Half-yearly Report
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 the
Academy education market and an excellent take up of the new Learner Management
product.
It was clear in the second half of 2007 that the investment banking and
securities markets were likely to be difficult in 2008 and we restructured the
Financial Markets division accordingly. The first half of 2008 continued to be
loss making but revenues increased in the second quarter and we now expect a
positive 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 2200
John East/Virginia Bull
College Hill Tel: 020 7457 2020
Jamie Ramsay Tel: 020 7457 2047
About 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 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 first
half of 2007. The actions taken to restructure the company reduced costs by
over £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 education
market. 11 new academy contract wins demonstrates that last year was not an
isolated result and with a total of 33 academy customers to date we are pleased
to report that we have maintained a market share of approximately 25 per cent.
Government plans continue to indicate strong support for this initiative and we
are well placed to continue to exploit the opportunity. We are currently viewed
as a leading supplier to this sector due in large part to a high level of
customer satisfaction.
Our new Learning Management software product also contributed significantly to
the first half results and at the end of the period we had succeeded in
contracting sales to 97 per cent of our existing customers. The new software
delivers increasing levels of functionality via a real time portal environment.
Staff can now access student data on-line as well as automating day to day
working practices, such as timetables and class registers via intuitive web
interfaces. In an increasingly competitive and commercial world our Internet
based enrolment and enquiry solutions will deliver clear business advantages
for our college customers.
Other new customers during the period included Orchard Hill College, based in
London, which has particular expertise for dealing with students with profound
learning difficulties and disabilities; Heythrop College, a member of the
University Of London Federation Of Colleges; and, Walford & North Shropshire
College.
The account management team also enjoyed success selling our Web solutions to
several of our existing commercial sector clients. This has been encouraging
and will stimulate a push during the second half of the year to raise our
presence 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 helped
by both the increase in long term repeatable revenues from existing customers
and also from consultancy services revenues which remained steady.
However, the revenue from a large Radica CAPS order signed in 2007 was further
delayed. The work was started in the period under review and we expect to see
the 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 this
service and prospect activity is growing despite the downturn in the financial
markets. There is also a plan to build on our investment in North America with
additional sales focus allied with marketing activities aimed at increasing
awareness of the Blue Curve products in this important market.
Operational processes have continued to improve following the merger of the
Blue Curve and Radica CAPS business. In particular, the recent appointment of
an experienced customer services manager in this area, highlights our
commitment to high quality services and customer satisfaction. As we move more
to a hosted service model, this role will become increasingly important to
ensuring 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 of
the new Learning Management product to our existing customers and also new
academy customers. Cost of sales relating to the resale of third party software
and services rose by approximately £200,000. These software and services are
being used in our payroll and Learner Management software. The divisional
profit 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 the
reduction due to the fall in new business licence revenues. Radica revenues
were £512,000 (2007: £705,000) with the reduction due to a combination of a
lack of new large licence sales and lower than expected professional services
revenues because of the delay in starting work relating to an already
contracted project. Despite the reduction in revenues, the divisional loss
before financing and taxation was £182,000 (2007: loss of £177,000) due to the
re-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 increase
since the year end was due to invoicing for the Learning Management product in
the Business Systems division offset by collection of Financial Markets year
end 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 will
also chair the Audit Committee and Richard Last, who will chair the
Remuneration Committee. They bring considerable experience to these positions
and I am confident we have a strong, capable Board with the right blend of
skills 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 the
intention to operate two divisions, Financial Markets and Business Systems, and
seek strong organic growth across both divisions and all four product lines -
Blue Curve, Radica CAPS, Resource Financial management and Learning Management
Systems. We continue to follow this strategy and believe we have the management
capability to support this approach. However, the Board will remain open to any
event that can deliver a substantial increase in shareholder value and
continues 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, the
contribution from the Business Systems division will slow in the second half as
it focuses on delivering the orders taken in the past six months. Secondly, the
Financial Markets division's primary market is the investment banking and
securities sector, which is experiencing considerable weakness with no
likelihood of short term improvement.
Overall, although we anticipate an operating profit for the second half of 2008
it may well be lower than that for the first half. We expect the Company to be
cash generative in the second half of 2008 and it is reassuring that 86 per
cent 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 Waller
Chairman
Consolidated Income Statement
For 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 5,244
Cost 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 16
Finance 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 expense
For 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 Sheet
As 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 2,361
Other 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 1,639
Cash 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 1,281
Deferred 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 4,557
Share premium 6,369 6,369 6,369
Merger reserve 1,023 1,023 1,023
Convertible unsecured loan stock 146 146 146
equity reserve
Share options reserve 12 21 15
Retained 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 Statement
For 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) 304 697
activities
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 16
Net 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 1 825 907 907
January 2008
Cash and cash equivalents at 422 807 825
balance 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 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 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 2007. 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 6 August 2008 and have been approved for issue by the Board of
Corero on 7 August 2008.
2. Segment reporting
Business 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. 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 43,347,651
ordinary 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 63
Amortisation 166 125 274
Finance income (6) (9) (16)
Finance expense 176 175 353
(Decrease)/Increase in (71) (13) 75
provisions
Share based payment (credit)/ (3) 6 -
charge
Changes in working capital
(Increase)/Decrease in trade (94) 866 824
and other receivables
(Decrease)/Increase in (280) (324) 567
payables and deferred revenue
Cash (absorbed by)/generated (68) 256 649
from continuing operations
Corporation tax received - 48 48
Net cash from operating (68) 304 697
activities
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 5
profit 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.
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