Last checked at 17 Sep 2009 07:00
17 September 2009 Corero PLC ("Corero" or "the Group") Half-yearly results for the six month period ended 30 June 2009
Corero PLC, the specialist provider of software solutions to the banking and securities and education markets, announces its half-yearly results for the six month period ended 30 June 2009. The results are reported under IFRS.
First half 2009 revenues were, as expected, considerably lower than the comparable period in 2008 which benefited from the positive impact of 576,000 of new Resource EMS software sales and this has lead to a loss for the period. The current view of 2009 as a whole has not significantly changed.
* Revenues 2.18 million (2008: 2.83 million) * Cost reduced by a further 105,000 * Group trading loss was 180,000 (2008: profit 183,000) and a loss after taxation of 442,000 (2008: profit 5,000) * Cash deposits at 30 June 2009 were 351,000 (2008: 422,000) * Business Systems division continues to win business and maintain a close to 30 per cent share of the growth City Academy market * Annual contract renewals for licencing, support and maintenance remain strong in the Financial Markets Division * The Board still expects both divisions to make a good contribution to group operating profits for the full year
Peter Waller, Executive Chairman, said:
"We have consistently said that 2009 would be a difficult year with little growth likely over 2008. This is proving to be the case. However, there are some signs of the market improving; July and August have been good months and although the final results will be dependent, as ever, on a small number of significant potential sales in the Financial Services Division, we are hopeful that the second half should show a significant improvement."
The half-yearly report for the six months ended 30 June 2009 is 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, a subsidiary of Merchant Securities PLC
John East/Virginia Bull Tel: 020 7628 2200About 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 and distribution of their financial research. It collates and presents complex financial data efficiently and quickly for analysts to make informed opinions on market conditions and trends. It speeds up the process of content creation, content approval and publishing. And it also makes sure that each piece of content conforms to the correct regulatory requirements, and that it gets sent to the right people, using the right method and at the right time.
Radica CAPS is a European leading software system that addresses the needs of asset servicing operations for the global banking & securities sector. By fully automating the life-cycle of corporate actions, dividends, including taxation and new issues and placings, Radica reduces the serious operational risk of missing or miscalculating corporate events. This area of operations has traditionally been very manual with all the risk and cost associated with such processes. Radica is designed for a global market and can address the needs of financial institutions from Europe, North America or Asia Pacific.
ICAEW accredited, Resource Financials, is at the core of the Corero suite of business 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 offering large and small enterprises modern and dynamic business solutions. Our Learner Management system manages the students, tutors and processes within Further Education by electronically capturing the information required throughout the "learning lifecycle", by satisfying Government reporting requirements and, most importantly, by helping to secure the funding upon which Colleges depend.
Chairman's Statement
for the six monthperiodended 30 June 2009
Results
Corero's performance in the first half of 2009 resulted in a loss for the period. Whilst this is disappointing, we still anticipate a performance for the year as a whole in line with our expectations. With the exception of 2008, when the company benefited from a significant new product release in the Business Systems division in the first half of the year, Corero's second half generally produces a stronger financial performance than the first half.
Group revenues at 2.18 million were 652,000 lower than those for the first half of 2008. The major reason for this reduction was that in 2008 the Business Systems division benefited from the positive impact of 576,000 of new Resource EMS software sales which we knew would not be repeated in 2009. Continued tight management control reduced costs by 105,000. Overall, in the period under review, the group recorded a trading loss of 180,000 (2008: 183,000 profit) and a loss before taxation of 445,000 (2008: 5,000 profit). The directors are not declaring an interim dividend.
Business Systems Division
The current economic climate has created fewer new business opportunities than in previous years. However the division had a solid first half performance underpinned by 13 new academy contract wins. In addition, we won a further 10 academy contracts in July and although the academy "buying" season is generally April to August each year, we still expect some further wins by the end of the year which will maintain our near 30 per cent share of this growing market. Our leading position in this sector is based upon our track record of successful implementations, the satisfaction of our customers and the competitiveness of our product offering.
Implementations of Resource EMS, our new Education Management System have occupied much of our time and energies in the first half and this will continue for the remainder of the year. The new web portal based product is being well received, with staff able to access a wide variety of student data in real time.
In June we received confirmation that South Staffordshire College, formed by the merger of the colleges at Rodbaston, Cannock and Tamworth & Lichfield, with almost 20,000 students, has committed to both our Resource Financials and EMS suites of software. They will be working with us to gain the maximum benefits of a fully integrated software solution providing key finance and MIS data across all of their campuses to senior managers, tutors and students.
We continue to assess the best approach to support the redevelopment of the core Resource Financials product suite and expect to be in a position to a make a formal decision on this matter in the latter part of the year.
We expect the division to make a good contribution to group trading profits for the full year.
Financial Markets Division
The first half of 2009 has continued to be difficult for the Financial Markets Division. The division has seen a decline in revenues of 11 per cent compared to the same period last year. This has partly been offset by a further reduction in expenses, and in particular direct staffing costs, which have also declined by 11 per cent in the same period. The costs for the first half include a one off exceptional expense of 60,000 associated with the termination of senior staff contracts, which will be offset by equivalent savings in the second half.
The main issue facing the Financial Markets division has been a lack of new business revenue, partly caused by the cautious attitude of many firms in the sector towards technology investment. This has been compounded by a reduction in new investment at existing customers. Despite this, annual contract renewals for licencing, support and maintenance remain strong, indicating ongoing confidence in our products and services. During the period new orders and existing contract renewals were received from Brewin Dolphin Securities, ING Financial Markets, Bank Vontobel and a major European Investment Bank.
At the beginning of the year we made a significant investment in sales and in new product development. The launch of Blue Curve version 5 in the third quarter of this year will place the software, once again, in a leadership position within its market. Initial feedback from beta test customers on the new software functions has been positive, and our focus on reducing the software operating costs has proved very relevant in the current economic environment. As a result, we have generated an improved sales pipeline and will expect to see positive results from this activity in the second half of this year as the market improves.
We are in lengthy negotiations with a major customer for a significant extension to their licence agreement for our Radica CAPS software. Assuming this is confirmed, along with anticipated new Blue Curve sales and existing contract renewals, this will result in a positive contribution from Financial Markets division for the full year.
Financial Review
The Group loss for the period was 442,000 (2008: profit 5,000). Revenues were 2,180,000, (2008: 2,832,000) a decrease of 652,000.
The Business Systems division revenues were 1,306,000 (2008: 1,844,000). As already stated, the comparative 2008 figure included new licence sales of Resource EMS which were not repeated in 2009. New licence sales were made to 13 city academies in 2009. The revenue from consultancy and support services was marginally better than in 2008. The divisional trading profit was 271,000 (2008: 618,000). The reduction was broadly equivalent to the margin on the Resource EMS sales in 2008. The divisional profit before financing and taxation was 300,000. (2008: 666,000).
The Financial Markets division revenues were 874,000 (2008: 988,000). Blue Curve revenues were 325,000 (2008: 476,000) with the reduction due to the fall in services revenues. Radica and FES revenues were 549,000 (2008: 512,000) with the increase due to an improvement in services revenues. The divisional trading loss was 129,000 (2008: 130,000). The loss was maintained at the 2008 level due to a reduction in expenses. The divisional loss before financing and taxation was 215,000 (2008: 182,000)
Central costs were 322,000 (2008: 306,000). Central costs before financing and taxation were 372,000 (2008: 309,000). The cost of the capital re-organisation, convertible unsecured loan stock amendments and changes to the articles of association of 42,000 were included in these costs.
Overall the Group loss before financing and taxation was 287,000 (2008: profit 175,000)
Financial Position
During the period 137,000 (2008: 141,000) of development costs were capitalised.
Trade and other receivables were 977,000 (2008: 1,733,000). The decrease represents the non recurring Resource EMS invoices raised in the first half of 2008.
Cash balances were 351,000 (2008: 422,000). Net cash from operating activities was an absorption of 492,000 (2008: absorption 68,000) due to a reduction in working capital, as is normal during this period, and the funding of the loss for the period. Cash spending on development and interest costs meant the reduction in cash since the start of the year was 794,000 (2008: 403,000)
The deferred income balances were 1,642,000 (2008: 1,853,000)
Business Strategy
In the first half of 2009 the Board revised the terms of the company's 4 million convertible unsecured loan stock. The principal changes were to defer the redemption date from 2011 to 2015 and to defer 50 per cent of the annual interest payable for three years. The action was taken to improve short term liquidity, provide funds for investment and to give greater confidence to prospective customers.
In the past two months the Board has undertaken an in depth review of all aspects of the Corero business with two objectives. These are to meet the short term objective of ensuring adequate working capital to meet current and future needs and to achieve the longer term objective of structuring the business for maximum profitable growth. The results of this review will be available to the Board shortly.
Outlook
We have consistently said that 2009 would be a difficult year with little growth likely over 2008. This is proving to be the case, although the Business Systems division is retaining its leading position in the City Academy market and there is evidence that budgets are beginning to free up in a number of financial institutions. The second half of 2009 should be stronger than the first and for the past two months the group has shown a good trading profit. As usual, however, the final result will be dependent upon a small number of significant potential sales in the Financial Services division.
Peter WallerChairman16 September 2009
Consolidated Interim Statement of Comprehensive Income
For the six months ended30 June 2009
Unaudited Unaudited Audited six months six months Year ended 31 ended ended December 30 June 30 June 2008 2009 2008 GBP'000 GBP'000 GBP'000 Revenue 2,180 2,832 5,249 Cost of sales (69) (253) (363) Gross profit 2,111 2,579 4,886 Trading Expenses (2,291) (2,396) (4,614) Trading (loss)/profit (180) 183 272 Non trading expenses (56) (7) 80 Restructuring (charge)/credit (51) (1) 14 Impairment charge - - (683) (Loss)/profit before financing (287) 175 (317) Finance income - 6 13 Finance costs (158) (176) (354) (Loss)/profit before taxation (445) 5 (658) Taxation 3 - 80 (Loss)/profit attributable to (442) 5 (578)equity shareholders Total comprehensive (loss)/income (442) 5 (578)for the period Basic and diluted (loss)/earnings (29.1p) 0.3p (38.1p)per share
Consolidated Interim Statement of Financial Position
As at 30 June 2009 Unaudited Unaudited Audited as at as at as at 30 June 30 June 31 December 2009 2008 2008 GBP'000 GBP'000 GBP'000 Assets Non-current assets Goodwill 1,677 2,361 1,677 Other intangible assets 1,174 1,162 1,241 Property, plant and equipment 97 146 122 2,948 3,669 3,040 Current assets Trade and other receivables 977 1,733 975 Cash and cash equivalents 351 422 1,145 1,328 2,155 2,120 Liabilities Current liabilities Trade and other payables (649) (922) (834) Provisions (11) (45) (14) Deferred income (1,642) (1,853) (1,892) (2,302) (2,820) (2,740) Net current liabilities (974) (665) (620) Non-current liabilities Convertible 8per cent. unsecured (4,055) (4,041) (4,058)loan stock Provisions (7) (27) (8) (4,062) (4,068) (4,066) Net liabilities (2,088) (1,064) (1,646) Shareholders' equity Ordinary share capital 15 4,557 4,557 Deferred share capital 4,542 - - Share premium 6,369 6,369 6,369 Merger reserve 1,023 1,023 1,023 Convertible unsecured loan stock 146 146 146equity reserve Share options reserve 12 12 12 Retained earnings (14,195) (13,171) (13,753) Total deficit attributable to (2,088) (1,064) (1,646)equity holders of the parent
Consolidated Interim Statement of Cash Flow
For the six months ended 30 June 2009
Unaudited Unaudited Audited six months six months year ended ended ended 31 December 30 June 30 June 2008 2009 2008 GBP'000 GBP'000 GBP'000 Net cash from operating (492) (68) 1,098activities Cash flows from investing activities Purchase of intangible assets (137) (141) (419) Purchase of property, plant and (4) (37) (49)equipment Net cash used in investing (141) (178) (468)activities Cash flows from financing activities Interest paid (161) (163) (323) Interest received - 6 13 Net cash used in financing (161) (157) (310)activities Net (decrease)/increase in cash (794) (403) 320and cash equivalents Cash and cash equivalents at 1 1,145 825 825January Cash and cash equivalents at 351 422 1,145balance sheet date
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 are unaudited and do not constitute statutory accounts within the meaning of Section 240 of the Companies Act 1985. 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 2008.
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 2008 has been derived from the published statutory accounts. A copy of the full accounts for that period, on which the auditors issued an unqualified report that did not contain statements under section 237 (2) of the Companies Act 1985, has been delivered to the Registrar of Companies.
These interim financial statements have been prepared in accordance with the accounting policies applied in the financial statements for the year ended 31 December 2008. 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 audit committee on 14 September 2009 and have been approved for issue by the Board of Corero on 16 September 2009.
2. Segment reportingBusiness segments
The Group is managed according to two operating divisions: Financial Markets and Business Systems. These divisions are the basis on which the Group reports its primary segment information. The principal activities of each division is the design, development and delivery of market leading software products for financial institutions through its Financial Markets division and business and education markets through its Business Systems division.
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.
Details of segmental financial performance can be found in the full interim statement available from the company's website www.corero.com.
3. (Loss)/earnings per share
Basic (loss)/earnings 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 (loss)/earnings per share is the same as the basic amount.
Unaudited Unaudited Audited six months six months ended Year ended ended 30 June 31 December 30 June 2008 2008 2009 (Loss)/earnings '000 after (442) 5 (578)taxation Basic (loss)/earnings per (29.1p) 0.3p (38.1p)share Weighted average number of 1,518,990 1,518,990 1,518,990ordinary shares
The weighted average number of shares has been adjusted in prior periods to reflect the capital reorganisation on 29 June 2009.
4. Cash flows from operations Unaudited Unaudited Audited six months six months ended year ended ended 30 June 31 December 30 June 2008 2008 2009 GBP'000 GBP'000 GBP'000 (Loss)/profit before taxation (445) 5 (658) Adjustments for: Depreciation 29 39 75 Amortisation 204 166 365 Impairment of goodwill - - 683 Finance income - (6) (13) Finance expense 158 176 354 Decrease in provisions (4) (71) (121) Share based payment credit - (3) (3) Changes in working capital (Increase)/decrease in trade (3) (94) 664and other receivables Decrease in payables and (434) (280) (328)deferred revenue Cash absorbed by continuing (495) (68) (1,018)operations Corporation tax received 3 - 80 Net cash from operating (492) (68) 1,098activities
5. Statement of changes in shareholder's equity
For six months ended 30 June 2009
2002 Capital Share CULS Merger Share Profit Total options equity reserve premium and loss reserve reserve account reserve GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 1 January 4,557 12 146 1,023 6,369 (13,753) (1,646)2009 Total - - - - - (442) (442)comprehensive loss for period ended 30 June 2009 30 June 2009 4,557 12 146 1,023 6,369 (14,195) (2,088)
6. Convertible Unsecured Loan Stock (CULS)
At a meeting of the CULS holders on 29 June 2009 the following major amendments were approved to the terms of the CULS instrument.
1. The deferment of the redemption date of the CULS from 31 October 2011 to 30 June 2015.
2. The rescheduling, with effect from and including 1 January 2009, of the annual 8 per cent. interest payable on the CULS.
For the three year period from 1 January 2009 to 31 December 2011 (the "First Interest Period"), the CULS will continue to bear interest on the principal outstanding sum at the rate of 8 per cent. per annum but only 50 per cent. of such interest will be paid (the "Paid Interest"). Payment of the remaining 50 per cent. of such interest (the "Deferred Interest") will be deferred and paid on the third anniversary of the date on which such Deferred Interest accrued (each date on which such Deferred Interest accrued being an "Accrual Date").
During the three and a half year period from 1 January 2012 to 30 June 2015 (the "Second Interest period") the CULS will continue to bear interest on the principal outstanding sum at the rate of 8 per cent. per annum and such interest payments will be made on the relevant interest payment date in the Second Interest Period (i.e. not deferred).
As a result, notwithstanding that the CULS continue to bear interest on the principal outstanding sum at the rate of 8 per cent. per annum, a CULS holder who holds CULS for the entire remaining life of the CULS will receive such payments by the Company as if the CULS bore interest at 4 per cent. per annum during the First Interest Period and 12 per cent. per annum during the Second Interest Period (save that the final payment of Deferred Interest shall be made on 31 December 2014, such that the final payment on 30 June 2015 will represent only the interest for the six month period at 8 per cent. per annum, and will not include any additional deferred interest).
Deferred Interest will be paid on the third anniversary of the relevant Accrual Date to the CULS holder who was on the register on the relevant Accrual Date. Accordingly, any transferee of any CULS will not receive any Deferred Interest which accrued prior to the date of transfer.
3. The enhancement of the conversion rights from four Existing Ordinary Shares for every 1 nominal of CULS to 12.5 Existing Ordinary Shares for every 1 nominal of CULS, which equated to a conversion price, prior to the capital re-organisation, of 8p. Following the capital re-organisation the enhanced conversion rights became 0.4167 New Ordinary Shares for every 1 nominal of CULS, resulting in an effective conversion price of 240p per New Ordinary Share.
4. The reduction of the price of an Existing Ordinary Share at which the Company has the right to compel CULS holders to convert their CULS into Ordinary Shares from 1.00 to 32p. Following the capital re-organisation this price was adjusted to 9.60.
7. Sundry Information
These consolidated half-yearly financial statements were approved by the audit committee on 14 September 2009 and have been approved for issue by the Board of Corero on 16 September 2009. Copies of the half-yearly report are available on the company's website at www.corero.com.
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