27th Apr 2006 07:02
Gresham Computing PLC27 April 2006 Embargoed until 07.00 27 April 2006 GRESHAM COMPUTING plc ("Gresham", the "group" or the "company") Preliminary results for the year ended 31 December 2005 Gresham, provider of enterprise software and solutions, announces itspreliminary results for the year ended 31 December 2005. The main resultshighlights are as follows: • Amendment to agreement with Cable & Wireless (announced today) • Continuing progress with Cable & Wireless Real Time Nostro ("CWRTN") service since January update: - 2 new banks including a top ten bank have agreed to take the RTN Direct service (total now 4); - A new subscriber for the Browser service (total now 4, with 10 trialling); and - 2 new major European banks now providing data to the service (total now 20) • Revenue at £14.0m (2004: £12.4m) and loss before tax of £1.2m (2004: £1.1m loss) • Cash ahead of expectations £2.0m at year end Financial Highlights 2005 2004Revenue £14.0m £12.4mTrading loss £(1.4)m £(1.3)mLoss before tax £(1.2)m £(1.1)mAttributable to equity holders of the parent £(1.1)m £(0.8)mLoss per share (pence) (2.20)p (1.54)p Andrew Walton-Green, Chief Executive Officer of Gresham, commented: "Today's amendment to our agreement with Cable & Wireless represents asignificant opportunity for Gresham and comes at a pivotal time for the CWRTNservice. Since our last update to the market at the end of January, we haveseen two more major banks agree to take the Direct subscriber service andanother take the Browser service. Trading has started well in the current yearand we anticipate improved trading overall in 2006." For further information, please contact: Gresham Computing plc +44 (0)207 653 0228Andrew Walton-Green, Chief Executive Officer Financial Dynamics +44 (0)207 831 3113James Melville-RossCass Helstrip Chairman's Statement I am pleased to present my report on the group's activities and results for theyear ended 31 December 2005, which are in line with the period-end tradingupdate that we issued on 31 January 2006. In addition, I am also pleased toreport that we have today reached an agreement with Cable & Wireless concerningthe Real Time Nostro service, which amends our respective roles andresponsibilities and provides a secure platform for the continued roll-out ofthe Cable & Wireless Real Time Nostro service with greater potential forGresham. Update on CWRTN and amendment to agreement with Cable & Wireless The CWRTN service gathered momentum in 2005 as global banks increasingly addressthe use of real time information in their businesses. Since our update to themarket in January I am pleased to report the following progress: • Two further major banks have agreed to take the CWRTN Direct service taking the total number of banks that have agreed to take the CWRTN Direct service to 4, 3 of which are top 20 banks. Several major banks are currently evaluating the CWRTN Direct service; • The CWRTN Direct service was enhanced by Gresham in March 2006 to allow data delivery using the preferred SWIFTNet method in the first half of 2006. This is important since banks can now utilise their existing SWIFT infrastructure to participate in the CWRTN Direct service; • A further major bank has subscribed to the CWRTN Browser service, taking the total number to 4, including 2 of the world's top 10 banks. There are currently in excess of 10 banks trialling the CWRTN Browser service; and • We have added 2 further major banks as agreed Providers, increasing the total number of banks that have agreed to provide data from 18 to 20, including 7 of the top 20 banks in the world and all of the top 4 (Bank of America, Citibank, HSBC and JP Morgan). Importantly, the majority of these banks are now live as providers of data to the service with their data available to subscribing banks. Discussions continue with a large number of potential providers of data to the service. Gresham and Cable & Wireless today announce a revision to their operatingresponsibilities in the delivery of the collaborative CWRTN service. Under thenew arrangement, effective immediately, Gresham will assume primaryresponsibility for the sales, marketing, integration and application softwaremanagement of this global banking industry initiative. Cable & Wireless willcontinue to support the roll out of this solution globally and in particularwill be responsible for the secure hosting and managed infrastructure, which arefundamental to the integrity and delivery of the service. These new arrangementsstrongly align both parties' operating responsibilities with their corestrengths and are aimed at ensuring that our customers are served in the mostappropriate manner. Under the agreement both parties will continue to share net subscriptionrevenues generated by CWRTN with the shares amended to reflect ongoing operatingresponsibilities. Gresham will henceforth receive a significant majority ofrevenues arising from the service. Cable & Wireless will be providing theongoing hosting and infrastructure services for CWRTN as well as making asubstantial up-front cash payment to Gresham and an ongoing contribution to thecosts of taking CWRTN to market. Summary of financial performance Results are in line with our period-end trading update issued 31 January 2006.Revenues increased to £14.0m from £12.4m in 2004 and the loss before taxincreased slightly to £1.2m (2004: £1.1m loss before tax). Year end cash was£2.0m and our cash position improved further in January following a significantcustomer receipt and will increase significantly in the first half of 2006following today's agreement with Cable & Wireless. Enterprise Solutions Overall, the results achieved by our Enterprise Solutions business weredisappointing and were adversely affected by contract delays and the absence ofsignificant licence revenues. However, trading and opportunities improved inthe second half of 2005 and this trend has continued in 2006. We continue tosee growth from a strong customer pipeline in our Integrated Client MoneySolution working alongside a major bank as well as increased activity from ourSolutions business generally. We continue to invest in developing our patent pending payables financingsolution, Gresham Payables Financing Solution ("GPFS"), and remain incontractual discussions with a number of parties regarding taking GPFS to marketin 2006, with a model of building a sound base of recurring revenues over time. Our staff placement business grew strongly during the year, with revenuesincreasing by 66% over 2004 in an ever challenging market. The growth arosefrom the provision of temporary staff, with higher margin permanent staffrevenues remaining at low levels in line with market conditions. Enterprise Software Revenue in our Enterprise Software division continued to be underpinned by astrong support and maintenance revenue base and grew 10% in the year. Our US storage business performed strongly in 2005 and contributed significantlyto the overall revenue growth of the Enterprise Software division. We havecontinued to invest in our new Storage Consolidation Platform ("SCP"), which wewill be bringing to market in 2006 largely through OEM channels. The SCPproduct suite has been engineered to address the full breadth of the secondarystorage back-up and archive market thus satisfying the key demands of endcustomers for this solution. The exceptional functionality and flexibility ofour platform will prove particularly useful to library vendors but also has widemarket applicability for enterprise storage customers and wider than that to allconcerned in the Storage Area Network (SAN) arena. SCP provides a significantopportunity to widen and solidify our global customer base and generate stronggrowth in the Enterprise Software division. The overall growth in Enterprise Software was achieved despite a particularlypoor performance from our French back-up business. Actions have been taken inthe first half of 2006 to significantly reduce our ongoing exposure in thatparticular market. Future Outlook The agreement announced today with Cable & Wireless is extremely positive forthe future of Gresham. The demands for real time access to banks' tradinginformation have if anything increased since the CWRTN venture was launched andwe feel that we are now reaching an inflexion point in the life of the service.This has been evidenced by a doubling in the number of subscribers and providersin the last 12 months. That we continue to be supported by Cable & Wireless andnow have the opportunity to derive a greater share of the revenue from theservice is positive news for us and our shareholders. Going forward, we have the platform in place to commit significant resource to astrong market focused sales and marketing effort to accelerate revenues in 2006and beyond. This will mean a greater investment than previously anticipatedover the next two years as we put more resources into building the revenues,however, the additional revenue share and long term potential of CWRTN make thisa worthy area for investment. CWRTN solves a problem for banks looking to deal with increasing regulatorypressures around international payments and this factor will encourage take upof the service. We are already beginning to see interest from bankingregulators in the application of the CWRTN service. In the early part of 2006, we secured a major contract providing EnterpriseSolutions in Malaysia building on our strong customer credentials in thatregion. We see further growth in this region and in March 2006 we opened anoffice in Kuala Lumpur, Malaysia, to service our major customers in that area. In addition we will bring new solutions to market in 2006, including ourexciting new Storage Consolidation Platform ("SCP") technology, which weconsider to have significant potential. We are currently taking steps to strengthen our sales and marketing resources,both in response to today's CWRTN announcement and also to improve our salesapproach to market generally. During 2005, we took actions to reduce our recurring indirect cost base to allowinvestment in expanding our customer and market facing activities. We expectthe impact of these moves to be seen in 2006. Taking into account all these factors, we anticipate improved trading in 2006together with a continued roll-out of CWRTN. Alan HowarthChairman 26 April 2006 Group income statementFor the year ended 31 December 2005 Notes 31 December 31 December 2005 2004 £'000 £'000Revenue 2 13,982 12,398Cost of goods sold (7,205) (5,796)Gross profit 6,777 6,602 Administrative expenses (8,133) (7,867)Trading loss 2 (1,356) (1,265) Finance revenue 124 217Finance costs (14) (19) Loss before tax (1,246) (1,067)Taxation 145 305Attributable to equity holders of the parent 5 (1,101) (762) Loss per share (total and continuing)Basic loss per share - pence 3 (2.20) (1.54)Diluted loss per share - pence 3 (2.20) (1.54) Group statement of recognised income and expenseFor the year ended 31 December 2005 2005 2004 £'000 £'000 Exchange differences on translation of foreign operations - (29) Net expense recognised directly in equity 0 (29) Attributable loss for the period (1,101) (762) Total recognised income and expense for the period (1,101) (791) Group balance sheetAt 31 December 2005 Notes 31 December 31 December 2005 2004 £'000 £'000ASSETSNon-current assetsProperty, plant and equipment 1,271 1,400Intangible assets 1,879 1,245 3,150 2,645Current assetsTrade and other receivables 8,175 6,791Income tax receivable 252 449Other financial assets 40 400Cash and cash equivalents 1,973 3,016 10,440 10,656 TOTAL ASSETS 13,590 13,301 EQUITY AND LIABILITIESEquity attributable to equity holders of theparentCalled up equity share capital 5 2,513 2,479Share premium account 5 10,009 9,713Other reserves 5 1,039 1,039Foreign currency translation reserve 5 (29) (29)Retained earnings 5 (5,973) (4,914) 5 7,559 8,288Non-current liabilitiesFinancial liabilities 21 40Deferred income 680 268 Current liabilitiesFinancial liabilities 43 61Income tax payable 109 20Trade and other payables 5,178 4,624 Total liabilities 6,031 5,013 TOTAL EQUITY AND LIABILITIES 13,590 13,301 Group cashflow statementFor the year ended 31 December 2005 Notes 2005 2004 £'000 £'000Cashflows from operating activitiesTrading loss (1,356) (1,265)Depreciation and amortisation 586 389Share based payment expense 42 29Increase in trade and other receivables (1,424) (1,318)Increase in trade and other payables 976 238 Cash outflow from operations (1,176) (1,927)Net income taxes received / (paid) 431 (40) Net cash outflow from operating activities (745) (1,967) Cash flows from investing activitiesInterest received 84 199Repayment of convertible bonds 400 389Purchase of property, plant and equipment (155) (234)Disposal of property, plant and equipment 4 0Payments to acquire intangible fixed assets (709) (278) Net cash (used in) / generated from investing activities (376) 76 Cash flows from financing activitiesProceeds from issue of ordinary share capital 140 91Share issue costs (10) (2)Interest paid (14) (19)Decrease in obligations under finance leases (65) (77) Net cash generated / (used in) by financing activities 51 (7) Net decrease in cash and cash equivalents (1,070) (1,898)Cash and cash equivalents at beginning of period 3,016 4,923Exchange adjustments 27 (9)Cash and cash equivalents at end of period 1,973 3,016 Notes to the financial information 1 Basis of preparation The above financial information does not constitute statutory financialstatements as defined by section 240 of the Companies Act 1985. The results forthe year ended 31 December 2005 and the balance sheet at that date are extractedfrom the statutory financial statements (on which the auditors have given anunqualified opinion) which will be filed with the Registrar of Companies. Thecomparative financial information is extracted from the statutory accounts forthe year ended 31 December 2004 (on which the auditors gave an unqualifiedopinion). This is the first year in which the group has prepared its financialstatements under IFRSs and the comparatives have been restated from UK GenerallyAccepted Accounting Practice (UK GAAP) to comply with IFRSs. The reconciliationsto IFRSs from the previously published UK GAAP financial statements werepublished with the group's 2005 interim announcement in September 2005 and areavailable on the Gresham website (www.gresham-computing.com). The preparation offinancial statements requires management to make estimates and assumptions.These impact the reported amounts of assets and liabilities and the reportedamount of revenues and expenses during the reporting period. 2 Segmental information The primary segment reporting format is determined to be business segments asthe group's risks and rates of return are affected predominantly by differencesin the products and services provided. Secondary segment information is reportedgeographically. The operating businesses are organised and managed separatelyaccording to the nature of the products and services provided, with each segmentrepresenting a strategic business unit that offers different products and servesdifferent markets. The solutions segment is a supplier of solutions predominantly to the financeand banking markets. The software segment is a supplier of software productsand related services. Transfer prices between business segments are set on an arm's length basis in amanner similar to transactions with third parties. Segment revenue, segmentexpense and segment result include transfers between business segments. Thosetransfers are eliminated in consolidation. The group's geographical segments are based on the location of the group'sassets. Sales to external customers disclosed in geographical segments are basedon the geographical location of its customers. Primary reporting format - Business segments The following tables present revenue and profit/loss information regarding thegroup's business segments for the years ended 31 December 2005 and 2004, all ofwhich are continuing. Revenue Year ended 31 December 2005 Year ended 31 December 2004 Segment Inter- Sales to Segment Inter- Sales to Revenue segment External Revenue Segment External sales customers sales customers £'000 £'000 £'000 £'000 £'000 £'000Solutions 3,777 (1) 3,776 4,350 - 4,350Specialist contract staff 3,908 (16) 3,892 2,359 (11) 2,348Enterprise Solutions 7,685 (17) 7,668 6,709 (11) 6,698Enterprise Software 6,314 - 6,314 5,704 (4) 5,700 13,999 (17) 13,982 12,413 (15) 12,398 Result by segment Year ended 31 December 2005 Year ended 31 December 2004 Enterprise Enterprise Total Enterprise Enterprise Total Solutions Software Solutions Software £'000 £'000 £'000 £'000 £'000 £'000Segment result (1,980) 1,726 (254) (1,705) 1,293 (412)Unallocated expenses (1,102) (853)Trading loss (1,356) (1,265)Net finance income 110 198Loss before income tax (1,246) (1,067)Income tax credit 145 305Net loss for the year (1,101) (762) Secondary reporting format - Geographical segments The following table presents revenue information regarding the group'sgeographical segments for the years ended 31 December 2005 and 2004. Revenue by destination 2005 2004 £'000 £'000Europe, Middle East and Africa 9,910 8,632North America 2,571 1,595Asia Pacific 1,501 2,171 13,982 12,398 3 Loss per ordinary share Basic loss per share amounts are calculated by dividing net loss or profit forthe year attributable to ordinary equity holders of the parent by the weightedaverage number of ordinary shares outstanding during the year. Diluted loss per share amounts are calculated by dividing the net loss or profitattributable to ordinary equity holders of the parent by the weighted averagenumber of ordinary shares outstanding during the year plus the weighted averagenumber of ordinary shares that would be issued on the conversion of all thedilutive potential ordinary shares into ordinary shares. The following reflects the loss and share data used in the basic and dilutedloss per share computations: £'000 £'000Net loss attributable to equity holders of the (1,101) (762)parent 2005 2004Basic weighted average number of shares 49,945,603 49,407,419Dilutive potential ordinary shares: Employee share options - -Diluted weighted average number of shares 49,945,603 49,407,419 The employee share options are not dilutive because they would reduce the lossper share in both years. There have been no other transactions involving ordinary shares or potentialordinary shares between the reporting date and the date of completion of thesefinancial statements. 4 Dividends paid and proposed No dividends were declared or paid during the year and no dividends are proposedfor approval at the AGM (2004: None). 5 Reconciliation of movements in equity Share Share Other Currency Retained Total capital premium reserves translation earnings reserves £'000 £'000 £'000 £'000 £'000 £'000 At 1 January 2004 2,464 9,639 1,039 0 (4,181) 8,961 Exchange differences on 0 0 0 (29) 0 (29)translation of foreignoperationsShare based expense 0 0 0 0 29 29recognised in the incomestatementIssue of shares 15 76 0 0 0 91Share issue costs 0 (2) 0 0 0 (2)Attributable loss for the 0 0 0 0 (762) (762)period At 31 December 2004 2,479 9,713 1,039 (29) (4,914) 8,288 Exchange differences on 0 0 0 0 0 0translation of foreignoperationsShare based expense 0 0 0 0 42 42recognised in the incomestatementIssue of shares 34 306 0 0 0 340Share issue costs 0 (10) 0 0 0 (10)Attributable loss for the 0 0 0 0 (1,101) (1,101)period At 31 December 2005 2,513 10,009 1,039 (29) (5,973) 7,559 6 Post balance sheet events On 26 April 2006, the group agreed with Cable & Wireless certain amendments tothe arrangement between the parties concerning the Cable & Wireless Real TimeNostro Service ("CWRTN"). Further details of these amendments and their impactcan be found in the Chairman's Statement. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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