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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Defenx Plc | LSE:DFX | London | Ordinary Share | GB00BYNF4J61 | ORD GBP0.018 |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 1.60 | 0.50 | 2.70 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From Apr 2019 to Apr 2024
TIDMDFX
RNS Number : 9012R
Defenx plc
27 September 2017
27 September 2017
Defenx PLC
("Defenx" or the "Company" or the "Group")
Unaudited Interim Results for the six months ended 30 June 2017
Defenx PLC (AIM:DFX), the cyber-security software group, is pleased to announce its unaudited interim results for the six months ended 30 June 2017.
Financial Highlights
-- Revenue up 35% to EUR3.13 million (1H16: EUR2.32 million) driven by channel partner wins and the impact of Memopal. Organic revenue growth, excluding the contribution from Memopal, was 21%. Underlying revenue growth, excluding the impact of both Memopal and sales incentives, was 45%.
-- Mobile continues to drive Security segment sales while PC Security Suite sales were reduced by one-off incentives ahead of the launch of our new in-house product.
-- Backup and protection segment revenues expected to show growth in the second half and into 2018 driven by emerging awareness of the requirements of the EU General Data Protection Regulation ("GDPR").
-- Operating loss (before transaction costs) of EUR1.31 million (1H16: EUR296,000) reflecting the front-loading of full year marketing contributions into the first half of the year to drive sales that are seasonally weighted into the second half of the year.
Operating Highlights
-- Strategic partnership with BV-Tech SpA ("BV-Tech"), to provide access to government, public administration & corporate customers, and acquisition of an encrypted voice & messaging software platform for EUR2.67 million in new Defenx shares.
-- Two new channel partners signed up in 2017, which together with new partners from 2016, contributed EUR1.3 million in the interim period with more expected in the second half of 2017.
Post Period End
-- Raised GBP2.99 million by way of a GBP1.49 million equity placing, GBP250,000 subscription by BV-Tech, both at GBP1.60 per share, and a GBP1.25 million issue of 10% secured convertible bonds in August 2017. The net proceeds after expenses amounted to EUR2.94 million with BV-Tech's current interest in the capital of Defenx now 28.1%.
-- Master Services Agreement ("MSA") signed with BV-Tech allowing them to tender for software development work and providing Defenx with additional development expertise.
Commenting on the results, Andrea Stecconi, Chief Executive Officer, said:
"I am pleased with the progress that the Company has made during the first half of 2017 and that our financial results were in line with management's expectations.
As we have previously indicated, our business is heavily seasonal with costs weighted towards the first half of the year and revenues towards the second half. As we invest in new product developments and move into the corporate market in collaboration with BV-Tech there may be an adverse effect on revenues and profits in the short term as we build for the future.
However, we remain confident that this is the right strategy to ensure that we maximise the opportunities available to us and maximise revenues and profits in the medium and long term."
Enquiries
Defenx PLC Andrea Stecconi - Chief Executive Officer Philipp Prince - Chief Financial Officer 020 3769 0687 Strand Hanson Limited (Nominated and Financial Advisor) Angela Hallett / Richard Tulloch / James Bellman 020 7409 3494 WH Ireland (Joint-Broker) Adrian Hadden / Jessica Cave 020 7220 1666 Beaufort Securities (Joint-Broker) Jon Belliss / Elliot Hance 020 7382 8300 IFC Advisory (Financial PR and IR) Graham Herring / Tim Metcalfe / Heather Armstrong 020 3053 8671
The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014.
About Defenx
Founded in 2009, Defenx is a fast-growing and profitable cyber-security software group that offers a range of Security, Backup and Protection solutions for smartphones, PCs and networks.
A channel sales strategy, focused on flexibility, white-labelling and profit-share arrangements with distributors, telecoms companies and hardware manufacturers, enables Defenx to compete with established industry incumbents. Defenx's global distribution partners currently include 3Italia, Türk Telecom and Western Digital, amongst others including telecoms operators, systems integrators and original equipment manufacturers.
Defenx was admitted to trading on AIM on 3 December 2015, acquired Memopal Srl in August 2016 and announced a strategic partnership with BV-Tech SpA, an Italian IT solutions provider, in April 2017. These have allowed the Company to diversify its product portfolio and grow its customer base by adding proprietary cloud backup and encryption technology as well as new channel partners.
Website
www.defenx.com/company/investors
Chairman's Statement
In this interim period we have sought to focus on broadening our product portfolio and customer base.
The major step on this journey was the announcement of our long-term strategic partnership with BV-Tech, a leading independent corporate IT and cyber security solutions provider in Italy, announced on 11 April 2017. The stated goal of this partnership, was and continues to be to strengthen both our product portfolio and reach into the corporate market.
Our various teams have since spent considerable time together to understand the available markets, their needs and to plan our strategies to take advantage of the opportunities. This is taking time, particularly that of senior management, with a knock-on effect on our speed of delivery.
We have now welcomed BV-Tech's two nominated directors to the Board. Raffaele Boccardo, the founder and CEO of BV-Tech, was appointed as a Non-Executive Director and Deputy Chairman in August. Franco Francione, the CFO of BV-Tech, with over 30 years' experience in finance and administration, was appointed as a Non-Executive Director in May. These appointments bring the Board up to six members: two executives, two independents and two nominated representatives of BV-Tech.
Also in August, we successfully raised GBP2.99 million by way an equity placing, subscription and issue of secured convertible bonds. This included follow-on investment by existing institutional shareholders, Hargreave Hale (now part of the Canaccord Genuity Group) and Guinness Asset Management, together with BV-Tech. BV-Tech now holds 28.1% of Defenx's ordinary shares.
With the announcement today of the Master Services Agreement entered into with BV-Tech and approved as a related party transaction under the AIM Rules, we now have all of the foundations in place for our strategic partnership.
Anthony Reeves
Chairman
26 September 2017
Chief Executive Officer's review
Markets
Our market is large and with the continuation of high profile cyber-attacks, most notably ransomware, which is increasingly becoming the weapon of choice for cyber criminals, cyber security is an ever increasing focus for many. While mobile security remains the fastest growing segment of the market, traditional PC devices, particularly significant installed bases in the corporate environment, represent a significant opportunity for Defenx. This re-enforces our strong belief that investing in corporate versions of our products is the right strategy.
Awareness of the GDPR, to be introduced in May 2018, is finally spreading into smaller corporate and SME markets with increasingly regular requests for information, training and solutions from our channel partners.
Channel partners
As previously announced, we added eight new channel partners during 2016 with a further two during the interim period.
Multi Time Srl ("Multi Time") is a field marketing agency serving many well-known consumer brands such as Bose, Canon and LG. Multi Time will be promoting and selling Defenx Mobile Security Suite, SOS and Parental Control apps to parents, teachers and students using its field force of 28,000 sales people across Italy.
Arnavalle Telecomunicaciones SL ("Arnavalle"), based in Spain, is a distributor of software and network hardware, primarily to the telecoms industry in Europe, Latin and South America and selected territories in Asia, including Thailand, Malaysia, Philippines and Australia. Arnavalle is now distributing Defenx Security and Backup solutions.
Combined, total orders from these new channel partners total EUR2.2 million including EUR1.3 million in the interim period. We anticipate further orders this year as Defenx products become established in their sales channels.
Other partners, in particular those requiring white labelling and back-end integration, are taking longer than initially anticipated to bring on stream. However, we remain confident they will generate future sales and so continue to invest in these relationships.
We are also continuing to build our UK-based sales team with a new VP sales with corporate expertise appointed to grow revenues and diversify country risk. We aim to launch a 'Family Protection Bundle' comprising Mobile Security Suite and Memopal Cloud Backup with a UK channel partner in October 2017.
Our sales and technical teams are making good progress with BV-Tech. Together with the Software Distribution Contract announced on 22 June 2017 and MSA, announced this morning, we look forward to working together to develop and sell new products from the final quarter of 2017.
Products
Our in-house PC Security Suite for Windows clients, for which we raised additional funding last autumn, is now in beta testing. We have chosen to launch the Windows client and network versions together in early 2018 to maximise the sales opportunities. Accordingly, we have incentivised our channel partners to continue buying our existing PC Security Software ahead of the migration to our new products.
Following the fund raising in August, we have started work on new products, particularly those addressing GDPR related issues, including encrypted cloud backup. The signing of the MSA with BV-Tech will allow us, subject to completing the tender processes set out in the MSA, to draw on their expertise in developing such products.
Outlook
The Board is satisfied with year-to-date trading. As explained in the trading update announced on 22 June 2017, our business continues to be heavily seasonal with the majority of billings falling towards the end of the year, whereas certain costs, notably marketing contributions, are higher in the first half of the year.
In this context, the full year revenue outcome is dependent on when a small number of high value contracts start and the treatment of the resultant billings under our revenue recognition policy. This may have an adverse effect both on our revenue and profits for the full year.
However, the Board remains confident that Defenx's diversification into the corporate market, supported by BV-Tech, will yield significant profitable growth over the medium term.
Andrea Stecconi
Chief Executive Officer
26 September 2017
Financial Review
Key performance indicators
Hot Features
Premium
1H17 1H16 % change
Revenue EURm 3.13 2.32 35.0%
Revenue growth % 35.0% 72.7%
Operating loss (before transaction
costs) EURm (1.31) (0.30) 336.7%
Operating margin (before transaction
costs) % -41.9% -12.8%
Loss per share EUR -0.097 -0.075 29.3%
Operating cash outflow EURm (0.26) (0.45) -42.2%
Free cash outflow (after capitalised
development costs) EURm (2.06) (1.18) 74.6%
Revenue
Group revenue grew 35% to EUR3.13 million in the first half compared with the same period in 2016 (1H16: EUR2.32 million), driven by channel partner wins and the impact of Memopal. On an organic basis excluding Memopal, the acquisition of which completed after the prior interim period, revenue growth was 21%.
Mobile revenues continued to drive Security segment sales while PC Security Suite sales were reduced by one-off incentives offered ahead of the launch of our new in-house products in 2018. These incentives, which totalled EUR560,000, have been taken against revenue.
Underlying revenue growth of 45% was better than management expectations driven by both volume and Average Revenue per User ("ARPU") improvements.
Backup segment revenues, predominantly generated by Memopal Cloud Backup, are growing steadily. With GDPR the key demand driver, the full potential will only be realised with the release of our Encrypted Cloud Backup in 2018. Protection segment revenues are now expected in the second half following the official launch of Parental Control.
A detailed assessment of the impact resulting from the application of IFRS 15 is on-going. In light of emerging market practice, the Board is considering whether it would be in the interests of shareholders to adopt early and report the 2017 full-year results under IFRS 15, specifically to avoid uncertainty between actual results and market forecasts. The Board will provide further guidance before the year end.
Gross profit
The gross profit margin of 69.2% (1H16: 81.5%) reflects the one-off impact of PC Security Suite discounting; additional Cloud Backup storage, connectivity and labour costs of sales; and amortisation, charged on a straight-line basis independent of sales seasonality. Amortisation of EUR0.87 million (1H16: EUR0.41 million) reflects a full period's charge for our Cloud Backup IP and the launch of Parental Control. As in previous years, we expect gross profit margins to increase in the second half of the year.
Expenses
The Group now reports operating expenses by department, being sales & marketing; research, development & operations; and administration, with transaction costs separately itemised. Analysed by their nature (see note 6), marketing, staff and AIM-related costs continue to account for the majority of operating expenses.
While sales seasonality results in a majority of Group revenue falling into the second half, the opposite is true for marketing contributions which are incurred in the first half to front-load the benefit over the whole year. Total marketing expenses were EUR2.23 million in the period (1H16: EUR1.48 million), reflecting this seasonality and the launch of two new channel partners in June.
The increase in staff costs to EUR599,000 (1H16: EUR327,000) reflects Memopal's staff costs (included in the period for the first time) and 2017 salary rises.
The increase in AIM-related expenses to EUR113,000 (1H16: EUR69,000) reflects the appointment of our joint-broker last autumn, increased financial PR activity and the annual increase in retainer fees agreed upon admission to AIM.
Loss for the period
The operating loss (before transaction costs) of EUR1.31 million (1H16: EUR296,000) reflects the impact of the seasonal mismatch between sales (second half weighted) and marketing contributions (first half weighted) [amplified] by the underlying growth in the business (see note 5).
Accordingly, the Board also reviews trailing 12-month results to monitor performance. The operating profit (before transaction costs) for the 12 months ended 30 June 2017 was EUR825,000 (12 months ended 30 June 2016: EUR566,000).
The net loss of EUR1.16 million for the period (1H16: EUR458,000) equates to an interim loss per share of EUR0.097 (1H16: EUR0.075) undiluted and EUR0.095 (1H16: EUR0.066) diluted.
Cash flow
The net cash outflow from operating activities during the period was EUR256,000 (1H16: EUR449,000) reflecting the operating loss, partially offset by a EUR373,000 reduction in working capital, and the payment of interest and tax during the period.
The cash outflow from investing activities reflects continued investment in our software assets, which accelerated following the placing and subscription in October 2016. During the period, capitalised software development costs were EUR1.81 million (1H16: EUR730,000). The consideration for the encrypted voice & messaging software platform acquired from BV-Tech was settled in shares and is therefore not shown under investing activities.
Free cash outflow, defined as the net cash flow from operating activities less internally capitalised development costs, was EUR2.06 million (1H16: EUR1.18 million).
The net cash inflow from financing activities reflects the EUR1.15 million subscription by BV-Tech and conversion of deferred shares in April 2017 less the partial repayment of the vendor loans in respect of the acquisition of Memopal.
Intangible assets
The net book value of capitalised software development costs increased to EUR10.2 million (FY16: EUR6.54 million) with the additions reflecting work on Defenx Security Suite for PC (EUR1.81 million) and the acquisition of the encrypted voice & messaging software platform from BV-Tech (EUR2.67 million).
Having assessed the sales prospects for our software products, the Board continues to be satisfied that carrying value of these intangible assets is appropriate.
Working capital
Net trade receivables fell to EUR4.19 million (FY16: EUR5.33 million) representing 53% of revenue for the 12 months ended 30 June 2017 (FY16: 75%). The Board recognises that this level of trade receivables is a matter of investor interest and maintains careful oversight of credit control, collections and bad debts, although extended terms are common in Southern Europe, the Middle East and Africa.
Financing
Gross debt, including vendor loans, was EUR1.66 million (FY16: EUR1.95 million) at the period end (see note 10). Cash and cash equivalents at the period end were EUR0.22 million (FY16: EUR1.18 million) resulting in net debt of EUR1.44 million (FY16: EUR774,000), equivalent to a debt-to-equity ratio of 11.4% (FY16: 8.0%) compared to the Board imposed limit of 25%. The weighted average interest rate payable for the period was 10.2% (1H16: nil).
Defenx completed a fundraising after the period end in August 2017, raising gross proceeds of GBP2.99 million by way of a GBP1.49 million equity placing, GBP250,000 subscription by BV-Tech, both at GBP1.60 per share, and a GBP1.25 million issue of secured convertible bonds. Interest of 10% per annum is payable quarterly on the bonds. The net proceeds after expenses amounted to EUR2.94 million.
These funds are already being invested in our product portfolio and will be deployed to broaden the development and operations teams.
Philipp Prince
Chief Financial Officer
26 September 2017
Unaudited Interim Condensed Consolidated Statement of Comprehensive Income
6 months 6 months Year ended
ended ended
30 June 30 June 31 December
2017 2016 2016
Unaudited Unaudited Audited
Note EUR EUR EUR
Revenue 4 3,133,764 2,320,483 7,088,162
Cost of sales 6 (965,210) (428,329) (1,240,462)
---------------------- ---------------------- ----------------------
Gross profit 2,168,554 1,892,154 5,847,700
Sales & marketing expenses 6 (2,410,218) (1,674,371) (2,587,518)
Research, development
& operations' expenses 6 (451,287) (86,228) (469,545)
Administrative expenses 6 (618,861) (427,944) (950,346)
----------------------- ----------------------- -----------------------
Operating expenses before
transaction costs 3,480,366 2,188,543 4,007,409
--------------------- --------------------- ---------------------
Operating (loss)/profit
before transaction costs (1,311,812) (296,389) 1,840,291
Transaction costs 6 (101,321) (153,792) (188,590)
--------------------- --------------------- ---------------------
(Loss)/profit from operations (1,413,133) (450,181) 1,651,701
Finance income 194 - 316
Finance expense (68,433) (960) (62,165)
---------------------- ---------------------- ----------------------
(Loss)/profit before
tax (1,481,372) (451,141) 1,589,852
Income tax credit/(expense) 324,929 (7,157) (368,660)
---------------------- ---------------------- ----------------------
(Loss)/profit for the
period (1,156,443) (458,298) 1,221,192
Attributable to:
Equity holders of the
parent (1,146,429) (458,298) 1,232,656
Non-controlling interests (10,014) - (11,464)
---------------------- ---------------------- ----------------------
Total comprehensive (loss)/profit
for the period (1,156,443) (458,298) 1,221,192
=========== =========== ===========
(Loss)/earnings per
share
Basic 7 (EUR0.097) (EUR0.075) EUR0.185
Diluted 7 (EUR0.095) (EUR0.066) EUR0.169
Unaudited Interim Condensed Consolidated Statement of Financial Position
30 June 30 June 31 December
2017 2016 2016
Unaudited Unaudited Audited
Note EUR EUR EUR
Non-current assets
Property, plant and
equipment 124,053 - 132,401
Intangible assets 8 11,593,208 2,929,451 7,979,534
---------------------- ---------------------- ----------------------
11,717,261 2,929,451 8,111,935
---------------------- ---------------------- ----------------------
Current assets
Trade and other receivables 9 4,386,781 3,628,996 5,503,927
Cash and short-term
deposits 217,632 154,855 1,177,644
---------------------- ---------------------- ----------------------
4,604,413 3,783,851 6,681,571
---------------------- ---------------------- ----------------------
Total assets 16,321,674 6,713,302 14,793,506
=========== =========== ===========
Current liabilities
Trade and other payables (587,462) (542,465) (1,393,382)
Deferred revenue (385,255) (299,508) (461,447)
Loans and borrowings 10 (1,416,888) - (1,437,334)
Deferred consideration (380,856) - -
Income taxes payable (398,437) (449,209) (772,851)
---------------------- ---------------------- ----------------------
(3,168,898) (1,291,182) (4,065,014)
---------------------- ---------------------- ----------------------
Non-current liabilities
Deferred revenue (234,441) (969) (128,812)
Loans and borrowings 10 (241,742) - (514,793)
Deferred consideration - - (380,856)
Deferred tax liabilities (47,391) (20,975) (53,091)
---------------------- ---------------------- ----------------------
(523,574) (21,944) (1,077,552)
---------------------- ---------------------- ----------------------
Total liabilities (3,692,472) (1,313,126) (5,142,566)
=========== =========== ===========
Net assets 12,629,202 5,400,176 9,650,940
=========== =========== ===========
Capital and reserves
Called up share capital 11 263,769 145,004 196,549
Share premium 11 9,582,975 4,051,322 5,542,365
Merger reserve 1,641,622 695,212 1,641,622
Share based payment
reserve 183,278 106,375 156,403
Retained earnings 946,788 402,263 2,093,217
---------------------- ---------------------- ----------------------
Attributable to equity
holders of the parent 12,618,432 5,400,176 9,630,156
Non-controlling interests 10,770 - 20,784
---------------------- ---------------------- ----------------------
Total equity 12,629,202 5,400,176 9,650,940
=========== =========== ===========
Unaudited Interim Condensed Consolidated Statement of Changes in Equity
Share
Share based
Share premium Merger payment Retained Non-controlling
capital account reserve reserve earnings Total interests Total
EUR EUR EUR EUR EUR EUR EUR EUR
As at 1
January
2017 196,549 5,542,365 1,641,622 156,403 2,093,217 9,630,156 20,784 9,650,940
Share based
payments - - - 26,875 - 26,875 - 26,875
Loss for
the period - - - - (1,146,429) (1,146,429) (10,014) (1,156,443)
Shares
issued 67,220 4,040,610 - - - 4,107,830 - 4,107,830
-------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
As at 30
June 2017
(unaudited) 263,769 9,582,975 1,641,622 183,278 946,788 12,618,432 10,770 12,629,202
========== ========== ========== ========== ========== ========== ========== ==========
As at 1
January
2016 145,004 4,051,322 695,212 60,343 860,561 5,812,442 - 5,812,442
Share based
payments - - - 46,032 - 46,032 - 46,032
Loss for
the period - - - - (458,298) (458,298) - (458,298)
-------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
As at 30
June 2016
(unaudited) 145,004 4,051,322 695,212 106,375 402,263 5,400,176 - 5,400,176
========== ========== ========== ========== ========== ========== ========== ==========
As at 1
January
2016 145,004 4,051,322 695,212 60,343 860,561 5,812,442 - 5,812,442
Profit for
the year - - - - 1,232,656 1,232,656 (11,464) 1,221,192
Acquisition
of Memopal
Srl 13,322 - 946,410 - - 959,732 32,248 991,980
Shares
issued 38,223 1,491,043 - - - 1,529,266 - 1,529,266
Share based
payments - - - 96,060 - 96,060 - 96,060
-------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
As at 31
December
2016
(audited) 196,549 5,542,365 1,641,622 156,403 2,093,217 9,630,156 20,784 9,650,940
========== ========== ========== ========== ========== ========== ========== ==========
Unaudited Interim Condensed Consolidated Cash Flow Statement
6 months 6 months Year ended
ended 30 ended 30 31 December
June 2017 June 2016 2016
Unaudited Unaudited Audited
EUR EUR EUR
Cash flows from operating
activities
Loss for the period after
taxation (1,156,443) (458,298) 1,221,192
Income tax (credit)/expense (324,929) 7,157 368,660
---------------------- ---------------------- ----------------------
Loss before tax (1,481,372) (451,141) 1,589,852
Adjustments to reconcile profit
before tax to net cash flows:
Net interest expense 68,238 960 61,849
Depreciation of property,
plant and equipment 22,491 - 22,482
Amortisation of intangible
assets 865,267 407,949 1,009,849
Share based payments expense 26,875 46,032 96,060
---------------------- ---------------------- ----------------------
Operating cash flows before
movements in working capital (498,501) 3,800 2,780,092
(Increase)/decrease in
trade receivables 1,142,198 378,158 (2,297,367)
(Increase)/decrease in
other receivables 4,142 (701,550) 857,061
Increase/(decrease) in
trade and other payables (801,243) (113,343) 847,193
Increase/(decrease) in
deferred revenue 28,279 (14,156) 191,081
---------------------- ---------------------- ----------------------
373,376 (450,891) (402,032)
Interest received 194 - 316
Interest paid (68,433) (960) (55,175)
Tax paid (62,565) (963) (924)
---------------------- ---------------------- ----------------------
Net cash flow from operating
activities (255,929) (449,014) 2,322,277
Investing activities
Purchase of property, plant
and equipment (4,354) - (22,482)
Development costs - internally
developed (1,805,225) (730,000) (3,988,821)
Acquisition of intangible
software assets - - (900,000)
Acquisition of a subsidiary,
net of cash acquired - - 353,788
---------------------- ---------------------- ----------------------
Net cash used in investing
activities (1,809,579) (730,000) (4,557,515)
Financing activities
Net proceeds from issue
of share capital 1,396,614 - 1,529,265
Proceeds from borrowings 5,408 - 647,533
Repayment of borrowings (253,902) - (260,525)
---------------------- ---------------------- ----------------------
Net cash from financing
activities 1,148,120 - 1,916,273
---------------------- ---------------------- ----------------------
Net increase in cash and
cash equivalents (917,388) (1,179,014) (318,965)
Cash and cash equivalents
at beginning of period 1,014,904 1,333,869 1,333,869
---------------------- ---------------------- ----------------------
Cash and net cash equivalents
at end of period 97,516 154,855 1,014,904
=========== =========== ===========
Notes to the Unaudited Interim Condensed Consolidated Financial Statements
1. General information
Defenx PLC is a public limited company incorporated in England and Wales, registration number 08993398, which is quoted on AIM. Its principal activity is the design and sale of software solutions for the mobile, PC and network that provide privacy and security for an online world. Management and control is exercised from the UK and its main countries of operation are Italy and Switzerland.
2. Basis of preparation
The unaudited interim condensed consolidated financial statements for the six months ended 30 June 2017 have been prepared in accordance with IAS 34 Interim Financial Reporting and do not constitute statutory financial statements. The unaudited interim condensed consolidated financial statements do not include all the information and disclosures required for a complete set of IFRS financial statements, and should be read in conjunction with the Group's annual financial statements as at 31 December 2016. However, selected explanatory notes are included to explain events and transactions that are significant to an understanding of the changes in the Group's financial position and performance since the last financial statements.
These unaudited interim financial statements were authorised for issue by Defenx's board of directors on 26 September 2016.
3. Accounting policies
There have been no changes to the accounting policies and methods of computation in the unaudited interim condensed consolidated financial statements for the six months ended 30 June 2017 as compared with the Group's most recent annual financial statements as at 31 December 2016.
IFRS 15 Revenue from contracts with customers, is effective for annual periods beginning on or after 1 January 2018, with early adoption permitted. It establishes a comprehensive framework for determining whether, how much and when revenue should be recognised and it replaces existing revenue recognition guidance, including IAS 18 Revenue. Depending on the contractual arrangements in place, application of the new standard may change the amount of revenue recognised on a contract and/or its timing, and the timing of the recognition of contract costs compared with current accounting policies.
An overview of the key considerations in determining the impact of IFRS 15 was presented in the Group's consolidated 2016 results. IFRS 15 has not yet been formally adopted by the European Union. The directors are currently performing a detailed assessment of the impact resulting from the application of IFRS 15 and are not yet able to provide specific guidance. The directors are also considering whether it would be in the interests of shareholders to adopt early and report the 2017 full-year results under IFRS 15, specifically to avoid uncertainty between actual results and market forecasts.
4. Segmental analysis
The Group operates as a single division selling three main categories of product:
-- Security - anti-malware software protection for mobile, PC and network devices
-- Protection - client, server and web based applications to monitor, manage and secure the online activities of individuals, families and corporate employees
-- Backup - Cloud based backup and synchronisation solutions to protect data and securely share it
Accordingly, the Group has a single reportable segment. This is consistent with the internal reporting provided to the chief operating decision-maker, identified as the management team including the Chief Executive Officer and the Chief Financial Officer.
Revenue by product platform for the Group is as follows:
6 months 6 months Year ended
ended 30 ended 30 31 December
June 2017 June 2016 2016
Unaudited Unaudited Audited
EUR EUR EUR
Revenue by product category
Security 2,793,915 2,268,912 6,835,265
Backup 324,832 - 198,394
Other 15,017 51,571 54,503
---------------------- ---------------------- ----------------------
3,133,764 2,320,483 7,088,162
=========== =========== ===========
Geographical segments
The Group is managed centrally and accordingly the Group does not analyse costs or assets by geographical region. Revenue by customer location is as follows:
6 months 6 months Year ended
ended 30 ended 30 31 December
June 2017 June 2016 2016
Unaudited Unaudited Audited
EUR EUR EUR
Revenue by geographic market (customer location)
Europe (EU including
the UK) 2,520,729 1,890,044 4,697,889
Europe (Non-EU) 613,035 413,113 2,342,006
Other - 17,326 48,267
---------------------- ---------------------- ----------------------
3,133,764 2,320,483 7,088,162
=========== =========== ===========
Non-current assets (capitalised development costs) by product segment for the Group are as follows:
6 months 6 months Year ended
ended 30 ended 30 31 December
June 2017 June 2016 2016
Unaudited Unaudited Audited
EUR EUR EUR
Non-current assets by
product category
Security 5,815,636 2,546,949 4,102,542
Backup 2,381,200 - 2,655,226
Protection 3,267,092 - 1,130,000
Other 253,333 382,500 224,167
----------------------- ---------------------- ----------------------
11,717,261 2,929,449 8,111,935
============ =========== ===========
5. Seasonality
The Group's revenue generated by and marketing contributions paid to channel partners are subject to seasonal trends.
The larger proportion of the annual marketing contributions arise in the first half of the year to support channel partners who in turn generate higher sales in the second half of the year driven by the back-to-school market, annual hardware release cycles and Christmas trading. This will typically lower revenues and profits for the first half of the year. The Group seeks to mitigate the seasonal impact by incentivising sales in the first half of the year.
For the 12 months ended 30 June 2017, Group revenue was EUR7.90m (12 months ended 30 June 2016: EUR5.47m) and marketing contributions were EUR2.97m (12 months ended 30 June 2016: EUR2.13m).
6. Loss/profit from operations
6 months 6 months Year ended
ended ended 31 December
30 June 30 June 2016
2017 2016 Audited
Unaudited Unaudited
The operating loss is EUR EUR EUR
stated after charging:
Cost of sales
Amortisation of intangible
assets 865,267 407,949 1,009,849
=========== =========== ===========
Sales, marketing and
administrative expenses
Marketing contributions 2,232,043 1,483,423 2,223,550
Staff costs 598,993 327,424 942,895
Auditors' remuneration
- audit services 16,567 20,100 43,179
Auditors' remuneration
- non-audit Services 1,877 1,915 13,456
Share based payment expense 26,875 46,032 96,060
Bad debt expense 104,289 753 (74,112)
Lease payments - land
and buildings 52,397 17,451 62,053
Net foreign exchange
losses/(gains) 15,995 23,313 (21,061)
AIM-related expenses 113,254 69,194 168,392
=========== =========== ===========
Transaction costs
Costs in respect of the
acquisition of
Memopal Srl - 153,792 188,590
Legal & professional 101,321 - -
fees in respect of the
BV-Tech SpA strategic
partnership
=========== =========== ===========
7. Loss/earnings per share (EPS)
Basic EPS amounts are calculated by dividing the profit for the period attributable to ordinary equity holders of Defenx PLC by the weighted average number of Ordinary Shares outstanding during the period.
Diluted EPS amounts are calculated by dividing the profit attributable to ordinary equity holders of Defenx PLC by the weighted average number of Ordinary Shares outstanding during the period plus the weighted average number of Ordinary Shares that would be issued on conversion of all the dilutive deferred shares, the exercise of options and crystallisation of the contingent share consideration.
The following reflects the income and share data used in the basic and diluted EPS computations:
6 months 6 months Year ended
ended ended 31 December
30 June 30 June 2016
2017 2016 Audited
Unaudited Unaudited
EUR EUR EUR
(Loss)/profit attributable
to ordinary equity holders
of Defenx PLC for basic
and adjusted EPS (1,146,429) (458,298) 1,232,656
=========== =========== ===========
Weighted average number
of Ordinary Shares for
basic EPS 11,776,694 6,098,912 6,674,406
Effect of:
- dilution from deferred
shares - 300,000 300,000
- dilution from share
options and warrants 72,081 526,614 62,245
- contingent shares on
acquisition of Memopal
Srl 238,035 - 238,035
---------------------- ---------------------- ----------------------
Weighted average number
of Ordinary Shares for
basic earnings per share
adjusted for the effect
of dilution 12,086,810 6,925,526 7,274,686
=========== =========== ===========
8. Intangible Assets
Goodwill Development Customer Total
costs relationships
EUR EUR EUR EUR
Cost
At 1 January 2017 1,139,229 8,133,151 353,933 9,626,313
Additions -
internally
developed - 1,805,225 - 1,805,225
Additions -
purchased - 2,673,716 - 2,673,716
---------------------- ---------------------- ---------------------- ----------------------
At 30 June 2017 1,139,229 12,612,092 353,933 14,105,254
=========== =========== =========== ===========
Accumulated
amortisation
At 1 January 2017 - 1,597,622 49,157 1,646,779
Amortisation
charge - 806,278 58,989 865,267
--------------------- ---------------------- ---------------------- ----------------------
At 30 June 2017
(unaudited) - 2,403,900 108,146 2,512,046
=========== =========== =========== ===========
Net book value
At 30 June 2017
(unaudited) 1,139,229 10,208,192 245,787 11,593,208
=========== =========== =========== ===========
Cost
At 1 January 2016 - 3,244,330 - 3,244,330
Additions -
internally
developed - 730,000 - 730,000
---------------------- ---------------------- ---------------------- ----------------------
At 30 June 2016 - 3,974,330 - 3,974,330
=========== =========== =========== ===========
Accumulated
amortisation
At 1 January 2016 - 636,930 - 636,930
Amortisation
charge - 407,949 - 407,949
--------------------- ---------------------- ---------------------- ----------------------
At 30 June 2016
(unaudited) - 1,044,879 - 1,044,879
=========== =========== =========== ===========
Net book value
At 30 June 2016
(unaudited) - 2,929,451 - 2,929,451
=========== =========== =========== ===========
Cost
At 1 January 2016 - 3,244,330 - 3,244,330
Additions -
internally
developed - 3,988,821 - 3,988,821
Additions -
purchased - 900,000 - 900,000
Arising on
business
combinations 1,139,229 - 353,933 1,493,162
---------------------- ---------------------- ---------------------- ----------------------
At 31 December
2016 1,139,229 8,133,151 353,933 9,626,313
=========== =========== =========== ===========
Accumulated
amortisation
At 1 January 2016 - 636,930 - 636,930
Amortisation
charge - 960,692 49,157 1,009,849
--------------------- ---------------------- ---------------------- ----------------------
At 31 December
2016 (audited) - 1,597,622 49,157 1,646,779
=========== =========== =========== ===========
Net book value
At 31 December
2016 (audited) 1,139,229 6,535,529 304,776 7,979,534
=========== =========== =========== ===========
The intangible assets booked represent qualifying expenditure on the development of software for resale less accumulated amortisation and impairment costs. The carrying value of these intangible assets is tested for impairment on a half yearly basis, or when there are indications that the value of the assets might be impaired.
The directors have assessed development projects' individual net present value against forecasts of future sales of the related products, unit sales prices and costs over a five-year period. No sales beyond five years have been included in the calculations. The impairment tests are sensitive to changes in these forecasts and changes could result in impairment; however, the varying bases indicate a net present value in excess of the carrying value of the intangible assets at the balance sheet date.
9. Trade and other receivables
6 months 6 months Year ended
ended ended 31 December
30 June 30 June 2016
2017 2016 Audited
Unaudited Unaudited
EUR EUR EUR
Gross trade receivables 4,490,752 2,722,292 5,528,661
Provision for impairment (300,537) (271,113) (196,248)
---------------------- ---------------------- ----------------------
Net trade receivables 4,190,215 2,451,179 5,332,413
Other receivables 196,566 49,741 171,514
Payments on account - 1,128,076 -
---------------------- ---------------------- ----------------------
Total receivables 4,386,781 3,628,996 5,503,927
=========== =========== ===========
Provisions for impairment
Opening balance (196,248) (270,360) (270,360)
Utilised during the period - - 25,372
Net (increase)/decrease
during the period (104,289) (753) 48,740
---------------------- ---------------------- ----------------------
Closing balance (300,537) (271,113) (196,248)
=========== =========== ===========
10. Loans and borrowing
The book and fair value of interest bearing loans and borrowings was:
Ultimate 6 months 6 months Year ended
maturity ended ended 31 December
30 June 30 June 2016
2017 2016 Audited
Unaudited Unaudited
EUR EUR EUR
Current
Overdrafts On demand 24,888 - 20,035
On demand 95,228 - 142,705
Invoice discounting Up to
facility 120 days 94,300 - 149,288
Supply chain Up to
facility 90 days 503,653 - 498,245
Bank loans -
unsecured 30/6/2019 197,011 - 97,770
Vendor loans
from business
combinations 31/7/2018 501,808 - 529,291
---------------------- ---------------------- ----------------------
1,416,888 - 1,437,334
Non-current
Bank loans -
unsecured 30/6/2019 202,989 - 302,230
Vendor loans
from business
combinations 31/7/2018 38,753 - 212,563
---------------------- ---------------------- ----------------------
241,742 - 514,793
---------------------- ---------------------- ----------------------
Total loans and
borrowing 1,658,630 - 1,952,127
=========== =========== ===========
Overdrafts and other short facilities, excluding the supply chain facility, attract variable interest at between 3% and 6% per annum. The supply chain facility, denominated in Sterling, attracts a fixed rate of interest of 1.65% per month. The bank and vendor loans, both denominated in Euros, attract interest at 3% over 3-month EURIBOR and at 8% fixed per annum respectively.
The average effective interest rate for the period ended 30 June 2017 was 10.2% (30 June 2016: nil).
At 30 June 2017, the Group had available EUR123,331 (30 June 2016: nil) of undrawn committed borrowing facilities.
11. Share capital
Number Share capital Share premium
of shares
EUR EUR
As at 1 January 2017 8,617,806 196,242 5,542,365
Issue of new ordinary
shares - BV-Tech SpA 3,143,888 66,752 4,041,210
Issue of new ordinary
shares - MBooster 22,348 457 37,043
Equity issue costs - - (59,379)
Exercise of Warrants 15,000 318 21,736
------------------------ ------------------------ ------------------------
As at 30 June 2017 (unaudited) 11,776,694 263,769 9,582,975
============ =========== ===========
As at 1 January and 30
June 2016 (unaudited) 6,098,912 144,697 4,051,322
============ =========== ===========
As at 1 January 2016 6,098,912 144,697 4,051,322
Issue of new ordinary
shares - Memopal Srl 621,394 13,322 -
Issue of new ordinary
shares - placing 1,647,500 33,176 1,441,284
Equity issue costs - - (169,489)
Directors' subscription
for new ordinary shares 250,000 5,047 219,248
------------------------ ------------------------ ------------------------
As at 31 December 2016
(audited) 8,617,806 196,242 5,542,365
============ =========== ===========
The ordinary shares of GBP0.018 carry the right to one vote per share at general meetings of the Company and the rights to share in any distribution of profits or returns of capital and to share in any residual assets available for distribution in the event of a winding up. The shares are denominated in Sterling.
On 11 April 2017, a cash subscription by BV-Tech for 861,666 new ordinary shares at GBP1.14 per share each raised EUR1.15 million (GBP0.98 million) before expenses. Also on 11 April 2017, all 2,400,000 deferred shares of GBP0.0001 were converted on an 8 for 1 basis into 300,000 new ordinary shares at GBP0.7992 pence each for an aggregate consideration of EUR281,334 (GBP239,760).
On 3 May 2017, in accordance with the terms of a software purchase agreement for a bespoke version of BV-Tech's encrypted voice and messaging software, the consideration of EUR2.67 million (GBP2.26 million) was settled through the issue of 1,982,222 new ordinary shares at GBP1.14 per share.
On 23 June 2017, 15,000 new ordinary shares were issued at GBP1.25 each upon the exercise of warrants for an aggregate consideration of EUR22,054 (GBP18,750).
On 30 June 2017, 22,348 new ordinary share were issued to MBooster Srl at GBP1.476 each, being the average mid-market price for the prior five business days, to settle a semi-annual fee of EUR37,500.
12. Events after the reporting date
On 26 July 2017, 63,750 new ordinary shares were issued at GBP0.80 each upon the exercise of warrants for an aggregate consideration of EUR57,089 (GBP51,000).
On 7 August 2017, 933,312 new ordinary shares were placed at GBP1.60 each raising gross proceeds of EUR1.65 million (GBP1.49 million). On 31 August 2017, a further 156,250 new ordinary shares were issued at GBP1.60 pursuant to a subscription by BV Tech raising EUR0.27 million (GBP0.25 million).
On 31 August 2017, EUR1.36 million (GBP1.25 million) secured convertible bonds were issued to eligible investors following an auction by UK Bond Network. The bonds are denominated in Sterling, secured by an all assets debenture and guarantee and are convertible into new ordinary shares at GBP2 each, being a 25% premium to their issue price. Interest of 10% per annum is payable quarterly in arrears.
The aggregate net proceeds of the placing, subscription and secured convertible bond issue were EUR2.94 million.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR BQLLLDKFZBBQ
(END) Dow Jones Newswires
September 27, 2017 02:01 ET (06:01 GMT)
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