Company Announcements

Unaudited H1 2021 Interim Results

Source: RNS
RNS Number : 6251L
Corero Network Security PLC
14 September 2021
 

14 September 2021

 

Corero Network Security plc (AIM: CNS)

("Corero," the "Company" or the "Group")

 

Unaudited H1 2021 Interim Results

 

EBITDA profit achieved 

underpinned by sustained growth and margin improvement

 

Corero Network Security plc (AIM: CNS), a leading provider of real-time, high performance, automatic Distributed Denial of Service (DDoS) cyber defense solutions, announces its unaudited interim results for the six months ended 30 June 2021.

 

Financial Summary:

·      Group revenue up 34% to $8.3 million (H1 2020: $6.2 million)

Growth across all key revenue categories: software subscription and appliance revenue, DDoS Protection as a Service ("DDPaaS") and Maintenance and Support revenues

·      Annualised Recurring Revenues1 ("ARR") up 27% to $11.2 million (H1 2020: $8.8 million)

·      Gross margin of 84% (H1 2020: 75%)

·      EBITDA2 profit of $0.1 million (H1 2020: loss of $1.2 million)

·      Loss before taxation of $1.2 million (H1 2020: loss of $2.7 million)

·      Loss per share of 0.3 cents (H1 2020: loss per share of 0.5 cents)

·      Net cash at 30 June 2021 of $5.1 million (30 June 2020: $3.3 million; 31 Dec 2020: $7.6 million)

·      The Company entered into, in April 2021, a new borrowing facility for up to £3.0 million (c. $.4.1 million) with its existing banking partner, comprising a drawn £2.0 million term loan facility and an undrawn £1.0 million revolving credit facility

 

1 Defined as the normalised annualised recurring revenue and includes recurring revenues from contract values of annual support, software subscription and from DDoS Protection-as-a-Service contracts.  2 Defined as Earnings before Interest, Taxation, Depreciation and Amortisation. 

 

Operational Highlights:

·      The demand for network security and protection against DDoS attacks continues to be reinforced and accelerate globally

·      Record H1 2021 order intake, increasing by 13% to $8.9 million (H1 2020: $7.9 million)

·      20 new customer wins secured in the period (H1 2020: 18 new customer wins), eight of which originated through Corero's strategic partnership with Juniper Networks Inc. (H1 2020: five new Juniper customers)

·      High levels of customer satisfaction and expansion of customer networks continue to result in higher follow-on orders of $4.2 million for the period (H1 2020: $3.0 million)

·      Significant progress achieved in delivering the Group's growth strategy, including:

Continued investment in sales and marketing underpins global direct and channel sales efforts

Addition of agent, distributor and reseller relationships in more geographies

Recent customer wins which broaden the Company's international footprint and mark the entry into a number of new verticals

Strong momentum through strategic partnerships and progress towards securing new relationships

Targeted content creation for each stage of the buying cycle, amplifying demand generation programmes

A broadened software solution offering to address diverse customer needs

 

Outlook

·      The Board continues to monitor the Covid-19 situation and global supply chain uncertainty,  though remains confident in Corero meeting expectations for FY 2021

·      Promising order pipeline for H2 2021 with increasing activity through Juniper Networks and GTT partnerships  

 

 

Lionel Chmilewsky, Chief Executive Officer of Corero, commented: 

 

"I am pleased to report that Corero has successfully delivered a strong trading performance in the first six months of the year. Our business continues to go from strength to strength, particularly the growth of recurring revenue generation and progress towards profitability."

 

"Sales momentum continues to build with significant traction now being generated through our strategic partnerships. To deliver 20 new customers in the first six months of the year is an outstanding performance and provides a solid foundation for the remainder of the year."

 

This announcement contains inside information for the purposes of article 7 of the Market Abuse Regulation (EU) 596/2014 as amended by regulation 11 of the Market Abuse (Amendment) (EU Exit) Regulations 2019/310. With the publication of this announcement, this information is now considered to be in the public domain.

 

Enquiries:

 

Corero Network Security plc

 

Lionel Chmilewsky, Chief Executive Officer

Neil Pritchard, Chief Financial Officer

Tel: +44(0) 1494 590 404

 

 

Canaccord Genuity Limited 

(Nominated Adviser and Broker)

Simon Bridges / Andrew Potts

Tel: +44(0) 20 7523 8000

 

 

Vigo Communications

Tel: +44(0) 20 7390 0230

Jeremy Garcia / Antonia Pollock

corero@vigocomms.com

 

 

About Corero Network Security

 

Corero Network Security plc is a global leader in real-time, high-performance, automatic DDoS cyber defense solutions. Both Service and Hosting providers, alongside digital enterprises across the globe rely on Corero's award winning cybersecurity technology to eliminate the threat of Distributed Denial of Service (DDoS) to their digital environment through automatic attack detection and mitigation, coupled with network visibility, analytics and reporting. Corero's industry leading SmartWall and SecureWatch technology provides scalable protection capabilities against external DDoS attackers and internal DDoS botnets in the most complex edge and subscriber environments, while enabling a more cost-effective economic model than previously available. Corero's key operational centers located in Marlborough, Massachusetts, USA and Edinburgh, UK, with the Company's headquarters in Amersham, UK. The Company is listed on the London Stock Exchange's AIM market under the ticker CNS.  For more information, visit www.corero.com

 

Interim review

 

Introduction

 

Building on a record year for Corero in 2020, I am pleased to report further positive progress in H1 2021, which demonstrates the Company's strategic focus on its global sales and marketing efforts and positions us well for sustained future growth.

 

Corero revenues in the first half of 2021 were $8.3 million (H1 2020: $6.2 million), an increase of 34%. This solid performance was underpinned by the Group's strong order intake, a record $8.9 million in the period (H1 2020: $7.9 million).

 

Recurring revenues, comprising revenues from security maintenance and support services and DDoS Protection-as-a-Service ("DDPaaS") was 59% of total revenue, which was comparable to the prior half year (H1 2020: 61%), with DDPaaS revenues increasing to $1.9 million (H1 2020: $1.2 million). Annualised Recurring Revenues ("ARR") as at 1 July 2021 increased to $11.2 million, an increase of 27% (H1 2020: $8.8 million), driven by growth in DDPaaS and software subscription orders. ARR is an important measure for the Group in providing visibility over future earnings. 

 

EBITDA profit for the six months ended 30 June 2021 was $0.1 million (H1 2020: loss of $1.3 million). This positive milestone was achieved through a combination of increased revenues, higher gross margins at 84% in the first six months of 2021 (H1 2020: 75%) due to the effect of mix of business, controlled opex (including some lower operating costs resulting from Covid-19) and income from the forgiveness of a US Payment Protection Plan (PPP) loan of $0.6 million (H1 2020: $Nil), offset by exchange losses of $0.2 million (H1 2020: $0.8m exchange gain). After adjusting for other non-cash items of share-based payments, depreciation on DDPaaS assets (which Corero owns) and unrealised foreign exchange differences on an intercompany loan, the adjusted EBITDA profit was $0.6 million (H1 2020: loss of $1.1 million). The loss before taxation in the period more than halved to $1.2 million (H1 2020: loss of $2.7 million).

 

Working remotely due to the Covid-19 pandemic is largely becoming the new norm globally, with many enterprises adopting long-term flexible working policies. Alongside this expanded network usage, the number of opportunistic DDoS attacks is also increasing. We continue to respond to our customers' ever-evolving needs with one of the broadest and diverse DDoS defense solution portfolios in the market.

 

During the first half of 2021, Corero added 20 new customers (H1 2020: 18), including eight through our global resale partnership with Juniper Networks (H1 2020: five new customers). We continue to strengthen relationships with all of our partners, with increased sales and support training, heightened interaction between management teams, and ongoing development in our joint marketing collateral and joint prospecting.

 

Strategic update

 

Following the strategic management changes in 2020, we announced an enhanced strategy for the business focused on delivering sustainable growth. Set out below are our six core strategic drivers and the progress which we have achieved against each one during the first half of 2021.

 

·      Increasing our international presence: recent customer wins across Australia, Germany, France, Japan, China, Brazil, Canada and the United States have broadened our international footprint. In addition, new business partners have been signed in international markets and our current pipeline includes further expansion in ten new countries

 

·      Leveraging existing strategic partnerships and adding new ones: a good proportion of our recent deals have been through our channel partnerships and strategic alliances with Juniper Networks and GTT; and we continue to make progress in securing new partners

 

·      Intensifying our Global, Tier One and major accounts relationships: customer wins have included significant global enterprises across a number of verticals such as utilities and research and educational networks. In 2021, existing large customers have also continued to expand their network using Corero's DDoS solutions to protect their infrastructure

 

·      Augmenting our services portfolio: we continue to explore and provide service initiatives that enhance the protection and network security visibility for our customers 

 

·      Amplifying our demand generation programmes: we have been creating targeted content at each stage of the buying cycle, and within the key segments we serve. This includes increasing advertising, targeted, sector-specific email campaigns and virtual speaking engagements with Partners, amongst many other initiatives

 

·      Continuing to increase our technological innovation leadership: further strengthened our portfolio of SmartWall products with major software releases including a new ETD (Edge Threat Defense) capability. The new ETD capability for SmartWall enables integrated scrubbing center deployments to protect against attacks accurately and automatically leading to a lower total cost of ownership for customers who prefer to use scrubbing center configurations

 

Total addressable market and market drivers

 

Corero's key target market, cybersecurity and networking, is high-growth and the market for DDoS protection and mitigation was forecast in June last year by MarketsandMarkets to grow from $2.4 billion in 2019 to $4.7 billion in 2024 (a compound annual growth rate (CAGR) of 14.0% over the forecast period). Market drivers growth include a rise in multi-vector attacks, availability of DDoS-for-hire services, the impact of growth in IoT devices, the roll-out of 5G services, and growing demand for hybrid DDoS protection and mitigations services and solutions.

 

Increasing competitive advantage

 

As DDoS attacks continue to grow in size, frequency and sophistication, they reinforce the need for scalable, accurate and automated DDoS mitigation solutions. Our mission to protect the increasing importance of our customers' internet facing networks and services drives our product roadmap. New network topologies including Cloud and Edge offer greenfield opportunities for innovative DDoS protection techniques. Corero has established itself as a pioneer in bringing real-time DDoS detection and mitigation into the Terabit era. Insights gained from observing millions of DDoS attacks via our SecureWatch service not only inform our customers but also serve to provide unique insights into what Corero should build next to stay at the forefront of our industry.    

 

Supporting multiple deployment topologies, SmartWall utilises an always-on DDoS mitigation architecture to automatically, and surgically, remove just the DDoS attack traffic. Corero continues to invest in its market leading solutions through its research and development efforts, and its engineering and customer service teams.

 

 

The Group reported revenues of $8.3 million in the six months ended 30 June 2021 (H1 2020: $6.2 million). 

 

Total operating expenses were $8.4 million (H1 2020: $7.1 million), with the following components:

 

·      Adjusted operating expenses, being those excluding depreciation and amortisation of intangible assets, increased to $7.2 million (H1 2020: $5.9 million), as a result of our increased investment in sales and marketing and engineering activity, and higher central overheads;

·      Depreciation and amortisation of intangible assets of $1.1 million (H1 2020: $1.2 million); and,

·      Capitalised R&D costs of $0.9 million (H1 2020: $0.7 million). 

 

Other significant income statement movements included: 

·      Increased share-based payment costs of $0.3 million (H1 2020: $0.1 million); and

·      $0.6 million credit from the forgiveness of the PPP loan previously received by the Company's trading subsidiary under the US CARES Act (H1 2020: $Nil); offset by a realised (trading) and unrealised (intercompany loan) total exchange loss of $0.2 million (H1 2020: total exchange gain of $0.8 million), an adverse variance of $1.0 million between the two halves. 

 

Loss before taxation was $1.2 million (H1 2020: loss of $2.7 million). Loss after taxation was $1.2 million (H1 2020: $2.6 million). The reported loss per share was 0.3 cents (H1 2020: loss per share 0.5 cents).

 

Gross cash at bank as at 30 June 2021 was $8.8 million (30 June 2020: $6.2 million; 31 Dec 2020: $10.1 million) and borrowings were $3.7 million (30 June 2020: $2.9 million; 31 Dec 2020: $2.5 million). Net cash as at 30 June 2021 was $5.1 million (30 June 2020: $3.3 million; 31 Dec 2020: $7.6 million).

 

Net cash from operating activities before working capital in the first six months was a net reduction of $0.1 million (H1 2020: net reduction of $1.1 million), reflecting the reduced loss for the period and the forgiveness of the PPP loan of $0.6 million; before the forgiveness, cash from operating activities would have registered an inflow of $0.5 million. There was a decrease in working capital in the half of $1.8 million (H1 2020: working capital increase of $0.4 million), following an unwind of a supplier commitment position associated with a large customer contract at the year end. Net cash used in investing activities included sustained investment in R&D of $0.9 million (H1 2020: $0.7 million spend), and capex investment lower at $0.2 million (H1 2020: $0.6 million). Net proceeds from borrowings less repayments were $1.9 million, reflecting the new drawn borrowing facility negotiated in April 2021. Overall, the decrease in cash and cash equivalents for the half was $1.3 million (H1 2020: decrease of $2.1 million). 

 

 

The long-term market dynamics for DDoS mitigation reinforces the technological superiority, cost-effectiveness and efficacy of Corero's solutions more than ever.  The ongoing impact of Covid-19 continues to drive working from home and network traffic flows. The superior total cost of ownership (TCO) performance of our SmartWall platform and our continued investment in R&D (of 21% of our revenue in the first half) positions our solution well with our current and prospective customers.

 

Our increased investment in sales and marketing as well as the development of our partner and channel strategy enables us to have a greater coverage of the market, with our solutions now deployed in more than 40 countries.  We have recently announced that we are strengthening our sales organisation and introducing a new go-to-market configuration with the plan to hire three senior sales executives in North America, in Rest of the World and for Channel Sales to drive further growth.

 

We continue to be vigilant of the economic ramifications of the on-going global pandemic and semiconductor supply chain shortages.  Nevertheless, based on our first half performance and solid pipeline, we expect trading for the full year 2021 to be in-line with expectations and remain of the view that Corero is well-placed for further growth in the medium and long term.  

 

Lionel Chmilewsky

Chief Executive Officer

13 September 2021

 

 

Condensed Consolidated Income Statement

for the six months ended 30 June 2021

 

 

 

 

 

Unaudited six months ended 30 June

Unaudited six months ended 30 June

Audited year ended 31 December

 

2021

2020

2020

Continuing operations

$'000

$'000

$'000

Revenue

8,298

6,238

16,877

Cost of sales

(1,364)

(1,559)

(3,832)

Gross profit

6,934

4,679

13,045

Operating expenses

(8,356)

(7,098)

(16,431)

Consisting of:

 

 

 

Operating expenses before depreciation and amortisation

(7,234)

(5,895)

(14,114)

 Depreciation and amortisation of intangible assets

(1,122)

(1,203)

(2,317)

Loss from operations

(1,422)

(2,419)

(3,386)

Share-based payments

(265)

(128)

(359)

Operating loss

(1,687)

(2,547)

(3,745)

Other income

637

-

-

Finance income

1

14

16

Finance costs

(182)

(164)

(301)

Loss before taxation

(1,231)

(2,697)

(4,030)

Taxation credit

-

122

246

Loss after taxation

(1,231)

(2,575)

(3,784)

Loss after taxation attributable to equity owners of the parent

(1,231)

(2,575)

(3,784)

 

Basic and diluted loss per share

 

 

 

 

Cents

Cents

Cents

Basic and diluted loss per share

(0.3)

(0.5)

(0.8)

 

EBITDA1

 

72

 

(1,345)

 

(1,428)

Adjusted EBITDA - for DDPaaS depreciation

254

(1,242)

(1,173)

Adjusted EBITDA - for DDPaaS depreciation and share based payments1

519

(1,114)

 

(814)

Adjusted EBITDA - for DDPaaS depreciation, share based payments and unrealised foreign exchange differences on intercompany loan - Fully adjusted basis1

609

(1,657)

(551)

 

     1 See note 6 for definition and reconciliation. 
 

Condensed Consolidated Statement of Total Comprehensive Income

for the six months ended 30 June 2021

 

 

 

 

 

Unaudited six months ended 30 June

Unaudited six months ended 30 June

Audited year ended 31 December

 

2021

2020

2020

 

$'000

$'000

$'000

Loss for the period

(1,231)

(2,575)

(3,784)

Other comprehensive income/(expense):

 

 

 

Items reclassified subsequently to profit or loss upon derecognition:

 

 

 

Foreign exchange differences

91

(689)

216

Other comprehensive income/(expense) for the period net of taxation attributable to the equity owners of the parent

91

(689)

216

Total comprehensive expense for the period attributable to the equity owners of the parent

(1,140)

(3,264)

(3,568)

 

 

Condensed Consolidated Statement of Financial Position

as at 30 June 2021

 

Unaudited

 as at 30

June

Unaudited

 as at 30

June

Audited

 as at 31 December

 

2021

2020

2020

 

$'000

$'000

$'000

Assets

 

 

 

Non-current assets

 

 

 

Goodwill

8,991

8,991

8,991

Acquired intangible assets

7

5

9

Capitalised development expenditure

4,640

4,870

4,646

Property, plant and equipment - owned assets

1,015

1,000

1,099

Leased right of use assets

186

295

237

Long term trade and other receivables

833

518

694

 

15,672

15,679

15,676

Current assets

 

 

 

Inventories

79

145

98

Trade and other receivables

3,193

2,386

3,714

Cash and cash equivalents

8,830

6,220

10,140

 

12,102

8,751

13,952

Total assets

27,774

24,430

29,628

 

 

 

 

Liabilities

 

 

 

Current Liabilities

 

 

 

Trade and other payables

(3,428)

(2,665)

(6,461)

Lease liabilities

(88)

(99)

(86)

Deferred income

(4,163)

(3,214)

(3,444)

Borrowings

(1,839)

(1,468)

(2,073)

 

(9,518)

(7,446)

(12,064)

Net current assets

2,584

1,305

1,888

 

 

 

 

Non-current liabilities

 

 

 

Trade and other payables

(326)

(130)

(402)

Lease liabilities

(126)

(214)

(171)

Deferred income

(2,869)

(1,277)

(2,705)

Borrowings

(1,929)

(1,409)

(405)

 

(5,250)

(3,030)

(3,683)

Net assets

13,006

13,954

13,881

 

 

 

 

Capital and reserves attributable to the equity owners of the parent

 

 

Share capital

6,914

6,914

6,914

Share premium

82,122

82,122

82,122

Capital redemption reserve

7,051

7,051

7,051

Share options reserve

1,233

737

968

Foreign exchange translation reserve

(1,293)

(2,289)

(1,384)

Accumulated profit and loss reserve

(83,021)

(80,581)

(81,790)

Total shareholders' equity

13,006

13,954

13,881

 

Consolidated Interim Statement of Cash Flows

for the six month period ended 30 June 2021

 

 

Unaudited six months ended 30 June

Unaudited six months ended 30 June

Audited year ended 31 December

 

2021

2020

2020

Operating activities

$'000

$'000

$'000

Loss before taxation for the period

(1,231)

(2,697)

(4,030)

Adjustments for movements:

 

 

 

Amortisation of acquired intangible assets

2

2

6

Amortisation of capitalised development expenditure

944

1,013

1,933

Depreciation - owned assets

307

231

514

Depreciation - leased assets

51

59

119

Finance income

(1)

(14)

(16)

Finance expense

172

149

274

Finance lease interest costs

10

15

27

Share based payments expense

265

128

359

Forgiveness of PPP loan

(637)

-

-

Cash used in operating activities before movement in working capital

(118)

(1,114)

(814)

Movement in working capital:

 

 

 

Decrease in inventories and sales evaluation assets

32

25

45

Decrease/(increase) in trade and other receivables

533

(1,118)

(1,187)

(Decrease)/increase in trade and other payables

(2,332)

1,454

6,852

Net movement in working capital

(1,767)

361

5,710

 

 

 

 

Cash (used in)/generated from operating activities

(1,885)

(753)

4,896

Taxation received

-

122

246

Net cash (used in)/generated from operating activities

(1,885)

(631)

5,142

 

 

 

 

Cash flows from investing activities

 

 

 

Purchase of intangible assets

-

-

(8)

Investment in development expenditure

(938)

(714)

(1,410)

Purchase of property, plant and equipment

(234)

(647)

(1,015)

Net cash used in investing activities

(1,172)

(1,361)

(2,413)

 

 

 

 

Cash flows from financing activities

 

 

 

Net proceeds from borrowings (after costs)

2,683

637

637

Finance income

1

14

16

Lease liability payments

(48)

(68)

(136)

Finance expense

(109)

(115)

(206)

Repayments of borrowings

(759)

(534)

(1,187)

Net cash generated from/(used in) financing activities

1,768

(66)

(876)

 

 

 

 

(Decrease)/increase in cash and cash equivalents

(1,289)

(2,058)

1,833

 

 

 

 

Effects of exchange rates on cash and cash equivalents

(21)

(43)

(14)

Cash and cash equivalents at 1 January

10,140

8,321

8,321

Cash and cash equivalents at balance sheet dates

8,830

6,220

10,140

 

 

Consolidated Interim Statement of Changes in Equity

for the six month period ended 30 June 2021

 

                                                                                                                                                                                                                                                                                               

Share capital

Share premium

Capital redemption reserve

Share options reserve

Foreign exchange translation reserve

Accumulated profit and loss reserve

Total attributable to equity owners of the parent

                                                                                                                                                                                                                       

$'000

$'000

$'000

$'000

$'000

$'000

$'000

1 January 2020

6,914

82,122

7,051

609

(1,600)

(78,006)

17,090

Loss for the period

-

-

-

-

-

(2,575)

Other comprehensive expense

-

-

-

-

(689)

-

(689)

Total comprehensive expense for the period

-

-

-

-

(689)

(3,264)

Contributions by and distributions to owners

 

 

 

 

 

 

 

Share based payments

-

-

-

128

-

-

128

Total contributions by and distributions to owners

-

-

-

128

-

-

128

30 June 2020

6,914

82,122

7,051

737

(2,289)

(80,581)

13,954

Loss for the period

-

-

-

-

-

(1,209)

Other comprehensive expense

-

-

-

-

905

-

905

Total comprehensive expense for the period

-

-

-

-

905

(1,209)

(304)

Contributions by and distributions to owners

 

 

 

 

 

 

 

Share based payments

-

-

-

231

-

-

231

Total contributions by and distributions to owners

-

-

-

231

-

-

231

31 December 2020 and 1 January 2021

6,914

82,122

7,051

968

(1,384)

(81,790)

13,881

Loss for the period

-

-

-

-

-

(1,231)

Other comprehensive expense

-

-

-

-

91

-

91

Total comprehensive expense for the period

-

-

-

-

91

(1,231)

(1,140)

Contributions by and distributions to owners

 

 

 

 

 

 

 

Share based payments

-

-

-

265

-

-

265

Total contributions by and distributions to owners

-

-

-

265

-

-

265

30 June 2021

6,914

82,122

7,051

1,233

(1,293)

(83,021)

13,006

 

 

 

Corero Network Security plc (the "Company") is a company domiciled in England. The condensed consolidated interim financial statements of the Company for the six months ended 30 June 2021 comprise the Company and its subsidiaries (together referred to as the "Group"). 

 

These condensed interim consolidated financial statements have been prepared in accordance with UK-adopted IAS 34,"Interim Financial Reporting". They do not include all disclosures that would otherwise be required in a complete set of financial statements and should be read in conjunction with the Annual Report and Accounts for the year ending 31 December 2020 ("2020 Annual Report and Accounts"). The financial information for the half years ended 30 June 2021 and 30 June 2020 do not constitute statutory accounts within the meaning of Section 434(3) of the Companies Act 2006 and have neither been audited nor reviewed by the Group Auditor.

 

The annual financial statements of Corero Network Security plc are prepared in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006. The comparative financial information for the year ended 31 December 2020 included within this report does not constitute the full statutory accounts for that period.  The statutory Annual Report and Financial Statements for 2020 have been filed with the Registrar of Companies. The Independent Auditors' Report on the Annual Report and Accounts for 2020 was unqualified, drew attention to a material uncertainty relating to going concern and did not contain a statement under 498(2) or 498(3) of the Companies Act 2006. Subsequent to the United Kingdom's exit from the European on 31 December 2020, the Group has transitioned from International Financial Reporting Standards (IFRS) as adopted by the European Union (EU) to UK-adopted international accounting standards. The transition has had no material impact on previously reported numbers.

 

The consolidated financial statements have been prepared on a going concern basis as the Directors believe, based on internal forecasts and cash flow projections, that the current sales prospects, combined with the Group's existing cash resources should ensure that the Group has adequate working capital to service its existing business and meet debt repayments for the foreseeable future. However, the ability of the Company and Group to achieve the future profit and cash flow projections cannot be predicted with certainty. Failure of the Company and the Group to meet these projections may adversely impact the achievability of the bank loan covenants which may result in the bank loan being required to be repaid before the maturity date if the covenants are not met and cannot be renegotiated.

 

There have been no related party transactions or changes in related party transactions described in the latest Annual Report and Accounts that could have a material effect on the financial position or performance of the Group in the first six months of the financial year. 

 

These consolidated interim financial statements were approved by the Board on 13 September 2021 and approved for issue on 14 September 2021.

 

A copy of this Interim Report can be viewed on the company's website: www.corero.com

 

 

 

The basis of preparation and accounting policies used in preparation of these interim financial statements have been prepared in accordance with the same accounting policies set out in the 2020 Annual Report and Accounts. 

 

 

 

 

The Group is managed according to one business unit, Corero Network Security, which makes up the Group's reportable operating segment. This business unit forms the basis on which the Group reports its primary segment information to the Board, which management consider to be the Chief Operating Decision maker for the purposes of IFRS 8 Operating Segments. Consequently, there are no separable 'other segmental information' not otherwise showed in these Condensed Consolidated Financial statements.  

 

The Group's revenues from external customers are divided into the following geographies:

 

 

Unaudited

six months ended 30 June 2021

Unaudited

six months ended 30 June 2020

Audited

year ended 31 December 2020

 

$'000

$'000

$'000

 

 

 

 

The Americas

5,858

4,687

10,988

EMEA

1,158

 1,485

4,501

APAC

 1,282

66

1,388

Total

8,298

6,238

16,877

 

Revenues from external customers are identified by invoicing systems and adjusted to take into account the difference between invoiced amounts and deferred revenue adjustments as required by IFRS accounting standards.

 

The revenue is analysed for each revenue category as:

 

 

Unaudited

six months ended 30 June 2021

Unaudited

six months ended 30 June 2020

Audited

year ended 31 December 2020

 

$'000

$'000

$'000

 

 

 

 

Software licence and appliance revenue

3,373

2,405

8,446

DDoS Protection-as-a-Service revenue

1,904

1,189

2,876

Maintenance and support services revenue

3,021

2,644

5,555

Total

8,298

6,238

16,877

 

 

The revenue is analysed by timing of delivery of goods or services as:

 

 

Unaudited

six months ended 30 June 2021

Unaudited

six months ended 30 June 2020

Audited

year ended 31 December 2020

 

$'000

$'000

$'000

 

 

 

 

Point-in-time delivery

3,373

2,405

8,446

Over time

4,925

3,833

8,431

Total

8,298

6,238

16,877

 

 

 

4. Taxation

 

The Group is currently loss making and consequently does not recognise a material taxation income tax expense or credit. The tax receipt(s) in the prior periods relates to research and development expenditure tax credit(s). 

 

 

 

Loss per share is calculated by dividing the earnings attributable to ordinary shareholders by the weighted average number of ordinary shares in issue during the period.  The effects of anti-dilutive ordinary shares resulting from the exercise of share options are excluded from the calculation of the loss per share.  Therefore, the diluted loss per share is equal to the loss per share.

 

30 June 2021 loss

30 June 2021 weighted average number of 1p shares

30 June 2021 loss per share

30 June 2020 loss

30 June 2020 weighted average number of 1p shares

30 June 2020 loss per share

 

$'000

Thousand

Cents

$'000

Thousand

Cents

Basic and diluted loss per share

(1,231)

494,852

(0.3)

(2,583)

494,852

(0.5)

               

 

 

 

 

 

31 Dec 2020 loss

31 Dec 2020 weighted average number of 1p shares

 

31 Dec 2020 loss per share

 

 

 

 

$'000

Thousand

Cents

Basic and diluted loss per share

 

 

 

(3,784)

494,852

(0.8)

 

 

 

6.  Key performance measures

 

EBITDA and Fully Adjusted EBITDA

 

Earnings before interest, tax, depreciation, and amortisation ("EBITDA") is defined as earnings from operations before all interest, tax, depreciation, and amortisation charges.    The following is a reconciliation of EBITDA and further adjustments for all three periods presented:

 

 

Unaudited

six months ended 30 June 2021

Unaudited

six months ended 30 June 2020

Audited

year ended 31 December 2020

 

$'000

$'000

$'000

 

 

 

 

Loss before taxation

(1,231)

(2,697)

(4,030)

Adjustments for:

 

 

 

Finance income

(1)

(14)

(16)

Finance expense

172

149

274

Finance lease interest costs

10

15

27

Depreciation - owned assets

125

128

259

Depreciation - lease liabilities

51

59

119

Amortisation of acquired intangible assets

2

2

6

Amortisation of capitalised development expenditure

944

1,013

1,933

EBITDA

72

(1,345)

(1,428)

Depreciation of DDoS Protection-as-a-Service assets charged to cost of sales

182

103

255

Adjusted EBITDA - for DDPaaS depreciation

254

(1,242)

(1,173)

Share based payments

265

128

359

Adjusted EBITDA - for DDPaaS depreciation and share based payments

519

(1,114)

(814)

Unrealised foreign exchange differences on intercompany loan

90

(543)

263

Adjusted EBITDA - for DDPaaS depreciation, share based payments and unrealised foreign exchange differences on intercompany loan - Fully adjusted basis

609

(1,657)

(551)

 

The EBITDA and Adjusted EBITDA measures above include the credit from the forgiveness of the Paycheck Protection Program Loan (see note 7) in respect of H1 2021 (H1 2020: $Nil). 

 

7. Analysis of changes in net cash (cash and cash equivalents, and borrowings) 

 

 

As at

 1 Jan

2020

Movement in period

As at 30 June

2020

Movement in period

As at

 1 Jan

2021

Movement in period

As at 30 June

2021

                                                                                                                                               

$'000

$'000

$'000

$'000

$'000

$'000

$'000

Cash and cash equivalents

8,321

(2,101)

6,220

3,920

10,140

(1,310)

8,830

Bank borrowings

(2,937)

697

(2,240)

399

(1,841)

(1,927)

(3,768)

Paycheck Protection Program Loan (see below)

-

(637)

(637)

 -

(637)

637

-

Total net cash

5,384

(2,041)

3,343

4,319

7,662

(2,600)

5,062

 

The movement in the period is a combination of the actual flow (from operating, financing and investing activities) and the exchange rate movement. 

 

Paycheck Protection Program Loan (PPP Loan)

 

Notification of the PPP loan forgiveness in full was received from Pacific Western Bank on 28th January 2021. The forgiveness of the PPP loan is a non-cash movement. 

 

New borrowing facility

 

The Company announced in April 2021 it had entered into a new borrowing facility for up to £3.0 million (c$4.2 million) with its existing banking partner, the net proceeds of which will be used for working capital purposes and its on-going investment programme to support its growth strategy.

 

The new borrowings facility comprises a drawn £2.0 million term loan facility and an undrawn £1.0 million Revolving Credit Facility ('RCF') for a three-year term.  The facility terms include: no early repayment penalties or redemption premium; a reduced interest rate (payable quarterly) at 6.5% per annum over the Bank of England base rate (before any potential downward EBITDA margin ratchet adjustment); 2.6% interest per annum on the RCF; arrangement fee of 3.75%; and standard security and loan covenants in line with the existing lending arrangement (which will continue to be repaid in the period to March 2022).

 

 

 

 

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