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RNS Number : 6359A
Corero Network Security PLC
30 September 2015
30 September 2015
Corero Network Security plc (AIM: CNS)
("Corero" or the "Company")
Interim results for the six month period ended 30 June 2015
Corero Network Security plc (AIM: CNS), the AIM listed network
security company, announces its half yearly report for the six
month period ended 30 June 2015.
Financial Highlights:
-- Revenue $4.0 million (H1 2014: revenue $3.7 million)
-- EBITDA loss* $3.5 million (H1 2014: loss $3.9 million)
-- Loss before tax $5.6 million (H1 2014: loss $5.2 million)
-- Loss per share 4.7 cents (H1 2014: loss per share 5.9 cents)
-- Net cash of $0.5 million at 30 June 2015 (30 June 2014: net cash $5.0 million)
* before depreciation, amortisation and financing costs
Operating Highlights:
-- Flagship SmartWall Threat Defense System ("TDS") order (value
of over $0.5 million) from a US internet service provider
-- Customer wins across the multiple SmartWall TDS target markets
-- SmartWall TDS trials in progress with three of the top 10 US Internet service providers
-- Key sales team appointments adding significant service provider sales experience
-- Partnership with Verisign to deliver hybrid Distributed
Denial of Service ("DDoS") protection solutions
-- New development facility in Edinburgh, Scotland
Post Balance Sheet Event:
-- On 28 August 2015 raised $7.7 million (GBP5.0 million) before
expenses by way of a subscription for 50,000,000 new ordinary
shares at a price of 10p per share
-- New funds to support ongoing SmartWall TDS development and
sales and marketing activities in the US and Europe
-- Directors contributed $3.1 million (GBP2.0 million) to the subscription
Ashley Stephenson, CEO of Corero, commented:
"We are very encouraged by the progress made in the first six
months of the year. We see this trend continuing with additional
new customer orders since the half year.
"We are now engaged in multiple trials with an increasing number
of the world's largest service providers and are encouraged by the
significant market opportunity these companies represent, whilst
recognising the impact of longer sales cycles in this particular
vertical. We believe many of these service providers will see the
value of the Corero approach to DDoS protection.
"Our focus for the second half of 2015 is on converting customer
trials to sales orders and building the pipeline of opportunities
for the SmartWall TDS. The Board remains positive about the outlook
for Corero."
Enquiries:
Corero Network Security plc
Andrew Miller, Chief Financial Tel: 01895 876382
Officer
FinnCap
Stuart Andrews/Carl Holmes (corporate Tel: 020 7220 0500
finance)
Stephen Norcross (corporate
broking)
Redleaf Communications Tel: 020 7382 4747
Rebecca Sanders-Hewett/David cns@redleafpr.com
Ison/Susie Hudson
About Corero Network Security
Corero Network Security, an organisation's First Line of
Defense(R) against Distributed Denial of Service (DDoS) attacks and
cyber threats, provide enterprises and service providers with an
additional layer of security capable of inspecting and analysing
Internet traffic and mitigating attacks. Corero products and
services enhance existing security architecture with a scalable,
flexible and responsive defence against DDoS attacks and cyber
threats before they reach the targeted IT infrastructure, allowing
online services to perform as intended. The latest addition to
Corero First Line of Defense(R) product family includes the Corero
SmartWall(R) Threat Defense System (TDS) allowing for modular,
highly scalable network visibility and DDoS defence for the Large
Enterprise, Datacentre and Hosting Provider, as well as the
Internet Service Provider.
For more information about how Corero solutions are eliminating
the DDoS challenge for organisations across the globe, visit
www.corero.com.
Interim results for the six month period ended 30 June 2015
Overview
The first half of 2015 is the first full six month reporting
period following Corero's decision in Q4 2014 to transition the
business to focus exclusively on the new SmartWall TDS product.
Highlights in the first half of 2015 include:
-- Flagship SmartWall TDS order (value of over $0.5 million) from a US service provider
o Solution comprises multiple Corero SmartWall TDS products
deployed at three regional locations with supporting SecureWatch
Analytics services for a 12-month period
o The Corero solution provides real-time DDoS protection and
analytics covering all Internet traffic arriving in the provider's
network
-- Customer wins across the multiple SmartWall TDS target markets
o Service providers, hosting providers and on-line
enterprises
-- SmartWall TDS trials in progress with three of the top 10 US Internet service providers
o Service providers are increasingly seeing the value of the
Corero approach to solving DDoS challenges through 'always on',
automatic threat protection and visibility
-- Key sales team appointments adding significant service provider sales experience
o Scott Prouty appointed Senior Vice President of Sales, North
America
o Prior to joining Corero, Prouty served as Vice President of
Service Provider Sales, North America for RedSeal Networks where he
led the sales and go-to-market strategy for building the company's
service provider customer base, which included some of the largest
service providers in North America
o Previously, at Arbor Networks, he held the position of Vice
President Sales, Americas and as founder of the sales organisation,
led the company to rapid growth
-- Partnership with Verisign to deliver hybrid DDoS protection solutions
o For Verisign and Corero customers, this integration combines
on-premises technology from Corero to defeat sub-saturating DDoS
attacks alongside cloud-based DDoS Protection Service from Verisign
for high volume and complex application layer attacks that exceed
the customer's network and resource capacity
o Together, these solutions are designed to provide
Internet-dependent organisations with scalable DDoS protection
capabilities
-- New development facility in Edinburgh, Scotland
o Adds significant security, virtualisation and software-defined
networking (SDN) expertise
o The new lab is operational and is fully integrated with the
Company's US based facility in Hudson, MA
Since the half-year, Corero has secured its largest SmartWall
TDS order to date; a $0.7m sale to a US regional service
provider.
Financial Summary
In the six months to 30 June 2015, Corero reported revenues of
$4.0 million (H1 2014: $3.7 million) and an EBITDA loss of $3.5
million (H1 2014: loss $3.9 million). The EBITDA loss is net of
capitalised R&D of $1.1 million relating to incremental feature
development of the SmartWall TDS product, a reduction over H1 2014
capitalised R&D of $2.2 million following the completion of the
initial SmartWall TDS product development in June 2014. Operating
costs net of capitalised R&D were $5.9 million (H1 2014: $6.3
million) and below the prior year reflecting the lower headcount in
the period. This was as a result of the skills rebalancing in the
second half of 2014 as the development efforts were focused on
enhancements to the SmartWall TDS DDoS defence capability following
general availability release of the SmartWall TDS in mid-2014.
The loss before taxation was $5.6 million (H1 2014: loss $5.2
million) including amortisation of capitalised R&D of $1.1
million (H1 2014: $0.2 million) reflecting a full six month's
amortisation following the first sale of the new SmartWall TDS
product in June 2014. The reported loss per share was 4.7 cents (H1
2014: 5.9 cents).
Corero had cash of $1.1 million at 30 June 2015 (2014: $5.4
million) and net cash of $0.5 million (2014: net cash of $5.0
million). The net reduction in cash from operating activities in
the 6 months ended 30 June 2015 was $4.1 million (H1 2014: net
reduction $2.1 million).
Post Balance Sheet Event
On 28 August 2015, the Company raised $7.7 million (GBP5.0
million) (before expenses), of which the Directors contributed $3.1
million (GBP2.0 million). The fundraising was completed by way of a
subscription for 50,000,000 new ordinary shares at a price of 10p
per share, to support SmartWall TDS sales and marketing activities
in North America and Europe, and the further development of the
SmartWall TDS product.
Market Opportunity
Corero is continuing to see a shift in enterprises looking to
their service providers for delivery of protection against DDoS
attacks. The Company's SmartWall TDS products enable it to address
the growing service provider demand for DDoS protection
solutions.
Despite longer sales cycles in the large service provider
market, the opportunity in this segment is larger than Corero had
originally anticipated. Demand is being driven by the immediate
need for next generation technology solutions to deliver DDoS and
cyber threat protection services to service provider customer bases
and also to protect the growing Cloud services infrastructure from
the impact of DDoS and cyber threats. Corero believes traction in
this market segment would be transformational for the success of
the Company.
Outlook
Based upon the growing level of interest and increasing number
of significant proof of concept trials, and the significant
customer win since the half-year, the outlook for the SmartWall TDS
product offering is very encouraging.
The Board remains confident in the Company's prospects and look
forward to updating the market on its continued progress.
Consolidated Interim Statement of Comprehensive Income
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for the six month period ended 30 June 2015
Unaudited six months ended 30 Unaudited six months ended 30 Audited year ended 31
June June December
2015 2014 2014
$'000 $'000 $'000
Revenue 4,032 3,672 7,477
Cost of sales (1,674) (1,226) (3,372)
------------------------------ ------------------------------ ----------------------
Gross profit 2,358 2,446 4,105
------------------------------ ------------------------------ ------------------------------ ----------------------
Operating expenses before
highlighted item (5,856) (6,338) (11,250)
Depreciation and
amortisation of intangible
assets (2,116) (1,313) (3,272)
------------------------------ ------------------------------ ------------------------------ ----------------------
Operating expenses (7,972) (7,651) (14,522)
Operating loss (5,614) (5,205) (10,417)
Finance income 8 11 22
Finance costs (13) (17) (24)
------------------------------ ------------------------------ ----------------------
Loss before taxation (5,619) (5,211) (10,419)
Taxation 191 186 358
------------------------------ ------------------------------ ----------------------
Loss for the period (5,428) (5,025) (10,061)
Other comprehensive
(expense)/income
Difference on translation of
UK functional currency
entities (109) 233 (479)
Total comprehensive expense
for the period (5,537) (4,792) (10,540)
------------------------------ ------------------------------ ----------------------
Total loss for the period
attributable to:
Equity holders of the parent (5,428) (5,025) (10,061)
Total (5,428) (5,025) (10,061)
------------------------------ ------------------------------ ----------------------
Total comprehensive expense
for the period attributable
to:
Equity holders of the parent (5,537) (4,792) (10,540)
Total (5,537) (4,792) (10,540)
------------------------------ ------------------------------ ----------------------
Basic and diluted loss
per share
31 December
30 June 30 June 2014
2015 2014
Cents Cents Cents
Basic and diluted loss
per share (4.7) (5.9) (11.5)
-------- ---------- ------------
Consolidated Interim Statement of Financial Position
as at 30 June 2015
Unaudited six months ended Unaudited six months ended Audited year ended 31
30 June 30 June December
2015 2014 2014
$'000 $'000 $'000
Assets
Non-current assets
Goodwill 17,983 17,983 17,983
Acquired intangible assets 938 2,071 1,548
Capitalised development
expenditure 8,553 8,066 8,624
Property, plant and
equipment 1,072 1,333 1,175
28,546 29,453 29,330
Current assets
Inventories 466 518 749
Trade and other receivables 2,420 2,247 2,811
Cash and cash equivalents 1,128 5,386 6,036
---------------------------- ---------------------------- ----------------------------
4,014 8,151 9,596
Liabilities
Current Liabilities
Trade and other payables (2,291) (2,118) (2,362)
Borrowings (653) (406) (20)
Deferred income (3,460) (3,087) (4,055)
(6,404) (5,611) (6,437)
Net current
(liabilities)/assets (2,390) 2,540 3,159
Non-current liabilities
Deferred income (965) (2,110) (1,570)
Deferred taxation (276) (639) (467)
---------------------------- ---------------------------- ----------------------------
(1,241) (2,749) (2,037)
---------------------------- ---------------------------- ----------------------------
Net assets 24,915 29,244 30,452
---------------------------- ---------------------------- ----------------------------
Equity
Ordinary share capital 1,804 1,333 1,804
Capital redemption reserve 7,051 - -
Deferred share capital* - 7,051 7,051
Share premium 50,000 43,507 50,000
Share options reserve 285 293 285
Translation reserve 605 1,426 714
Retained earnings (34,830) (24,366) (29,402)
---------------------------- ---------------------------- ----------------------------
Total equity 24,915 29,244 30,452
---------------------------- ---------------------------- ----------------------------
*On 17 June 2015 the Company purchased the entire deferred share
capital of 1,518,900 GBP2.99 shares for a consideration of 1p. The
deferred shares were subsequently cancelled on 22 June 2015.
Consolidated Interim Statement of Cash Flows
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for the six month period ended 30 June 2015
Unaudited six months ended Unaudited six months ended Audited year ended 31
30 June 30 June December
2015 2014 2014
Cash flows from operating
activities $'000 $'000 $'000
Loss for the period (5,428) (5,025) (10,061)
Adjustments for:
Amortisation of acquired
intangible assets 613 612 1,229
Amortisation of capitalised
development expenditure 1,140 228 1,118
Depreciation 363 473 925
Finance income (8) (11) (22)
Finance expense 13 17 24
Taxation (191) (186) (358)
Share based payment credit - - (8)
Decrease/(increase) in
inventories 283 (189) (334)
Decrease in trade and other
receivables 391 1,483 893
(Decrease)/increase in
payables (1,271) 504 1,234
---------------------------- ---------------------------- ----------------------------
Net cash from operating
activities (4,095) (2,094) (5,360)
Cash flows from investing
activities
Purchase of intangible
assets (3) (48) (142)
Capitalised development
expenditure (1,069) (2,173) (3,621)
Purchase of property, plant
and equipment (260) (463) (844)
Net cash used in investing
activities (1,332) (2,684) (4,607)
Cash flows from financing
activities
Net proceeds from issue of
ordinary share capital - - 6,964
Finance income 8 11 22
Finance expense (13) (17) (24)
Receipt/(repayment) of
credit facility 633 149 (236)
---------------------------- ---------------------------- ----------------------------
Net cash from financing
activities 628 143 6,726
Effects of exchange rates on
cash and cash equivalents (109) 246 (498)
Net decrease in cash and
cash equivalents (4,908) (4,389) (3,739)
Cash and cash equivalents at
1 January 6,036 9,775 9,775
---------------------------- ---------------------------- ----------------------------
Cash and cash equivalents at
balance sheet dates 1,128 5,386 6,036
---------------------------- ---------------------------- ----------------------------
Consolidated Interim Statement of Changes in Equity
for the six month period ended 30 June 2015
2002 Total
attributable
Capital Share Share to equity
Share redemption premium options Translation Retained holders of
capital reserve account reserve reserve earnings the parent
$'000 $'000 $'000 $'000 $'000 $'000 $'000
1 January 2014 8,384 - 43,507 293 1,193 (19,341) 34,036
Loss for the period - - - - - (5,025) (5,025)
Other comprehensive income - - - - 233 - 233
-------- ----------- -------- -------- ------------ --------- -------------
Total comprehensive expense for the period - - - - 233 (5,025) (4,792)
30 June 2014 8,384 - 43,507 293 1,426 (24,366) 29,244
Loss for the period - - - - (5,036) (5,036)
Other comprehensive income - - - - (712) - (712)
Total comprehensive expense for the period - - - - (712) (5,036) (5,748)
Contributions by and distributions to owners
Share based payments - - - (8) - - (8)
Issue of share capital 471 - 6,493 - - - 6,964
Total contributions by and distributions to owners 471 - 6,493 (8) - - 6,956
31 December 2014 8,855 - 50,000 285 714 (29,402) 30,452
Loss for the period - - - - - (5,428) (5,428)
Other comprehensive income - - - - (109) - (109)
-------- ----------- -------- -------- ------------ --------- -------------
Total comprehensive expense for the period - - - - (109) (5,428) (5,537)
-------- ----------- -------- -------- ------------ --------- -------------
Contributions by and distributions to owners
Buy back of deferred shares (7,051) - - - - - (7,051)
Creation of capital redemption reserve* - 7,051 - - - - 7,051
-------- ----------- -------- -------- ------------ --------- -------------
Total contributions by and distributions to owners (7,051) 7,051 - - - - -
-------- ----------- -------- -------- ------------ --------- -------------
30 June 2015 1,804 7,051 50,000 285 605 (34,830) 24,915
-------- ----------- -------- -------- ------------ --------- -------------
* the capital redemption reserve arose as result of the
Company's purchase of the entire deferred share capital of
1,518,900 GBP2.99 shares for a consideration of 1p on 17 June 2015
and subsequent cancellation on 22 June 2015.
Notes to the interim financial statements
1. General information and basis of preparation
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