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2011-08-12 08:15:00 CEST 2011-08-12 08:15:24 CEST REGULATED INFORMATION Stonesoft - Interim report (Q1 and Q3)STONESOFT CORPORATION INTERIM REPORT FOR JANUARY-JUNE 2011Stonesoft Corporation Stock Exchange Release 12 August 2011 at 9:15 a.m. StoneGate product sales grew strongly Stonesoft Corporation's StoneGate product sales grew by 53% and net sales by 29% compared to the corresponding period in the previous year. Operating result remained negative and was MEUR -0.7, which is MEUR -0.5 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 2011 - Net sales MEUR 6.5 (5.1), growth 29% - Product sales MEUR 3.3 (2.2), growth 53% - Operating result MEUR -0.7 (-1.2) - Operating result as percentage of net sales -12 (-25)% - Earnings per share -0.01 (-0.02) EUR - Operative cash flow MEUR -0.5 (0.0) - Liquid cash funds at the end of the fiscal period MEUR 9.3 (11.5). The corporate had no interest-bearing debts. January-June 2011 - Net sales MEUR 13.0 (11.2), growth 16% - Product sales MEUR 6.9 (5.4), growth 27% - Operating result MEUR -1.6 (-1.4) - Operating result as percentage of net sales -12 (-13)% - Earnings per share EUR -0.02 (-0.02) EUR - Operative cash flow MEUR 1.2 (0.7) CEO ILKKA HIIDENHEIMO During the second quarter of the year 2011, StoneGate product sales grew by 53% and net sales by 29%. The growth was strong, even though some expected fairly large orders were postponed. The company increased its investments in customer acquisition and sales promotion from the previous level, which is why expenses grew compared to the previous year. These investments are expected to contribute positively during the second half of the year. The series of serious security breaches that came to publicity during the first quarter of the year continued on an almost daily basis during the second quarter of the year. Security breaches against Pentagon, Lockheed Marting and Citibank, among others, demonstrate that the current method of protecting networks is insufficient. Until now, network protection has largely been based on previous experience and knowledge; since some protection methods have worked before and are well-known, their use has continued. The challenge posed to network security by Advanded Evasion Techniques that were discovered by Stonesoft has not decreased since our knowledge has grown. In practice, 24/7 monitoring is useless, if security devices and alarm systems do not discover attacks. The paradigm shift of network security is such a serious issue that every organization with critical or valuable data assets should review their current security policy and operations at board level as part of risk management in order to make sure they are up to date. Previously, while building security devices, the aim has been to optimize speed at the expense of security, and low-cost special-purpose processors have been used to maximize performance. The increased efficiency of standard processors, together with the change of the threat landscape has proven our vision about dynamic security correct. This has also become evident in tests requiring extremely high performance and security, where our security systems have achieved excellent results. In several competition situations where potential customers have organized third-party evaluations the measurement results have proven that the competitiveness of our appliances in handling real-world traffic is excellent. The nominal speed rates of some competitors drop to a fraction of what has been reported, for example when the packet size is smaller or when the actual security features of the appliances are switched on. Similar to what happened earlier with the so-called engineering work stations, we have now reached the point where the capacity of standard PC components is the same or even higher than that of special circuits. From security point of view, standard components are superior thanks to their modifiability and programmability, enabling swift reactions to dynamic challenges. The above-mentioned factors strengthen our view about the necessity of dynamic security and we see the possibility of strong organic growth in the future. NET SALES AND RESULT April-June 2011 (hereinafter 'reporting period') The Group's net sales in the fiscal period were MEUR 6.5 (5.1). Increase compared to the corresponding period in the previous year was MEUR 1.4, or 29%. The operating result (EBIT) was MEUR -0.7 (-1.2) and the result after taxes was MEUR -0.8 (1.3). Product sales were MEUR 3.3 (2.2), growth by 53% compared to the corresponding quarter in the previous year. The geographical distribution of net sales was as follows: Europe 63 (62)%, Emerging Markets (Russia, North Africa and Middle East) 22 (11)%, Americas (North and South America) 12 (19)% and APAC (Asia-Pacific) 3 (3)%. January-June 2011 (hereinafter 'fiscal period') The Group's net sales in the fiscal period were MEUR 13.0 (11.2). Increase compared to the corresponding period in the previous year was MEUR 1.8, or 16%. The operating result (EBIT) was MEUR -1.6 (-1.4) and the result after taxes was MEUR -1.4 (-1.3). Product sales were MEUR 6.9 (5.4), growth by 27% compared to the corresponding quarter in the previous year. The geographical distribution of net sales was as follows: Europe 59 (62)%, Emerging Markets (Russia, North Africa and Middle East) 25 (17)%, Americas (North and South America) 13 (19)% and APAC (Asia-Pacific) 3 (2)%. FINANCE AND INVESTMENTS At the end of the fiscal period, the Group's total assets were MEUR 18.8 (19.0). The equity ratio was 40 (60)% and gearing (the ratio of net debt to shareholders' equity) was -2.89 (-1.96). The comparable cash flow during the fiscal period was MEUR 1.2 (0.7). The Group has no interest-bearing debt. The consolidated liquid assets at the end of the fiscal period totalled MEUR 9.3 (11.5). Investments in tangible and intangible assets totalled MEUR 0.4 (0.2). DEVELOPMENT OF BUSINESS OPERATIONS Main business events in the fiscal period In April, Stonesoft announced it had expanded its partnered offering with Optimesys, a Finnish specialist company focused on producing information security services. In May, Stonesoft introduced two new firewall appliances specifically designed to meet the security needs of today's most demanding high-capacity environments. The new StoneGate(TM) FW-5201 and FW-5205 appliances are Stonesoft's latest addition to its family of modular network security appliances. In June, Stonesoft introduced the world's first Anti-Evasion Readiness Test(TM) service. This service tests how well an organization's critical digital assets are protected against advanced evasion techniques (AETs). The service will be provided by selected, independent IT service organizations around the world. In June, Stonesoft made its public website www.stonesoft.com and corporate blog StoneBlog http://stoneblog.stonesoft.com available over IPv6 to demonstrate their readiness to help their customers migrate securely into IPv6. Both web services are IPv6 enabled and protected by StoneGate Firewall/VPN. In June, Stonesoft introduced a new solution for the mass deployment, tuning and upkeep of network security. The StoneGate Mass Security solution has been designed to meet the security needs of small branch and remote offices such as retail and hotel chains as well as unattended locations, for example ATMs. In June, Stonesoft announced its StoneGate network security solutions had received Common Event Format (CEF) Certification from ArcSight, Inc., an HP company and a leading global provider of security and compliance management solutions that protect enterprises and government agencies. Stonesoft is one of the first security vendors worldwide to offer full support for CEF. In June, Stonesoft encouraged organizations to re-evaluate their existing risk management and security architecture. Recent phenomena such as Wikileaks, Stuxnet, Advanced Evasion Techniques and the latest security breaches have changed the security landscape permanently and acted as wake-up calls also in the strategic aspect. In June, Stonesoft introduced the StoneGate Firewall/VPN 5.3 and StoneGate Management Center 5.3. The new version offers enhanced access control, authentication and mass security as well as a broad range of additional features and improvements. We estimate the above-mentioned operations and achievements to strengthen the company's competitiveness. Main business events after the fiscal period In August ECCT, a leading US-based managed security services provider (MSSP), will deploy the StoneGate IPS across 50 regional and community banks and credit unions by end of year. The MSSP has already successfully deployed or is in the process of deploying the StoneGate IPS solution in 33 financial institutions. RESEARCH AND DEVELOPMENT Stonesoft continued its strong investments in R&D. Investments during the fiscal period totalled MEUR 3.0 (2.9). This represented 23 (25)% of operating expenses. R&D employed 76 (70) persons at the end of the fiscal period. Stonesoft has booked 0.3 MEUR R&D funding from Tekes, the Finnish Funding Agency for Technology and Innovation during the fiscal period. SHARE CAPITAL AND STOCK OPTION PROGRAMS Stonesoft has one class of shares and all shares have equal rights. At the end of the fiscal period, the share capital recorded in the Trade Register was 1 150 574.64 Euros. The number of shares was 63 312 482. Stonesoft or its daughter companies do not own its shares. There were no changes in the share capital during the fiscal period. Stock Option Programs The company had one valid stock option program, Stock Option Program 2008-2014, under which the subscription price is EUR 0.30 and the total number of stock options to be granted based on this program is 3 000 000 at the maximum. The subscription period of the shares is graded and will end for all stock options on December 31, 2014. During the fiscal period no subscriptions were made on the basis of the Stock Option Program 2008-2014. DEVELOPMENT OF SHARE PRICES AND TURNOVER In the beginning of the fiscal period on January 3, 2011, the price of Stonesoft share was EUR 0.58 (0.70). At the end of the fiscal period on 30 June 2011 the price was EUR 0.60 (0.72). The highest price was EUR 0.65 (1.19) and the lowest EUR 0.51 (0.69). During the fiscal period the total turnover of Stonesoft shares amounted to MEUR 3.8 (17.0) and 6.5 (11.1) million shares, which is 10.3 (19.4)% of the total amount of the shares. Based on the share price at the end of the fiscal period, Stonesoft's market value was MEUR 38.0 (45.5). The company gave no notices in change of ownership during the fiscal period. ACQUISITIONS AND CHANGES IN GROUP STRUCTURE No acquisitions were made during the fiscal period and there were no changes in the Group structure. PERSONNEL At the end of the reporting period, the Group's personnel totalled 203 (192). AUTHORIZATIONS OF THE BOARD OF DIRECTORS The AGM decided on 13.4.2011 to authorize the Board of Directors of the company to decide about one or more share issues as well as the issuance of option and other special rights so that the total number of new shares may be 12 600 000 at the maximum. Based on the authorization the Board of Directors may decide on issuance of shares to the shareholders according to the shareholders' pre-emptive subscription rights as well as in a directed issuance of shares or stock options or other special rights in deviation from the shareholders' pre-emptive subscription 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 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 2012 AGM. The Board of Directors is not authorized to purchase the company's own shares. SHORT-TERM RISKS AND BUSINESS UNCERTAINTIES During the fiscal year 2011, 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. In addition, the recent political restlessness in North Africa and Middle East may have a negative impact on the company's business operations in these markets. Also insecurities related to public economies in the United States as well as in the European Union may have a negative effect on the public sector projects in these areas. The company has no risks related to the order book, because it normally can process incoming orders within a couple of work days. Stonesoft's risk management and its principles are discussed more extensively at the company website and in the Annual Report 2010. FUTURE OUTLOOK According to the research company Infonetics, the enterprise network equipment and software market is estimated to grow by 4% during 2011. Stonesoft's products meet the new security challenges brought by cloud services, virtualization and outsourcing of security. Advanced Evasion Techniques In 2010 Stonesoft announced it had discovered anew network security threat category, Advanced Evasion Techniques (AETs). As we have continued our research, this area has become an even more challenging problem than initially estimated. We have reported additional findings to CERT- FI, who is in charge of international vulnerability coordination. Due to wrong technology choices, many competitors seem to have great difficulties in amending their solutions to provide protection against AETs. Stonesoft estimates that there will be additional findings for years to come. In June 2011, the company introduced a tool which security experts can use to help their customers evaluate their own situation. The most efficient protection against the threat posed by advanced evasions techniques is provided by flexible software-based systems, which can detect advanced evasion techniques and are remotely updated and centrally managed. Stonesoft's network security solutions fulfill these criteria. The latest security breaches around the world have made many parties understand the importance of security and demand organizations to take additional measures to strengthen their security. Instead of speed or performance, the ability of security systems to protect organizations' critical data capital and systems has become increasingly important. Based on Stonesoft's view, the above mentioned issues will open new business opportunities for the company, have a positive effect on its net sales and profitability and strengthen its competitiveness and market position as general understanding and knowledge about advanced evasion techniques grow. In 2011, Stonesoft aims for faster-than-market growth of net sales and improved profitability. 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 and the relatively big impact of individual deals on the development of net sales and operating result. SUMMARY OF FINANCIAL STATEMENTS AND NOTES JANUARY 1 - JUNE 30, 2011 Basis of preparation The Interim Report has been prepared in accordance with the IAS 34 Interim Reports standard. The company has adopted certain new or revised IFRS standards and IFRIC interpretations at the beginning of the financial period as described in the Financial Statements for 2010. However, the adoption of these new and amended standards has not yet had an effect on the reported figures in practice. In other respects, the same accounting policies have been followed as in the Financial Statements for 2010. Key indicator calculations remain unchanged. The figures presented in this release are unaudited. Stonesoft Group Income Statement 4-6/2011 4-6/2010 1-6/2011 1-6/2010 1-12/2010 (1000 Euros) Net sales 6 506 5 060 13 015 11 216 24 341 Other operating income 279 219 398 460 847 Materials and services -862 -610 -1 941 -1 445 -3 640 Personnel expenses -4 007 -3 538 -8 038 -7 340 -14 744 Depreciation -124 -108 -248 -215 -437 Other operating expenses -2 540 -2 264 -4 762 -4 112 -9 052 Operating result -748 -1 240 -1 576 -1 436 -2 685 Financial income and expenses 53 21 236 172 217 Result before taxes -695 -1 219 -1 340 -1 264 -2 468 Taxes -62 -44 -93 -73 -221 Result for the accounting period -757 -1 263 -1 433 -1 336 -2 689 Other comprehensive income Exchange differences on translating foreign operations -3 37 -16 27 -15 Total other comprehensive income -3 37 -16 27 -15 Total comprehensive income -760 -1 226 -1 449 -1 310 -2 704 Basic earnings per share (EUR), continuing operations -0,01 -0,02 -0,02 -0,02 -0,04 Diluted earnings per share (EUR), continuing operations -0,01 -0,02 -0,02 -0,02 -0,04 Stonesoft Group Balance Sheet (1000 Euros) 30.6.2011 30.6.2010 31.12.2010 ASSETS Non-Current Assets Tangible assets 762 506 649 Intangible assets 186 116 112 Other investments 10 10 10 Total 958 632 771 Current assets Inventories 1 361 1 106 953 Trade and other receivables 7 169 5 699 10 106 Prepayments 64 101 69 Marketable securities 0 21 0 Cash and cash equivalents 9 260 11 487 8 016 Total 17 853 18 415 19 144 Total assets 18 811 19 047 19 915 EQUITY AND LIABILITIES Equity attributable to equity holders of the parent company Share capital 1 151 1 148 1 151 Issue of shares 0 0 0 Share premium account 76 602 76 871 76 603 Conversion differences -967 -910 -951 Reserve for invested unrestricted equity fund 4 751 4 404 4 751 Retained earnings -78 334 -75 654 -76 986 Total 3 202 5 859 4 567 Long-term liabilities Prepayments *) 3 022 2 589 2 976 Total 3 022 2 589 2 976 Short-term liabilities Trade and other payables 4 729 3 692 4 571 Prepayments *) 7 685 6 758 7 687 Tax liability 122 91 76 Provisions 52 59 37 Total 12 587 10 599 12 372 Total liabilities 15 609 13 188 15 348 Total equity and liabilities 18 811 19 047 19 915 *) Prepayments contain customers advance payment of support and maintenance contracts 10 707 9 346 10 663 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 1.1.2010 1 146 0 76 821 -936 0 -74 346 2 685 Comprehensive -1 income 0 0 0 27 0 -1 336 310 Share premium termination 0 0 0 0 0 0 0 Directed share issue 0 0 0 0 4 560 0 4 560 Transaction costs from equity 0 0 0 0 -170 0 -170 Stock options exercised 2 0 51 0 13 0 66 Stock option expenses 0 0 0 0 0 28 28 Shareholders' equity at 30.6.2010 1 148 0 76 871 -910 4 404 -75 654 5 859 Reserve Issue for invested Share of Share Conversion unrestricted Retained capital shares premium differences equity fund earnings Total Shareholders' equity at 1.1.2011 1 151 0 76 603 -951 4 751 -76 986 4 567 Comprehensive -1 income 0 0 0 -16 0 -1 433 449 Share premium termination 0 0 0 0 0 0 0 Directed share issue 0 0 0 0 0 0 0 Transaction costs from equity 0 0 0 0 0 0 -1 Stock options exercised 0 0 0 0 0 0 0 Stock option expenses 0 0 0 0 0 85 85 Shareholders' equity at 30.6.2011 1 151 0 76 602 -967 4 751 -78 334 3 202 Stonesoft Group Cash flow statement (1000 Euros) 1.1.-30.6.2011 1.1.-30.6.2010 1.1-31.12.2010 Cash flow from operating activities Operating Result -1 576 -1 436 -2 685 Adjustments Non-cash transactions 57 -65 58 Financial expenses -76 -5 -96 Financial incomes 313 282 464 Change in net working capital 3 079 2 423 481 Taxes paid -102 -73 -221 Total cash flow from operating activities 1 696 1 126 -1 999 Cash flow from investing activities Investments in tangible assets -323 -199 -537 Investments in intangible assets -111 -6 -30 Total cash flow investing activities -435 -205 -566 Cash flow from financing activities Proceeds from issue of share capital 0 4 391 4 391 Stock options exercised -1 65 146 Payments of financial leasing liabilities 0 0 0 Total cash flow from financing activities -1 4 456 4 537 Change in cash and cash equivalents Cash and cash equivalents at beginning of period 8 016 6 210 6 210 Conversion differences -17 70 -17 Changes in the market value of investments 0 -148 -148 Total cash and cash equivalents at end of period *) 9 260 11 509 8 016 *) Total cash and cash equivalents at end of the period contains pledged securities 467 498 477 Stonesoft Group Geographical segments 1.1.-30.6.2011 1.1.-30.6.2010 1.1.-31.12.2010 (1000 Euros) Net sales Europe 7 726 6 996 14 599 Emerging Markets 3 290 1 849 4 255 Americas 1 641 2 103 4 525 APAC 359 268 961 Total net sales 13 015 11 216 24 341 Operating profit Europe -818 -535 -661 Emerging Markets -106 35 -169 Americas -472 -799 -1 479 APAC -179 -137 -375 Total operating profit -1 576 -1 436 -2 685 Stonesoft Group Contingent liabilities 1.1.-30.6.2011 1.1.-30.6.2010 1.1.-31.12.2010 (1000 Euros) Contingent off-balance sheet Non-cancellable other leases 2 024 2 245 2 327 Contingent liabilities for the Company 171 66 94 Stonesoft Group Quarterly development Q2 / Q1 / Q4 / Q3 / Q2 / Q1 / (Euro Millions) 2011 2011 2010 2010 2010 2010 2010 Software 0,4 0,4 0,5 0,4 0,3 0,3 1,5 Security appliances 2,9 3,2 3,9 2,5 1,9 2,9 11,2 Services 3,2 3,0 3,1 2,8 2,8 2,8 11,6 Other products 0,0 -0,1 0,0 -0,1 0,1 0,1 0,0 Net sales continuing operations 6,5 6,5 7,5 5,6 5,1 6,2 24,3 Change-% from previous year 29 6 15 -6 -16 21 3 Sales margin 5,6 5,4 6,2 4,7 4,4 5,3 20,7 Sales margin % 87 83 83 84 88 86 85 Operative expenses 6,7 6,4 7,1 5,4 5,9 5,7 24,2 Operating profit (EBITA) -0,7 -0,8 -0,7 -0,6 -1,2 -0,2 -2,7 % of net sales -12 -13 -9 -10 -25 -3 -11 Result before taxes -0,7 -0,6 -0,8 -0,4 -1,2 0,0 -2,5 % of net sales -11 -10 -11 -7 -24 -1 -10 Stonesoft Group Key ratios 1.1.-30.6.2011 1.1.-30.6.2010 1.1.-31.12.2010 (1000 Euros) Net sales 13 015 11 216 24 341 Net sales change-% 16 1 3 Operating result -1 576 -1 436 -2 685 % of net sales -12 -13 -11 Operating result before taxes -1 340 -1 264 -2 468 % of net sales -10 -11 -10 ROE - %, annualized -74 -63 -74 ROI - %, annualized -64 -58 -65 Equity ratio-% 40 60 49 Net gearing -2,89 -1,96 -1,75 Total Assets 18 811 19 047 19 915 Capital expenditure 435 205 566 Capital disposals 0 0 0 R&D costs 3 006 2 879 5 639 % of net sales 23 26 23 Number of employees (weighted average) 199 185 191 Number of employees (end of the period) 203 192 201 Share Specific Ratios Earnings per share -0,02 -0,02 -0,04 Equity per share 0,05 0,09 0,07 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 (Profit before taxes - income Return on equity (ROE) % = taxes) x 100 / Shareholders' equity + minority interest (average) (Profit before extraordinary Return on invested capital items+interest and other financial (ROI)% = expenses) x100 / Balance sheet total - non-interest bearing debt (average) (Equity + minority interest) x Equity ratio % = 100 / Balance sheet total - advances received Interest bearing net debt - cash in hand and on deposit - Net gearing = marketable securities / Equity + minority interest Profit before taxes - minority Earning per share (EPS) = interest - income taxes / Average number of shares adjusted for dilutive effect of options Equity per share = Equity / Number of shares at end of period 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 12 August, 2011 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#1538052] |
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