2009-04-22 08:15:00 CEST
2009-04-22 08:16:36 CEST
REGULATED INFORMATION
Stonesoft - Interim report (Q1 and Q3)
STONESOFT CORPORATION'S INTERIM REPORT FOR JANUARY-MARCH 2009
Stonesoft Corporation Stock Exchange Release April 22, 2009 at 9:15
a.m.
STONESOFT CORPORATION'S INTERIM REPORT FOR JANUARY-MARCH 2009
Net sales near to the level of the previous year, cash flow positive
Stonesoft Corporation's operating result for the first quarter
improved slightly and was MEUR -1.1 or 8 % better than during the
corresponding period in the previous year. The sales of the company's
main product portfolio, StoneGate product family, declined and were
MEUR 2.4. The net sales were MEUR 5.1 or 3% less than during the
first quarter quarter in the previous year. The cash flow was MEUR
0.3 or MEUR 1.4 better than during the corresponding period in the
previous year.
Summary
The comparable figures from the corresponding period in the previous
year are in brackets and refer to the figures of continuing
operations.
January-March 2009
- Stonesoft's core business, the sales of the StoneGate product
family, MEUR 2.4 (3.1) million, -26%
- Net sales MEUR 5.1 (5.3), -3%
- Operating result MEUR -1.1 (-1.2)
- Operating result as percentage of net sales -22% (-24%)
- Earnings per share EUR -0.02 (-0.02)
- Cash flow MEUR 0.3 (-1.1). The last part of the selling price of
Embe Systems Oy, MEUR 0.8, has been removed from the total cash flow
of the previous year
- Interest bearing funds exceeded interest bearing debts by MEUR 7.4
(7.9)
CEO Ilkka Hiidenheimo
The comparable cash flow and net sales of the company as well as the
sales of the StoneGate product family have developed positively
during the previous five quarters. During the first quarter in 2009
this positive development continued in respect of the cash flow and
net sales, but the sales of StoneGate product family declined. The
cash flow was MEUR 1.4 better and the net sales MEUR 0.2 less than
during the corresponding period in the previous year.
In our main market area, in Europe, the positive development of sales
of the StoneGate product family continued. In the Emerging Markets
(Russia, North Africa and Middle East) several considerable projects
have been postponed, which led to the slight breakage of the
company's total net sales.
In April our StoneGate firewall solution was granted a Common
Criteria Evaluation Assurance Level EAL 4+ information security
classification, which is the highest available certificate for
commercial products. The certificate is an important selection
criterion for example in the selection and decision processes of
financial institutions and military forces.
In April Stonesoft introduced the new StoneGate Management Center 5.0
and StoneGate Firewall 5.0 through which the competitiveness of the
company's products will be significantly improved. These products
will solve many fundamental problems related to outsourcing of
network security, encryption of communication and situation awareness
of the network.
Stonesoft is specialized in providing network security solutions to
distributed organizations, but also for critical and military-grade
network environments. These environments require a different approach
from traditional enterprise solutions and set exceptionally high
demands to both network architecture and security. Our
competitiveness in this area is strong and I believe that the
cost-efficiency of our products and the benefits they bring to
business of our customers become even more important during
economically difficult times.
NET SALES AND RESULT
January-March 2009
The Group's net sales decreased MEUR 0.2 or 3% being MEUR 5.1 (5.3).
The operating result (EBIT) was MEUR -1.1 (-1.2) and the result after
taxes was MEUR -1.0 (-1.3).
The Group's core business, the sales of the main portfolio StoneGate,
which comprises of firewall, VPN, SSL VPN and IPS (intrusion
detection and prevention system), were MEUR 2.4 (3.1), or 26% less
compared to previous year's corresponding quarter.
The geographical distribution of net sales was as follows: Europe 67%
(59%), Emerging Markets (Russia, North Africa and Middle East) 10%
(17%) Americas (North and South America) 20% (19%) and APAC
(Asia-Pacific) 3% (5%).
Finance and investments
At the end of reporting period, the Group's total assets were MEUR
14.5 (15.7). The equity ratio was 44% (51%) and gearing (the ratio of
net debt to shareholder's equity) -2.92 (-1.77). Interest bearing
funds exceeded interest bearing debts by MEUR 7.4 (7.9). Investments
in tangible and intangible assets were MEUR 0.1 (0.1).
In order to strengthen the company's capital structure and to ensure
the continuance of the positive development in the future in line
with the company's strategy and growth plan, the main shareholders of
the company have confirmed to the Annual General Meeting held on
March 26, 2009 their readiness to invest at least three (3) million
Euros in the company in form of convertible bond or directed issuance
of shares. The commitment is in force until the end of the AGM in
2010.
The company has not executed the convertible bond arrangement or
directed issuance of shares.
MAIN BUSINESS EVENTS AFTER THE REPORTING PERIOD
Stonesoft's StoneGate firewall solution was granted a Common Criteria
Evaluation Assurance Level EAL 4+ information security
classification, which is the highest available certificate for
commercial products. This ensures that the solution fulfills the
requirements for demanding business network security needs. The
importance of the certificate is emphasized in particular in the area
of administration and it is an important selection criterion for
example in the selection and decision processes in the financial
field and by the military forces. For example it is recommended that
the agencies of the United States government use commercial products
which are EAL4 certified.
In April the company introduced the new StoneGate Management Center
5.0 and StoneGate Firewall 5.0, offering new revenue opportunities
and cost savings for MSSPs (Managed Security Service Providers).
REVIEW OF MAJOR RESEARCH AND DEVELOPMENT ACTIVITIES
Stonesoft continued its strong investments in R&D. Investments during
the reporting period totaled MEUR 1.3 (1.4) million. This represented
22% (23%) of operating expenses.
R&D employed 66 (68) persons at the end of the reporting period.
SHARE CAPITAL AND STOCK OPTION PROGRAMS
At the end of the reporting period, Stonesoft's share capital
recorded in the Trade Register totaled EUR 1 146 054.64 euros. The
number of shares was 57 302 732. The share capital remained
unchanged.
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 reporting period no subscriptions were made on the
basis of the stock option programs for the key personnel of the
company.
DEVELOPMENT OF SHARE PRICES AND TURNOVER
In the beginning of the reporting period the price of Stonesoft share
was EUR 0.32 (0.29). At the end of the reporting period the price was
EUR 0.36 (0.27). The highest price was EUR 0.42 (0.34) and the lowest
EUR 0.31 (0.24). Share price divided by the earnings per share was
-19.4 (-12.2) (P/E) at the end of the reporting period. During the
reporting period the total turnover of Stonesoft shares amounted to
MEUR 0.52 (0.85). Based on the share price at the end of the
reporting period, Stonesoft's market value was MEUR 20.6 (15.5).
NOTICES IN CHANGE OF OWNERSHIP
The company gave no notices in change of ownership during the
reporting period.
ACQUISITIONS AND CHANGES IN GROUP STRUCTURE
No acquisitions were made and no other changes in the Group structure
were implemented during the reporting period.
PERSONNEL
At the end of the reporting period, the Group's personnel totaled 185
(185).
AUTHORIZATIONS OF THE BOARD OF DIRECTORS
The Annual General Meeting held on March 26, 2009 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 issue may be directed in whole or in part to the main
shareholders of the company Ilkka Hiidenheimo and Hannu Turunen, who
have confirmed still to be ready to invest at least three (3) million
Euros in the company in form of convertible bond or directed issuance
of shares in order to strengthen the company's capital structure with
an additional cash reserve and to ensure the continuance of the
positive development in the future in line with the company's
strategy and growth plan. The commitment given by the main
shareholders is in force until the end of the AGM in 2010.
The Board of Directors was authorized to decide on other terms and
conditions related to the share issues and to the issuance of option
or other special rights. The authorization is in force until the end
of the 2010 AGM.
The Board of Directors has not used the granted authorization.
The company does not own its shares and the Board of Directors do not
have an authorization to acquire its own shares.
CORPORATE GOVERNANCE
Stonesoft complies with the Corporate Governance Code issued by the
Securities Market Association (a cooperation body established by the
Confederation of Finnish Industries EK, the Central Chamber of
Commerce of Finland and NASDAQ OMX Helsinki Ltd) in October 2008, as
explained on the web pages of the company.
SHORT-TERM RISKS AND BUSINESS UNCERTAINTIES
During the fiscal year in 2009, Stonesoft's main risks and business
uncertainties relate to the realization timetable of the sales
projects forming the basis of net sales, possible production
disruption of our subcontractors and suppliers and fluctuation of
exchange rates. In addition to these factors, the general economic
uncertainty has turned into a global depression, and the economical
uncertainty may affect the operations of the company. Otherwise there
have been no significant changes in these risks and business
uncertainties in comparison to what has been announced earlier.
FUTURE OUTLOOK
Companies will continue to network with their partners and
subcontractors, and this development will create even higher
requirements for network security and availability. At the same time,
the demand for outsourcing solutions and services will grow. Managed
Security Service Providers (MSSPs) have a growing need to provide
their customers with the possibility to track the status of their
network security while maintaining an overview of their own data
network. According to the company's view combining security and high
availability, which is the cornerstone of StoneGate product design,
will prove its strength even better in this development.
The convergence of voice, video and data on IP-based networks will
create more demand for capacity and drive the adoption of 10 Gbps
networks. The growing demand for added bandwidth together with new
protocols in the IP networks is expected to increase the general
demand for better reporting, monitoring and analysis tools. This
development will support Stonesoft in achieving its year 2009 growth
plan, since these are the cornerstones in StoneGate Management
Center's functionality.
The strong growth of virtualization has created a demand for ensuring
network security and business continuity also in virtual
environments. StoneGate products are better suited for virtual
environments than the competitors' products because they are based on
software solutions.
As security threats in the public sector increase, growing number of
government organizations have started improving their protection
against network attacks and cyber espionage. StoneGate products offer
comprehensive, centrally managed protection and suit well to the
needs of the public sector.
While the global financial uncertainty continues, companies need to
pay attention to the cost efficiency of their operations. This will
further strengthen the competitiveness of the StoneGate solutions and
emphasize the possibilities the solutions offer for generating
considerable cost savings in relation to infrastructure,
communications and operating costs.
Stonesoft will continue its decisive and persistent efforts to
increase its net sales and to improve its profitability. The
company's main target in 2009 is growth of net sales and improved
profitability. The measures for growing the net sales and reducing
the cost structure will continue with the aim of continuous
improvement of the company's economical situation and competitiveness
as fast as possible.
Due to the prevailing global economical uncertainty, the company
considers it difficult to give any estimates on the future
development. The customers of both public and private sector postpone
their investment decisions and allocate them for longer period than
planned. As a consequence, the predictability of the sales projects
has become more difficult both in terms of size and timing.
Furthermore, the fluctuation of the currency exchange rates makes the
forecasting more challenging. The impact of this economical
uncertainty varies strongly by main territories.
Based on the above, the company does not see it justified to give any
estimate on the future development of the net sales and the result.
With regard to the development of the turnover and the operating
result, significant 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 1-3/2009 1-3/2008 1-12/2008
(1000 Euro)
Continuing operations
Net sales 5 084 5 259 24 427
Other operating income 164 293 1 275
Materials and services -693 -950 -3 547
Personnel expenses -3 603 -3 551 -14 796
Depreciation -115 -111 -483
Other operating expenses -1 969 -2 177 -9 161
Operating result -1 133 -1 237 -2 286
Financial income and expenses 104 23 276
Result before taxes -1 029 -1 214 -2 010
Taxes -35 -51 -219
Result from continuing operations -1 064 -1 265 -2 229
Result from discontinued operations 0 186 186
Result for the accounting period -1 064 -1 079 -2 043
Other comprehensive income
Exchange differences on translating
foreign operations 20 -74 -30
Total other comprehensive income 20 -74 -30
Total comprehensive income -1 044 -1 153 -2 068
Basic earnings per share (EUR),
continuing operations -0,02 -0,02 -0,04
Diluted earnings per share (EUR),
continuing operations -0,02 -0,02 -0,04
Basic earnings per share (EUR),
discontinued operations 0,00 0,00 0,00
Diluted earnings per share (EUR),
discontinued operations 0,00 0,00 0,00
Stonesoft Group
Balance Sheet (1000 Euro) 31.3.2009 31.3.2008 31.12.2008
ASSETS
Non-Current Assets
Tangible assets 633 707 692
Intangible assets 181 79 104
Other investments 10 10 10
Deferred tax assets 0 1 0
Total 824 797 806
Current assets
Inventories 828 848 911
Trade and other receivables 5 353 6 171 7 371
Prepayments 72 62 19
Marketable securities 6 666 6 815 6 310
Cash and cash equivalents 717 1 056 738
Total 13 637 14 951 15 348
Total assets 14 461 15 748 16 154
EQUITY AND LIABILITIES
Equity attributable to equity holders
of the parent company
Share capital 1 146 1 146 1 146
Share premium account 76 821 76 821 76 821
Conversion differences -931 -1 001 -951
Retained earnings -74 511 -72 541 -73 473
Total 2 525 4 424 3 543
Long-term liabilities
Provisions 0 50 26
Other long-term
liabilities (* 2 398 1 783 2 336
Total 2 398 1 833 2 363
Short-term liabilities
Trade and other
payables (* 9 233 9 285 9 991
Tax liability 101 32 41
Provisions 204 118 214
Short-term interest bearing
liabilities 1 54 2
Total 9 538 9 490 10 248
Total liabilities 11 937 11 324 12 611
Total equity and liabilities 14 461 15 748 16 154
*) Other liabilities include
customers'
pre-paid maintenance agreements
periodicity 8 739 7 102 8 372
Stonesoft Group
Statement of changes in
equity
(1000 Euro)
Share Share Conversion Retained
capital premium differences earnings Total
Shareholders' equity at
1.1.2008 1 146 76 821 -927 -71 461 5 579
Comprehensive income -74 -1 079 -1 153
Stock options -1 -1
At the closing on
31.12.2008 transferred
stock option expenses
accumulated retained
earnings 1 -1 0
Shareholders' equity at
31.3.2008 1 146 76 821 -1 001 -72 541 4 424
Share Share Conversion Retained
capital premium differences earnings Total
Shareholders' equity at
1.1.2009 1 146 76 821 -951 -73 473 3 543
Comprehensive income 20 -1 064 -1 044
Stock options 25 25
Shareholders' equity at
31.3.2009 1 146 76 821 -931 -74 511 2 525
Stonesoft Group
Cash flow statement
(1000 Euro) 1.1.-31.3.2009 1.1.-31.3.2008 1.1.-31.12.2008
Cash flow from
operating activities
Operating Result -1 133 -1 237 -2 286
Adjustments
Non-cash
transactions 53 100 319
Financial
expenses -30 -31 -93
Financial incomes 134 53 375
Change in net
working capital 1 410 265 614
Taxes paid -35 -50 -218
Total cash flow from
operating activities 399 -899 -1 288
Cash flow from
investing activities
Investments in
tangible assets -44 -99 -422
Investments in
intangible assets -90 -6 -66
Investments in
affiliated company 0 0 0
Investments in other
shares 0 -10 -10
Net cash flow
investing activities
continuing operations -134 -115 -498
Net cash flow
investing activities
discontinued
operations 0 761 761
Total cash flow
investing activities -134 646 263
Cash flow from
financing activities
Payments of
financial leasing
liabilities -1 -20 -72
Total cash flow from
financing activities -1 -20 -72
Change in cash and cash
equivalents
Cash and cash
equivalents at
beginning of period 7 048 8 210 8 210
Conversion
differences 20 -74 -30
Changes in the
market value of
investments 52 9 -34
Total cash and cash
equivalents at end of
period *) 7 383 7 871 7 048
*) Total cash and cash
equivalents at end of
the period
contains pledged
securities 333 263 315
Stonesoft Group
Geographical segments 1.1.-31.3.2009 1.1.-31.3.2008 1.1.-31.12.2008
(1000 Euro)
Net sales
Europe 3 402 3 096 14 740
Emerging Market 497 909 4 123
Americas 1 013 973 4 495
APAC 171 280 1 069
Total net sales 5 084 5 259 24 427
Operating profit
Europe -461 -665 -1 061
Emerging Market -102 -158 338
Americas -569 -375 -1 532
APAC -1 -39 -31
Total operating profit -1 133 -1 237 -2 286
Stonesoft Group
Contingent liabilities 1.1.-31.3.2009 1.1.-31.3.2008 1.1.-31.12.2008
(1000 Euro)
Contingent off-balance
sheet
Non-cancelable other
leases 2 987 4 323 3 377
Contingent
liabilities for the
Company 63 20 63
Stonesoft Group
Related party
information 1.1.-31.3.2009 1.1.-31.3.2008 1.1.-30.9.2008
(1000 Euro)
Consultation fees paid
to the Board of
Directors 0 0 0
Stonesoft Group
Quarterly development Q1 / Q4 / Q3 / Q2 / Q1 /
(Euro Millions) 2009 2008 2008 2008 2008 2008
Software 0,4 1,0 0,5 0,7 0,4 2,6
Security appliances 2,0 3,4 2,8 3,4 2,8 12,3
Services 2,6 2,6 2,4 2,3 2,2 9,5
Other products 0,1 0,0 0,1 0,0 -0,1 0,1
Net sales continuing operations 5,1 6,9 5,9 6,4 5,3 24,4
Change-% from previous year -3 19 45 32 22 28
Sales margin 4,4 6,1 5,1 5,4 4,3 20,9
Sales margin % 86 88 86 85 82 85
Operative expenses 5,7 6,6 5,9 6,0 5,8 24,4
Operating profit (EBITA) -1,1 -0,2 -0,5 -0,4 -1,2 -2,3
% of net sales -22 -3 -9 -6 -24 -9
Result before taxes -1,0 -0,1 -0,4 -0,3 -1,2 -2,0
% of net sales -20 -2 -7 -4 -23 -8
Stonesoft Group
Key ratios 1.1.-31.3.2009 1.1.-31.3.2008 1.1.-31.12.2008
(1000 Euro)
Net sales, continuing
operations 5 084 5 259 24 427
Net sales change-% -3 22 28
Operating result,
continuing operations -1 133 -1 237 -2 286
% of net sales -22 -24 -9
Operating result before
taxes -1 029 -1 214 -2 010
% of net sales -20 -23 -8
ROE - %, annualized,
continuing operations -140 -101 -49
ROI - %, annualized -123 -90 -40
Equity ratio-% 44 51 46
Net gearing -2,92 -1,77 -1,99
Total Assets 14 461 15 748 16 154
Capital expenditure 134 105 488
Capital disposals 20 0 0
R&D costs 1 261 1 372 5 230
% of net sales 25 26 21
Number of employees
(weighted average) 185 181 183
Number of employees
(end of the period 185 185 185
Share Specific Ratios
Earnings per share,
continuing operations -0,02 -0,02 -0,04
Earnings per share,
discontinued operations 0,00 0,00 0,00
Equity per share 0,04 0,08 0,06
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 (Profit before taxes - income taxes) x
(ROE) % = 100 /
Shareholders' equity + minority interest
(average)
Return on invested (Profit before extraordinary items+interest and
capital (ROI)% = other financial expenses) x 100 /
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 on
Net gearing = deposit - marketable securities /
Equity + minority interest
Earning per share Profit before taxes - minority interest -
(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 is prepared in accordance with IFRS standards. As
of January 1, 2009, the Group has applied the following new and
revised standards: IFRS 8 Operating Segments and IAS 1 Presentation
of Financial Statements. In all other respects the same accounting
principles, as in the Financial Statements for 2008, have been
applied. The accounting principles for key figures and the related
formulas remain unchanged and they have been presented in the
Financial Statements for 2008.
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.
The presented figures are unaudited.
PRESS CONFERENCE
A press conference for analysts and investors will be held on April
22, 2009 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 release and the presentation material related to this report are
also available on Stonesoft's web site at www.stonesoft.com.
Distribution:
NASDAQ OM Helsinki Ltd
www.stonesoft.com
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