Defenx PLC (LON:DFX), the cyber-security software group, has today announced that, further to the software acquisition and investment by BV-Tech SpA (“BV-Tech”) announced on 11 April 2017, the Company has entered into a software distribution contract as part of its strategic partnership with BV-Tech.
Software Distribution Contract
Defenx, via its subsidiary Memopal Srl, has entered into a software distribution contract with BV-Tech (the “Software Distribution Contract”), which is in line with the terms offered to other major Defenx channel partners.
As previously announced, BV-Tech is a leading independent corporate IT solutions provider in Italy, with a particular focus on information security management, fraud prevention and cyber security. BV-Tech has grown rapidly, reporting revenues of €56 million in 2016 and employing over 600 engineers and IT experts. Its significant customers include the Lombardy and Veneto Regional governments, the Italian Ministry of Justice, TIM (Telecom Italia Mobile), American Express, NATO, Leonardo, Bulgari, Eni and Saipem.
Under the Software Distribution Contract, which is for an initial term of three years subject to 180 days’ notice by either party, the Company will offer its product range for sale by BV-Tech on a global, non-exclusive basis. Pursuant to the Software Distribution Contract, BV-Tech will predominately target large corporate clients, providing Defenx with accelerated access to the corporate market.
Invoicing will be on a non-recourse basis, payable on 60 days – shorter than in the non-corporate markets we currently operate in – which the directors believe will help reduce Defenx’s working capital requirements.
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 29.6 per cent. of the Company’s issued share capital. Accordingly, the entry into the Software Distribution Contract 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 Franco Francione, who as BV-Tech’s CFO and nominee on the Board is not deemed to be independent) consider, having consulted with the Company’s nominated adviser, Strand Hanson Limited, that the terms of the Software Distribution Contract are fair and reasonable insofar as its shareholders are concerned.
Any future amendments to the Software Distribution Contract 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.
Trading update
The directors are pleased with year-to-date trading, which is in line with management’s expectations. As seen in previous years, our business is 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.
While the directors believe that the strategic partnership with BV-Tech, notably the Software Distribution Contract announced today, will in time reduce this seasonality, the Company’s results for 2017 are inevitably dependent on billings in the second half of 2017 and driven predominately by the existing core business.
The core business, which is focused on the distribution of mobile and PC security software to our channel partners, is maturing and new channel partners and products are now starting to support future growth. Meanwhile, our sales and technical teams are making good progress with BV-Tech, with whom a promising pipeline of opportunities is developing. Accordingly, the directors remain confident that Defenx’s diversification into the corporate market, supported by BV-Tech, will yield significant profitable growth over the medium term and the results for 2017 will remain in line with expectations.
The interim results for the six months ending 30 June 2017 will be announced in late September 2017.
Andrea Stecconi, Chief Executive Officer of Defenx Plc, commented: “I am pleased with our performance so far this year and am excited by the future opportunities available as a result of the strategic partnership with BV-Tech. Through the Software Distribution Contract, Defenx will gain access to BV-Tech’s sophisticated sales network and strong client relationships, which represents a major step-change in our ability to reach large corporate customers. We can now sell our digital protection solutions to BV-Tech’s customers, many of whom have customers of their own that will become users of our products and solutions.”
