Full year results
18 March 2011
CORERO PLC
Full year results
Corero plc (AIM: CORO, 'Corero', or 'the Group'), the international network security vendor and supplier of business systems to the education market, announces its full year audited results for the year ending 31 December 2010.
Highlights
· Trading profit of £223,000
· Total comprehensive income £404,000(2009: loss £176,000)
· Strong performance by Business Systems division - 12% revenue growth
· The Group was transformed in August 2010 by:
o £6.5 million equity raising
o Sale of the Financial Markets division for assumption by purchaser of £2.0 million of convertible unsecured loan stock ("CULS")
o Conversion of remaining £2.0 million of CULS to ordinary shares
Post period end - acquisition and placing
· In March 2011, Corero acquired Top Layer Networks, Inc. ("Top Layer") for maximum consideration of $15.3m in shares, loan notes and cash
· First step in strategy of building security systems business focused on the network security market
· Top Layer focuses on network security infrastructure software solutions which help commercial and government organisations protect critical on-line assets from cyber threats
· Raised £2.3 million in a placing of ordinary shares
Andrew Miller, Corero Chief Operating Officer, said:
"This has been a year of transformation for Corero. Our new management team, disposal and fundraising have set us up on a solid footing and the performance of the business systems division has been strong.
"Since the period end we have delivered on the next stage of our strategy, and are excited about the potential of the network security business."
Enquiries:
Corero plc |
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Andrew Miller, Chief Operating Officer |
Tel: 01923 897333 |
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FinnCap |
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Sarah Wharry/Henrik Persson |
Tel: 020 7600 1658 |
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College Hill |
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Kay Larsen/Rozi Morris |
Tel: 020 7457 2020 |
About Corero: www.corero.com
Corero is focused on building a network security solutions business through acquisition to deliver high-growth solutions and related services to mid-market and enterprise customers through international channels. In addition, Corero's Business Systems division serves the business and education sectors by delivering powerful, dynamic modular accounting and business management software and services.
Overview
On 6 August 2010, Corero was transformed financially and operationally by a £6.5 million equity fund raising, the sale of its Financial Markets division ("discontinued operations"), the conversion of the convertible unsecured loan stock to ordinary shares and the appointment of two new directors and senior executives.
Since the end of the financial year, the Group has made its first strategic step with the acquisition of Top Layer Networks, Inc ("Top Layer").
The results for the year ended 31 December 2010 showed a good improvement on 2009 and are in line with the trading update issued on 26 January 2011. The Group reported a trading profit of £223,000 including a trading profit from discontinued operations of £108,000 (2009: £313,000 including £350,000 trading profit from discontinued operations). Revenues were £4.0 million including £1.0 million revenue from discontinued operations (2009: £4.9 million including £2.2 million revenue from discontinued operations).
The total comprehensive income was £404,000 (2009: loss £176,000).
The cash position of the Group at the end of 2010 was £7.2 million (2009: £686,000).
Business strategy
The Group's strategy is to build, through a combination of acquisition and organic development, a network security technology business focused on delivering software and hardware solutions and related support services to mid-market commercial and enterprise customers and telecommunication service providers, through international channels.
Corero Security Systems will operate alongside the Corero Business Systems division, which supplies accounting and management information software solutions to the education and commercial markets.
The strategy for the Security Systems division will be to drive Top Layer's revenue growth through increased marketing and industry visibility of Top Layer's approach and product capabilities and developing an international, channel focused sales model which will enable the Group to access new markets and customers. In terms of product development, the emphasis will be on leveraging Top Layer's Intrusion Prevention Systems ("IPS") and Distributed Denial of Service ("DDoS") protection product offerings and developing a broader network security portfolio, including a next generation firewall offering, both organically and through complementary acquisitions.
The strategy for the Business Systems division will be to continue to invest and grow the business focusing on the education sector where it has a strong market position, particularly in the further education college and academy markets in England. Development will continue on Resource Financials & HR and Resource Education Management System ("EMS") with additional modules to meet customer requirements and, in particular, Resource Financials 7, the next generation financial software solution, which is planned to be released in the first half of 2011.
The Group will manage and operate Corero as two separate divisions, with a minimum central overhead.
Operational review
Security Systems division
In July 2010, Corero announced its intention to build a network security solutions business through acquisition to deliver high-growth solutions and related services to mid-market and enterprise customers through international channels. The acquisition of Top Layer which was announced on 7 February 2011, for a maximum consideration of $15.3 million, is the first step in this strategy.
Top Layer is based in Hudson, Massachusetts, and focuses on developing and bringing to market network security infrastructure solutions such as IPS and DDOS protection solutions that help commercial and governmentorganisations protect their critical on-line assets from the losses and risks associated with cyber threats.
Top Layer has a strong proprietary technology offering with a multi-core processing platform to support high performance security applications and scalable architecture, which will be developed to add functionality with which to broaden its network security offering.
Top Layer presents an exciting prospect for Corero by providing a core platform on which to build a leading network security systems business in a market that offers significant growth potential.
Business Systems division
The Business Systems division is a provider of management information software solutions to the further education, academy, school and commercial markets. The Business Systems' software solutions include Resource Financials & HR, a financial software solution, and Resource EMS, a management information system aimed at the sixth form and further education sector.
Despite a tough economic backdrop and pressure on public sector finances, the division reported a strong performance with strong growth in the academy market, posting a trading profit of £675,000 compared to £544,000 in 2009, on revenues of £3.0 million which showed a 12% increase over 2009.
The highlight of the year was winning a total of 70 academies, compared with 25 in 2009, showing the division's strong position in this growth market and maintaining its c. 30% market share. As a result of the policies of the previous government and the extension of the academy status for schools by the current government, the number of academies has reached over 400 by the start of 2011 with more also applying to become academies. The success in the academy market underpins Corero's reputation for high levels of customer service aligned to a proven product offering at a competitive price.
At this time of cuts to public sector funding, the division has proved that it can provide customers with added value solutions, allowing them to streamline business processes and increase their operational efficiencies.
Financial performance
In August 2010, the Group sold its Financial Markets division leaving the Business Systems division as its continuing operation.
For the year ended 31 December 2010, the Group reported a trading profit of £223,000 including a trading profit from discontinued operations of £108,000 (2009: £313,000 including a trading profit from discontinued operations of £350,000) and a profit after taxation of £404,000 (2009: loss £176,000).
The revenue from the Business Systems division grew by 12% from £2.70 million to £3.02 million and trading profit increased to £675,000 (2009: £544,000).
Central costs reduced by 4% to £560,000 (2009: £581,000). Central costs relate to the Group. The additional costs of the new management team appointed in August 2010 are included in central costs.
As a result of share options issued in August 2010 to the new management team, there was a charge in the year of £131,000 (2009 £2,000).
Interest on the 8% CULS up to the redemption in August 2010 was £199,000 (2009: £317,000 (a full year)). Interest paid during 2010 was £292,000 (2009: £241,000). The deferred interest due from 1 January 2009 on £2.0 million of the CULS was paid in August 2010.
The trading profit from discontinued operations was £108,000 (2009 £350,000) and the profit from discontinued operations was £4,000 (2009: £150,000). The profit before taxation on the disposal of discontinued operations was £492,000.
Loss per share on continuing operations was 0.7 pence (2009: loss 21.5 pence). Profit per share including discontinued operations was 3.0p (2009: loss 11.6p).
Cash and financial position
The Group's cash and financial position has been transformed with the proceeds of the £6.5 million equity raising (before costs) and redemption of the £4.0 million CULS in August 2010. The closing cash balance was £7.2 million (2009: £686,000). The net increase in cash and cash equivalents, excluding the proceeds of the share issue, was £117,000 (2009: net decrease £459,000).
The Group's net assets at the year end were £6,923,000 (2009: liabilities £1,789,000).
Post balance sheet events
On 7 February 2011, Corero announced the acquisition of Top Layer for a maximum consideration of $15.3 million to be satisfied by shares, loan notes and cash. The acquisition of Top Layer became effective on 2 March 2011.
On the 2 March 2011, the Company raised £2.3 million (before costs) by way of a placing of 6,571,429 new ordinary shares at a price of 35p per share.
Outlook
Top Layer is an established player in the enterprise market for high end network security systems and brings key proprietary intellectual property and a scalable software platform. The Group sees significant opportunities to develop Top Layer's products and drive revenue growth. The Group's expertise will address the fast developing next generation firewall market and complement Top Layer's existing business by growing international sales channels.
The Business Systems division is expected to continue to produce a good profit contribution and continue to win new business in the growing academy market.
Consolidated Statement of Comprehensive Income
for the year ended 31 December 2010
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2010 |
2009* |
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£'000 |
£'000 |
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Revenue |
3,020 |
2,700 |
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Cost of sales |
(230) |
(148) |
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Gross profit |
2,790 |
2,552 |
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Trading expenses |
(2,675) |
(2,589) |
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Trading profit/(loss)** |
115 |
(37) |
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Share options charge |
(131) |
(2) |
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Other non trading items |
91 |
26 |
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Profit/(loss) before financing |
75 |
(13) |
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Finance income |
32 |
- |
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Finance costs |
(199) |
(317) |
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Loss before taxation |
(92) |
(330) |
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Taxation |
- |
4 |
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Loss for the year from continuing operations |
(92) |
(326) |
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Profit for the year from discontinued operations |
4 |
150 |
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Profit from sale of discontinued operations |
492 |
- |
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Profit/(loss) for the year |
404 |
(176) |
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Other comprehensive income |
- |
- |
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Profit/(loss) and total comprehensive income/(loss) for the year - attributable to equity holders of the parent |
404 |
(176) |
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Basic and diluted (loss)/earnings per share |
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Loss from continuing operations |
(0.7p) |
(21.5p) |
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Earnings from discontinued operations |
3.7p |
9.9p |
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Total |
3.0p |
(11.6p) |
*2009 restated for discontinued operations
**Trading profit including discontinued operations £223,000 (2009: £313,000)
Statement of Financial Position
as at 31 December 2010
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2010 |
2009 |
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£'000 |
£'000 |
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Assets |
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Non-current assets |
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Goodwill |
509 |
1,677 |
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Other intangible assets |
596 |
1,119 |
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Property, plant and equipment |
36 |
78 |
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1,141 |
2,874 |
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Current assets |
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Trade and other receivables |
756 |
885 |
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Other short term financial assets |
64 |
- |
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Cash and cash equivalents |
7,186 |
686 |
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8,006 |
1,571 |
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Liabilities |
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Current Liabilities |
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Trade and other payables |
(735) |
(630) |
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Provisions |
(4) |
(12) |
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Deferred income |
(1,485) |
(1,458) |
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(2,224) |
(2,100) |
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Net current assets/(liabilities) |
5,782 |
(529) |
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Non-current liabilities |
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Convertible unsecured loan stock |
- |
(4,134) |
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- |
(4,134) |
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Net assets/(liabilities) |
6,923 |
(1,789) |
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Shareholders' equity |
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Ordinary share capital |
319 |
15 |
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Deferred share capital |
4,542 |
4,542 |
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Share premium |
14,341 |
6,369 |
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Merger reserve |
1,023 |
1,023 |
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Convertible unsecured loan stock equity reserve |
- |
146 |
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Share options reserve |
146 |
14 |
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Retained earnings |
(13,448) |
(13,898) |
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Total surplus /(deficit) attributable to equity holders of the parent |
6,923 |
(1,789) |
Consolidated Cash Flow Statements
for the year ended 31 December 2010
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2010 |
2009 |
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£'000 |
£'000 |
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Net cash from operating activities |
768 |
85 |
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|
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Cash flows from investing activities |
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|
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Purchase of intangible assets |
(367) |
(292) |
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Purchase of property, plant and equipment |
(24) |
(11) |
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Net cash (used in) investing activities |
(391) |
(303) |
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Cash flows from financing activities |
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Proceeds from issue of share capital |
6,383 |
- |
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Interest paid |
(292) |
(241) |
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Interest received |
32 |
- |
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Net cash from/(used in) financing activities |
6,123 |
(241) |
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Net increase/(decrease) in cash and cash equivalents |
6,500 |
(459) |
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Cash and cash equivalents at 1 January |
686 |
1,145 |
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Cash and cash equivalents at 31 December |
7,186 |
686 |
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Cash flows from operating activities |
|
|
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2010 |
2009* |
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£'000 |
£'000 |
|
Continuing operations |
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Loss before taxation |
(92) |
(330) |
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Adjustments for: |
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Depreciation |
22 |
27 |
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Amortisation of intangibles |
175 |
145 |
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Finance income |
(32) |
- |
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Finance expense |
199 |
317 |
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Decrease in provisions |
(8) |
(10) |
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Share based payment charge |
131 |
2 |
|
|
|
|
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Changes in working capital |
|
|
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(Increase)/decrease in trade and other receivables |
(344) |
122 |
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Increase /(decrease) in payables |
424 |
(387) |
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Cash generated from continuing operations |
475 |
(114) |
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|
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Corporation tax credit |
- |
4 |
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Net cash from continuing operations |
475 |
(110) |
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Net cash from discontinued operations |
293 |
195 |
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Net cash from operating activities |
768 |
85 |
*2009 restated for discontinued operations
Statement of changes in shareholders' equity
for the year ended 31 December 2010
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Share |
CULS |
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Share |
Profit |
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Share |
options |
equity |
Merger |
premium |
and loss |
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capital |
reserve |
reserve |
reserve |
account |
reserve |
Total |
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£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
31 December 2009 |
4,557 |
14 |
146 |
1,023 |
6,369 |
(13,898) |
(1,789) |
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Share based payments |
- |
132 |
- |
- |
|
- |
132 |
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Redemption of CULS |
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(146) |
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|
146 |
- |
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CULS fair value adjustments |
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|
567 |
567 |
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Issue of share capital |
304 |
|
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|
7,972 |
(667) |
7,609 |
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Total comprehensive profit for year ended 31 December 2010 |
- |
- |
- |
- |
- |
404 |
404 |
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31 December 2010 |
4,861 |
146 |
- |
1,023 |
14,341 |
(13,448) |
6,923 |
Notes
1. Segmental Analysis
Continuing Operations
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Business Systems |
Unallocated |
Total |
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2010 |
2009 |
2010 |
2009 |
2010 |
2009 |
|
|
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
Revenue from external customers |
3,020 |
2,700 |
- |
- |
3,020 |
2,700 |
|
Trading profit/(loss) |
675 |
544 |
(560) |
(581) |
115 |
(37) |
|
Share options charge |
- |
- |
(131) |
(2) |
(131) |
(2) |
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Non trading income and expenses |
153 |
88 |
(62) |
(62) |
91 |
26 |
|
Profit/(loss) before financing |
828 |
632 |
(753) |
(645) |
75 |
(13) |
|
Finance income |
- |
- |
32 |
- |
32 |
- |
|
Finance costs |
- |
- |
(199) |
(317) |
(199) |
(317) |
|
Profit/(loss) before taxation |
828 |
632 |
(920) |
(962) |
(92) |
(330) |
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Taxation |
- |
- |
- |
4 |
- |
4 |
|
Profit/(loss) for the year from continuing operations |
828 |
632 |
(920) |
(958) |
(92) |
(326) |
Discontinued Operations
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|
Financial Markets |
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2010 |
2009 |
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£'000 |
£'000 |
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Revenue from external customers |
|
985 |
2,222 |
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Trading profit |
|
108 |
350 |
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Non trading income and expenses |
|
(104) |
(200) |
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Profit before financing |
|
4 |
150 |
In addition, the profit on sale of discontinued operations was £492,000.
Unallocated costs relate to the costs of the central services employees covering the areas of group management, finance, and administration, and the costs of the chairman and non executive directors, as well as the regulatory costs of being an AIM listed company.
2. Sundry Information
The financial information set out above does not constitute the Company's Annual Report and Financial Statements for the years ended 31 December 2010 or 2009. The Annual Report and Financial Statements for 2009 have been delivered to the Registrar of Companies and those for 2010 will be delivered following the Company's annual general meeting. The auditor's reports on both the 2010 and 2009 accounts were unqualified, did not draw attention to any matters by way of emphasis and did not contain statements under s498(2) or (3) of the Companies Act 2006. Whilst the financial information included in this preliminary announcement has been computed in accordance with International Financial Reporting Standards (IFRSs) this announcement does not itself contain sufficient information to comply with IFRSs.
Copies of the Annual Report and Financial Statements for the year to 31 December 2010 will be posted to shareholders shortly and will be obtainable from the Company's registered offices or www.corero.com when published.
The information in this preliminary announcement was approved by the board on 17 March 2011.
This information is provided by RNS