptional costs and financing of
GBP138,000 (H1 2010: profit GBP306,000).
Corero Network Security
Corero's acquisition of Top Layer marked the first step in the
Company's strategy to build a network security technology business
focused on delivering software and hardware solutions to mid-market
commercial and enterprise customers and telecommunication service
providers, through international channels.
In the period since the acquisition closed, a number of
important milestones have been achieved:
-- Launch of DDoS Defence System ('DDS'), an industry first
network-layer and application-layer Distributed Denial of Service
('DDoS') defence product (which prevents malicious attacks causing
damaging business interruption)
-- Management team reshaped with the appointment of a General
Manager and CFO (who was appointed Chief Executive Officer of the
CNS subsidiary on 18 July 2011) and the recruitment of a Vice
President of Engineering, Chief Marketing Officer, and VP of
Finance
-- Sales teams recruited in France, Italy, Malaysia, Germany,
Spain and Taiwan (the latter covering Taiwan, Hong Kong and
China)
-- The rebranding of Top Layer to "Corero Network Security"
CNS reported revenue of GBP2,696,000 and an operating lossbefore
depreciation, amortisation, exceptional costs and financing of
GBP80,000 in the period since the 2 March 2011 acquisition
date.
CNS sales order intake in the period post the Top Layer
acquisition was $5.0 million (GBP3.0 million). The benefit of
investment in marketing and sales is expected to be seen in the six
months to 31 December 2011.
In the period since the acquisition, CNS secured 40 new
customers including material orders from BWIN (one of the world's
largest on-line gaming companies), City of Baltimore, a leading
national newspaper in the US, and Bridgepoint Education (an on-line
& campus based Higher Education provider). In addition,
material upgrade and renewal orders were secured from existing
customers including a leading national insurer and Party Gaming
(which was acquired by BWIN).
Corero Business Systems
Revenues increased by 37% in the first half of 2011 to
GBP1,891,000 (H1 2010: GBP1,384,000). CBS' sales order intake in
the six month period ended 30 June 2011 was GBP2.5 million
(compared to GBP1.5 million in the same period in 2010).
CBS reported an operating profit before depreciation,
amortisation, exceptional costs and financing in the six months to
30 June 2011 of GBP620,000 (H1 2010: GBP481,000).
Key achievements in the first half of 2011 include:
-- Continued success in the education Academy market winning
contracts from 114 academies (H1 2010: 17, FY 2010: 70) underlying
a strong position in this growth market with c. 30% market
share
-- Two new contract wins with sixth form colleges in the period
for Resource EMS, CBS' Learner Management Information System
('MIS'). After evaluating a number of alternative MIS systems,
Resource EMS was selected by these two colleges to meet their
financial and business requirements.
-- Strategic partnership with the Schools Partnership Trust, a
leading 'multi academy' group and one of only four organisations
nationally to be awarded 'Accredited Schools Group Status', to
supply Resource Financials to all of their schools
-- Strengthening of the management team by appointment of HR
manager to aid expansion
-- Launch of new web site to focus on key products and
sectors
-- Launch of Resource Financials v7, CBS' next generation
financial software solution. The new version, initially aimed at
colleges, incorporates a number of enhancements including an
improved user interface, extended general ledger coding and
budgeting, a completely revamped reporting engine with support for
multiple output scenarios, closer integration with MS Office and a
dynamic hierarchy manager for more in-depth analysis and
reporting.
The education sector in the UK offers CBS an excellent
opportunity for growth, particularly in light of the significant
increase in the demand for schools to convert to Academies. Over
the coming year, CBS will make further investment to drive growth,
enhance the service offering and increase market share.
Financial Review
In the six months to 30 June 2011, the Group reported revenues
of GBP4,587,000 (H1 2010: GBP1,384,000) and operating profit before
depreciation, amortisation, exceptional costs and financing of
GBP138,000 (H1 2010: profit GBP306,000).
CNS revenues were GBP2,696,000 in the period since the 2 March
2011 acquisition closing date. CNS reported an operating loss
before depreciation, amortisation, exceptional costs and financing
of GBP80,000 in the period.
CBS revenues were GBP1,891,000 (H1 2010: GBP1,384,000). CBS
reported an operating profit before depreciation, amortisation,
exceptional costs and financing of GBP620,000 (H1 2010:
GBP481,000).
Central costs before depreciation, amortisation, exceptional
costs and financing were GBP402,000 (H1 2010: GBP175,000).
The Group operating profit before depreciation, amortisation,
exceptional costs and financing was GBP138,000 (H1 2010: profit
GBP306,000) and loss before taxation was GBP849,000 (H1 2010:
profit GBP48,000). The Group reported a loss per share of 2.05p (H1
2010: earnings per share 1.38p).
The Company changed the presentation of the Statement of
Comprehensive Income in the period in line with best practice and
other software companies. Note 5 sets out the presentation of the
Statement of Comprehensive Income on the basis adopted in prior
years and a reconciliation of the 2011 loss before tax to the
presentation format adopted in prior years.
In the period, the Company changed its accounting policy for
cost of sales to include all direct costs associated with revenue
generation, including services delivery and support costs. The cost
of sales reported for the six month period to 30 June 2011 has been
determined based on the new policy and the comparatives for the six
months to 30 June 2010 and year ended 31 December 2010 restated in
accordance with the new policy.
The Group had cash balances of GBP5.3 million at 30 June 2011
(2010: GBP621,000). Net cash from operating activities was
(GBP1,059,000) (H1 2010: GBP241,000).
Outlook
The network security market is forecast to continue to grow
strongly, fuelled by escalating cyber crime attacks, the economic
disruption and associated costs as cyber attacks multiply, and
increasing security compliance and business continuity
requirements. In order to capitalise on this opportunity, CNS
expects to accelerate its investment in sales, marketing and
product development. The investment is planned to be mainly
headcount and would see the number of CNS employees increase from
54 at 30 June 2011 to approximately 80 by 31 December 2011.
Consequently, CNS will see an increase in its second half operating
costs of $2.5 million (GBP1.6 million) compared to the first half
of 2011. The benefit of this increased investment and the launch of
the DDoS defence product, which will be available in October 2011,
is expected to be seen in the second half of 2011 and into
2012.
The Academy market in which CBS operates is expected to continue
to grow, encouraged by government support. Like CNS, CBS intends to
capitalise on the opportunity in its marketplace by accelerating
investment mainly in headcount in the second six months of the year
and into 2012 to drive revenue growth, enhance its service offering
and increase market share. Consequently, CBS expects to increase
the number of employees from 40 at 30 June 2011 to approximately 60
by 31 December 2011. The strong order intake in the six months to
30 June 2011 is expected to result in revenue growth in the second
six months of the year.
The Board believes this investment in CNS and CBS will create
businesses with greater scale and better longer-term profitable
growth. Full year Group operating profit (before depreciation,
amortisation, exceptional costs and financing) is expected to be in
line with market expectations.
The Board remains confident in the Company's prospects.
Consolidated Interim Statement of Comprehensive Income
For the six months ended 30 June 2011
Unaudited Unaudited*
six months six months Audited*
ended ended year ended
30 June 30 June 31 December
2011 2010 2010
GBP'000 GBP'000 GBP'000
Revenue 4,587 1,384 3,020
Cost of sales (967) (232) (593)
------------ ------------ -------------
Gross profit 3,620 1,152 2,427
Operating expenses (3,479) (846) (1,963)
Share options charge (3) - (131)
------------ ------------ -------------
Operating profit before
depreciation, amortisation,
exceptional costs and financing 138 306 333
Depreciation and amortisation of
intangible assets (354) (94) (198)
------------ ------------ -------------
Operating (loss)/profit before
exceptional costs and financing (216) 212 135
Exceptional costs - acquisition
and restructuring costs (576) (1) (60)
------------ ------------ -------------
(Loss)/profit before financing (792) 211 75
Finance income 30 - 32
Finance costs (87) (163) (199)
------------ ------------ -------------
(Loss)/profit before taxation (849) 48 (92)
Taxation - - -
------------ ------------ -------------
(Loss)/profit for the period from
continuing operations (849) 48 (92)
(Loss)/profit for the period from
discontinued operations - (27) 4
Profit from sale of discontinued
operations - - 492
------------ ------------ -------------
(Loss)/profit for the period (849) 21 404
Other comprehensive loss (369) - -
------------ ------------ -------------
(Loss)/profit and total
comprehensive (loss)/income for
the period - attributable to
equity holders of the parent (1,218) 21 404
============ ============ =============
* restated for change in cost of sales accounting policy as set
out in note 1
The unaudited Statement of Comprehensive Income as at 30 June
2011 split between continuing and acquired operations is set out on
page 7.
Basic and diluted earnings/(loss) per share
Unaudited Unaudited
six months six months Audited
ended ended year ended
30 June 30 June 31 December
2011 2010 2010
Basic (loss)/earnings per share
from continuing and acquired
operations (2.05p) 3.16p (0.7p)
Basic (loss)/earnings from - (1.78p) 3.7p
discontinued operations
------------ ------------ -------------
Total (2.05p) 1.38p 3.0p
============ ============ =============
Unaudited Unaudited Audited
six months six months year ended
ended ended 31 December
30 June 30 June 2010
2011 2010
Diluted (loss) per share from (1.89p) n/a (0.62p)*
continuing and acquired
operations
Diluted earnings from discontinued - n/a 3.35p*
operations
Total (1.89p) n/a 2.73p*
============ ============ =============
* restated to include options issued which were dilutive,
previously not reported as such.
Consolidated Interim Statement of Comprehensive Income
For the six months ended 30 June 2011
Unaudited
six months ended
30 June 2011
GBP'000 GBP'000 GBP'000
Continuing Acquired Total
Revenue 1,891 2,696 4,587
Cost of sales (362) (605) (967)
----------- --------- --------
Gross profit 1,529 2,091 3,620
Operating expenses (1,308) (2,171) (3,479)
Share options charge (3) - (3)
----------- --------- --------
Operating profit/(loss) before
depreciation, amortisation, exceptional
costs and financing 218 (80) 138
Depreciation and amortisation of intangible
assets (96) (258) (354)
----------- --------- --------
Operating profit/(loss) before exceptional
costs and financing 122 (338) (216)
Exceptional costs - acquisition and
restructuring costs (284) (292) (576)
----------- --------- --------
Loss before financing (162) (630) (792)
Finance income 30 - 30
Finance costs - (87) (87)
----------- --------- --------
Loss before taxation (132) (717) (849)
Taxation - - -
----------- --------- --------
Loss for the period (132) (717) (849)
Other comprehensive loss (369) - (369)
----------- --------- --------
Loss and total comprehensive loss for
the period - attributable to equity
holders of the parent (501) (717) (1,218)
=========== ========= ========
Basic and diluted loss per share
Basic loss for the period - - (2.05p)
=========== ========= ========
Diluted loss for the period - - (1.89p)
=========== ========= ========
Consolidated Interim Statement of Financial Position
As at 30 June 2011
Unaudited Unaudited Audited
as at as at as at
30 June 30 June 31 December
2011 2010 2010
GBP'000 GBP'000 GBP'000
Assets
Non-current assets
Goodwill 10,430 1,677 509
Acquired intangible assets 3,180 251 5
Capitalised development expenditure 815 872 591
Property, plant and equipment 381 59 36
---------- ---------- -------------
14,806 2,859 1,141
---------- ---------- -------------
Current assets
Stock 213 - -
Trade and other receivables 3,164 1,194 756
Other short term financial
assets 143 - 64
Cash and cash equivalents 5,315 621 7,186
---------- ---------- -------------
8,835 1,815 8,006
Liabilities
Current liabilities
Trade and other payables (2,680) (722) (735)
Provisions (4) (4) (4)
Deferred income (5,549) (1,500) (1,485)
(8,233) (2,226) (2,224)
Net current assets/(liabilities) 602 (411) 5,782
---------- ---------- -------------
Non-current liabilities
Deferred income (659) - -
Other long term financial liabilities (256) - -
8% loan notes (3,122) - -
Convertible 8% unsecured loan
stock ("CULS") - (4,216) -
(4,037) (4,216) -
Net assets/(liabilities) 11,371 (1,768) 6,923
---------- ---------- -------------
Shareholders' equity
Ordinary share capital 477 15 319
Deferred share capital 4,542 4,542 4,542
Share premium 19,846 6,369 14,341
Merger reserve 1,023 1,023 1,023
Convertible unsecured loan
stock equity reserve - 146 -
Share options reserve 149 14 146
Translation exchange difference
on foreign subsidiary (369) - -
Retained earnings (14,297) (13,877) (13,448)
---------- ---------- -------------
Total surplus/(deficit) attributable
to equity holders of the parent 11,371 (1,768) 6,923
---------- ---------- -------------
Consolidated Interim Statement of Cash Flow
For the six months ended 30 June 2011
Unaudited Unaudited Audited
six months ended six months ended year ended
30 June 30 June 31 December
2011 2010 2010
GBP'000 GBP'000 GBP'000
Net cash from
operating activities (1,059) 241 768
------------------ ------------------ -------------
Cash flows from
investing activities
Acquisition of
subsidiaries net of
cash acquired (2,106) - -
Purchase of intangible
assets (308) (222) (367)
Purchase of property,
plant and equipment (242) (3) (24)
------------------ ------------------ -------------
Net cash used in
investing activities (2,656) (225) (391)
Cash flows from
financing activities
Proceeds from issue of
share capital 2,125 - 6,383
Interest paid - (81) (292)
Interest received 30 - 32
Repayment of credit
facility (306) - -
Capital element of
finance lease
payments (5) - -
------------------ ------------------ -------------
Net cash used in
financing activities 1,844 (81) 6,123
Net
(decrease)/increase
in cash and cash
equivalents (1,871) (65) 6,500
Cash and cash
equivalents at 1
January 7,186 686 686
------------------ ------------------ -------------
Cash and cash
equivalents at
balance sheet date 5,315 621 7,186
------------------ ------------------ -------------
Consolidated Statement of Changes in Shareholders' Equity
For six months ended 30 June 2011
Share CULS Share Profit
options equity Translation Merger premium and loss
Capital reserve reserve reserve reserve account reserve Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
1 January
2010 4,557 14 146 - 1,023 6,369 (13,898) (1,789)
Total
comprehensive
income for
period ended
30 June 2010 - - - - - - 21 21
-------- -------- -------- ------------ -------- -------- --------- --------
30 June 2010 4,557 14 146 - 1,023 6,369 (13,877) (1,768)
Share based
payments 132 132
Redemption
of CULS (146) 146 -
CULS fair
value
adjustments - - - - - - 567 567
Issue of
share capital 304 - - - - 7,972 (667) 7,609
Total
comprehensive
income for
period ended
31 December
2010 - - - - - - 383 383
-------- -------- -------- ------------ -------- -------- --------- --------
31 December
2010 4,861 146 - - 1,023 14,341 (13,448) 6,923
Share based
payments - 3 - - - - - 3
Issue of
share capital 158 - - - - 5,505 - 5,663
Translation
difference on
translation
of foreign
subsidiary - - - (369) - - - (369)
Total
comprehensive
loss for
period ended
30 June 2011 - - - - - - (849) (849)
-------- -------- -------- ------------ -------- -------- --------- --------
30 June 2011 5,019 149 - (369) 1,023 19,846 (14,297) 11,371
-------- -------- -------- ------------ -------- -------- --------- --------
Notes to the interim financial statements
1. General information and basis of preparation
The consolidated interim financial statements have been prepared
in accordance with the AIM Rules for Companies and in accordance
with International Financial Reporting Standard (IFRS) IAS 34
Interim Financial Reporting.
The interim financial statements have not been audited or
reviewed pursuant to guidance issued by the Auditing Practices
Board and do not constitute statutory accounts within the meaning
of Section 435 of the Companies Act 2006. They do not include all
of the information required for full annual financial statements
and should be read in conjunction with the consolidated financial
statements of the Group for the year ended 31 December 2010.
Corero's consolidated interim financial statements are presented
in Pounds Sterling (GBP), which is also the functional currency of
the parent company.
The financial information for the year ended 31 December 2010
has been derived from the published statutory accounts as amended
to reflect the change in presentation of the Comprehensive
Statement of Income in line with best practice and other software
companies and the change in the accounting policy for cost of
sales. A copy of the full accounts for that period, on which the
auditors issued an unqualified report, has been delivered to the
Registrar of Companies.
Apart from the change in the accounting policy for cost of sales
to include all direct costs associated with revenue generation,
including services delivery and support costs, these interim
financial statements have been prepared in accordance with the
accounting policies applied in the financial statements for the
year ended 31 December 2010. They have been prepared under the
historical cost convention except for the valuation of financial
instruments. The 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 should
ensure that Corero 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 6 September 2011 and approved for issue on 7 September
2011.
2. Segment reporting
Business segments
The Group is managed according to two business units: Corero
Network Security and Corero Business Systems. These divisions are
the basis on which the Group reports its primary segment
information. 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 accounting and management information
software to the academy, school, further education and commercial
markets.
There are no inter-segment sales. Segment results, assets and
liabilities include items directly attributable to a segment as
well as those that can be allocated on a reasonable basis.
Unallocated assets and liabilities comprise items such as cash and
cash equivalents, taxation, accruals, prepayments and
borrowings.
Notes to the interim financial statements
continued
2. Segment reporting (continued) - Statement of Comprehensive
Income
Corero Network Corero Business
Security Systems Central Costs Total
--------------- ---------------------------- ---------------------------- ---------------------------- ----------------------------
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
6m 6m 12m 6m 6m 12m 6m 6m 12m 6m 6m 12m
30 30 31 30 30 31 30 30 31 30 30 31
Jun Jun Dec Jun Jun Dec Jun Jun Dec Jun Jun Dec
2011 2010 2010 2011 2010 2010 2011 2010 2010 2011 2010 2010
--------------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Revenue
to external
customers
Product
and licence 1,195 - - 496 244 556 - - - 1,691 244 556
Professional
services 62 - - 483 278 699 - - - 545 278 699
Support 1,439 912 862 1,765 - - - 2,351 862 1,765
-------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Total 2,696 - - 1,891 1,384 3,020 - - - 4,587 1,384 3,020
Cost of
sales -605 - - -362 -232 -593 - - - -967 -232 -593
-------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Gross profit 2,091 - - 1,529 1,152 2,427 - - - 3,620 1,152 2,427
Operating
expenses -2,171 - - -909 -671 -1,406 -399 -175 -557 -3,479 -846 -1,963
Share options
charge - - - - - - -3 - -131 -3 - -131
-------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Operating
(loss)/profit
before
depreciation,
amortisation,
exceptional
costs and
financing -80 - - 620 481 1,021 -402 -175 -688 138 306 333
Depreciation
and
amortisation
of intangible
assets -258 - - -93 -92 -193 -3 -2 -5 -354 -94 -198
-------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Operating
(loss)/profit
before
exceptional
costs and
financing -338 - - 527 389 828 -405 -177 -693 -216 212 135
-------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Acquisition
and
restructuring
costs -292 - - - - - -284 -1 -60 -576 -1 -60
-------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
(Loss)/profit
before
financing -630 - - 527 389 828 -689 -178 -753 -792 211 75
Finance
income - - - - - - 30 - 32 30 - 32
Finance
costs -87 - - - - - - -163 -199 -87 -163 -199
-------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
(Loss)/profit
before
taxation -717 - - 527 389 828 -659 -341 -920 -849 48 -92
Taxation - - - - - - - - - - - -
-------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
(Loss)/profit
for the
period -717 - - 527 389 828 -659 -341 -920 -849 48 -92
--------------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Notes to the interim financial statements
continued
2. Segment reporting (continued) - Statement of Comprehensive
Income
Discontinued Operations
Financial Markets and
Total
------------------- ----------------------------
GBP'000 GBP'000 GBP'000
6m 6m 12m
30 Jun 30 Jun 31 Dec
2011 2010 2010
------------------- -------- -------- --------
Revenue to
external
customers - 830 986
(Loss)/profit
before financing - -27 4
------------------- -------- -------- --------
Notes to the interim financial statements
continued
2. Segment reporting (continued) - Statement of Financial
Position
Corero Network Corero Business
Security Systems Unallocated Total
---------------------- ---------------------------- ---------------------------- ---------------------------- ----------------------------
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
6m 6m 12m 6m 6m 12m 6m 6m 12m 6m 6m 12m
30 30 31 30 30 31 30 30 31 30 30 31
Jun Jun Dec Jun Jun Dec Jun Jun Dec Jun Jun Dec
2011 2010 2010 2011 2010 2010 2011 2010 2010 2011 2010 2010
---------------------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Goodwill 9,921 - - 509 509 509 - - - 10,430 509 509
Acquired intangible
assets 3,175 - - 5 8 5 - - - 3,180 8 5
Capitalised
development
expenditure 94 - - 721 541 591 - - - 815 541 591
Property,
plant & equipment 340 - - 41 27 36 - - - 381 27 36
-------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Non current
assets 13,530 - - 1,276 1,085 1,141 - - - 14,806 1,085 1,141
Stock 213 - - - - - - - - 213 - -
Trade and
other receivables 1,582 - - 1,560 498 532 22 313 288 3,164 811 820
Other short
term financial
assets 85 - - 2 - - 56 - - 143 - -
Cash and cash
equivalents 276 - - 159 - - 4,880 621 7,186 5,315 621 7,186
---------------------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Total assets 15,686 - - 2,997 1,583 1,673 4,958 934 7,474 23,641 2,517 9,147
Trade, other
payables and
provisions -1,734 - - -783 -157 -252 -167 -496 -487 -2,684 -653 -739
Deferred income -3,538 - - -2,011 -1,208 -1,485 - - - -5,549 -1,208 -1,485
---------------------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Total current
liabilities -5,272 - - -2,794 -1,365 -1,737 -167 -496 -487 -8,233 -1,861 -2,224
---------------------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Non current
liabilities -4,037 - - - - - - -4,216 - -4,037 -4,216 -
---------------------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Net
assets/(liabilities) 6,377 - - 203 218 -64 4,791 -3,778 6,987 11,371 -3,560 6,923
---------------------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Notes to the interim financial statements
continued
2. Segment reporting (continued) - Statement of Financial
Position
Segmental net assets/(liabilities)
Total
----------------------- ----------------------------
GBP'000 GBP'000 GBP'000
6m 6m 12m
30 31
30 Jun Jun Dec
2011 2010 2010
----------------------- -------- -------- --------
Segmental
assets 23,641 2,517 9,147
Discontinued
operations - 2,157 -
Segmental
liabilities -12,270 -6,077 -2,224
Discontinued
operations - -365 -
----------------------- -------- -------- --------
Group net
assets/(liabilities) 11,371 -1,768 6,923
----------------------- -------- -------- --------
3. Earnings/(loss) per share
Basic earnings/(loss) per share is calculated by dividing the
earnings attributable to ordinary shareholders by the weighted
average of ordinary shares outstanding during the period.
Unaudited Unaudited
six months six months Audited
ended ended year ended
30 June 30 June 31 December
2011 2010 2010
(Loss)/earnings GBP'000
after taxation - continuing
and acquired operations (849) 48 (92)
------------ ------------ -------------
Basic (loss)/earnings
per share - continuing
and acquired operations (2.05p) 3.16p (0.7p)
------------ ------------ -------------
(Loss)/earnings GBP'000
after taxation - discontinued
operations - (27) 496
------------ ------------ -------------
(Loss)/earnings per share
- discontinued operations - (1.78p) 3.7p
------------ ------------ -------------
Total (2.05p) 1.38p 3.0p
------------ ------------ -------------
Weighted average number
of ordinary shares 42,390,142 1,518,990 13,529,948
------------ ------------ -------------
Notes to the interim financial statements
continued
3. Earnings/(loss) per share (continued)
Diluted earnings/(loss) per share is calculated by dividing the
earnings attributable to ordinary shareholders by the weighted
average of ordinary shares outstanding during the period plus
applicable share options.
The CULS were non-dilutive for periods ending 30 June 2010 and
31 December 2011 and the share options were non-dilutive for the
period ending 30 June 2010 (therefore the diluted and basic
(loss)/earnings per share were the same).
Unaudited
six months Audited
ended year ended
30 June 31 December
2011 2010
Loss GBP'000 after taxation
- continuing and acquired operations (849) (92)
------------ -------------
Diluted loss per share - continuing
and acquired operations (1.89p) (0.62p)*
------------ -------------
Earnings GBP'000 after taxation
- discontinued operations - 496
------------ -------------
Diluted earnings per share -
discontinued operations - 3.35p*
------------ -------------
Total (1.89p) 2.73p*
------------ -------------
Weighted average number of ordinary
shares and options 44,994,225 14,786,948
------------ -------------
* restated to include options issued which were dilutive,
previously not reported as such.
Notes to the interim financial statements
continued
4. Cash flows from operations
Unaudited Unaudited
six months six months Audited
ended ended year ended
30 June 30 June 31 December
2011 2010 2010
GBP'000 GBP'000 GBP'000
(Loss)/profit before taxation (849) 21 (92)
Adjustments for:
Depreciation 48 22 22
Amortisation of intangibles 306 218 175
Finance income (30) - (32)
Finance expense 87 163 199
Decrease in provisions - (8) (8)
Share based payment charge 3 - 131
Changes in working capital
(Increase) in stock (74) - -
(Increase) in trade and other
receivables (1,511) (309) (344)
Increase in payables 961 134 424
------------ ------------ -------------
Net cash generated from continuing
and acquired operations (1,059) 241 475
Net cash from discontinued
operations - - 293
------------ ------------ -------------
Net cash from operating activities (1,059) 241 768
------------ ------------ -------------
Notes to the interim financial statements
continued
5. Statement of comprehensive income - restatement
The statement of comprehensive income below illustrates the
statement of comprehensive income prepared on the same basis and
applying the cost of sale accounting policy adopted in the 31
December 2010 financial statements.
Unaudited Unaudited Audited
six months six months year ended
ended ended 31
30 June 30 June December
2011 2010 2010
GBP'000 GBP'000 GBP'000
Revenue 4,587 1,384 3,020
Cost of sales (715) (73) (230)
------------ ------------ ------------
Gross profit 3,872 1,311 2,790
Trading expenses (4,287) (1,205) (2,675)
Trading (loss)/profit (415) 106 115
Share options charge (3) - (131)
Other non trading items* (374) 105 91
(Loss)/profit before financing (792) 211 75
Finance income 30 - 32
Finance costs (87) (163) (199)
------------ ------------ ------------
(Loss)/profit before taxation (849) 48 (92)
Taxation - -
------------ ------------ ------------
(Loss)/profit for the period from
continuing operations (849) 48 (92)
(Loss)/profit for the period from
discontinued operations - (27) 4
Profit from sale of discontinued
operations - - 492
------------ ------------ ------------
(Loss)/profit for the period (849) 21 404
Other comprehensive loss (369) - -
------------ ------------ ------------
(Loss)/profit and total
comprehensive (loss)/income for
the period - attributable to
equity holders of the parent (1,218) 21 404
============ ============ ============
* holiday pay accrual, capitalisation and amortisation of
research and development costs and exceptional costs Notes to the
interim financial statements
continued
5. Statement of comprehensive income - restatement
(continued)
The statement of comprehensive income below illustrates the
statement of comprehensive income for the six month period to 30
June 2011 prepared on the same basis and applying the cost of sale
accounting policy adopted in the 31 December 2010 financial
statements as shown in the column "Old Basis" and the effect of the
new cost of sales accounting policy and reclassification of costs
in the statement of comprehensive income as presented in the
interim financial statements above shown in the column "New
Basis".
Unaudited Unaudited
six months Change in six months
ended cost of sales ended
30 June accounting 30 June
2011 policy and 2011
Old Basis reclassification New Basis
GBP'000 GBP'000 GBP'000
Revenue 4,587 - 4,587
Cost of sales (715) (252) (967)
Trading/operating expenses (4,287) 808 (3,479)
Share options charge (3) - (3)
Depreciation and amortisation
of intangible assets - (354) (354)
Exceptional costs -
acquisition and
restructuring costs - (576) (576)
Other non trading items (374) 374 -
------------ ------------------ ------------
Loss before financing (792) - (792)
------------ ------------------ ------------
Notes to the interim financial statements
continued
6. Goodwill
Unaudited
six months
ended
30 June
2011
GBP'000
Cost
At 1 January 509
Additions 9,921
------------
At 30 June 10,430
------------
Impairment -
At 1 January -
Period -
------------
At 30 June -
------------
Carrying amount at 30 June 10,430
============
7. Acquisition
On 2 March 2011, the Company acquired the entire issued share
capital of Top Layer which has since been renamed Corero Network
Security, Inc.
The aggregate consideration for the acquisition was $15,288,160
satisfied as follows:
-- $6,304,602 by the issue, credited as fully paid, of 9,038,855
new Ordinary shares Corero;
-- $5,000,000 by the issue of loan notes by Top layer. These
loan notes bear interest at 8% per annum and are repayable on 2
March 2014;
-- $3,860,000 in cash (of which $500,000 was paid into an escrow
account); and
-- Deferred consideration of $123,558, to be satisfied by the
issue of 177,145 new Ordinary shares Corero to be issued on 2
September 2012 subject to adjustment for set off against any
warranty claims brought by the Company in accordance with the terms
of the acquisition agreement.
Notes to the interim financial statements
continued
7. Acquisition (continued)
The assets and liabilities of Top Layer at the date of
acquisition were:
Fair value
GBP'000
Property, plant and equipment 159
Other non-current assets 84
Inventory 136
Trade and other receivables 820
Cash and cash equivalents 130
Trade and other payables (1,323)
Other short term financial liabilities (362)
Deferred income (3,874)
Other non-current liabilities (185)
-----------
Net liabilities (4,415)
Goodwill 9,921
Customer contracts and related
customer relationships 121
Software 3,266
Satisfied by consideration 8,893
-----------
Consideration comprises:
Completion consideration shares 3,344
Loan notes 3,071
Cash 2,413
Deferred consideration shares 65
Total consideration 8,893
-----------
The Company's strategy as set out in the Circular to
shareholders dated 14 July 2010 is to build a network security
technology focused business. The acquisition of Top Layer is the
first step in executing the Company's acquisition strategy and
provides a core platform on which to build a leading network
security business. The goodwill arising from the acquisition
includes Top Layer's 12 years of deep domain expertise in security
and networking and its proprietary technology offering with a
multi-core processing platform to support high performance security
applications and scalable architecture. The Company plans to add
functionality to the Top Layer platform to broaden its network
security offering to deliver revenue growth.
The costs relating to the acquisition of Top Layer (a reverse
takeover under the AIM Rules) and associated placing referred to in
note 8 below were GBP551,000, of which GBP284,000 has been
recognised as an expense in the statement of comprehensive income
in the six months ended 30 June 2011 and included under Exceptional
costs, and GBP267,000 has been charged to the share premium arising
from the issue of the consideration and placing shares.
The revenue and loss of Top Layer since the acquisition date
included in the consolidated statement of comprehensive income for
the six months to 30 June 2011 is shown in note 2 under the heading
Corero Network Security. The consolidated revenue and operating
loss before depreciation, amortisation of intangible assets,
exceptional costs and financing for the
Notes to the interim financial statements
continued
7. Acquisition (continued)
six months ended 30 June 2011 as though the acquisition date had
been effective as of the beginning of the annual reporting period,
would have been GBP3,595,000 and GBP288,000 respectively.
8. Placing
On 2 March 2011, the Company raised GBP2.3 million (before
costs) by way of a placing of 6,571,429 new ordinary shares at a
price of 35p per share.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR KMGGLKVDGMZM
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