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Corero sees strong support for fund-raising

Shareholders will have the opportunity to participate in the share issue

Cyber security
The net proceeds will be used to support the marketing and further development of the SmartWall TDS product

Cyber-security firm Corero Network Security PLC (LON:CNS) is to offer shareholders a chance to buy shares at a discount as part of a £9mln fund-raising.

The company has conditionally placed 36.36mln shares at 22p a pop, raising £8mln in the process, and is seeking to raise an additional £1mln through an open offer to shareholders of 4.6mln shares on the basis of 1 new share for every 36 shares held, also at 22p a share.

There will be an excess application facility that essentially allows shareholders to apply for more shares than they would ordinarily be entitled to, subject to other shareholders not taking up their full entitlements.

The issue price represents a 5.5p discount to last night's closing mid-market price. The shares have been on a tremendous run this year – up 84% year-to-date - on the back of some impressive contract wins, and demand for the new shares was strong from both existing investors and institutional investors, Corero said.

The net proceeds will be used to support the marketing and further development of the SmartWall TDS product and for the general working capital requirements of the group.

SmartWall TDS is a leading cyber-security product that protects against distributed denial of service (DDOS) attacks, where a company's network becomes overwhelmed by a flood of input/output requests.

“We have been extremely encouraged by the investor response to the fund raise, which was significantly oversubscribed and also introduces a number of new blue chip institutions to the company’s shareholder register,” said Ashley Stephenson, Corero's chief executive officer.

“The company continues to build on the momentum from 2015 with a number of significant contracts for its flagship SmartWall TDS product in 2016. We are at an exciting point in the development of Corero, and the proceeds of the fund raise will enable us to continue to take advantage of the substantial opportunities available to us in the fast growing DDoS defence market,” Stephenson added.

The cash call coincided with a set of results for 2015 that showed the company's decision to focus exclusively on the SmartWall TDS product beginning to pay off.

Orders for the SmartWall TDS product in 2015 were up 186% to US$4.3mln from US$1.5mln in 2014.

Corero sold the SmartWall TDS to more than 20 service providers, hosting providers and enterprises in 2015, providing real-time DDoS and cyber-threat protection, with an average order value exceeding US$200,000, which was a significant increase over the 2014 average order value of US$74,000.

Revenue for the group as a whole rose 11% to US$8.3mln from US$7.5mln the year before. The group ended the year strongly, with final quarter billings of US$3.2mln, which was the company's highest quarterly billings for more than three years.

The loss before interest, tax, depreciation and amortisation (LBITDA) narrowed to US$6.4mln from US$7.1mln the year before. Loss before tax was US$11.62mln, versus US$10.42mln the year before. The loss per share contracted to 8.5 cents from 11.5 cents.

Corero ended the year with net cash of US$2.7mln, down from $6.0mln at the end of 2014.

“2015 was a pivotal year for Corero and its flagship SmartWall TDS product. During the period, we began to realise significant sales traction and a growing prospect list as a result of customer demand for real-time, automatic DDoS mitigation. That momentum has continued in the first quarter of 2016,” Stephenson said.

“The wins to date are a strong endorsement of the SmartWall TDS value proposition. In addition, the company’s exceptional performance in the recent NSS Labs independent security test, provides third-party validation for the industry-disrupting capabilities of SmartWall TDS. We firmly believe we are in the early adaption phase of this opportunity; a view that is supported by leading industry analysts such as IDC and Infonetics Research, who forecast double-digit growth in the DDoS market and expect it to be worth in excess of US$1 billion in three years’ time,” the chief executive continued.

“This backdrop of accomplishments in 2015, and the fact that we are currently engaged in a number of even larger opportunities with new customers, gives Corero confidence that it can deliver strong revenue growth in 2016 and beyond,” Stephenson concluded.

Quick facts: Corero Network Security PLC

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