TIDMDFX
RNS Number : 2060O
Defenx plc
30 September 2019
30 September 2019
Defenx PLC
("Defenx" or the "Company" or the "Group")
Unaudited Interim Results for the six months ended 30 June
2019
Set out below are the interims results for Defenx for the six
months ended 30 June 2019.
Chairman's Statement
Following our 2018 'reboot' year, there have been a number of
positive developments at Defenx in 2019, which I detail below.
Sales
In April 2019, the Company entered into a software distribution
agreement (the "Distribution Agreement") with BV Tech S.p.A. ("BV
Tech"), the Company's majority shareholder. Pursuant to the
Distribution Agreement, BV Tech has paid the Company EUR1.0 million
for the sole right to sell Defenx products into certain sectors in
Italy and committed to purchase Defenx's products, with a minimum
value of EUR1.2 million, to be received in a number of instalments
during 2019 and 2020.
The EUR1.0 million 'right-to-sell' under the Distribution
Agreement has been recognised primarily in the first half of 2019,
with a small percentage being carried forward to future years, in
recognition of an element of future obligation to maintain the
software.
As a result, the Distribution Agreement has resulted in an
upturn in revenues being recognised in the first half of 2019,
though the Group still reported a small loss for the period.
The Board believes that investment in next generation products
is also coming to fruition with products now available for sale to
corporate and private users of computers and smartphones. Marketing
and sales to third parties are currently primarily being channelled
through BV Tech, where several major contracts are being pursued,
though these have not yet reached signature stage.
The Board is also pleased to announce that it has identified a
candidate to lead the sales operations for our Swiss subsidiary
(covering sales to the core markets of Switzerland and Italy) and
we look forward to keeping you updated in this regard.
Cash and going concern
As set out in the 2018 Accounts, the Group continues to be
reliant on the financial support of BV Tech. In addition to the
EUR1.0 million received pursuant to the right-to-sell, of the eight
quarterly minimum payments of EUR150k pursuant to the minimum
purchase for 2019 and 2020, three have been paid on time and the
Company has also received advance payment on a further three,
leaving EUR300k of the of the EUR1.2 million still to be
received.
This demonstration of continuing financial support enables the
Board to continue to view the Group as a going concern, whilst the
Group seeks to builds its sales back to and beyond cash
breakeven.
Other matters
The Swiss tax authorities have opened a tax investigation for
2016 in respect to our Swiss subsidiary. It is possible that the
outcome of this ongoing investigation will be a significant cash
payment to the Swiss tax authorities for technical profits made in
that year.
As we have previously disclosed, the sales leading to those
profits and local capital values subsequently proved to be illusory
and were almost all written off. Swiss tax law does not enable the
carry-back of losses in subsequent years, but nevertheless, the tax
demand under negotiation is exceeded by the tax provisions made in
past years and still held in the Accounts.
The Company also notes that the Swiss tax authorities have
indicated that they will seek to review the subsidiary's 2017 and
2018 filings.
Resignation of Nominated Adviser
Strand Hanson has given the Company notice of its resignation as
Nominated Adviser to the Company, such resignation to take effect
at the close of business on 4 November 2019.
The Board is in talks with a number of potential replacement
Nominated Advisers and will update the market in due course.
Pursuant to Rule 1 of the AIM Rules for Companies, in the event
that the Company is unable to appoint a replacement Nominated
Adviser on or before 4 November 2019, trading in the Company's
ordinary shares on AIM will be suspended with effect from 5
November 2019. Further, also pursuant to Rule 1 of the AIM Rules,
should the Company subsequently be unable to appoint a replacement
Nominated Adviser within one month of Strand Hanson ceasing to be
the Company's Nominated Adviser, then the admission to trading of
the Company's ordinary shares on AIM will be cancelled.
Board and senior management changes
Clive Eplett will be stepping down as the Group's interim CFO in
October 2019 and will be undertaking an orderly handover to his
successor, Paul Williams, who has been appointed as interim CFO in
his stead.
Tony Reeves and Nic Hellyer are currently in discussions with
the Board, with regard to resigning as directors of the Company,
but wish to work with the Board to enact an orderly handover, both
to any newly appointed Nominated Adviser and, potentially, to any
new director(s) to be appointed to the Board. Further announcements
will be made as required.
Outlook
The results for the first half of 2019 benefited from the
one-off payment from BV Tech in respect of the 'right-to-sell' that
will not recur.
Accordingly, sales in the second half of 2019 are unlikely to
reach the level of the first half and a further operating loss is
likely to arise for the full year.
Anthony Reeves
Executive Chairman
30 September 2019
Raffaele Boccardo, Deputy Chairman of Defenx, commented:
"I and BV Tech remain fully supportive of Defenx and I believe
that the Company has made significant progress in recent months,
particularly with its next generation products. I look forward to
providing further updates as matters develop."
Enquiries
Defenx PLC
Anthony Reeves - Interim Executive Chairman
Clive Eplett - Interim Chief Financial Officer 020 3769 0687
Strand Hanson Limited (Nominated and Financial
Advisor)
Stuart Faulkner / Richard Tulloch / James Bellman 020 7409 3494
WH Ireland (Joint-Broker)
Adrian Hadden / Jessica Cave 020 7220 1666
IFC Advisory (Financial PR and IR)
Tim Metcalfe / Graham Herring / Florence Chandler 020 3934 6630
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 cyber-security software group that
offers a range of Security, Backup and Protection solutions for
smartphones, PCs and networks.
Website
www.defenx.com/company/investors
Unaudited Interim Condensed Consolidated Statement of
Comprehensive Income
6 months ended 6 months ended Year ended
30 June 2019 30 June 2018 31 December
Unaudited Unaudited 2018
Audited
Note EUR000 EUR000 EUR000
Revenue 1,501 701 1,420
Cost of sales 5 (597) (670) (1,988)
---------------------- ---------------------- ----------------------
Gross profit/(loss) 904 31 (568)
Other operating income 5 27 101 853
----------------------- ----------------------- -----------------------
Sales & marketing expenses 5 - (182) (7)
Research, development & operations'
expenses 5 (99) (514) (198)
Administrative expenses 5 (741) (947) (2,250)
Impairment of trade receivables 5 (24) - (1,349)
Operating expenses before
transaction
costs (864) (1,643) (3,804)
----------------------- ----------------------- -----------------------
Profit/(loss) from operations 67 (1,511) (3,519)
Finance income - -
Finance expense (143) (138) (278)
---------------------- ---------------------- ----------------------
Loss before tax (76) (1,649) (3,797)
Income tax (charge)/credit (35) 5 11
---------------------- ---------------------- ----------------------
Loss for the period (111) (1,644) (3,786)
---------------------- ---------------------- ----------------------
Attributable to:
Equity holders of the parent (144) (1,598) (3,730)
Non-controlling interests 33 (46) (56)
---------------------- ---------------------- ----------------------
Total comprehensive loss for the
period (111) (1,644) (3,786)
=========== =========== ===========
Loss per share
Basic 6 (EUR0.004) (EUR0.069) (EUR0.154)
Diluted 6 (EUR0.004) (EUR0.067) (EUR0.150)
Unaudited Interim Condensed Consolidated Statement of Financial
Position
30 June 2019 30 June 2018 31 December
Unaudited Unaudited 2018
Audited
Note EUR000 EUR000 EUR000
Non-current assets
Property, plant and equipment 88 136 104
Intangible assets 7 3,662 4,320 3,513
Government grant 1,096 1,522 1,149
---------------------- ---------------------- ----------------------
4,846 5,978 4,766
---------------------- ---------------------- ----------------------
Current assets
Trade and other receivables 8 280 1,218 600
Government grant 496 168 483
Cash and short-term deposits 252 791 95
---------------------- ---------------------- ----------------------
1,028 2,177 1,178
---------------------- ---------------------- ----------------------
Total assets 5,874 8,155 5,944
=========== =========== ===========
Current liabilities
Trade and other payables (1,457) (1,146) (2,303)
Deferred revenue (163) (392) (253)
Loans and borrowings 9 (145) (379) (396)
Income taxes payable (66) (389) -
---------------------- ---------------------- ----------------------
(1,831) (2,306) (2,952)
---------------------- ---------------------- ----------------------
Non-current liabilities
Deferred revenue (359) (744) -
Loans and borrowings 9 (1,403) (1,423) (1,392)
Deferred tax liabilities (22) (37) (30)
---------------------- ---------------------- ----------------------
(1,784) (2,204) (1,422)
---------------------- ---------------------- ----------------------
Total liabilities (3,615) (4,510) (4,374)
=========== =========== ===========
Net assets 2,259 3,645 1,570
=========== =========== ===========
Capital and reserves
Called up share capital 10 817 601 635
Share premium 10 13,064 12,329 12,446
Merger reserve 1,641 1,641 1,641
Convertible bond option reserve 164 164 164
Share based payment reserve 153 237 153
Retained earnings (13,422) (11,146) (13,278)
---------------------- ---------------------- ----------------------
Attributable to equity holders
of the parent 2,417 3,826 1,761
Non-controlling interests (158) (181) (191)
---------------------- ---------------------- ----------------------
Total equity 2,259 3,645 1,570
=========== =========== ===========
Unaudited Interim Condensed Consolidated Statement of Changes in
Equity
Convertible
Shares bond Share
Share to be option based
Share premium Merger issued reserve payment Retained Non-controlling
capital account reserve reserve reserve earnings Total interests Total
EUR000 EUR000 EUR000 EUR000 EUR000 EUR000 EUR000 EUR000 EUR000 EUR000
As at 1
January
2019 635 12,446 1,641 - 164 153 (13,278) 1,761 (191) 1,570
Loss for the
period - - - - - (144) (144) 33 (111)
Shares issued 182 618 - - - - 800 - 800
Share based - - - - - - - - - -
payments
-------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
As at 30 June
2019 817 13,064 1,641 - 164 153 (13,422) 2,417 (158) 2,259
(unaudited) ========== ========== ========== ========== ========== ========== ========== ========== ========== ==========
As at 1
January
2018 287 11,370 1,641 37 164 210 (9,548) 4,161 (135) 4,026
Loss for the
period - - - - - - (1,598) (1,598) (46) (1,644)
Shares issued 314 959 - (37) - - - 1,236 - 1,236
Share based
payments - - - - - 27 - 27 - 27
-------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------
As at 30 June
2018 601 12,329 1,614 - 164 237 (11,146) 3,826 (181) 3,645
(unaudited) ========== ========== ========== ========== ========== ========== ========== ========== ========== ==========
As at 1
January
2018 287 11,370 1,641 37 164 210 (9,548) 4,161 (135) 4,026
Loss for the
year - - - - - - (3,730) (3,730) (56) (3,786)
Shares issued 348 1,076 - - - - - 1,424 - 1,424
Shares to be
issued - - - (37) - - - (37) - (37)
Share based
payments - - - - - (57) - (57) - (57)
-------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------
As at 31
December2018 635 12,446 1,641 - 164 153 (13,278) 1,761 (191) 1,570
(audited) ========== ========== ========== ========== ========== ========== ========== ========== ========== ==========
Unaudited Interim Condensed Consolidated Cash Flow Statement
6 months ended 6 months ended Year ended
30 June 2019 30 June 2018 31 December
Unaudited Unaudited 2018
Audited
EUR000 EUR000 EUR000
Cash flows from operating activities
Loss for the period after taxation (111) (1,644) (3,786)
Income tax (credit)/expense 35 (5) (11)
---------------------- ---------------------- ----------------------
Loss before tax (76) (1,649) (3,797)
Net interest expense 143 138 278
Depreciation of property, plant
and equipment 16 - 43
Amortisation of intangible assets 521 590 1,881
Impairment of trade receivables 24 - 1,349
Share based payments
expense/(credit) - 27 (94)
---------------------- ---------------------- ----------------------
Operating cash flows before
movements
in working capital 628 (894) (340)
---------------------- ---------------------- ----------------------
Decrease)/(increase) in trade
receivables 296 284 (706)
Increase/(decrease) in trade and
other payables (780) 75 1,452
(Decrease)/increase in deferred
revenue 269 (457) (1,255)
---------------------- ---------------------- ----------------------
(215) (98) (509)
---------------------- ---------------------- ----------------------
Interest paid (71) (84) (278)
Tax paid (3) (6) (243)
---------------------- ---------------------- ----------------------
Net cash flow from operating
activities 339 (1,082) (1,370)
---------------------- ---------------------- ----------------------
Investing activities
Purchase of property, plant and
equipment - (1) (12)
Development costs - internally
developed (670) (6) (490)
---------------------- ---------------------- ----------------------
Net cash used in investing
activities (670) (7) (502)
---------------------- ---------------------- ----------------------
Financing activities
Net proceeds from issue of share
capital 800 1,377 1,424
Proceeds from borrowings - - 72
Repayment of borrowings (312) (426) (458)
---------------------- ---------------------- ----------------------
Net cash from financing activities 488 951 1,038
---------------------- ---------------------- ----------------------
Net increase/(decrease) in cash
and cash equivalents 157 (138) (834)
Cash and cash equivalents at
beginning
of period 95 929 929
---------------------- ---------------------- ----------------------
Cash and net cash equivalents
at end of period 252 791 95
=========== =========== ===========
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 2019 have been prepared
in accordance with IAS 34 Interim Financial Reporting and do not
constitute statutory financial statements. They 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 2018.
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 on 30 September 2019.
3. Going Concern
As set out in the 2018 Accounts, the Group continues to be
reliant on the financial support of BV Tech. In addition to the
EUR1.0 million received pursuant to the right-to-sell, of the eight
quarterly minimum payments of EUR150k pursuant to the minimum
purchase for 2019 and 2020, three have been paid on time and the
Company has also received advance payment on a further three,
leaving EUR300k of the of the EUR1.2 million still to be
received.
This demonstration of continuing financial support enables the
Board to continue to view the Group as a going concern, whilst the
Group seeks to builds its sales back to and beyond cash
breakeven.
4. Accounting policies
There have been no changes to the accounting policies and
methods of computation in these financial statements compared with
those of the previous full year.
IFRS 16, Lease accounting, has been adopted in these accounts.
No material impact arises when contrasted to the previous basis of
accounting for leases.
The two sales agreements signed with BV Tech in April 2019, and
that comprise the majority of revenue for the period, provide
products on the same operating model is sales to third parties.
Accordingly, the same revenue recognition policy has been applied
to those sales.
5. Loss from operations
6 months ended 6 months ended Year ended
30 June 2019 30 June 2018 31 December
Unaudited Unaudited 2018
Audited
The operating loss is stated
after charging: EUR000 EUR000 EUR000
Cost of sales
Amortisation of intangible assets 521 590 1,881
=========== =========== ===========
Other operating income
Research & development tax credit
income (40) (101) (838)
Sales, marketing and administrative
expenses
Impairment of trade receivables 24 - 1,349
Depreciation of property, plant
and equipment 16 - 43
Staff costs 342 679 677
Share based payment expense - 27 (57)
Lease payments - land and buildings 26 49 103
Lease payments - plant and machinery 6 - 10
AIM-related expenses 102 100 289
=========== =========== ===========
6. Loss per share (EPS)
Basic EPS amounts are calculated by dividing the profit for the
period attributable to ordinary equity holders of Defenx 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 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 ended 6 months ended Year ended
30 June 2019 30 June 2018 31 December
Unaudited Unaudited 2018
Audited
EUR000 EUR000 EUR000
Loss attributable to ordinary
equity holders of Defenx PLC
for basic and adjusted EPS (144) (1,598) (3,730)
=========== =========== ===========
Weighted average number of Ordinary
Shares for basic EPS (thousand) 36,956 22,905 23,812
Effect of:
- dilution from convertible
bond 625 625 625
---------------------- ---------------------- ----------------------
Weighted average number of Ordinary
Shares for 37,581 23,530 24,437
diluted EPS (thousands) =========== =========== ===========
7. Intangible Assets
Goodwill Development Customer Total
costs relationships
EUR000 EUR000 EUR000 EUR000
Cost
At 1 January 2019 1,139 13,125 354 14,618
Additions -
internally
developed - 670 - 670
Additions - - - -
purchased
---------------------- ---------------------- ---------------------- ----------------------
At 30 June 2019 1,139 13,795 354 15,288
=========== =========== =========== ===========
Accumulated
amortisation
At 1 January 2019 1,139 9,612 354 11,105
Amortisation
charge - 521 - 521
--------------------- ---------------------- ---------------------- ----------------------
At 30 June 2019
(unaudited) 1,139 10,133 354 11,626
=========== =========== =========== ===========
Net book value
At 30 June 2019
(unaudited) - 3,662 - 3,662
=========== =========== =========== ===========
At 30 June 2018
(unaudited) - 4,320 - 4,320
=========== =========== =========== ===========
At 31 December
2018
(audited) - 3,513 - 3,513
=========== =========== =========== ===========
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.
8. Trade and other receivables
6 months ended 6 months ended Year ended
30 June 2019 30 June 2018 31 December
Unaudited Unaudited 2018
Audited
EUR000 EUR000 EUR000
Gross trade receivables 4,700 4,682 5,013
Offset deferred revenue - (454) (194)
Provision for impairment (4,590) (3,217) (4,566)
---------------------- ---------------------- ----------------------
Net trade receivables 110 1,011 253
Other receivables 170 207 347
---------------------- ---------------------- ----------------------
Total receivables 280 1,218 600
=========== =========== ===========
Provisions for impairment
Opening balance (4,566) (3,217) (3,217)
Net increase during the period (24) - (1,349)
---------------------- ---------------------- ----------------------
Closing balance (4,590) (3,217) (4,566)
=========== =========== ===========
9. Loans and borrowing
The book and fair value of interest bearing loans and borrowings
was:
Ultimate 6 months ended 6 months ended Year ended
maturity 30 June 2019 30 June 2018 31 December
Unaudited Unaudited 2018
Audited
EUR000 EUR000 EUR000
Current
Overdrafts On demand - - -
On demand - - -
Invoice discounting Up to 120
facility days - - 149
Supply chain facility Up to 90 - - -
days
Bank loans - unsecured 30/06/2019 - 203 102
Bank loans - unsecured 22/11/2021 130 123 130
Vendor loans from
business combinations 31/07/2018 15 53 15
---------------------- ---------------------- ----------------------
145 379 396
---------------------- ---------------------- ----------------------
Non-current
Bank loans - unsecured 30/06/2019 - - -
Bank loans - unsecured 22/11/2021 177 306 238
Vendor loans from 31/07/2018 - - -
business combinations
Convertible bonds 31/08/2020 1,226 1,117 1,154
---------------------- ---------------------- ----------------------
1,403 1,423 1,392
---------------------- ---------------------- ----------------------
Total loans and borrowing 1,548 1,802 1,788
=========== =========== ===========
Overdrafts and other short term 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
2018 was 8.3% (30 June 2018: 7.5%).
At 30 June 2019, the Group had available EUR70,000 (30 June
2018: EUR270,000) of undrawn committed borrowing facilities.
10. Share capital
Number of Share capital Share premium
shares
thousands EUR000 EUR000
As at 1 January 2019 29,810 635 12,446
Issue of new ordinary shares
- BV-Tech SpA 8,899 182 618
------------------------ ------------------------ ------------------------
As at 30 June 2019 (unaudited) 38,709 817 13,064
As at 1 January 2018 12,952 287 11,370
Issue of new ordinary shares
- BV-Tech SpA 11,777 244 840
Issue of new ordinary shares
- Open offer 3,186 66 227
Issue of new ordinary shares
- MBooster 243 4 51
Equity issue costs - - (159)
------------------------ ------------------------ ------------------------
As at 30 June 2018 (unaudited) 28,158 601 12,329
============ =========== ===========
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.
11. Availability of the interims
The Interim Report will shortly be available on the Company's
website at www.investors.defenx.com.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR ZBLFXKKFZBBX
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