Stock Exchange Release
STONESOFT CORPORATION'S FINANCIAL STATEMENTS RELEASE FOR JANUARY-DECEMBER 2005
SUMMARY
January-December
- Net sales for the financial year totalled EUR 22.2 million, which was 1% less than in the previous year
- Sales of Stonesoft’s core product, StoneGate™ were EUR 8.4 million, up by 24% on the previous year.
- Operating loss before amortization of goodwill was EUR 6.3 million. The previous year’s comparable loss was EUR 9.0 million.
- Earnings per share were EUR -0.10, compared with EUR –0.23 for the previous year.
- Liquid assets totaled EUR 18,1 million at the end of the financial year, which was EUR 4.1 million less than in the end of the previous year.
- Cash flow was negative EUR 4.1 million. The previous year’s cash flow was negative EUR 6.0 million.
”Stonesoft continued during the year adding new sales resources and implementing its go-to-market strategy. Sales cycles turned out to be longer than anticipated, especially concerning large customers”, says Ilkka Hiidenheimo, CEO.
“Company saw positive development of its business operations during the year 2005. The annual sales growth of the company’s main product StoneGate™ was 24% while the Firewall/VPN and Intrusion detection and protection market grew by roughly 10 % during the three first quarters according to an estimate given by Infonetics, a well-established industry analyst. The operating loss was significantly lower than previous year”, continues Hiidenheimo.
October - December
- Net sales for the fourth quarter were EUR 5,8 million, which is a 9% decrease compared with the previous year’s corresponding quarter. The decrease was mainly resulting from the decrease in the sales of the consulting daughter company
- StoneGate™ sales totaled EUR 2.4 million in the last quarter, a 2% increase compared with the corresponding quarter of 2004
- Operating loss before amortization of goodwill was EUR 2.0 million. The comparable loss for the corresponding quarter in previous year was EUR 1.4 million
- Cash flow in the fourth quarter was a negative EUR 2.0 million.
Stonesoft Corporation (HEX: SFT1V) is an innovative provider of integrated network security and business continuity. Stonesoft is a global company focused on enterprise level customers requiring advanced network security and always-on business connectivity with low TCO, best price-to-performance ratio, and highest ROI. StoneGate™ Security Platform unifies firewall, VPN and IPS, blending network security and end-to-end availability into a unified and centrally managed system for distributed enterprises. StoneGate™ incorporates the award-winning load balancing technology of StoneBeat®. Founded in 1990, Stonesoft Corporation has corporate headquarters in Helsinki, Finland. Additional information is available at www.stonesoft.com
BOARD OF DIRECTORS' REPORT
NET SALES AND PROFIT
(Previous year's figures in parenthesis).
January - December
Net sales in January-December were EUR 22.2 million (22.5 million). Compared with the previous year's corresponding period EUR –0.3 million or –1%. The earnings before interest, taxes & amortization for the financial year were EUR –6.3 million (-9.0 million).
The geographical distribution of net sales was as follows: Europe, Middle East and Africa 72% (74%), North and South America 20% (19%) and Asia-Pacific 8% (7%).
The loss for the year after taxes was EUR 6.0 million. The previous year's loss was EUR 13.0 million.
Finance and investments
At the end of the year under review, total assets were EUR 26.0 million (31.7 million). The equity ratio was 77% (81%) and gearing (the ratio of net debt to shareholders' equity) was –1.10 (-0.98). Consolidated liquid assets at the end of the year totaled 18.1 million (22.2 million). Investments in fixed assets totaled EUR 0.4 million (0.5 million).
DEVELOPMENT OF BUSINESS OPERATIONS
Markets and competitive environment
According to an estimate given by Infonetics, the Firewall/VPN and Intrusion detection and protection market grew by roughly 10 %, being 3 billion euros in 2005.
Main business events in 2005
- In March the company implemented new sales management system. The system helps to manage the sales resources and enables transparent monitoring on global level with higher granularity.
- In April the company invited M.Soc.Sc, Juha Kivikoski, Vice President, Global Marketing as a new member to the company Management team. Mr. Kivikoski joined Stonesoft in December 2004.
- In June the company promoted Mr. Mika Rautila as Chief Technology Officer and as a member of the company Management Team. Mr. Rautila has been with Stonesoft since 1999 and holds a PhD in Mathematics.
- In June, the company announced new versions of the StoneGate™ Management Center, StoneGate™ FW/VPN and StoneGate™ IPS products. The new versions further unify the security components of StoneGate™ offering and deliver new solutions to better and more advanced management functionalities to the complex security solutions.
- In June, the company announced SGI-20A IPS appliance that combines sensor and analyzator.
- In July Stonesoft was granted a US patent called "Data Transmission Control Method" (patent number 6,912,200) covering the VPN component of the Multi-Link functionality and the connection selection method when both ends of communication are protected by the StoneGate™ platform.
- In August IBM Global Services and Stonesoft renewed and expanded their partnership agreement in EMEA and USA to cover also Canada.
- In August Stonesoft was granted an European wide patent for a fail-safe remote upgrade called "a method of managing a network device, a management system, and a network device" (patent number EP 1259028) removes the risk that an error in a firewall configuration may lead to a situation making the network management center no longer able to connect to the firewall node in question, which could only be solved by making a costly visit to the site where the firewall node is located.
- In September Siemens Business Services and Stonesoft announced partnership agreement in Sweden, Denmark, Norway, Germany, Belgium and Luxemburg. Siemens Business Services is offering Stonesoft solutions as part of its wide service offering to its customers.
- In September Stonesoft announced its flagship SG-4000, a FW/VPN product for large enterprises and distributed networks the delieveries of which started in the last quarter.
- In October Stonesoft announced four new StoneGate™ appliances. StoneGate™ SG-250e, SG-500e50, SG-500e-100 and SG-570e appliances are targeted for medium sized organizations as well as for corporate remote and branch offices to answer to the future security requirements.
- In November, Stonesoft secured the UN World Summit on the Information Society in Tunis. The Summit had 20 000 participants and national delegations from 174 nations. The Summit was organized by ITU.
- In the last fiscal quarter, Stonesoft enforced its position in France. The company reorganized its sales operations and made further recruitments.
REVIEW OF MAJOR RESEARCH AND DEVELOPMENT ACTIVITIES
Stonesoft focuses on innovative research and development and the protection of its inventions. In the financial year, the focus was on developing both new and existing high availability network security solutions.
The investments in research and development during the fiscal year totaled EUR 4.6 million (5.1).
Research and development employed 67 (63) persons at the end of the financial year.
In line with the Corporation's accounting principles, R&D expenditure is booked as an expense at the moment it occurs.
ADOPTION OF IFRS
Stonesoft adopted IFRS-compliant reporting in 2005
SHARE CAPITAL
At the end of the financial year on 31 December 2005, Stonesoft's share capital entered in the Trade Register totaled EUR 1,146,054.64. The number of shares was 57,302,732 and the counter book value of each share was EUR 0.02. The share capital remained unchanged.
DEVELOPMENT OF SHARE PRICES AND TURNOVER
On January 3, 2005, Stonesoft's shares were valued at EUR 0.58. At the end of the year, the share price was EUR 0.51. The highest share price was EUR 0.69 and the lowest EUR 0.46. During the year, the total turnover of Stonesoft shares amounted to EUR 13.1 million. Stonesoft's share price decreased by 12 % during the fiscal year. Over the same period, the Helsinki Stock Exchange HEX index increased by 35 %, while the telecom & electronics sector index increased by 35 %. Based on the share price on December 30, 2005, Stonesoft’s market capitalization was EUR 29.2 million.
PROPOSAL BY THE BOARD OF DIRECTORS FOR DISTRIBUTION OF PROFIT
The parent company's operating loss before amortization of goodwill (EBITA) was EUR 10.5 million. At the end of the period, neither the group nor the parent company had any distributable equity in its shareholders' equity. The Board of Directors proposes that the parent pay no dividend for 2005 and that the loss be debited to the retained earnings account.
PERSONNEL
At the end of the fiscal period, Stonesoft's personnel numbered 252 (237). During the financial year the company increased mainly the number of people engaged in sales duties.
THE COMPANY'S BOARD OF DIRECTORS AND EXECUTIVE MANAGEMENT
In the financial year, Ilkka Hiidenheimo was the CEO of the company. The Chairman of the Board of Directors was Alexis Sozonoff and other members were Ilkka Hiidenheimo, Pertti Ervi and Jyrki Ritvala.
In the beginning of the financial year, the members of the company's Management Team were Ilkka Hiidenheimo, Mikael Nyberg, Erkki Panula, Saara Laine and Tobias Christen. Juha Kivikoski started as a new member of the company’s Management Team on April 12, 2005. Mika Rautila started as a new member of the company’s Management Team on June 13, 2005 replacing Tobias Christen.
MAJOR EVENTS AFTER THE FINANCIAL YEAR
In February Finnish Defence Forces announced that they have chosen after a bidding process Stonesoft´s firewall solution to their systems management network. Product deliveries are anticipated to begin in February. This project is strategically significant to Stonesoft.
In February Stonesoft Corp. received information that prosecutor has decided to press charges in the Helsinki District Court in a suspected securities market information offence related to the ongoing disclosure requirements for public companies and regarding the alleged delay of Stonesoft’s profit warning issued in February 2001. The charges are pressed against Stonesoft Corp. and the Board members and CEO of the company in 2000. Stonesoft denies all charges and claims made.
FUTURE OUTLOOK
According to an estimate given by Infonetics, the Firewall/VPN and Intrusion detection and protection market is estimated to achieve an average growth of roughly 10% during 2006.
Stonesoft continues decisive work to increase turnover and to improve financial result. The structural changes, restructuring measures and added sales resources, the new products and the strategic partnerships concluded during the years 2004 and 2005, will create a lasting foundation for a positive development. With these changes, turnover, operating result and market position of the company, on the long term, is aimed to be equal to the competitiveness of the product offering.
The main goal for 2006 is to achieve faster growth than the market growth in the sales of StoneGate™ products, by utilizing the past investments. The company believes that as a result of this growth the right balance between the expenses and the sales will be achieved over time. The company will enforce the focus to the selected key markets, develop further the partner community to support sales efforts and to further sharpen the marketing and communications actions to the key interest groups.
Stonesoft anticipates the growth in the sales of StoneGate™ products to continue on a year-to-year basis. However, the development of the sales may fluctuate during the fiscal quarters.
FORWARD-LOOKING STATEMENTS
This report contains statements concerning among others Stonesoft’s financial condition and 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 others (1) changes in our market position or in the Firewall/VPN and Intrusion detection and protection market in general; (2) the effects of competition; (3) the success, financial condition, and performance of our collaboration partners, suppliers and customers;(4)our ability to source quality components without interruption and at acceptable prices;(5) our ability to recruit, retain and develop appropriately skilled employees;(6) exchange rate fluctuations, including, in particular, fluctuations between the euro, which is our reporting currency, and the US dollar;(7)other factors related to sale of products, economic situation, business, competition or legislation affecting the business of Stonesoft or the industry in general and (8) our ability to control the variety of factors affecting our ability to reach our targets and give accurate forecasts.
The figures in this financial statements release are unaudited.
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 Corp.
Ilkka Hiidenheimo
CEO
Distribution:
The Helsinki Stock Exchange
Main media
This release and the presentation material related to this report are also available on
Stonesoft’s web site at http://www.stonesoft.com.
A press conference will take place on February 14, 2006 at 10.30 a.m. at the Stonesoft headquarters, street address Itälahdenkatu 22A, 00210 Helsinki.
Please see the full financial statements release (PDF) for financial figures.
Tuesday, February 14, 2006
