5th Sep 2006 07:03
Gresham Computing PLC05 September 2006 Embargoed until 07.00 05 September 2006 GRESHAM COMPUTING plc ("Gresham", the "group" or the "company") Interim results for the 6 months ended 30 june 2006 Gresham, provider of real-time financial solutions and storage solutions,announces its unaudited interim results for the 6 months ended 30 June 2006. Themain results highlights are as follows: • Assumed primary responsibility for Real Time Nostro service from Cable & Wireless and continued progress with users and providers• Revenue up 5% to £7.0m (2005: £6.6m);• Loss before tax reduced by 42% to £0.4m (2005: £0.7m loss)• Cash up at £5.3m (31 December 2005 £2.1m)• Launched our Virtual Tape Library solution• Ranked 2nd in the world by independent storage analysts• First OEM channel deal secured with partner• Proposed launch of Gresham Payables Financing Service H2 2006• A number of strategic hires focused on growing the business more quickly Financial Highlights H1 2006 H1 2005 £'000 £'000 Revenue 6,967 6,634Trading loss (484) (783)Loss before tax (433) (742)Attributable to equity holders of the parent (383) (632) Loss per share (pence) (0.76) (1.27) Cash 5,327 2,105 Andrew Walton-Green, Chief Executive Officer of Gresham, commented: "The first half of 2006 has been a period of significant change and activity forGresham. Since taking the primary sales and marketing role for the Real TimeNostro service in April, we have restructured our business and are makingstrategic hires to enable us to fully engage with the banking community. Ourstrategic focus is very clearly now on delivering real-time financial solutionsto the global banking community and wider. I am also pleased with developmentsin our storage business where today we provide core storage software to overhalf of the Fortune 500. Our new product, a Virtual Tape Library solution, hassignificant potential and has been assessed as a leading solution by independentstorage analysts. We have emerged from the first half stronger and bettercapable of driving the business forward and are focused on improving trading forthe second half of 2006 and beyond." For further information, please contact:Gresham Computing plc +44 (0)207 653 0228Andrew Walton-Green, Chief Executive OfficerFinancial Dynamics +44 (0)207 831 3113James Melville-Ross Matt Dixon Chairman's Statement I am pleased to present my report on the group's activities and results for thesix months ended 30 June 2006. Introduction The period to the date of this report has been one of significant change andactivity for Gresham. • Assumed primary responsibility for Real Time Nostro service from Cable & Wireless and continued progress with users and providers;• Revenue up 5% to £7.0m (2005: £6.6m)• Loss before tax reduced by 42% to £0.4m (2005: £0.7m loss);• Cash up at £5.3m (31 December 2005 £2.1m);• Launched our Virtual Tape Library solution; • Ranked 2nd in the world by independent storage analysts • First OEM channel deal secured with partner• Proposed launch of Gresham Payables Financing Service H2 2006; and• A number of strategic hires focused on growing the business more quickly. CWRTN In April, Gresham and Cable & Wireless announced a revision to operatingresponsibilities in the delivery of the collaborative CWRTN service. Greshamassumed primary responsibility for the sales, marketing, integration andapplication software management. Cable & Wireless continue to support the rollout globally and in particular are responsible for the secure hosting andmanaged infrastructure, which are fundamental to the integrity and delivery ofthe service. These new arrangements strongly align both parties' operatingresponsibilities with their core strengths and are aimed at ensuring that ourcustomers are served in the most appropriate manner. Under the agreement both parties continue to share net subscription revenuesgenerated by CWRTN with the shares amended to reflect ongoing operatingresponsibilities. Gresham now receives a significant majority of revenuesarising from the service. Cable & Wireless continue to provide the ongoinghosting and infrastructure services for CWRTN, have made a substantial up-frontcash payment to Gresham in the first half and are making an ongoing contributionto the costs of taking CWRTN to market. Since April, the primary sales and marketing responsibility has beensuccessfully transferred to Gresham and we increased our team accordingly. Weinitiated a period of customer consultation and engagement to ensure that thestrategy for CWRTN is properly aligned to customer needs. Feedback from themajor banks around Gresham assuming the primary role has been generallypositive. The following progress was achieved in the period: • A total of 5 major banks have now agreed to take the CWRTN Direct service, 3 of which are top 20 banks. Several other major banks are currently evaluating the CWRTN Direct service and in particular the SWIFTNet delivery route; • The number of banks subscribed to the CWRTN Browser service remained at 4, including 2 of the world's top 10 banks, with an increase in the number of currencies under subscription. We are engaged with several new potential subscriber banks for the Browser service; • A total of 21 banks have now agreed to provide data, including 7 of the top 20 banks in the world and all of the top 4. Work has continued on integrating more of these Provider banks into the service, increasing the number of currencies available and improving user subscription interest; and • We are in detailed discussion with a number of other major banks with a view to becoming Providers as well as seeking to accelerate integration of existing Providers using the preferred SWIFTNet method and application. Enterprise Solutions Our Enterprise Solutions business results were much improved on H1 05 withrevenues up 23% and losses down by 59%. Cost control played a major part inreducing first half losses for this business segment. We saw growth from ourIntegrated Client Money Solution working alongside Barclays Bank as we jointlyroll the solution out to a strong customer pipeline. We continue to invest in developing our patent pending payables financingsolution, Gresham Payables Financing Solution ("GPFS"), and are currentlyworking on launching services in both Asia and Europe. Our IT recruitment services business delivered a solid performance in the firsthalf with revenue up 20% on H1 2005 and profitability improved. Enterprise Software Revenue in our Enterprise Software business was down 15% compared to H1 2005with profits also reduced. Our French storage business underperformed andaccounted for the majority of the decrease in revenue and profitability with thebalance accounted for by an expected slower start for our well establishedstorage products. We have restructured the French storage business to reduceour exposure in that market, reducing headcount from 14 to 3 supporting ourFrench customer base, which will significantly reduce costs going into H2 2006. We have continued to make significant investment in our new Virtual Tape Librarysolution (Storage Consolidation Platform - "SCP") and were delighted to receiveglowing results in an independent product test performed by Diogenes AnalyticalLabs ranking us in the global top two Virtual Tape Library storage products. Akey route to market for SCP is through OEM channels and in July we signed ourfirst OEM deal with Tributary Systems Inc, targeted at the HP Non-Stop platformmarket. TSI have indicated that they expect first live users in the second halfof 2006. In October, we will be showcasing our Storage Solutions at Storage NetworkingWorld (Orlando, USA). Summary of financial performance Revenues for the first six months increased 5% to £7.0m (2005: £6.6m) and theloss before tax was reduced by 42% to £0.43m (2005: £0.74m loss). Period end cash was £5.3m, a significant increase on the prior balance of £2.1mat 31 December 2005 as a result of payments received from Cable & Wireless underthe new RTN arrangement and a major receipt in January from Q4 2005 trading. People Changes We have taken steps to strengthen our sales and marketing resources, both inresponse to the CWRTN announcement and also to improve our approach to market inthe real-time payments and storage solutions markets generally. These changeswere mostly implemented in June and July and will increase the market'sawareness of Gresham solutions through direct customer facing activities.Whilst this represents a substantial investment we believe that such investmentis justified to now engage strongly with customers and prospects. Future Outlook We have solutions intended to deliver short, medium and long term returns in thereal-time financial and storage solutions markets. Initiatives such as RealTime Secure Communications and SCP provide the opportunity to grow revenues inthe short term, complementing revenues from our existing legacy products.Solutions such as GPFS are expected to begin generating revenues in the short tomedium term. CWRTN is already delivering revenue and we anticipate that theserevenues will continue to grow over time with the opportunity to earnsubstantial revenues in the long term. The revised CWRTN agreement gives us the continuing support of Cable & Wirelessand the opportunity to derive a greater share of the revenue from the service.The regulatory demands for real-time information have increased. From ourexisting pipeline, we anticipate further growth in CWRTN users and providers inthe second half, building from our presence at SIBOS and ongoing activity. The market interest for GPFS is high and we are working with potential customersand partners towards having our first GPFS installation live in the second halfof 2006. SCP brings significant value to customers especially those with multiple storageplatforms and we will continue to seek further OEM deals in the second half andat the same time adopting a direct sales approach to existing customers. Taking into account all these factors, I believe that we have emerged from thefirst half stronger and better capable of driving the business forward. We arefocused on improving trading for 2006 and beyond. Alan HowarthChairman4 September 2006 Group income statementFor the period ended 30 June 2006 6 months 6 months 12 months ended ended ended 30 June 30 June 31 December 2006 2005 2005 Unaudited Unaudited Audited Notes £'000 £'000 £'000 Revenue 2 6,967 6,634 13,982Cost of goods sold (3,924) (3,471) (7,205)Gross profit 3,043 3,163 6,777 Administrative expenses (3,527) (3,946) (8,133)Trading loss 2 (484) (783) (1,356) Finance revenue 56 49 124Finance costs (5) (8) (14) Loss before tax 2 (433) (742) (1,246)Taxation 3 50 110 145Attributable to equity holders of the parent 6 (383) (632) (1,101) Loss per share (total and continuing)Basic loss per share - pence 4 (0.76) (1.27) (2.20)Diluted loss per share - pence 4 (0.76) (1.27) (2.20) Group statement of recognised income and expenseFor the period ended 30 June 2006 6 months 6 months 12 months ended ended ended 30 June 30 June 31 December 2006 2005 2005 Unaudited Unaudited Audited £'000 £'000 £'000 Exchange differences on translation of foreign operations (81) (56) - Net expense recognised directly in equity (81) (56) 0 Attributable loss for the period (383) (632) (1,101) Total recognised income and expense for the period (464) (688) (1,101) Group balance sheetAt 30 June 2006 At At At 30 June 30 June 31 December 2006 2005 2005 Unaudited Unaudited Audited Notes £'000 £'000 £'000ASSETSNon-current assetsProperty, plant and equipment 1,205 1,278 1,271Intangible assets 7 5,334 1,560 1,879 6,539 2,838 3,150Current assetsTrade and other receivables 7 2,634 7,579 8,175Income tax receivable 302 214 252Other financial assets 36 0 40Cash and cash equivalents 5,327 2,105 1,973 8,299 9,898 10,440 TOTAL ASSETS 14,838 12,736 13,590 EQUITY AND LIABILITIESEquity attributable to equity holders of theparentCalled up equity share capital 6 2,513 2,490 2,513Share premium account 6 10,009 9,937 10,009Other reserves 6 1,039 1,039 1,039Foreign currency translation reserve 6 (110) (85) (29)Retained earnings 6 (6,365) (5,528) (5,973) 6 7,086 7,853 7,559Non-current liabilitiesFinancial liabilities 0 38 21Deferred income 7 2,058 118 680 Current liabilitiesFinancial liabilities 28 37 43Income tax payable 109 20 109Trade, other payables and deferred income 7 5,557 4,670 5,178 Total liabilities 7,752 4,883 6,031 TOTAL EQUITY AND LIABILITIES 14,838 12,736 13,590 Group cashflow statementFor the period ended 30 June 2006 At At At 30 June 30 June 31 December 2006 2005 2005 Unaudited Unaudited Audited Notes £'000 £'000 £'000Cashflows from operating activitiesTrading loss (484) (783) (1,356)Depreciation and amortisation 152 189 586Share based payment (credit) / expense (9) 18 42Decrease/(Increase) in trade and other receivables 2,104 (371) (1,424)Increase in trade and other payables 7 1,903 32 976 Cash inflow / (outflow) from operations 7 3,666 (915) (1,176)Net income taxes received 0 259 431 Net cash inflow / (outflow) from operating activities 3,666 (656) (745) Cash flows from investing activitiesInterest received 56 49 84Repayment of convertible bonds 0 24 400Purchase of property, plant and equipment (42) (57) (155)Disposal of property, plant and equipment 0 0 4Payments to acquire intangible fixed assets (262) (250) (709) Net cash used in investing activities (248) (234) (376) Cash flows from financing activitiesProceeds from issue of ordinary share capital 0 33 140Share issue costs 0 0 (10)Interest paid (5) (8) (14)Decrease in obligations under finance leases (30) (38) (65) Net cash (used in) / generated by financing activities (35) (13) 51 Net increase / (decrease) in cash and cash equivalents 3,383 (903) (1,070)Cash and cash equivalents at beginning of period 1,973 3,016 3,016Exchange adjustments (29) (8) 27Cash and cash equivalents at end of period 5,327 2,105 1,973 Notes to the financial information 1 Basis of preparation These interim financial statements are unaudited and do not constitute statutoryaccounts within the meaning of s240 of the Companies Act 1985. The interim financial statements have been prepared in accordance with IAS 34'Interim Financial Reporting' and the Listing Rules of the Financial ServicesAuthority ('FSA'). The accounting polices applied in these interim financialstatements are consistent with those applied in the Group's most recent annualfinancial statements. The interim financial statements were approved by theBoard on 4 September 2006. The financial statements for the year ended 31 December 2005, which wereprepared in accordance with International Financial Reporting Standards, asendorsed by the European Union ('IFRS'), and with those parts of the CompaniesAct 1985 applicable to companies reporting under IFRS, have been delivered tothe Registrar of Companies. The auditors' opinion on these financial statementswas unqualified and did not contain a statement made under s237 (2) or (3) ofthe Companies Act 1985. These interim financial statements will be forwarded to shareholders shortly. 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. The operating businesses are organisedand managed separately according to the nature of the products and servicesprovided, with each segment representing a strategic business unit that offersdifferent products and serves different 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. Primary reporting format - Business segments The following tables present revenue and profit/loss information regarding thegroup's business segments for the periods ended 30 June 2006 and 30 June 2005,all of which are continuing. Revenue Six months ended 30 June 2006 Six months ended 30 June 2005 Inter- Sales to Inter- Sales to Segment segment external Segment segment external revenue revenue customers revenue revenue customers £'000 £'000 £'000 £'000 £'000 £'000 Solutions 2,301 - 2,301 1,828 - 1,828IT recruitment services 1,984 (19) 1,965 1,654 (10) 1,644Enterprise Solutions 4,285 (19) 4,266 3,482 (10) 3,472Enterprise Software 2,701 - 2,701 3,162 - 3,162 6,986 (19) 6,967 6,644 (10) 6,634 Result by segment Six months ended 30 June 2006 Six months ended 30 June 2005 Enterprise Enterprise Total Enterprise Enterprise Total Solutions Software Solutions Software £'000 £'000 £'000 £'000 £'000 £'000Segment result (541) 614 73 (1,313) 1,070 (243)Unallocated expenses (557) (540)Trading loss (484) (783)Net finance revenue 51 41Loss before income tax (433) (742) 3 Taxation Six months Six months Year ended ended ended 30 June 30 June 31 December 2006 2005 2005UK taxResearch and development credit 50 110 234Foreign taxWitholding tax charge - - (89) 50 110 145 4 Loss per ordinary share Basic loss per share amounts are calculated by dividing net loss or profit forthe period attributable to ordinary equity holders of the parent by the weightedaverage number of ordinary shares outstanding during the period. 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 period plus the weightedaverage number of ordinary shares that would be issued on the conversion of allthe dilutive potential ordinary shares into ordinary shares. The following reflects the loss and share data used in the basic and dilutedloss per share computations: Six months ended Year ended 30 June 30 June 31 December 2006 2005 2005 £'000 £'000 £'000Net loss attributable to equity holders of the parent (383) (632) (1,101) Number Number NumberBasic weighted average number of sharesDilutive potential ordinary shares: 50,269,809 49,646,035 49,945,603 Employee share options - - -Diluted weighted average number of shares 50,269,809 49,646,035 49,945,603 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 thisinterim statement. 5 Dividends paid and proposed No dividends were declared or paid during the period or comparative periods. 6 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 2005 2,479 9,713 1,039 (29) (4,914) 8,288 Exchange differences on translation offoreign operations 0 0 0 (56) 0 (56)Share based expense recognised in theincome statement 0 0 0 0 18 18Issue of shares 11 232 0 0 0 243Share issue costs 0 (8) 0 0 0 (8)Attributable loss for the period 0 0 0 0 (632) (632) At 30 June 2005 2,490 9,937 1,039 (85) (5,528) 7,853 Exchange differences on translation offoreign operations 0 0 0 56 0 56Share based expense recognised in theincome statement 0 0 0 0 24 24Issue of shares 23 74 0 0 0 97Share issue costs 0 (2) 0 0 0 (2)Attributable loss for the period 0 0 0 0 (469) (469) At 31 December 2005 2,513 10,009 1,039 (29) (5,973) 7,559 Exchange differences on translation offoreign operations 0 0 0 (81) 0 (81)Share based expense recognised in theincome statement 0 0 0 0 (9) (9)Issue of shares 0 0 0 0 0 0Share issue costs 0 0 0 0 0 0Attributable loss for the period 0 0 0 0 (383) (383) At 30 June 2006 2,513 10,009 1,039 (110) (6,365) 7,086 7 Change of arrangement with Cable & Wireless As a result of the new arrangement agreed with Cable & Wireless in April 2006, aone off payment of cash was made to Gresham by Cable & Wireless in the period.In addition, from April 2006 additional fixed quarterly payments are being madeto Gresham by Cable & Wireless. The initial one off payment is being deferredin the balance sheet and released on a straight line basis as a credit toadministrative expenses over a period of 3 years from May 2006 to be matchedagainst additional costs incurred by Gresham under the new arrangement. Thefurther fixed quarterly payments are also being deferred in the balance sheetand released on a straight line basis as a credit to administrative expensesover the quarters to which they relate. In the six months to 30 June 2006 thecredit to administrative expenses totalled approximately £200,000, with noimpact on the comparative figures. As a consequence of the new arrangement withCable & Wireless, £3.3m of costs previously reported in the balance sheet ascontract costs within current assets have been reclassified as research anddevelopment expenditure and included within intangible assets where theycontinue to be amortised over their useful life against associated revenues,with no impact on the comparative figures. The payments noted above led to a gross operating cash receipt during the periodof £3.3m, inclusive of £0.5m of output VAT which was subsequently paid to HMRevenue and Customs in August 2006. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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