Defenx PLC (LON:DFX), the cyber-security software group, has today announced its unaudited interim results for the six months ended 30 June 2017.
Financial Highlights
· Revenue up 35% to €3.13 million (1H16: €2.32 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 €1.31 million (1H16: €296,000) 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 €2.67 million in new Defenx shares.
· Two new channel partners signed up in 2017, which together with new partners from 2016, contributed €1.3 million in the interim period with more expected in the second half of 2017.
Post Period End
· Raised £2.99 million by way of a £1.49 million equity placing, £250,000 subscription by BV-Tech, both at £1.60 per share, and a £1.25 million issue of 10% secured convertible bonds in August 2017. The net proceeds after expenses amounted to €2.94 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, Defenx Plc 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.”
Further to the software acquisition and investment by BV-Tech SpA (“BV-Tech”) announced on 11 April 2017 and the software distribution contract entered into on 22 June 2017 as part of its strategic partnership with BV-Tech, the Company has now entered into a master services agreement in relation to the development and assignment of software.
Master Service Agreement
Defenx has entered into a Master Services Agreement with BV-Tech (the “Master Services Agreement”), which is a framework agreement intended to govern the process by which Defenx will assign work to BV-Tech in relation to the development of software.
The Master Services Agreement acknowledges that BV-Tech will act in the best interests of Defenx and on an arms length basis in relation to the provision of any software development services to the Company and that, notwithstanding that fact, BV-Tech is a preferred supplier of such services to the Company given its expertise and relationship with Defenx.
The key terms of the Master Services Agreement are as follows:
· All software development projects will be put out to tender with BV-Tech and other third party suppliers selected by the Company.
· Software development services will be assigned to the supplier of services deemed most suitable based on criteria including the quality, cost and timeframe for delivery. BV-Tech shall have the right to match or better the terms offered by an alternative supplier provided that the overall proposal is at least equal to the alternative option.
· All intellectual property rights in relation to work provided by BV-Tech under contracts governed by the Master Services Agreement are created solely for the benefit of Defenx and shall be transferred and assigned to Defenx on receipt of the relevant fees due from the Company.
· The Master Services Agreement and any contracts governed by it may be terminated by either party providing at least 90 days’ written notice.
Related party transaction
BV-Tech is a substantial shareholder in the Company as defined in the AIM Rules for Companies (“AIM Rules”), in that it is currently interested in 28.1 per cent. of the Company’s issued share capital. Accordingly, the entry into the Master Services Agreement with BV-Tech constitutes a related party transaction in accordance with Rule 13 of the AIM Rules.
The board of directors (the “Board”) (apart from Raffaele Boccardo and Franco Francione, who as BV-Tech’s nominees on the Board are not deemed to be independent) consider, having consulted with the Company’s nominated adviser, Strand Hanson Limited, that the terms of the Master Services Agreement are fair and reasonable insofar as its shareholders are concerned.
Any future amendments to the Master Services Agreement will be subject to consideration by the Board and, if necessary under the AIM Rules, involve the provision of a fair and reasonable opinion by the independent directors in consultation with the Company’s nominated adviser.
Andrea Stecconi, Chief Executive Officer of Defenx, commented: “With the Master Services Agreement in place with BV-Tech, we now have the foundations for our strategic partnership. I look forward to working with BV-Tech to target larger corporate customers and add high quality, recurring revenues.”
