Half-yearly Report
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 2200
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 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 Waller
Chairman
16 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
£'000 £'000 £'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
£'000 £'000 £'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 146 146 146
equity 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
£'000 £'000 £'000
Net cash from operating (492) (68) 1,098
activities
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) 320
and cash equivalents
Cash and cash equivalents at 1 1,145 825 825
January
Cash and cash equivalents at 351 422 1,145
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 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 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. (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 1,518,990
ordinary 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
£'000 £'000 £'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) 664
and 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) 1,098
activities
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
£'000 £'000 £'000 £'000 £'000 £'000 £'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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