29th Apr 2008 07:01
Gresham Computing PLC29 April 2008 Embargoed until 07.00 HRS (BST) 29 April 2008 Gresham Computing plc ("Gresham," "the Group" or "the Company") Preliminary Results for the year ended 31 December 2007 Gresham, the specialist provider of real-time financial solutions and storagesolutions, today announces preliminary results for the year ended 31 December2007. Alan Howarth, having steered the business through a number of key changes stepsdown from the Board today and Eric Sepkes joins as Chairman. Eric, ex-Citigroup, has had a distinguished career to date and is recognised asa leading innovator in the global banking industry. He joins us to helpaccelerate the roll out of our unique solutions to the global finance andbanking markets and further develop Gresham's thought leadership in real-timefinancial solutions. Commenting on his appointment, Eric Sepkes, Chairman, said "I am delighted to join the Board of Gresham at this point of flux in worldmarkets because with change, comes opportunity. We are in an age where demandfor real-time information is clear and yet largely unfulfilled in many areas ofboth the banking and corporate markets. I am excited to be taking on this newchallenge and joining a team that has a track record of innovation, developmentand delivery of market leading real-time financial solutions. Gresham has donethe heavy lifting in getting these solutions to market and I now intend torapidly increase Gresham's profile and ensure that the demands for real-timefinancial information are met." Highlights: • Significant growth in cash reporting services • Successful launch of a supply chain financing solution, "Optus Early Pay" • Market acceptance of our new data storage solution In 2007 our focus has been on building long term recurring revenues. We started2008 with a significantly improved order book, representing around threequarters of our 2007 turnover. As a result, Q1 2008 trading performance wassignificantly better than the like for like period in 2007 with net cashbalances at the end of Q1 2008 being broadly similar to the 2007 year endposition. Commenting on the results Andrew Walton-Green, Gresham Chief Executive Officer,said: "Our movement from a largely licensed based sales model to selling software as aservice is now starting to pay off. We made solid progress in taking our coresolutions to market and we have made a solid start to 2008. I am delighted thatEric has joined Gresham. His knowledge and experience in financial markets isrenowned and the whole team is excited at the opportunity to focus ourattentions on fulfilling the growing demand for our solutions." "I would like to thank Alan Howarth on behalf of myself and the Board for hisassistance over the years in steering the business through some key changes,including the launch of core technologies, and for assisting us in bringing Ericonto the Board." For further information please contact:Gresham Computing plcAndrew Walton-Green +44(0)20 7653 0228 CHAIRMAN'S STATEMENT Overview of the year I am pleased to report that we have made substantial progress in 2007 towardsour strategic objectives. We have significantly grown our cash reporting business, launched our supplychain financing solution and successfully installed our storage backupvirtualisation technology in multiple customer sites. We have invested heavily over the last few years to build an innovative range ofproducts in the payments, cash management and storage markets with a view tosecuring the longer-term benefits of recurring revenues, predominantly fromselling software as a service. Strategy Our strategy is to grow the business by focusing on real-time financial andstorage solutions. Our preferred model is to work closely with our customersand partners globally to add value to their business and hence our own. The markets for real-time financial solutions and storage solutions are huge andwe believe that Gresham technology is well placed to satisfy a significant partof the growing demand for both. We have strengthened our businesses with theaddition of new people and increased our sales and marketing capabilities toachieve growth based on meeting the needs of our customers. When the time is right, we will seek acquisitions to accelerate our growth inthe real-time financial solutions market. During the year under review, weidentified a number of businesses within the group that do not fit with our corefocus. As a result, we are currently reviewing our options regarding thesebusinesses and expect this review may give rise to one or more businessdisposals in the current financial year. Real-time financial solutions Cash reporting During the year, we further increased the number of providers and currenciesavailable on the Clareti Cash Reporting Service at the request of our userbanks. We now have 29 major banks (an increase of 7 in 12 months) that haveagreed to provide data to the service of which data from 20 of them is nowavailable in 19 currencies, with more on the way. There are 9 user banks, someof which have deeply embedded our solution in their back office environment. Weare currently collating data and building the business case for another 20banks. We continue to see transaction traffic with a value in excess of $500 billionper day passing across our service to users. We are already seeing significant interest in us delivering this solution to thebroker dealer community via their primary bankers. Our outsourced real-timeinformation solution provides efficiency and speed to market for banks wishingto provide this service. When the service was originally launched the primary targets were the banks asthe end users of the data. Our experience indicates that while the pressure forreal-time data grows, especially in a credit crunch, the most significant driverof new revenues for us is the demand for intra-day/real-time cash managementinformation from the banks' corporate customers. This can then be used by thecorporate for intraday decision making and hence drives new revenues for thebank. It also acts as a differentiator in a globally competitive market. Thevisibility of real-time data is a significant enabler to risk management, whichis particularly relevant in uncertain economic times. As at 31 December 2007, our solutions were enabling 10 corporate customers of amajor UK clearing bank with intraday cash management information. I am pleasedto report that a hosted version of this service went live in the first quarterof 2008 and the number of customers is now growing. We currently have a pipelineof several hundred new corporate users and will be working closely with ourpartners to bring these onboard during 2008 and beyond. Supply chain finance Unlocking the working capital tied up between corporate buyers and theirsuppliers is of immense value. We have developed a world leading technologysolution for multiple forms of trade finance and are currently engaged inrolling this service out to market with some major players. Our supply chain finance technology went live in the second half of 2007,initially in Australia. The "Optus Early Pay" collaboration between Optus, aglobal bank and Gresham is focused on providing a comprehensive solution forsupply chain financing. The first major corporate buyer, a multi-billionturnover listed company, went live in Q3 2007 on this service and we are workingto on-board their suppliers. Four more major buyers are currently integrating tothe service. Our banking partner has developed a strong pipeline and hasaggressive growth plans for 2008 and beyond. Treasury management In February 2008, we were pleased to announce a substantial contract win for a treasury management solution with a blue chip customer. The implementation of this solution is expected to be completed during 2008. This new win follows earlier successful implementations at both Petronas and Khazanah in Malaysia where we continue to deliver enhancements and provide support. Storage Our storage solutions provide advanced backup/restore capability designed tomeet the needs of the largest and most complex businesses but are also equallyeffective in the mid market. We focus on ease of use, scalability andperformance and have over 4,000 installations of our software including 90customers in the global Fortune 500. Historically we have sold largely through major resellers hence our brandawareness has been lower than one would expect for a company with such anestablished client base. In 2007, we made significant steps to grow our brandrecognition within the global storage technology industry in order to gain moreattention to our newest storage product. We have invested in senior experiencedprofessionals for major account development, reseller partner management andglobal marketing. We also increased our engagement with the press and industryanalyst community to educate our customers, our partners and the market on oursolutions. During 2007, we successfully launched our Backup Virtualization solution, whichallows multiple backup applications to write to any number of disks or tape. Iam pleased to report that we now have 15 implementations, including a number ofFortune 500 companies. These solutions are typically running in complex open andmainframe system environments both in the US and Europe. Financials During the year we continued to invest in our three core technologies; cashreporting, supply chain finance and backup virtualisation. Alongside this wecontinue to invest in brand awareness and marketing focused on our core targetmarkets for these technologies. Group revenues were £13.4m (2006: £14.5m) generating a loss after tax of £2.4m(2006: loss £0.4m) with cash at year end of £2.3m (2006: £3.6m). We saw anEBITDA loss of £2.2m (2006: loss £49,000), with an adjusted EBITDA loss of £1.5m(2006: loss £85,000). Overall, we saw growth from all three of our core technology solutions. Weinvested in taking them to market faster and with greater brand awareness. We saw lower revenues in non core areas, especially our Staff IT contracting armand in legacy products. We also saw the deferral of a significant treasurymanagement contract from 2007 to Q1 2008. A significant proportion of ourrevenues are from overseas and the weakened US Dollar has also adverselyimpacted revenues. In aligning the business with our core technologies we have been able to reducecost and increase focus going into 2008. During 2007, we incurred one offrestructuring costs of approximately £700,000 in non core areas, with a cash payback period of less than six months. The benefits of this restructuring arealready being felt. EMEA revenues were £8.2m (2006: £8.8m) with growth in our core businesses offsetby lower sales volumes in non core businesses. North American revenues weresteady at £3.9m (2006: £3.9m) with growth in sales of our new technology offsetby unfavourable foreign currency rates. Asia Pacific revenues were £1.3m (2006:£1.8m) which reflects the focus on establishing longer term revenues from thesupply chain financing service as opposed to short term services/product. Withinthis region, we saw one major treasury management deal fall away and onedeferred into 2008. The benefits from this focus on core technologies resultedin good progress with our supply chain financing technology in Australia andwinning of the deferred treasury management deal in 2008. EBITDA calculated as earnings before interest, tax, amortisation anddepreciation Adjusted EBITDA calculated as EBITDA before non-cash share option charges andone off restructuring charge in 2007 of £700,000 Board change After several years overseeing the transition of the group to this point, I havedecided that the time is right to step down from my role as Chairman of theboard on announcement of these preliminary results. I am delighted to announce that Eric Sepkes has agreed to become Chairman of theGroup. Eric is a very well known figure in the global banking community, withparticular interests in international payments, cash management and tradefinance. Eric completed 38 years with Citigroup where he held variousmanagement positions, including Operations and Treasury and Cash Management, andmost recently held a senior strategic role in Global Transaction Services. Erichas been involved in Payment Infrastructures since 1985, when he was responsiblefor managing Citibank's entry into CHAPS (Clearing House Automatic PaymentSystem) where he was director for 12 years and Chairman for 3 years. He wasChairman and Deputy Chairman of the Euro Banking Association between 1994 and2005. He was the founder and coordinator of the European Payments Group(formerly Heathrow Group) and was a member of both APACS (the UK tradeassociation for payments and for those institutions that deliver paymentservices to customers) and the European Council. Latterly he was a member ofAPACS Senior Sponsors Committee for Faster Payments in the UK. Eric is a well known industry speaker and event chairman retaining key roles atmany industry events including International Payments Systems week and theSupply Chain Management Forum. I welcome Eric to the Board and to the position of Chairman. Outlook We started the year with a very substantial level of contracted revenues for2008 in the above mentioned areas of our business. We also have a strongpipeline of new or incremental revenue in each of our core areas of business. Weare aggressively pursuing these opportunities, which we believe should have asignificant impact on our trading performance in 2008 and beyond. We willdispose of non-core businesses as the opportunity arises. I am pleased to report that our trading performance in Q1 2008 was significantlyahead of that seen in the comparative period with cash balances broadly similarto those held at 31 December 2007. We are working towards improving theseresults further during 2008 and beyond. Alan HowarthChairman28 April 2008 Group income statementFor the year ended 31 December 2007 Notes 31 December 31 December 2007 2006 £'000 £'000Revenue 2 13,423 14,522Cost of goods sold (7,192) (6,928)Gross profit 6,231 7,594 Administrative expenses (9,184) (8,124)Trading loss 2 (2,953) (530) Finance revenue 107 132Finance costs (23) (16) Loss before taxation (2,869) (414)Taxation 449 40Attributable to equity holders of the parent 5 (2,420) (374) Loss per share (total and continuing)Basic loss per share - pence 3 (4.74) (0.74)Diluted loss per share - pence 3 (4.74) (0.74) Group statement of recognised income and expenseFor the year ended 31 December 2007 2007 2006 £'000 £'000 Exchange differences on translation of foreign operations 68 (103) Net income / (expense) recognised directly in equity 68 (103) Attributable loss for the period (2,420) (374) Total recognised income and expense for the period (2,352) (477) Group balance sheetAt 31 December 2007 Notes 31 December 31 December 2007 2006 £'000 £'000ASSETSNon-current assetsProperty, plant and equipment 1,327 1,195Intangible assets 6,086 5,879 7,413 7,074Current assetsTrade and other receivables 3,650 3,543Inventories 100 0Income tax receivable 374 305Other financial assets 20 32Cash and cash equivalents 2,300 3,557 6,444 7,437 TOTAL ASSETS 2 13,857 14,511 EQUITY AND LIABILITIESEquity attributable to equity holders of the parentCalled up equity share capital 2,643 2,518Share premium account 12,564 10,037Other reserves 1,039 1,039Foreign currency translation reserve (64) (132)Retained earnings (8,761) (6,383) 5 7,421 7,079Non-current liabilitiesDeferred income 715 1,562Provisions 0 90 Current liabilitiesIncome tax payable 61 121Trade and other payables 5,460 5,659Provisions 200 0 Total liabilities 2 6,436 7,432 TOTAL EQUITY AND LIABILITIES 13,857 14,511 Group cashflow statement 31 31 December December 2007 2006 £'000 £'000Cash flows from operating activitiesLoss before taxation (2,869) (414)Depreciation, amortisation and impairment 741 481Share based payment expense/(credit) 42 (36)Increase in inventories (100) 0(Increase)/Decrease in trade and other receivables (188) 1,337(Decrease)/Increase in trade and other payables (1,151) 1,408Movement in provisions 110 33Net finance income 84 116 Cash (outflow)/inflow from operations (3,331) 2,925Net income taxes received 474 - Net cash (outflow)/inflow from operating activities (2,857) 2,925 Cash flows from investing activitiesInterest received (107) (132)Purchase of property, plant and equipment (324) (180)Payments to acquire intangible fixed assets (662) (956) Net cash used in investing activities (1,093) (1,268) Cash flows from financing activitiesProceeds from issue of ordinary share capital 2,750 33Share issue costs (98) -Interest paid 11 8Decrease in obligations under finance leases - (59) Net cash generated by/(used in) financing activities 2,663 (18) Net (decrease)/ increase in cash and cash equivalents (1,287) 1,639Cash and cash equivalents at beginning of period 3,557 1,973Exchange adjustments 30 (55)Cash and cash equivalents at end of period 2,300 3,557 Notes to the financial information 1 Basis of preparation The financial information contained herein does not constitute the company'sstatutory accounts for the years ended 31 December 2007 or 2006 but is derivedfrom those accounts. Statutory accounts for 2006 have been delivered to theRegistrar of Companies and those for 2007 will be delivered following theCompany's annual general meeting. The auditors have reported on those accounts;their reports were unqualified, did not include references to any matters towhich the auditors drew attention by way of emphasis without qualifying theirreports and did not contain statements under the Companies Act 1985, s 237(2) or(3). The financial statements are prepared under the historical cost convention,except for certain financial instruments which are measured at fair value. The preparation of financial statements in conformity with generally acceptedaccounting principles requires the use of estimates and assumptions that affectthe reported amounts of assets and liabilities and disclosure of contingentassets and liabilities at the date of the financial statements, and the reportedamounts of revenues and expenses during the reporting period. Although theseestimates are based on the Directors' best knowledge of current events andactions, actual results ultimately may differ from those estimates. 2 Segmental information The primary segment reporting format is determined to be geographical segmentsas the group's risks and rates of return are affected predominantly bydifferences in geography. Secondary segment information is reported by businesssegment. The operating businesses are organised and managed separately accordingto geography, with each segment representing a strategic business unit thatoffers the Clareti range of solutions to market. The group's geographical segments are based on the location of the group'sassets. Sales to external customers disclosed in geographic segments are basedon the geographical location of its customers and destination. The geographicsegments relate primarily to operations in the following countries: AsiaPacific: Australia and Malaysia; EMEA: UK and Northern Europe; North America:United States of America, Canada and the Caribbean. The real time financial solutions segment is a supplier of solutionspredominantly to the finance and banking markets. Included within the real timefinancial solutions segment is the group's IT staff placement business and,because this business contributes significant revenues, certain additionalinformation concerning the results of this business have been provided to aidunderstanding of the overall segment results. The storage solutions segment isa supplier of solutions predominantly to the enterprise level storage market. Transfer prices between segments are set on an arm's length basis in a mannersimilar to transactions with third parties. Segment revenue, segment expense andsegment result include transfers between business segments. Those transfers areeliminated in consolidation. Primary reporting format - Geographical segments The following tables present revenue and profit/loss and certain asset andliability information regarding the group's geographical segments for the yearsended 31 December 2007 and 2006, all of which are continuing. Revenue by source Year ended 31 December 2007 Year ended 31 December 2006 Segment Inter-segment Sales to Segment Inter-segment Sales to revenue sales external revenue sales external customers customers £'000 £'000 £'000 £'000 £'000 £'000Asia Pacific 2,034 (755) 1,279 2,384 (613) 1,771EMEA 8,203 (14) 8,189 8,869 (54) 8,815North America 5,770 (1,815) 3,955 3,936 0 3,936 16,007 (2,584) 13,423 15,189 (667) 14,522 Result by segment Year ended 31 December 2007 Year ended 31 December 2006 Asia EMEA North Total Asia EMEA North Total Pacific America Pacific America £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000Segment result (555) (272) (406) (1,233) (81) 95 711 725Unallocated expenses (1,720) (1,255)Trading loss (2,953) (530)Net finance revenue 84 116Loss before income tax (2,869) (414)Income tax credit 449 40Net loss for the (2,420) (374)year Assets by segment Year ended 31 December 2007 Year ended 31 December 2006 Asia EMEA North Total Asia EMEA North Total Pacific America Pacific America £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000Segment assets 1,670 5,684 2,911 10,265 1,438 5,943 2,166 9,547Unallocated assets 3,592 4,964Total assets 13,857 14,511 Segment liabilities (690) (3,863) (1,814) (6,367) (342) (5,219) (1,536) (7,097)Unallocated liabilities (69) (335)Total liabilities (6,436) (7,432) Unallocated assets and liabilities comprise certain property, plant andequipment, cash and taxation. Secondary reporting format - Business segments The following tables present revenue, expenditure and certain asset informationregarding the group's business segments for the years ended 31 December 2007 and2006. Revenue by business segment 2007 2006 £'000 £'000Real Time Financial Solutions 10,969 11,823Storage Solutions 2,454 2,699 13,423 14,522 Included in the Real Time Financial Solutions business segment is £2,952,000 ofrevenue in respect of the IT staff placement business (2006: £3,411,000). 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 except when suchdilutive instruments would reduce the loss per share. The following reflects the loss and share data used in the basic and dilutedloss per share computations: 2007 2006 £'000 £'000Net loss attributable to equity holders of the parent (2,420) (374) 2007 2006Basic weighted average number of shares 51,042,671 50,293,800Dilutive potential ordinary shares: Employee share options - -Diluted weighted average number of shares 51,042,671 50,293,800 Basic loss per share - pence (4.74) (0.74)Diluted loss per share - pence (4.74) (0.74) 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 (2006: None). 5 Reconciliation of movements in equity Share Share Other Currency Retained Total capital premium reserves translation earnings reserves £'000 £'000 £'000 £'000 £'000 £'000At 1 January 2006 2,513 10,009 1,039 (29) (5,973) 7,559 Exchange differences on translation of foreign 0 0 0 (103) 0 (103)operationsShare based payment expense 0 0 0 0 (36) (36)Issue of shares 5 28 0 0 0 33Share issue costs 0 0 0 0 0 0Attributable loss for the period 0 0 0 0 (374) (374) At 31 December 2006 2,518 10,037 1,039 (132) (6,383) 7,079 Exchange differences on translation of foreign 0 0 0 68 0 68operationsShare based payment income 0 0 0 0 42 42Issue of shares 125 2,625 0 0 0 2,750Share issue costs 0 (98) 0 0 0 (98)Attributable loss for the period 0 0 0 0 (2,420) (2,420) At 31 December 2007 2,643 12,564 1,039 (64) (8,761) 7,421 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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