Final Results
Gresham Computing PLC
20 April 2004
Embargoed until 07.00 20 April 2004
GRESHAM COMPUTING plc
('Gresham', the 'group' or the 'company')
Preliminary results for the year ended 31 December 2003
Financial Highlights
2003 2002
Turnover £10.2m £11.6m
Operating loss £2.2m £3.5m
(Loss)/profit before tax £(1.9)m £1.1m
Earnings per share (4.05)p 2.51p
Gresham, provider of enterprise software and solutions, announces its
preliminary results for the year ended 31 December 2003. The main results
highlights are as follows:
• Reduced operating loss of £2.2m (2002: £3.5m)
• Real Time Nostro ('RTN') service goes live with JP Morgan Chase and RBS
• Encouraging start to 2004 for Integration and Storage
• Important strategic step in Bank to Corporate market with recent
contract win
• Net funds at 31 December 2003 of £4.9 Million (2002: £3.9 Million)
• Board changes
Andrew Walton-Green, Chief Executive Officer of Gresham, commented:
'The group's principle focus remains on assisting Cable & Wireless to deliver
the Cable & Wireless RTN service to the market. The live RTN service is a
significant step towards achieving this goal.'
For further information, please contact:
Gresham Computing plc 020 7653 0228
Andrew Walton-Green, Chief Executive Officer
Weber Shandwick Square Mile 020 7067 0700
Christian Taylor-Wilkinson
GRESHAM COMPUTING plc
('Gresham', the 'group' or the 'company')
Preliminary results for the year ended 31 December 2003
Results
I am pleased to report the group's final results for the year ended 31 December
2003. The group's turnover for the year was £10.2 million (2002: £11.6 million).
The operating loss was £2.2 million (2002: £3.5 million loss). Loss before
taxation was £1.95 million (2002: £3.3 million loss on continuing operations,
£1.1 million profit including the disposal of SIM) with a retained loss for the
period of £1.9 million (2002: £1.2 million profit). The resultant loss per share
is 4.05 pence (2002: 7.92 pence loss before the disposal of SIM, 2.51 pence
profit per share after the disposal of SIM).
The trading conditions faced by the group during the year were generally
challenging, although our storage business saw an improvement in market
conditions in the second half of the year. The decrease in group turnover is
largely attributable to our contract staff agency for which trading conditions,
in common with other such agencies, remained difficult throughout the period.
Notwithstanding the market conditions, we have significantly reduced the level
of operating loss while continuing to invest in the development of the business.
Since year end we have seen a gradual improvement in the market conditions
facing the business.
The group's financial position was strengthened during the year by the raising
of £3.9 million through a share placement. As a result the net funds position
has increased from £3.9 million last year to £4.9 million at 31 December 2003.
Strategy
We continue our strategy of focusing on the core areas of the business; Banking,
Integration and Storage. 2004 will be a key year in starting to deliver against
the opportunities these businesses have developed. In the past twelve months we
have successfully increased market awareness of the group and its capabilities,
particularly in the finance and banking sector. As we move forward we believe
that our proven integration technology and skills combined with our banking
systems know-how will underpin the future development of the group. We have
current developments under way that will build on our skills and market
recognition in this area by expanding our offerings in the rapidly growing Bank
to Bank and Bank to Corporate systems marketplace.
Banking
Our primary focus in this area continues to be in the delivery of application
software and marketing support to the Cable & Wireless Real Time Nostro ('C&
WRTN') service. Although it has taken longer to bring the service to market than
we had hoped, considerable progress has been made in the past year towards the
commercial realisation of the service. I am pleased to be able to report that C&
WRTN has gone live utilising US Dollar information from JP Morgan Chase with the
Royal Bank of Scotland as initial subscribers.
C&WRTN continues to be well received by the market. This can be seen by the
impressive list of banks that have already agreed to provide data to the
service: ANZ Bank, Barclays, Bangkok Bank, JP Morgan Chase, Mizuho Corporate
Bank and RBC Global Services. In addition, the Royal Bank of Scotland, Santander
Central Hispano and Dresdner Kleiner Wasserstein have already agreed to be
subscribers for the service.
Your board considers that C&WRTN has the potential to deliver the most
significant returns in the group's history. C&WRTN is a subscription based
service and the group will receive a share of these revenues through its
contract with Cable & Wireless. We expect that, as with any subscription based
service, initially revenues from C&WRTN will grow gradually from this point and
build significantly over the coming years as the service is rolled out. The
board believes that the speed of roll out of C&WRTN will be determined by the
number of data providers that sign up to the service which will broaden its
currency coverage and the level of user satisfaction.
Integration
Although, 2003 was a disappointing year for our integration business in terms of
financial results we were successful in developing a number of partnerships that
have increased our routes to market, and in generating increased interest in our
integration capabilities and products. We also increased the market awareness of
our integration capabilities and focused on the enhancement of our integration
products.
The essential groundwork of 2003 has started to bear fruit in the early months
of 2004. We have recently signed our most significant integration contract for
some years with a major UK bank, to licence our own software in conjunction with
a partner. This contract is an important strategic step for us in the Bank to
Corporate systems marketplace. We anticipate that this contract will provide us
with a sound base for a recurring revenue stream as we will be jointly marketing
with the bank our offering to the bank's customers.
We believe that our proven integration and development capabilities combined
with the increased market awareness of the group, particularly but not
exclusively in the finance and banking sector, will enable the early progress of
2004 to be sustained throughout the year and beyond.
Storage
The performance of our storage division showed considerable improvement in the
second half of the year as market conditions improved. However, the increase in
activity was in part offset by the weakness of the US dollar in the second half
of the year. During the year we expanded our current niche product range by
increasing the number of platforms it serves. In addition, we have continued to
develop new products in order to enhance our offering to a wider storage market.
Since the end of the year we have also broadened our routes to market with the
recent completion of a worldwide distribution agreement with Storagetek. As a
result of these factors, we believe that this division is well equipped to build
on the performance in the second half of 2003 and to deliver revenue growth in
2004.
Board of directors
I am happy to announce that we have today appointed Chris Errington as the
finance director of the group. Chris joined us in February as company secretary
and his appointment will strengthen the management team. Dean Osman now takes on
a new role as the group's operations director where he will be focused on
assisting operational management to improve the performance of the group. I
would like to thank Dean for the important part he has played in the development
of the group over the last few years and wish him well in this new role where
his detailed knowledge of the business will be invaluable.
After serving the group for the past 35 years, I have decided to retire from the
Board following the Annual General Meeting on 28 May. I believe that we have now
put the past few difficult years behind us and are now suitably positioned to
deliver on the significant opportunities we have generated in the last three
years. I am delighted that Alan Howarth, who was appointed as a non-executive
director in August, has agreed to take on the role of chairman following the
Annual General Meeting. Alan brings to the group extensive business and
management experience and I am confident of his ability to oversee the exciting
next stage of the group's development.
Outlook
C&WRTN remains our most significant market opportunity and has the potential to
deliver the most substantial returns in the group's history. The continuing
progress on C&WRTN has moved us much closer to realising this potential and has
significantly raised the profile of the group in our chosen markets. Our
strategy is to build on this opportunity by utilising our know-how, technology
and skills in the finance and banking sector to expand our offerings in the
rapidly growing Bank to Bank and Bank to Corporate systems marketplace. We are
also encouraged by the recent progress made in our integration and storage
businesses and consider that they are now better placed to deliver revenue
growth in 2004 and beyond.
The continuing focus of the group and all its employees is to deliver the
significant medium and long term growth that the group has the potential to
achieve. As I conclude my last report to you as chairman, I consider that we are
now well placed to start delivering against the opportunities in the core
businesses that we have so resolutely developed.
As always, and sadly, for the last time, I must extend my gratitude and thanks
to our staff for their unstinting efforts, as well as to my fellow directors and
to our patient shareholders for their considerable efforts in bringing the
Company to this exciting stage of its development.
Sid Green
Chairman
Gresham Computing plc
Group Profit and Loss Account
for the year ended 31 December 2003
Notes 2003 2002
£'000 £'000
--------------------------------------- ------ ------- -------
TURNOVER 2 10,245 11,578
Cost of sales 4,535 6,707
--------------------------------------- ------ ------- -------
GROSS PROFIT 5,710 4,871
--------------------------------------- ------ ------- -------
Administrative expenses - pre-exceptional items 7,868 8,160
Administrative expenses - exceptional items 3 - 252
--------------------------------------- ------ ------- -------
Administrative expenses - total 7,868 8,412
--------------------------------------- ------ ------- -------
OPERATING LOSS (2,158) (3,541)
Share of operating loss in associate - (398)
--------------------------------------- ------ ------- -------
TOTAL OPERATING LOSS: GROUP AND SHARE OF ASSOCIATE (2,158) (3,939)
Profit on sale of discontinued operations 3 - 4,881
--------------------------------------- ------ ------- -------
(LOSS)/PROFIT ON ORDINARY ACTIVITIES BEFORE INTEREST AND
TAXATION (2,158) 942
Interest receivable 209 234
Interest payable (6) (28)
--------------------------------------- ------ ------- -------
203 206
--------------------------------------- ------ ------- -------
(LOSS)/PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION (1,955) 1,148
Taxation credit on (loss)/profit on ordinary 12 27
activities
--------------------------------------- ------ ------- -------
(LOSS)/PROFIT ON ORDINARY ACTIVITIES AFTER TAXATION (1,943) 1,175
Dividends 5 - -
--------------------------------------- ------ ------- -------
RETAINED (LOSS)/PROFIT FOR THE YEAR (1,943) 1,175
--------------------------------------- ------ ------- -------
Basic (loss)/earnings per share - pence 4 (4.05) 2.51
Diluted (loss)/earnings per share - pence 4 (4.05) 2.45
--------------------------------------- ------ ------- -------
Gresham Computing plc
Group Balance Sheet
at 31 December 2003
2003 2002
£'000 £'000
----------------------------------- ------- -------
FIXED ASSETS
Intangible assets 1,043 1,121
Tangible assets 1,336 1,556
----------------------------------- ------- -------
2,379 2,677
----------------------------------- ------- -------
CURRENT ASSETS
Debtors 6,301 4,861
Cash at bank and in hand 4,923 4,009
----------------------------------- ------- -------
11,224 8,870
----------------------------------- ------- -------
Creditors: amounts falling due within one year 3,820 3,498
----------------------------------- ------- -------
NET CURRENT ASSETS 7,404 5,372
----------------------------------- ------- -------
TOTAL ASSETS LESS CURRENT LIABILITIES 9,783 8,049
----------------------------------- ------- -------
Creditors: amounts falling due after more than one year 477 742
----------------------------------- ------- -------
9,306 7,307
----------------------------------- ------- -------
CAPITAL AND RESERVES
Called up share capital 2,464 2,350
Share premium account 9,639 5,701
Special reserve 313 313
Merger reserve 726 726
Profit and loss account (3,836) (1,783)
----------------------------------- ------- -------
SHAREHOLDERS' FUNDS - equity interests 9,306 7,307
----------------------------------- ------- -------
Gresham Computing plc
Group Statement of Cash Flow
for the year ended 31 December 2003
Notes 2003 2002
£'000 £'000
----------------------------------- ------ ------- --------
NET CASH OUTFLOW FROM OPERATING ACTIVITIES 6 (3,083) (3,223)
----------------------------------- ------ ------- --------
DIVIDEND RECEIVED FROM ASSOCIATED UNDERTAKING - 79
----------------------------------- ------ ------- --------
RETURNS ON INVESTMENTS AND SERVICING OF FINANCE
Interest received 225 232
Interest paid (6) (28)
Dividends paid to preference shareholders - (66)
----------------------------------- ------ ------- --------
219 138
----------------------------------- ------ ------- --------
TAXATION
Corporation tax paid (21) (38)
Overseas tax received 12 -
----------------------------------- ------ ------- --------
(9) (38)
----------------------------------- ------ ------- --------
CAPITAL EXPENDITURE AND FINANCIAL INVESTMENT
Payments to acquire tangible fixed assets (167) (194)
Receipts from sale of tangible fixed assets - 3
----------------------------------- ------ ------- --------
(167) (191)
----------------------------------- ------ ------- --------
ACQUISITIONS AND DISPOSALS
Disposal of associated undertaking - 6,751
Costs of disposal (25) (173)
----------------------------------- ------ ------- --------
(25) 6,578
----------------------------------- ------ ------- --------
EQUITY DIVIDENDS PAID - -
----------------------------------- ------ ------- --------
NET CASH (OUTFLOW) / INFLOW BEFORE FINANCING (3,065) 3,343
----------------------------------- ------ ------- --------
FINANCING
Issue of share capital 4,184 105
Share issue costs (132) -
Repayment of short-term loans - (250)
Repayments of finance leases (76) (130)
----------------------------------- ------ ------- --------
Net inflow/(outflow) from financing 3,976 (275)
----------------------------------- ------ ------- --------
INCREASE IN CASH 911 3,068
----------------------------------- ------ ------- --------
Reconciliation of Net Cash Flows to Movement in Net Funds
for the year ended 31 December 2003
Increase in cash 911 3,068
Repayments of loans - 250
Repayments of capital element of finance leases 76 130
----------------------------------- ------ ------- --------
Change in net funds resulting from cashflows 987 3,448
----------------------------------- ------ ------- --------
Inception of finance leases - (19)
Exchange differences 3 (14)
----------------------------------- ------ ------- --------
MOVEMENT IN NET FUNDS 990 3,415
NET FUNDS AT 1 JANUARY 3,928 513
----------------------------------- ------ ------- --------
NET FUNDS AT 31 DECEMBER 4,918 3,928
----------------------------------- ------ ------- --------
Gresham Computing plc
Group Statement of Total Recognised Gains and Losses
for the year ended 31 December 2003
2003 2002
£'000 £'000
---------------------------------------- ------- -------
(Loss)/profit for the financial year (1,943) 1,175
Exchange difference on retranslation of net assets of
subsidiary undertakings (110) (1)
---------------------------------------- ------- -------
Total recognised gains and losses relating to the year (2,053) 1,174
---------------------------------------- ------- -------
Reconciliation of Group Shareholders' Funds
for the year ended 31 December 2003
2003 2002
£'000 £'000
---------------------------------------- ------- -------
Total recognised gains and losses relating to the year (2,053) 1,174
Issue of shares (net of associated costs) 4,052 105
---------------------------------------- ------- -------
Total movements during the year 1,999 1,279
Opening shareholders' funds 7,307 6,028
---------------------------------------- ------- -------
Closing shareholders' funds 9,306 7,307
---------------------------------------- ------- -------
GRESHAM COMPUTING plc
NOTES TO THE PRELIMINARY RESULTS ANNOUNCEMENT FOR THE YEAR ENDED 31
DECEMBER 2003
1. The above financial information does not constitute statutory accounts as
defined in section 240 of the Companies Act 1985. The results for the year
ended 31 December 2003 and the balance sheet at that date are extracted from
the statutory accounts (on which the auditors have given an unqualified
opinion),which will be filed with the Registrar of Companies. The
comparative financial information is extracted from the statutory accounts
for the year ended 31 December 2002 (on which the auditors have given an
unqualified opinion), which have already been sent to shareholders and filed
with the Registrar of Companies. The financial information has been prepared
in accordance with UK generally accepted accounting practice and on the
basis of accounting policies consistent with those applied in previous
periods.
2. Turnover and segmental analysis
The group's principal areas of activity, which are continuing, are the
provision of solutions, software and specialist contract staff.
Analysis of turnover
by segment: Inter Inter
Turnover segment External Turnover segment External
turnover turnover turnover turnover
2003 2003 2003 2002 2002 2002
£'000 £'000 £'000 £'000 £'000 £'000
--------------- -------- ------- ------- -------- ------- -------
Solutions 2,842 (16) 2,826 2,549 - 2,549
Specialist
contract staff 1,789 (21) 1,768 3,456 (55) 3,401
--------------- -------- ------- ------- -------- ------- -------
Enterprise
solutions 4,631 (37) 4,594 6,005 (55) 5,950
Enterprise
software 5,658 (7) 5,651 5,628 - 5,628
--------------- -------- ------- ------- -------- ------- -------
10,289 (44) 10,245 11,633 (55) 11,578
--------------- -------- ------- ------- -------- ------- -------
Geographical analysis
of turnover
by source: Inter Inter
Turnover segment External Turnover segment External
turnover turnover turnover turnover
2003 2003 2003 2002 2002 2002
£'000 £'000 £'000 £'000 £'000 £'000
--------------- -------- ------- ------- -------- ------- -------
United Kingdom 6,302 (31) 6,271 7,755 (3) 7,752
North America 3,058 (828) 2,230 2,799 (751) 2,048
Rest of World 2,686 (942) 1,744 2,764 (986) 1,778
--------------- -------- ------- ------- -------- ------- -------
12,046 (1,801) 10,245 13,318 (1,740) 11,578
--------------- -------- ------- ------- -------- ------- -------
Geographical analysis of
turnover by destination:
2003 2002
£'000 £'000
-------------------------------------------------------------------------------
United Kingdom 4,908 7,006
North America 1,641 1,918
Rest of World 3,696 2,654
-------------------------------------------------------------------------------
10,245 11,578
-------------------------------------------------------------------------------
2. Turnover and segmental analysis (continued)
Common costs comprise the costs of all central group services.
Analysis of (loss)/profit on ordinary activities before
taxation by segment:
2003 2002
£'000 £'000
--------------------------------------- ------- -------
Enterprise solutions (1,998) (2,686)
Enterprise software 669 291
--------------------------------------- ------- -------
(1,329) (2,395)
Common costs (829) (1,146)
--------------------------------------- ------- -------
Operating loss (2,158) (3,541)
Share of operating loss of associate - (398)
--------------------------------------- ------- -------
Total operating loss: group and share of associate (2,158) (3,939)
Non-operating exceptional items - 4,881
Net interest receivable 203 206
--------------------------------------- ------- -------
(Loss)/profit on ordinary activities before taxation (1,955) 1,148
--------------------------------------- ------- -------
Analysis of (loss)/profit on ordinary activities before
taxation by source:
2003 2002
£'000 £'000
--------------------------------------- ------- -------
United Kingdom (976) (1,835)
North America (125) (491)
Rest of World (228) (69)
--------------------------------------- ------- -------
(1,329) (2,395)
Common costs (829) (1,146)
--------------------------------------- ------- -------
Operating loss (2,158) (3,541)
Share of operating loss of associate - (398)
--------------------------------------- ------- -------
Total operating loss: group and share of associate (2,158) (3,939)
Non-operating exceptional items - 4,881
Net interest receivable 203 206
--------------------------------------- ------- -------
(Loss)/profit on ordinary activities before taxation (1,955) 1,148
--------------------------------------- ------- -------
3. Exceptional items
2003 2002
£'000 £'000
Recognised in arriving at operating loss:
Reorganisation and restructuring costs - 252
--------------------------------------- ------- -------
Recognised below operating loss:
Profit on sale of 49.99% interest in SIM Group Limited - (4,881)
--------------------------------------- ------- -------
4. Earnings per share
The calculations of earnings per share are based on the following earnings
and numbers of shares.
2003 2002
£'000 £'000
-------------------------------------- -------- --------
(Loss) / profit for the financial year (1,943) 1,175
-------------------------------------- -------- --------
2003 2002
Number of Number of
shares shares
-------------------------------------- -------- --------
Weighted average number of shares:
For basic earnings per share 48,022,384 46,816,200
Potential ordinary shares - share options - 1,197,072
-------------------------------------- --------- ---------
Diluted weighted average number of shares 48,022,384 48,013,272
-------------------------------------- --------- ---------
For the year ended 31 December 2003, the loss attributable to ordinary
shareholders and weighted average number of ordinary shares for the purpose of
calculating the diluted earnings per ordinary share are identical to those used
for basic earnings per ordinary share. This is because the potential diluting
events would have the effect of reducing the loss per ordinary share and are
therefore not dilutive under the terms of FRS 14.
5. Dividends
The directors do not propose the payment of an ordinary dividend in respect of
the year ended 31 December 2003.
6. Reconciliation of operating loss to net cash flow from operating activities
2003 2002
£'000 £'000
----------------------------------- --------- --------
Operating loss (2,158) (3,541)
Depreciation 390 467
Amortisation 132 153
Increase in debtors (1,586) (286)
Increase/(decrease) in creditors 139 (16)
----------------------------------- --------- --------
Net cash outflow (3,083) (3,223)
----------------------------------- --------- --------
7. This preliminary statement of results will not appear as an advertisement
in any newspaper but the annual report is being sent to all shareholders
by 26 April 2004 and copies will be available to members of the public
from the company's registered office: Sopwith House, Brook Avenue,
Warsash, Southampton SO31 9ZA.
This information is provided by RNS
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