2010-08-13 08:15:00 CEST
2010-08-13 08:15:38 CEST
REGULATED INFORMATION
Stonesoft - Interim report (Q1 and Q3)
STONESOFT CORPORATION INTERIM REPORT FOR JANUARY-JUNE 2010
Stonesoft Corporation Stock Exchange Release 13 August 2010 at 9:15 a.m.
Stonesoft Corporation's operating result for the first quarter declined and was
MEUR -1.2 or MEUR -0.7 less than during the corresponding period in the previous
year. The company's product sales were MEUR 2.2 while total net sales were MEUR
5.1. Cash flow was MEUR 0.0 positive, which is MEUR 0.7 better than in the
corresponding period in the previous year.
The comparable figures from the corresponding period in the previous year are in
brackets and refer to the figures of continuing operations.
April-June 2010
- Net sales MEUR 5.1 (6.0), down by -16%
- Product sales MEUR 2.2 (3.4), down by -35%
- Operating result MEUR -1.2 (-0.6)
- Operating result as percentage of net sales -25% (-9%)
- Earnings per share -0.02 (-0.01) EUR
- Operative cash flow MEUR 0.0 (-0.7)
- Liquid cash funds at the end of the reporting period MEUR 11.5 (6.7). The
corporate had no interest-bearing debts.
January-June 2010
- Net sales MEUR 11.2 (11.1), growth 1%
- Product sales MEUR 5.4 (5.7), down by -5%
- Operating result MEUR -1.4 (-1.7)
- Operating result as percentage of net sales -13% (-15%)
- Earnings per share -0.02 (-0.03) EUR
- Operative cash flow MEUR 0.7 (-0.3)
CEO ILKKA HIIDENHEIMO
The development of Stonesoft's product sales did not continue as expected during
the second quarter of the year 2010. The net sales and operating result of the
period were affected by the postponement of customers' large investment
decisions while the economic uncertainty in the company's main market areas
increased. In addition, a couple of significantly sized deliveries moved to the
third and fourth quarters of the year. The company's sales project pipeline is
strong, and it has developed positively during the whole first half of the year.
We have continued our long-standing investments in significant customer accounts
and business growth. The growth and improvement of the result will become
visible during the second half of the year.
NET SALES AND RESULT
April-June 2010 (hereinafter 'reporting period')
The Group's net sales in the reporting period were MEUR 5.1 (6.0). Decrease
compared to the corresponding period in the previous year was MEUR -1.0, or
-16%. The operating result (EBIT) was MEUR -1.2 (-0.6) and the result after
taxes was MEUR -1.3 (-0.5).
Product sales were MEUR 2.2 (3.4), down by -35% compared to the corresponding
quarter in the previous year.
The geographical distribution of net sales was as follows: Europe 67% (62%),
Emerging Markets (Russia, North Africa and Middle East) 11% (22%), Americas
(North and South America) 19% (13%) and APAC (Asia-Pacific) 3% (3%).
January-June 2010 (hereinafter 'fiscal period')
The Group's net sales in the fiscal period were MEUR 11.2 (11.1). Decline
compared to the corresponding period in the previous year was MEUR 0.1, or 1%.
The operating result (EBIT) was MEUR -1.4 (-1.7) and the result after taxes was
MEUR -1.3 (-1.6).
Product sales were MEUR 5.4 (5.7), down by -5% compared to the corresponding
period in the previous year.
The geographical distribution of net sales was as follows: Europe 62% (65%),
Emerging Markets (Russia, North Africa and Middle East) 17% (16%), Americas
(North and South America) 19% (16%) and APAC (Asia-Pacific) 2% (3%).
FINANCE AND INVESTMENTS
At the end of the fiscal period, the Group's total assets were MEUR 19.0 (14.5).
The equity ratio was 60% (33%) and gearing (the ratio of net debt to
shareholder's equity) -1.96 (-3.37). The strong change in the cash balance is
due to 5 700 000 new shares subscribed in a directed share issue in March 2010.
As a result of the share issue, shareholders' equity grew by MEUR 4.4. The
Group's liquid cash funds at the end of the reporting period were MEUR 11.5
(6.7). The corporate had no interest bearing debts. Investments in tangible and
intangible assets were MEUR 0.2 (0.2).
DEVELOPMENT OF BUSINESS OPERATIONS
Main business events in the reporting period
In April, Stonesoft shared five tactics organizations can use to protect
themselves against security threats and attacks related to cloud services and to
improve their IT strategy.
Main business events after the reporting period
In July, Stonesoft announced it expects net sales for the second quarter of
2010 to decline by compared to the corresponding period in the previous year and
the operating result to be negative.
In July, Stonesoft introduced the StoneGate 5.2 network security solution,
comprising of the StoneGate Firewall/VPN, StoneGate IPS intrusion prevention
system and StoneGate Management Center management tool.
RESEARCH AND DEVELOPMENT
Stonesoft continued its strong investments in R&D. Investments during the
reporting period totaled MEUR 2.9 (2.7). This represented 25% (23%) of operating
expenses.
R&D employed 70 (65) persons at the end of the fiscal period. Personnel
resources have grown in the R&D department in Poland.
SHARE CAPITAL AND STOCK OPTION PROGRAMS
At the end of the fiscal period, Stonesoft's share capital recorded in the Trade
Register totaled EUR 1.147.929,64. The number of shares was 63.140.232. The
share capital increased by EUR 1.875,00 by subscriptions through stock option
programs.
The new shares have been entered in the Finnish Trade Register on 3 May, 2010
and 28 May, 2010. The new shares were admitted for trading on Main market of
NASDAQ OMX Helsinki Ltd on 7 May, 2010 and 31 May, 2010 together with the
existing shares of the company.
The company gave no notices in change of ownership during the reporting period.
Stock option programs
The company has two valid stock option programs, Stock Option Program
2004-2010, the subscription price of which is EUR 0.56, and Stock Option Program
2008-2014, the subscription price of which is EUR 0.30.
During the fiscal period 93 750 subscriptions were made on the basis of the
stock option program 2004-2010, of which 60 000 subscriptions were made during
the reporting period. During the fiscal period 43 750 subscriptions were made on
the basis of the stock option program 2008-2014. All subscriptions were made
during the reporting period. Shares have been registered in the Finnish Trade
Register during the reporting period and admitted to public trading.
Development of share prices and turnover
In the beginning of the fiscal period the price of Stonesoft share was EUR 0.70
(0.32). At the end of the fiscal period the price was EUR 0.72 (0.40). The
highest price was EUR 1.19 (0.50) and the lowest EUR 0.69 (0.31). During the
fiscal period the total turnover of Stonesoft shares amounted to MEUR 17.0
(1.6). Based on the share price at the end of the fiscal period, Stonesoft's
market value was MEUR 45.5 (22.9).
ACQUISITIONS AND CHANGES IN GROUP STRUCTURE
No acquisitions were made during the reporting period and there were no other
changes in the group structure.
PERSONNEL
At the end of the reporting period, the Group's personnel totaled 192 (180).
AUTHORIZATIONS OF THE BOARD OF DIRECTORS
The Annual General Meeting held on April 22, 2010 decided to grant the Board of
Directors an authorization, according to which the Board of Directors may decide
to issue new shares in one or several issues and to grant option and other
special rights. The total number of shares or rights to the shares issued may be
11.450.000 at the maximum.
Based on the authorization, the Board of Directors may decide to issue new
shares for subscription according to the shareholders´ pre-emptive subscription
rights or in deviation from the shareholders´ pre-emptive subscription right, or
in a directed issue of option rights or other special rights in case the
deviation is justified by a weighty financial reason for the company, such as
financing of an acquisition, other arrangement concerning the business of the
company or development of its capital structure, or incentive to the company's
personnel.
The company does not own its shares and the Board of Directors does not have an
authorization to acquire its own shares.
SHORT-TERM RISKS AND BUSINESS UNCERTAINTIES
During the fiscal year 2010, Stonesoft's main risks and business uncertainties
relate to the realization timetable of the sales projects and possible
production disruption of our subcontractors and suppliers.
The company's risk management and risk management principles are discussed more
extensively at the company's website and in the Annual Report 2009.
FUTURE OUTLOOK
According to the research company Gartner, Inc. the enterprise network equipment
market that declined by 19% during 2009, is estimated to recover to annual
growth of 4.7% during 2010.
Stonesoft's products protect large and critical network environments that
require advanced network security. The company has launched security solutions
that meet the capacity needs of 10 Gbps networks. Large enterprises are
currently making a transition to 10 Gbps networks, which will fulfill their
needs today and in the near future. Large network environments are under
constant change pressures, because companies strive for increasingly efficient
operations and at the same time need to adapt to rapidly changing competitive
situations. This sets special demands to the flexibility and manageability of
security solutions. Many traditional security companies and products are too
static to adapt to these changes fast enough. Stonesoft has always stood out as
a company and with its product through its flexibility and ability to quickly
meet dynamic security challenges and its customers' changing needs.
The strong growth of MSSP (Managed Security Service Provider)-, virtualization,
SAAS (Software as a Service) and cloud services as well as the spreading of
social media services have continued to create a need for ensuring network
security and business continuity also in new environments. In addition, illicit
acquisition of confidential data to obtain financial benefits has to a large
extent surpassed non-professional operations. The management features of
StoneGate, the scalability of the appliance based product family and the
excellent suitability of the product for virtual environments offer an optimal
system for these environments.
As security threats in the public sector increase, a growing number of
government organizations have started improving their protection against network
attacks and cyber espionage. The amount of confidential material that is handled
in the net such as patient data and juridical documents is constantly growing.
In addition, various interest groups, political extremist groups and
governmental intelligence agencies are searching for information more and more
from the net. StoneGate products offer a comprehensive, centrally managed
protection and are ideally suited for the needs of the public sector. Currently
Stonesoft's network security solutions are used by more than 50 government
departments at five continents around the world.
The relative importance of the operationality and availability of data networks
to business is continuously increasing. This had led to the growth of the
demands to network security design and to the need to achieve a comprehensive
overview of the state of the network and data communications. This strengthens
Stonesoft's competitive position. We are specialized in delivering comprehensive
network security solutions, which meet also the exceptionally high demands of
critical network environments and enable increased efficiency and flexibility.
Stonesoft will continue its decisive and persistent efforts to increase its net
sales and operating result. The company has announced it expects its net sales
to grow from the previous year's level and to make a positive result in 2010.
Based on the current view, the company still estimates its net sales to grow,
but reaching a positive result is uncertain due to increased investments in new
business opportunities.
With regard to the development of the turnover and the operating result,
variation is expected between the quarters in comparison to the corresponding
quarter during the previous year as well as to the previous quarter as a
consequence of, among others, long sales cycles, a relatively big impact of
individual deals, and the variation between the quarters in the previous year.
Stonesoft Group
Income Statement 4-6/2010 4-6/2009 1-6/2010 1-6/2009 1-12/2009
(1000 Euros)
Continuing operations
Net sales 5 060 6 039 11 216 11 122 23 597
Other operating income 219 341 460 505 969
Materials and services -610 -1 120 -1 445 -1 814 -3 539
Personnel expenses -3 538 -3 686 -7 340 -7 289 -14 004
Depreciation -108 -113 -215 -228 -454
Other operating expenses -2 264 -2 011 -4 112 -3 980 -7 616
Operating result -1 240 -550 -1 436 -1 683 -1 048
Financial income and expenses 21 45 172 150 316
Result before taxes -1 219 -505 -1 264 -1 533 -731
Taxes -44 -44 -73 -80 -240
Result for the accounting period -1 263 -549 -1 336 -1 613 -971
Other comprehensive income
Exchange differences on
translating foreign operations 37 -10 27 10 15
Total other comprehensive income 37 -10 27 10 15
Total comprehensive income -1 226 -559 -1 310 -1 603 -956
Basic earnings per share (EUR),
continuing operations -0,02 -0,01 -0,02 -0,03 -0,02
Diluted earnings per share (EUR),
continuing operations -0,02 -0,01 -0,02 -0,03 -0,02
Stonesoft Group
Balance Sheet (1000 Euros) 30.6.2010 30.6.2009 31.12.2009
ASSETS
Non-Current Assets
Tangible assets 506 556 494
Intangible assets 116 174 176
Other investments 10 10 10
Total 632 740 680
Current assets
Inventories 1 106 730 673
Trade and other receivables 5 699 6 313 8 383
Prepayments 101 44 67
Marketable securities 21 5 546 5 240
Cash and cash equivalents 11 487 1 156 970
Total 18 415 13 789 15 333
Total assets 19 047 14 529 16 013
EQUITY AND LIABILITIES
Equity attributable to equity holders of the
parent company
Share capital 1 148 1 146 1 146
Issue of shares 0 0 0
Share premium account 76 871 76 821 76 821
Conversion differences -910 -941 -936
Reserve for invested unrestricted equity fund 4 404 0 0
Retained earnings -75 654 -75 038 -74 346
Total 5 859 1 988 2 685
Long-term liabilities
Prepayments *) 2 589 2 594 2 606
Total 2 589 2 594 2 606
Short-term liabilities
Trade and other payables 3 692 3 699 3 943
Prepayments *) 6 758 5 997 6 660
Tax liability 91 125 81
Provisions 59 126 37
Short-term interest bearing liabilities 0 0 0
Total 10 599 9 946 10 722
Total liabilities 13 188 12 541 13 328
Total equity and liabilities 19 047 14 529 16 013
*) Prepayments contain customers advance
payment of support and maintenance contracts 9 346 8 591 9 267
Stonesoft
Group
Statement of
changes in
equity
(1000 Euros)
Reserve
Issue for invested
Share of Share Conversion unrestricted Retained
capital shares premium differences equity fund earnings Total
Shareholders'
equity at
1.1.2009 1 146 0 76 821 -951 0 -73 473 3 543
Comprehensive -1
income 10 -1 613 603
Directed share
issue 0 0
Transaction
costs from
equity 0 0 0
Stock options
exercised 0 0 0 0 0
Stock option
expenses 48 48
Shareholders'
equity at
30.6.2009 1 146 0 76 821 -941 0 -75 038 1 988
Reserve
Issue for invested
Share of Share Conversion unrestricted Retained
capital shares premium differences equity fund earnings Total
Shareholders'
equity at
1.1.2010 1 146 0 76 821 -936 0 -74 346 2 685
Comprehensive -1
income 27 -1 336 310
Directed share
issue 4 560 4 560
Transaction
costs from
equity 0 -170 -170
Stock options
exercised 2 0 51 13 66
Stock option
expenses 28 28
Shareholders'
equity at
30.6.2010 1 148 0 76 871 -910 4 404 -75 654 5 859
Stonesoft Group
Cash flow statement (1000 Euros) 1.1.-30.6.2010 1.1.-30.6.2009 1.1.-31.12.2009
Cash flow from operating
activities
Operating Result -1 436 -1 683 -1 048
Adjustments
Non-cash transactions -104 -52 644
Financial expenses -5 -67 -129
Financial incomes 282 165 336
Change in net working capital 2 423 1 459 -226
Taxes paid -73 -65 -210
Total cash flow from operating
activities 1 088 -243 -632
Cash flow from investing
activities
Investments in tangible assets -199 -67 -202
Investments in intangible
assets 32 -95 -126
Investments in other shares 0 0 0
Total cash flow investing
activities -166 -162 -328
Cash flow from financing
activities
Proceeds from issue
of share capital 4 391 0 0
Stock options
exercised 65 0 0
Payments of
financial leasing
liabilities 0 -2 -2
Total cash flow from financing
activities 4 456 -2 -2
Change in cash and cash
equivalents
Cash and cash equivalents at
beginning of period 6 210 7 048 7 048
Conversion differences 70 10 15
Changes in the market value of
investments -148 52 109
Total cash and cash equivalents at
end of period *) 11 509 6 702 6 210
*) Total cash and cash equivalents
at end of the period
contains pledged securities 498 316 452
Stonesoft Group
Geographical segments 1.1.-30.6.2010 1.1.-30.6.2009 1.1.-31.12.2009
(1000 Euros)
Net sales
Europe 6 996 7 164 15 182
Emerging Markets 1 849 1 814 3 162
Americas 2 103 1 817 4 605
APAC 268 327 648
Total net sales 11 216 11 122 23 597
Operating profit
Europe -535 -520 546
Emerging Market 35 -102 -327
Americas -799 -986 -1 180
APAC -137 -74 -87
Total operating profit -1 436 -1 683 -1 048
Stonesoft Group
Contingent liabilities 1.1.-30.6.2010 1.1.-30.6.2009 1.1.-31.12.2009
(1000 Euros)
Contingent off-balance sheet
Non-cancellable other leases 2 245 2 926 2 541
Contingent liabilities for the
Company 66 63 117
Stonesoft Group
Quarterly development Q2 / Q1 / Q4 / Q3 / Q2 / Q1 /
(Euro Millions) 2010 2010 2009 2009 2009 2009 2009
Software 0,3 0,3 0,6 0,4 0,3 0,4 1,6
Security appliances 1,9 2,9 3,1 2,9 3,1 2,0 11,0
Services 2,8 2,9 2,8 2,7 2,7 2,6 10,9
Other products 0,1 0,1 0,0 0,0 0,0 0,1 0,1
Net sales continuing operations 5,1 6,2 6,5 6,0 6,0 5,1 23,6
Change-% from previous year -16 21 -6 2 -5 -3 -3
Sales margin 4,4 5,3 5,7 5,1 4,9 4,4 20,1
Sales margin % 88 86 87 85 81 86 85
Operative expenses 5,9 5,7 5,8 4,7 5,8 5,7 22,0
Operating profit (EBITA) -1,2 -0,2 0,1 0,5 -0,6 -1,1 -1,0
% of net sales -25 -3 1 9 -9 -22 -4
Result before taxes -1,2 0,0 0,1 0,7 -0,5 -1,0 -0,7
% of net sales -24 -1 2 11 -8 -20 -3
Stonesoft Group
Key ratios 1.1.-30.6.2010 1.1.-30.6.2009 1.1.-31.12.2009
(1000 Euros)
Net sales, continuing
operations 11 216 11 122 23 597
Net sales change-% 1 -4 -3
Operating result,
continuing operations -1 436 -1 683 -1 048
% of net sales -13 -15 -4
Operating result before
taxes -1 264 -1 533 -731
% of net sales -11 -14 -3,10
ROE - %, annualized,
continuing operations -63 -117 -31
ROI - %, annualized -58 -99 -19
Equity ratio-% 60 33 40
Net gearing -1,96 -3,37 -2,31
Total Assets 19 047 14 529 16 013
Capital expenditure 166 162 328
Capital disposals 0 20 19
R&D costs 2 879 2 657 4 918
% of net sales 26 24 21
Number of employees
(weighted average) 185 183 178
Number of employees (end
of the period) 192 176 174
Share Specific Ratios
Earnings per share,
continuing operations -0,02 -0,03 -0,02
Equity per share 0,09 0,03 0,05
Dividend 0,00 0,00 0,00
Dividend per share (EUR) 0,00 0,00 0,00
Dividend / Profit-% 0 0 0
Calculation of indicators
Return on equity (ROE) % = (Profit before taxes - income taxes) x 100 /
Shareholders' equity + minority interest
(average)
(Profit before extraordinary items+interest
Return on invested capital (ROI)% = and other financial expenses) x100 /
Balance sheet total - non-interest bearing
debt (average)
Equity ratio % = (Equity + minority interest) x 100 /
Balance sheet total - advances received
Interest bearing net debt - cash in hand and
Net gearing = on deposit - marketable securities /
Equity + minority interest
Profit before taxes - minority interest -
Earnings per share (EPS) = income taxes /
Average number of shares adjusted for
dilutive effect of options
Equity per share = Equity /
Number of shares at end of period
ACCOUNTING PRINCIPLES
This Interim Report Release has been prepared in accordance with IAS 34
standard. The presented figures are unaudited.
FORWARD-LOOKING STATEMENTS
This report contains statements concerning, among other things, Stonesoft's
financial condition and the results of operations that are forward-looking in
nature. Such statements are not historical facts, but rather represent
Stonesoft's future expectations. The company believes that the expectations
reflected in these forward-looking statements are based on reasonable
assumptions. However, these forward-looking statements involve inherent risks
and uncertainties, which could cause actual results or outcomes to differ
materially from those anticipated in the statements. These risks and
uncertainties may include, among other things, (1) changes in our market
position or in the Firewall/VPN and Intrusion detection and protection market in
general; (2) the effects of competition; (3) the success, financial condition,
and performance of our collaboration partners, suppliers and customers;(4) our
ability to source quality components without interruption and at acceptable
prices;(5) our ability to recruit, retain and develop appropriately skilled
employees;(6) exchange rate fluctuations, including, in particular, fluctuations
between the Euro, which is our reporting currency, and the US dollar;(7) other
factors related to sale of products, economic situation, business, competition
or legislation affecting the business of Stonesoft or the industry in general
and (8) our ability to control the variety of factors affecting our ability to
reach our targets and give accurate forecasts.
PRESS CONFERENCE
A press conference for analysts and investors will be held on 13 August, 2010 at
10.30 am at the Stonesoft headquarters, street address Itälahdenkatu 22 A,
00210 Helsinki.
For additional information, please contact:
Ilkka Hiidenheimo, CEO, Stonesoft Corporation
Tel. +358 9 476 711
E-mail: ilkka.hiidenheimo@stonesoft.com
Mikael Nyberg, CFO, Stonesoft Corporation
Tel. +358 9 476 711
E-mail: mikael.nyberg@stonesoft.com
Stonesoft Corporation
Ilkka Hiidenheimo
CEO
This stock exchange release and the presentation material related to this report
are also available at the Stonesoft web site www.stonesoft.com.
Distribution:
NASDAQ OMX Helsinki Ltd
www.stonesoft.com
[HUG#1437810]
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