When a company makes a big loss-making acquisition in a hot market, as Corero did with its $15.3m (£9.6m) purchase of cyber security firm, Top Layer Networks, in early 2011, investors expect so see strong growth. Unfortunately, the group's cyber security operation hasn't delivered on those hopes in the first half - leaving few reasons to buy the shares.
Indeed, on a like-for-like basis, revenues at the cyber security side rose just 15 per cent in the year to $6.66m (£4.2m) - which was attributed to an economy-induced slowdown soon after March's $6.9m fund-raising. Costs rose substantially, too, as Corero invested in products and staff, although management says costs should now have levelled out. So, while overall group turnover - helped by 34 per cent growth from the school administration software business, as well as the acquisition - rose impressively, operating expenses before amortisation, depreciation and exceptional items jumped 70 per cent to $9.6m.
Indeed, in cash terms, the results were worse than the reported loss - due to $1.5m of capitalised development spending and a $900,000 adverse movement in working capital - which both attributed to a $4.4m cash outflow before financing.
| CORERO NETWORK SECURITY (CNS) | ||||
|---|---|---|---|---|
| ORD PRICE: | 36p | MARKET VALUE: | £17m | |
| TOUCH: | 34-37p | 12-MONTH HIGH: | 61p | LOW: 35p |
| DIVIDEND YIELD: | nil | PE RATIO: | na | |
| NET ASSET VALUE: | 46¢* | NET CASH: | $3.1m | |
| Half-year to 30 Jun | Turnover ($m) | Pre-tax profit ($m) | Earnings per share (¢) | Dividend per share (¢) |
|---|---|---|---|---|
| 2011 | 7.44 | -1.38 | -3.30 | nil |
| 2012 | 10.8 | -2.79 | -4.90 | nil |
| % change | +45 | |||
Ex-div: - Payment: - *Includes intangible assets of $26.5m, or 56¢ a share £1=$1.59 | ||||
