Last checked at 8 Aug 2008 07:00
Corero PLC ("Corero" or "the Group") Interim Results for the six months ended 30 June 2008
Corero PLC, the specialist provider of software solutions to the banking & securities and education markets, announces its interim results for the six months ended 30 June 2008. The results are reported under IFRS.
* A return to profit after large losses in 2007. PBT of ‚£5,000 for the first
half of 2008 (first half of 2007: loss of ‚£601,000) * Revenues up 9 per cent at ‚£2.83 million ( 2007: ‚£2.59 million) * Cost reduced by ‚£456,000 (16 per cent lower than same period 2007) * Group earnings per share 0.01p (first half of 2007: loss 1.34p)
* Business Systems revenues 52 per cent higher and contribution 70 per cent
higher * Financial Markets has continuing losses but second quarter performance points to improving trend * Research and development of the product range continues at historical levels * The general improvement should continue in the second half 2008.
Peter Waller, Executive Chairman, said:
"The results represent a major turnaround after a disappointing 2007 and reflect the effects of streamlining the business in the past twelve months.
The Business Systems division had an outstanding half with further wins in theAcademy education market and an excellent take up of the new Learner Managementproduct.It was clear in the second half of 2007 that the investment banking andsecurities markets were likely to be difficult in 2008 and we restructured theFinancial Markets division accordingly. The first half of 2008 continued to beloss making but revenues increased in the second quarter and we now expect apositive contribution from this division in the second half of 2008.
In the medium term we expect Corero's revenues to grow in both of its markets."
8 August 2008
The interim accounts for the six months ended 30 June 2008 are available on the Company's website www.corero.com
Enquiries:
Corero PLC Peter Waller, Executive Chairman Tel: 07785
228080
Duncan Swallow, Financial Controller Tel: 01923 695136 John East & Partners Limited Tel: 020 7628 2200John East/Virginia Bull College Hill Tel: 020 7457 2020Jamie Ramsay Tel: 020 7457 2047About Corero
Corero designs, develops and delivers market leading software products for financial institutions through its Financial Markets Division, and business and education markets through its Business Systems Division.
Blue Curve software allows organisations to vastly improve the production anddistribution of their financial research. It collates and presents complexfinancial data efficiently and quickly for analysts to make informed opinionson market conditions and trends. It speeds up the process of content creation,content approval and publishing. And it also makes sure that each piece ofcontent conforms to the correct regulatory requirements, and that it gets sentto the right people, using the right method and at the right time.Radica CAPS is a European leading software system that addresses the needs ofasset servicing operations for the global banking & securities sector. By fullyautomating the life-cycle of corporate actions, dividends, including taxationand new issues and placings, Radica reduces the serious operational risk ofmissing or miscalculating corporate events. This area of operations hastraditionally been very manual with all the risk and cost associated with suchprocesses. Radica is designed for a global market and can address the needs offinancial institutions from Europe, North America or Asia Pacific.ICAEW accredited, Resource Financials, is at the core of the Corero suite ofbusiness applications. Solutions also exist for eProcurement, Project Costing,HR & Payroll, Continuing Professional Development and Learner Management.Together with Workflow and Web Applications, covering Reporting, Timesheets,Expenses and Requisitions, there are over 30 highly integrated modules offeringlarge and small enterprises modern and dynamic business solutions. Our LearnerManagement system manages the students, tutors and processes within FurtherEducation by electronically capturing the information required throughout the"learning lifecycle", by satisfying Government reporting requirements and, mostimportantly, by helping to secure the funding upon which Colleges depend.Chairman's Statementfor the six month period ended 30 June 2008
Results
Corero's performance in the first half of 2008 was broadly in line with expectations and resulted in an operating profit and small overall profit. This represents a major turnaround after a disappointing 2007.
Group revenues at ‚£2.83 million were 9 per cent higher than those for the firsthalf of 2007. The actions taken to restructure the company reduced costs byover ‚£400,000. As a result the group recorded an operating profit of ‚£175,000(2007: loss of ‚£435,000) and a profit before taxation of ‚£5,000 (2007: loss of‚£601,000).
These results were achieved principally through a very strong contribution from the Corero Business Systems division. Corero Financial Markets division continued to make a loss although the second quarter was stronger than the first, indicating an improving trend.
Business Systems Division
The division has once again performed strongly especially in its key educationmarket. 11 new academy contract wins demonstrates that last year was not anisolated result and with a total of 33 academy customers to date we are pleasedto report that we have maintained a market share of approximately 25 per cent.Government plans continue to indicate strong support for this initiative and weare well placed to continue to exploit the opportunity. We are currently viewedas a leading supplier to this sector due in large part to a high level ofcustomer satisfaction.Our new Learning Management software product also contributed significantly tothe first half results and at the end of the period we had succeeded incontracting sales to 97 per cent of our existing customers. The new softwaredelivers increasing levels of functionality via a real time portal environment.Staff can now access student data on-line as well as automating day to dayworking practices, such as timetables and class registers via intuitive webinterfaces. In an increasingly competitive and commercial world our Internetbased enrolment and enquiry solutions will deliver clear business advantagesfor our college customers.Other new customers during the period included Orchard Hill College, based inLondon, which has particular expertise for dealing with students with profoundlearning difficulties and disabilities; Heythrop College, a member of theUniversity Of London Federation Of Colleges; and, Walford & North ShropshireCollege.The account management team also enjoyed success selling our Web solutions toseveral of our existing commercial sector clients. This has been encouragingand will stimulate a push during the second half of the year to raise ourpresence in this sector.
We continue to invest and enhance our product portfolio and expect this to bear fruit towards the end of the current year and on into 2009.
Financial Markets Division
Following on from 2007 and with the well documented difficulties of the Investment Banking sector, the first half of 2008 was always going to be challenging. Despite a reduction in revenues, the cost cutting measures taken in the second half of 2007
did ensure that losses were contained to similar levels. This was also helpedby both the increase in long term repeatable revenues from existing customersand also from consultancy services revenues which remained steady.However, the revenue from a large Radica CAPS order signed in 2007 was furtherdelayed. The work was started in the period under review and we expect to seethe majority of this revenue recognized by the end of the current year.The period saw two further customers go live on the Blue Curve hosted service,bringing the total to five. We are seeing an increasing interest in thisservice and prospect activity is growing despite the downturn in the financialmarkets. There is also a plan to build on our investment in North America withadditional sales focus allied with marketing activities aimed at increasingawareness of the Blue Curve products in this important market.Operational processes have continued to improve following the merger of theBlue Curve and Radica CAPS business. In particular, the recent appointment ofan experienced customer services manager in this area, highlights ourcommitment to high quality services and customer satisfaction. As we move moreto a hosted service model, this role will become increasingly important toensuring long term revenue and profit retention.
Financial Review
The Group profit for the period was ‚£5,000 (2007: loss of ‚£553,000). Revenues were ‚£2,832,000 (2007: 2,587,000) an increase of ‚£245,000.
The Business Systems division revenues grew to ‚£1,844,000 (2007: 1,212,000).This was predominantly due to the increase in licence revenues from sales ofthe new Learning Management product to our existing customers and also newacademy customers. Cost of sales relating to the resale of third party softwareand services rose by approximately ‚£200,000. These software and services arebeing used in our payroll and Learner Management software. The divisionalprofit before financing and taxation increased by 70 per cent to ‚£666,000(2007: 391,000).The Financial Markets division revenues declined overall to ‚£988,000 (2007: ‚£1,375,000). Blue Curve revenues were ‚£476,000 (2007: ‚£670,000) with thereduction due to the fall in new business licence revenues. Radica revenueswere ‚£512,000 (2007: ‚£705,000) with the reduction due to a combination of alack of new large licence sales and lower than expected professional servicesrevenues because of the delay in starting work relating to an alreadycontracted project. Despite the reduction in revenues, the divisional lossbefore financing and taxation was ‚£182,000 (2007: loss of ‚£177,000) due to there-structuring and cost reduction that took place at the end of 2007.
Central costs were ‚£309,000 (2007: ‚£649,000). This 52 per cent reduction resulted from the actions contained in the business recovery plan which was implemented in the second half of 2007. Regulatory and marketing costs were reduced wherever possible and the former Chief Executive and Finance Director both left the Company without direct replacement.
Overall the Group profit before financing and taxation was ‚£175,000 (2007: loss of ‚£435,000) an improvement of ‚£610,000.
Financial Position
During the period ‚£141,000 (2007: ‚£190,000) of research and development costs were capitalised.
Trade and other receivables were ‚£1,733,000 (2007: ‚£1,598,000). The increasesince the year end was due to invoicing for the Learning Management product inthe Business Systems division offset by collection of Financial Markets yearend outstanding debtors.
Our cash balances were ‚£422,000 (2007: ‚£807,000). Cash balances decreased from the start of the year due to a reduction in working capital. Net cash from operating activities was an absorption of ‚£68,000 (2007: generation of ‚£ 304,000).
The deferred income balances were ‚£1,853,000 (2007: ‚£1,398,000), the increase representing deferred professional service days for the Learning Management product in the Business Systems division and the Radica CAPS product in the Financial Markets division.
Board Changes
During the period two long serving non-executive directors, Colin Peters and Bernard Fairman, retired from the Corero Board having both made immense contributions to the Company.
They have been replaced as non-executive directors by Roy Mitchell, who willalso chair the Audit Committee and Richard Last, who will chair theRemuneration Committee. They bring considerable experience to these positionsand I am confident we have a strong, capable Board with the right blend ofskills to take Corero forward.
Staff
2007 saw a significant restructuring of the Company leading to considerable staff changes in the Financial Markets division and corporate staff. I am pleased to say that the first half of 2008 has been one of staff continuity and great effort from all of our employees, which is reflected in the results.
Business Strategy
Following a review of our operations in 2007 the Company reinforced theintention to operate two divisions, Financial Markets and Business Systems, andseek strong organic growth across both divisions and all four product lines -Blue Curve, Radica CAPS, Resource Financial management and Learning ManagementSystems. We continue to follow this strategy and believe we have the managementcapability to support this approach. However, the Board will remain open to anyevent that can deliver a substantial increase in shareholder value andcontinues to examine a range of actions to achieve this.
Outlook
We expect to see the general improvement maintained in the second half of 2008.
However, there are a number of caveats to the medium term outlook. Firstly, thecontribution from the Business Systems division will slow in the second half asit focuses on delivering the orders taken in the past six months. Secondly, theFinancial Markets division's primary market is the investment banking andsecurities sector, which is experiencing considerable weakness with nolikelihood of short term improvement.Overall, although we anticipate an operating profit for the second half of 2008it may well be lower than that for the first half. We expect the Company to becash generative in the second half of 2008 and it is reassuring that 86 percent of the revenue which we expect for this period is already contracted.
In summary, 2008 is a year of transition which has started well. We are confident that the Company is now better positioned to take advantage of the opportunities that exist in the market.
Peter WallerChairmanConsolidated Income StatementFor the six months ended 30 June 2008 Unaudited Unaudited Audited six months six months Year ended 31 ended ended December 30 June 30 June 2007 2008 2007 ‚£'000 ‚£'000 ‚£'000 Revenue 2,832 2,587 5,244Cost of sales (253) (144) (303) Gross profit 2,579 2,443 4,941 Administrative expenses - other (2,403) (2,859) (5,694)Administrative expenses - (1) (19) (401)restructuring costs Profit/(Loss) before financing 175 (435) (1,154) Finance income 6 9 16Finance costs (176) (175) (353) Profit/(Loss) before taxation 5 (601) (1,491) Taxation - 48 48 Profit/(Loss) attributable to 5 (553) (1,443)equity shareholders Basic and diluted earnings/(loss) 0.01p (1.34p) (3.33p)per share Statement of recognised income and expenseFor the six months ended 30 June 2008 Unaudited Unaudited Audited six months six months Year ended ended ended 31 December 30 June 30 June 2007 2008 2007 ‚£'000 ‚£'000 ‚£'000 Profit/(Loss) for the financial 5 (553) (1,443)period Total recognised profits/(losses) 5 (553) (1,443)relating to the period Total recognised losses since the 5 (553) (1,443)last financial statements Consolidated Balance SheetAs at 30 June 2008 Unaudited Unaudited Audited As at As at As at 30 June 30 June 31 December 2008 2007 2007 ‚£'000 ‚£'000 ‚£'000 Assets Non-current assets Goodwill 2,361 2,361 2,361Other intangible assets 1,162 1,232 1,187
Property, plant and equipment 146 67
148 3,669 3,660 3,696 Current assets Trade and other receivables 1,733 1,598 1,639Cash and cash equivalents 422 807 825 2,155 2,405 2,464 Liabilities Current liabilities Trade and other payables (922) (767) (1,093)Provisions (45) (20) (90) (967) (787) (1,183) Net current assets 1,188 1,618 1,281Deferred income (1,853) (1,398) (1,962) Non-current liabilities Convertible 8 per cent. unsecured (4,041) (4,014) (4,027)loan stock Provisions (27) (35) (53) (4,068) (4,049) (4,080) Net liabilities (1,064) (169) (1,065) Shareholders' equity Ordinary share capital 4,557 4,557 4,557Share premium 6,369 6,369 6,369Merger reserve 1,023 1,023 1,023
Convertible unsecured loan stock 146 146
146equity reserve Share options reserve 12 21 15Retained earnings (13,171) (12,285) (13,175) Total deficit attributable to (1,064) (169)
(1,065)
equity holders of the parent Interim Consolidated Cash Flow StatementFor the six months ended 30 June 2008 Unaudited Unaudited Audited six months six months Year ended ended ended 31 December 30 June 30 June 2007 2008 2007 ‚£'000 ‚£'000 ‚£'000 Net cash from operating (68) 304 697activities Cash flows from investing activities Purchase of intangible assets (141) (242) (345)Purchase of property, plant and (37) (19) (133)equipment Interest received 6 9 16Net cash used in investing (172) (252) (462)activities
Cash flows from financing
activities Interest paid (163) (152) (317)
Net decrease in cash and cash (403) (100)
(82)
equivalents Cash and cash equivalents at 1 825 907
907January 2008
Cash and cash equivalents at 422 807
825balance sheet date
Notes to the interim financial statements
1. General information and basis of preparation
The consolidated interim financial statements have been prepared in accordancewith the AIM Rules for Companies and in accordance with International FinancialReporting Standard (IFRS) IAS 34 Interim Financial Reporting.The interim financial statements are unaudited and do not constitute statutoryaccounts within the meaning of Section 240 of the Companies Act 1985. They donot include all of the information required for full annual financialstatements and should be read in conjunction with the consolidated financialstatements of the Group for the year ended 31 December 2007.
Corero's consolidated interim financial statements are presented in Pounds Sterling (‚£), which is also the functional currency of the parent company.
The financial information for the year ended 31 December 2007 has been derivedfrom the published statutory accounts. A copy of the full accounts for thatperiod, on which the auditors issued an unqualified report that did not containstatements under section 237 (2) of the Companies Act 1985, has been deliveredto the Registrar of Companies.These interim financial statements have been prepared in accordance with theaccounting policies applied in the financial statements for the year ended 31December 2007. They have been prepared under the historical cost conventionexcept for the valuation of financial instruments. The financial statementshave been prepared on a going concern basis as the Directors believe that thecurrent sales prospects combined with existing working capital resources shouldensure that Corero has adequate working capital to service its existingbusiness for the foreseeable future. The directors have made this assessmentbased on internal forecasts and cash flow projections.
These consolidated interim financial statements were approved by the audit committee on 6 August 2008 and have been approved for issue by the Board of Corero on 7 August 2008.
2. Segment reportingBusiness segmentsThe Group is managed according to two operating divisions: Financial Marketsand Business Systems. These divisions are the basis on which the Group reportsits primary segment information. The principal activities of each division isthe design, development and delivery of market leading software products forfinancial institutions through its Financial Markets division and business andeducation markets through its Business Systems division.There are no inter-segment sales. Segment results, assets and liabilitiesinclude items directly attributable to a segment as well as those that can beallocated on a reasonable basis. Unallocated assets and liabilities compriseitems such as cash and cash equivalents, taxation, accruals, prepayments andborrowings.
Details of segmental financial performance can be found in the full interim statement available from the company's website www.corero.com.
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.
The CULS and share options were non-dilutive for both periods and thus the diluted earnings/(loss) per share is the same as the basic amount.
Unaudited Unaudited Audited six months six months Year ended ended ended 31 December 30 June 30 June 2007 2008 2007 Earnings/(Loss) ‚£'000 after 5 (553) (1,443)taxation Basic earnings/(Loss) per 0.01p (1.34p) (3.33p)share Weighted average number of 45,569,702 41,208,601 43,347,651ordinary shares
4. Cash flows from operating activities
Unaudited Unaudited Audited six months six months Year ended ended ended 31 December 30 June 30 June 2007 2008 2007 ‚£'000 ‚£'000 ‚£'000 Profit/(Loss) before taxation 5 (601) (1,491)Adjustments for: Depreciation 39 31 63Amortisation 166 125 274Finance income (6) (9) (16)Finance expense 176 175 353(Decrease)/Increase in (71) (13) 75provisions Share based payment (credit)/ (3) 6 -charge Changes in working capital (Increase)/Decrease in trade (94) 866 824and other receivables (Decrease)/Increase in (280) (324) 567payables and deferred revenue Cash (absorbed by)/generated (68) 256 649from continuing operations Corporation tax received - 48 48 Net cash from operating (68) 304 697activities
5. Statement of changes in shareholder's equity
For six months ended 30 June 2008
Capital Share CULS Merger Share Profit Total options equity reserve premium and loss reserve reserve account reserve ‚£'000 ‚£'000 ‚£'000 ‚£'000 ‚£'000 ‚£'000 ‚£'000 1 January 4,557 15 146 1,023 6,369 (13,176) (1,066)2008 Retained - - - - - 5 5profit for period ended 30 June 2008 Share based - (3) - - - - (3)payments 30 June 2008 4,557 12 146 1,023 6,369 (13,171) (1,064)6. Sundry Information
These consolidated interim financial statements were approved by the audit committee on 6 August 2008 and have been approved for issue by the Board of Corero on 7 August 2008.Copies of the interim report are available on the company's website at www.corero.com.
vendor