Trading Statement

RNS Number : 7572V

Corero Network Security PLC

17 January 2013

 



Corero Network Security plc (AIM: CNS)

("Corero" or the "Group")

Trading update

Corero Network Security plc,the AIM listed network security and business software provider, announces an update on trading for the year ended 31 December 2012.

Group revenue for the full year ended 31 December 2012 is expected to be in the range $20.0million to $21.0 million and show solid growth over the previous year (2011: $18.0 million).  The Corero Network Security ("CNS") business will, in a year of significant internal change and market repositioning, and adverse macroeconomic factors in Europe, report revenue in line with revenue reported in 2011 ($11.0 million).  The Corero Business Systems business ("CBS") has delivered a strong year-on-year performance in terms of both revenue and profit growth.

The Group's consolidated operating loss before depreciation, amortisation and financing is expected to be in the range $3.0 million to $3.5 million (2011: profit $0.4million) reflecting the investment in CNS and including a $0.3 million unrealised exchange loss on intercompany balances (2011: $0.1 million unrealised exchange gain).

The Group had a gross cash balance of $4.9 million at 31 December 2012 (2011: $6.7 million), with borrowings of $6.2 million (2011: $5.8 million). 

Outlook:

The CBS division performed very strongly in 2012 and the Group expects this to continue into 2013. 

Significant progress has been made in the CNS division with the focus now being to deliver revenue growth, with a differentiated network security product and services offering, through a channel centric sales model. Accordingly, Ashley Stephenson, who joined in March 2012 as Executive Vice President Product Marketing and Strategy, has been appointed Chief Executive Officer of the CNS division and will lead this drive.

Corero is committed to continuing to invest in the CNS division, both in terms of sales and marketing, and its First Line of Defense next generation product which the Group envisages will broaden significantly its addressable market.

Further information on the CNS and CBS performance is set out below.

Andrew Miller, Group Chief Operating Officer commented:

"Whilst the Corero Network Security division's sales growth in the year has been disappointing, the Board are confident that the progress and investment made in the business, and appointment of Ashley Stephenson as Chief Executive Officer to drive forward its sales-led growth strategy, have positioned the business well for the future.  We are confident of the market opportunity and CNS' growth prospects. It is clear to the Board that organisations are ever more reliant upon the Internet, with unsuitable and insufficient network security solutions to meet the challenges posed by an explosion in the number and capabilities of cyber-attack entrepreneurs and hacktivists."

"The Corero Business Systems division has delivered strong profitable growth in 2012 on the back of growth in the Academy schools market which is expected to continue in 2013 and beyond.  CBS has, and will, continue to invest in its award winning portfolio of software solutions for the education and commercial markets to broaden its customer base."

Corero will release preliminary results for the 12 months ended 31 December 2012 at the end of March 2013.

Enquiries:

Corero Network Security plc
Andrew Miller, Group Chief Operating Officer		Tel: [phone]
FinnCap
Stuart Andrews/Henrik Persson (corporate finance)		Tel: [phone]
Simon Johnson/Stephen Norcross (corporate broking)
Walbrook PR		Tel: [phone]
Bob Huxford/ Helen Westaway (Media Relations)
Paul Cornelius (Investor Relations)

Corero Network Security ("CNS"):

CNS refocused its positioning and go-to-market proposition as a "First Line of Defense" solution to leverage its industry leading Distributed Denial of Service (DDoS) protection and intrusion prevention technology. Sales order intake (bookings as opposed to amounts recognised as revenue) in the 12 month period ended 31 December 2012 was $10.4 million (2011: $12.0 million).

The sales order intake has been impacted in the short term by CNS' September 2012 repositioning as a First Line of Defense solution followed by a period of market development activity to educate the market and partners.  With the increase in the prevalence of attacks, particularly DDoS attacks, organisations, most notably in financial services and ecommerce verticals, are starting to include DDoS protection investment in their IT security budgets.

The second half of 2012 has been focused on channel enablement including partner training, investment in sales tools and collateral, partner recruitment and increasing Corero brand awareness through targeted security industry public relations.  In 2012, 44 new partners have been recruited bringing the total number of partners at 31 December 2012 to over 80. The First Line of Defense repositioning has been well received by partners as a compelling and highly differentiated offering.  

·      "Corero is the new IT perimeter. Adding it to our arsenal of best-of-breed offerings perfectly rounds out our network security portfolio. By stopping all the known and unknown traffic at the perimeter, Corero's solutions guarantee uptime while ensuring our customers' are able to maximize their existing IT infrastructure investment, from their next generation firewalls to their IPS devices, and remain secure."  John Harris, Director of Sales at AE Business Solutions, a Wisconsin IT solutions provider

·      "Corero's ability to stop complex, multi-vector attacks at the edge of the network allows us to provide our customers more peace of mind regarding the availability of their networks. Corero's First Line of Defense approach ensures that unwanted traffic is stopped before it hits the existing security infrastructure simplifying installation and improving availability for their users." Joe Lovetere, President, Hub Technical Services, a Massachusetts based IT security solutions provider

·      "Corero's First Line of Defence is a truly differentiated security offering which we are taking to our customers whose existing security solutions cannot protect against Denial of Service attacks which are growing in frequency and intensity. Corero's First Line of Defence eradicates DDoS and server targeted malicious attack activity by filtering and removing attack traffic before it hits the network, and as a result legitimate, revenue generating customer traffic is not slowed down or blocked. This allows the entire IT infrastructure to operate more efficiently, optimizing the performance of security devices, network applications and servers, and ensures business continuity." Mark Miller, Partner at M&S Technologies, a Texas based security integrator

In order to capitalise on the progress made in the product development, marketing and operational aspects of the business in the last year, CNS has recently undergone a leadership reconfiguration to position the business for a sales led growth strategy.  As part of this reconfiguration, Ashley Stephenson, who joined CNS in March 2012 as Executive Vice President Product Marketing and Strategy, has been appointed Chief Executive Officer in January 2013 taking over the role from Marty Meyer who will remain with CNS in the role of President.

Highlights of 2012 include:

·      Business continues to win new customers - 66 (2011: 78)

·      Investment in the productisation of SecureWatch and SecureWatchPLUS services

·      Launched "ReputationWatch" which identifies known malicious entities in real-time to dynamically prevent Distributed Denial of Service ("DDoS") cyber attacks

·      Partnership with Webroot to integrate Webroot's IP Reputation Service, which delivers updated high risk IP address threat data within minutes and protects against attacks from multiple threat sources, into Corero's First Line of Defense solution

·      Ranked by Gartner as "a Visionary" in the IPS Magic Quadrant published in July 2012

New customer wins in 2012 included significant orders from: Agarik (a leading French web hosting and managed service provider); leading telecommunications service providers in Italy and Thailand; Books.com; a Malaysian state ministry; a leading French retail group; and a leading international provider of financial technology to banks and corporations.

Material orders (upgrades and support contract renewals) in 2012 from existing customers included: the world's leading online gaming company; a Swiss based telecommunication service provider; a leading international credit card processing company; one of the largest telecommunication service providers in Europe and South America; City Index; Moneysupermarket.com; a leading UK based on-line gaming company; a leading international energy group and one of the largest insurers in the US.

Significant progress has been made in the development of Corero's next generation First Line of Defense product which leverages existing intellectual property.  The next generation product, which will be available at the end of 2013, will significantly increase CNS' addressable market with a hardware platform independent solution which can be deployed in virtual environments and in high performance networks. This will enable CNS to target not only the corporate enterprise and service provider market but also the high growth Cloud Computing market.

Corero Business Systems ("CBS"):

CBS continues to perform strongly with sales order intake (bookings as opposed to amounts recognised as revenue) in the 12 month period ended 31 December 2012 up 30% to $10.5 million (2011: $8.1 million).

Highlights of 2012 include:

·      251 new academy and school customers (2011: 192) with a total of over 580 academy and school customers at the end of 2012

·      Strengthening of the management team with the appointment of Mike Stansfield as Product Development Director

·      Continued investment in the business' software products (Resource Financials and the Resource EMS)

·      CBS' Resource Financials product announced as the winner of The UK Business Software Industry Software Satisfaction Awards 2012 ("SSA12") in the category of Accounting & Finance (corporate)

About Corero Network Security

Corero Network Security plc consists of two businesses: Corero Network Security and Corero Business Systems.

Corero Network Securityis an international network security company and the leading provider of next generation security solutions. Deployed as a First Line of Defense (FLoD) solution, Corero's products and services sit outside of a client's network, effectively stopping unwanted traffic (including Distributed Denial of Service ("DDoS") cyber-attacks) from reaching and overwhelming firewalls and other infrastructure components, such that good customer traffic can flow unimpeded.

The need for such a solution is rapidly increasing as organisations rely ever more upon the Internet to streamline their businesses and improve revenue growth. The huge growth in online sales has created an explosion of cyber-attack entrepreneurs looking to cash in on the burgeoning digital marketplace.

Research published by the Ponemon Institute found that occurrences of cyber-attacks is mounting with a 42 per cent increase in the number of cyber-attacks, with the average annualized cost of cybercrime incurred by a benchmark sample of U.S. organizations of $8.9 million. It noted that organizations experienced an average of 102 successful attacks per week, compared to 72 attacks per week in 2011. It cited DDoS as a common attack type and one of the most costly cybercrimes.

The ever increasing number of attacks is driving forecast growth in the DDoS protection market to more than double in size to $450m by 2015 (Infonetics Research). With the number of successful attacks on the rise it is evident that existing firewall, intrusion prevention systems, and traditional security infrastructure are not equipped to combat them. These technologies were not built to stop many of today's attacks and are being overwhelmed by DDoS attacks, advanced evasion attacks, server side exploits and other unwanted traffic.

Corero's First Line ofDefencesolution utilizes sophisticated techniques and technologies to block malicious traffic to stop DDoS and other advanced cyber-attacks before they enter an organisation's IT infrastructure.  This industry best practice is helping customers worldwide, including enterprises, service providers and government organisations, safeguard their IT infrastructure and eliminate downtime, ultimately protecting their bottom line.

Corero Business Systems is a leading provider of powerful and dynamic modular accounting, human resources, payroll and management information software to the schools (including academies) and further education and commercial sectors in the UK and internationally.  Corero has a strong background and pedigree in education having been involved in the sector since early 1990's.

Corero's proprietary software solution "Resource" is at the core of the Corero suite of business applications:

•       Resource Financials & HR - a finance and HR management solution delivering web-enabled and workflow controlled business processes.

•       Resource EMS - a student record and learner management information solution for the post 16 education sector.

The Resource software solutions are designed to deliver key business benefits to customers including:

•       Resource Financials & HR - flexible reporting in real time; control of budgets and spending; cash flow forecasting; reduction of data processing costs and the use/handling of paper.

•       Resource EMS - streamlined management of the whole learner administration process from enquiry to enrolment to completion and leaving; enhanced curriculum planning and examination management tools; full management of statutory returns.

Corero Resource Financials & HR software won The UK Business Software Industry Software Satisfaction Awards 2012 in the category of Accounting & Finance (corporate). The Software Satisfaction Awards are unique in that they are decided by end-user views, representing a wide cross-section of businesses from sole traders and SMEs through to government and corporate bodies, with the 2012 survey being completed by over 10,000 organisations.

 

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