Final Results
Gresham Computing PLC
27 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 its
preliminary results for the year ended 31 December 2005. The main results
highlights 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 2004
Revenue £14.0m £12.4m
Trading loss £(1.4)m £(1.3)m
Loss before tax £(1.2)m £(1.1)m
Attributable to equity holders of the parent £(1.1)m £(0.8)m
Loss 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 a
significant opportunity for Gresham and comes at a pivotal time for the CWRTN
service. Since our last update to the market at the end of January, we have
seen two more major banks agree to take the Direct subscriber service and
another take the Browser service. Trading has started well in the current year
and we anticipate improved trading overall in 2006.'
For further information, please contact:
Gresham Computing plc +44 (0)207 653 0228
Andrew Walton-Green, Chief Executive Officer
Financial Dynamics +44 (0)207 831 3113
James Melville-Ross
Cass Helstrip
Chairman's Statement
I am pleased to present my report on the group's activities and results for the
year ended 31 December 2005, which are in line with the period-end trading
update that we issued on 31 January 2006. In addition, I am also pleased to
report that we have today reached an agreement with Cable & Wireless concerning
the Real Time Nostro service, which amends our respective roles and
responsibilities and provides a secure platform for the continued roll-out of
the Cable & Wireless Real Time Nostro service with greater potential for
Gresham.
Update on CWRTN and amendment to agreement with Cable & Wireless
The CWRTN service gathered momentum in 2005 as global banks increasingly address
the use of real time information in their businesses. Since our update to the
market 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 operating
responsibilities in the delivery of the collaborative CWRTN service. Under the
new arrangement, effective immediately, Gresham will assume primary
responsibility for the sales, marketing, integration and application software
management of this global banking industry initiative. Cable & Wireless will
continue to support the roll out of this solution globally and in particular
will be responsible for the secure hosting and managed infrastructure, which are
fundamental to the integrity and delivery of the service. These new arrangements
strongly align both parties' operating responsibilities with their core
strengths and are aimed at ensuring that our customers are served in the most
appropriate manner.
Under the agreement both parties will continue to share net subscription
revenues generated by CWRTN with the shares amended to reflect ongoing operating
responsibilities. Gresham will henceforth receive a significant majority of
revenues arising from the service. Cable & Wireless will be providing the
ongoing hosting and infrastructure services for CWRTN as well as making a
substantial up-front cash payment to Gresham and an ongoing contribution to the
costs 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 tax
increased 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 significant
customer receipt and will increase significantly in the first half of 2006
following today's agreement with Cable & Wireless.
Enterprise Solutions
Overall, the results achieved by our Enterprise Solutions business were
disappointing and were adversely affected by contract delays and the absence of
significant licence revenues. However, trading and opportunities improved in
the second half of 2005 and this trend has continued in 2006. We continue to
see growth from a strong customer pipeline in our Integrated Client Money
Solution working alongside a major bank as well as increased activity from our
Solutions business generally.
We continue to invest in developing our patent pending payables financing
solution, Gresham Payables Financing Solution ('GPFS'), and remain in
contractual discussions with a number of parties regarding taking GPFS to market
in 2006, with a model of building a sound base of recurring revenues over time.
Our staff placement business grew strongly during the year, with revenues
increasing by 66% over 2004 in an ever challenging market. The growth arose
from the provision of temporary staff, with higher margin permanent staff
revenues remaining at low levels in line with market conditions.
Enterprise Software
Revenue in our Enterprise Software division continued to be underpinned by a
strong support and maintenance revenue base and grew 10% in the year.
Our US storage business performed strongly in 2005 and contributed significantly
to the overall revenue growth of the Enterprise Software division. We have
continued to invest in our new Storage Consolidation Platform ('SCP'), which we
will be bringing to market in 2006 largely through OEM channels. The SCP
product suite has been engineered to address the full breadth of the secondary
storage back-up and archive market thus satisfying the key demands of end
customers for this solution. The exceptional functionality and flexibility of
our platform will prove particularly useful to library vendors but also has wide
market applicability for enterprise storage customers and wider than that to all
concerned in the Storage Area Network (SAN) arena. SCP provides a significant
opportunity to widen and solidify our global customer base and generate strong
growth in the Enterprise Software division.
The overall growth in Enterprise Software was achieved despite a particularly
poor performance from our French back-up business. Actions have been taken in
the first half of 2006 to significantly reduce our ongoing exposure in that
particular market.
Future Outlook
The agreement announced today with Cable & Wireless is extremely positive for
the future of Gresham. The demands for real time access to banks' trading
information have if anything increased since the CWRTN venture was launched and
we 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 providers
in the last 12 months. That we continue to be supported by Cable & Wireless and
now have the opportunity to derive a greater share of the revenue from the
service is positive news for us and our shareholders.
Going forward, we have the platform in place to commit significant resource to a
strong market focused sales and marketing effort to accelerate revenues in 2006
and beyond. This will mean a greater investment than previously anticipated
over 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 this
a worthy area for investment.
CWRTN solves a problem for banks looking to deal with increasing regulatory
pressures around international payments and this factor will encourage take up
of the service. We are already beginning to see interest from banking
regulators in the application of the CWRTN service.
In the early part of 2006, we secured a major contract providing Enterprise
Solutions in Malaysia building on our strong customer credentials in that
region. We see further growth in this region and in March 2006 we opened an
office in Kuala Lumpur, Malaysia, to service our major customers in that area.
In addition we will bring new solutions to market in 2006, including our
exciting new Storage Consolidation Platform ('SCP') technology, which we
consider 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 sales
approach to market generally.
During 2005, we took actions to reduce our recurring indirect cost base to allow
investment in expanding our customer and market facing activities. We expect
the impact of these moves to be seen in 2006.
Taking into account all these factors, we anticipate improved trading in 2006
together with a continued roll-out of CWRTN.
Alan Howarth
Chairman
26 April 2006
Group income statement
For the year ended 31 December 2005
Notes 31 December 31 December
2005 2004
£'000 £'000
Revenue 2 13,982 12,398
Cost 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 124 217
Finance costs (14) (19)
Loss before tax (1,246) (1,067)
Taxation 145 305
Attributable 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 expense
For 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 sheet
At 31 December 2005
Notes 31 December 31 December
2005 2004
£'000 £'000
ASSETS
Non-current assets
Property, plant and equipment 1,271 1,400
Intangible assets 1,879 1,245
3,150 2,645
Current assets
Trade and other receivables 8,175 6,791
Income tax receivable 252 449
Other financial assets 40 400
Cash and cash equivalents 1,973 3,016
10,440 10,656
TOTAL ASSETS 13,590 13,301
EQUITY AND LIABILITIES
Equity attributable to equity holders of the
parent
Called up equity share capital 5 2,513 2,479
Share premium account 5 10,009 9,713
Other reserves 5 1,039 1,039
Foreign currency translation reserve 5 (29) (29)
Retained earnings 5 (5,973) (4,914)
5 7,559 8,288
Non-current liabilities
Financial liabilities 21 40
Deferred income 680 268
Current liabilities
Financial liabilities 43 61
Income tax payable 109 20
Trade and other payables 5,178 4,624
Total liabilities 6,031 5,013
TOTAL EQUITY AND LIABILITIES 13,590 13,301
Group cashflow statement
For the year ended 31 December 2005
Notes 2005 2004
£'000 £'000
Cashflows from operating activities
Trading loss (1,356) (1,265)
Depreciation and amortisation 586 389
Share based payment expense 42 29
Increase 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 activities
Interest received 84 199
Repayment of convertible bonds 400 389
Purchase of property, plant and equipment (155) (234)
Disposal of property, plant and equipment 4 0
Payments to acquire intangible fixed assets (709) (278)
Net cash (used in) / generated from investing activities (376) 76
Cash flows from financing activities
Proceeds from issue of ordinary share capital 140 91
Share 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 4,923
Exchange 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 financial
statements as defined by section 240 of the Companies Act 1985. The results for
the year ended 31 December 2005 and the balance sheet at that date are extracted
from the statutory financial statements (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 2004 (on which the auditors gave an unqualified
opinion). This is the first year in which the group has prepared its financial
statements under IFRSs and the comparatives have been restated from UK Generally
Accepted Accounting Practice (UK GAAP) to comply with IFRSs. The reconciliations
to IFRSs from the previously published UK GAAP financial statements were
published with the group's 2005 interim announcement in September 2005 and are
available on the Gresham website (www.gresham-computing.com). The preparation of
financial statements requires management to make estimates and assumptions.
These impact the reported amounts of assets and liabilities and the reported
amount of revenues and expenses during the reporting period.
2 Segmental information
The primary segment reporting format is determined to be business segments as
the group's risks and rates of return are affected predominantly by differences
in the products and services provided. Secondary segment information is reported
geographically. The operating businesses are organised and managed separately
according to the nature of the products and services provided, with each segment
representing a strategic business unit that offers different products and serves
different markets.
The solutions segment is a supplier of solutions predominantly to the finance
and banking markets. The software segment is a supplier of software products
and related services.
Transfer prices between business segments are set on an arm's length basis in a
manner similar to transactions with third parties. Segment revenue, segment
expense and segment result include transfers between business segments. Those
transfers are eliminated in consolidation.
The group's geographical segments are based on the location of the group's
assets. Sales to external customers disclosed in geographical segments are based
on the geographical location of its customers.
Primary reporting format - Business segments
The following tables present revenue and profit/loss information regarding the
group's business segments for the years ended 31 December 2005 and 2004, all of
which 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 £'000
Solutions 3,777 (1) 3,776 4,350 - 4,350
Specialist contract staff 3,908 (16) 3,892 2,359 (11) 2,348
Enterprise Solutions 7,685 (17) 7,668 6,709 (11) 6,698
Enterprise 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 £'000
Segment 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 110 198
Loss before income tax (1,246) (1,067)
Income tax credit 145 305
Net loss for the year (1,101) (762)
Secondary reporting format - Geographical segments
The following table presents revenue information regarding the group's
geographical segments for the years ended 31 December 2005 and 2004.
Revenue by destination 2005 2004
£'000 £'000
Europe, Middle East and Africa 9,910 8,632
North America 2,571 1,595
Asia 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 for
the year attributable to ordinary equity holders of the parent by the weighted
average number of ordinary shares outstanding during the year.
Diluted loss per share amounts are calculated by dividing the net loss or profit
attributable to ordinary equity holders of the parent by the weighted average
number of ordinary shares outstanding during the year plus the weighted average
number of ordinary shares that would be issued on the conversion of all the
dilutive potential ordinary shares into ordinary shares.
The following reflects the loss and share data used in the basic and diluted
loss per share computations:
£'000 £'000
Net loss attributable to equity holders of the (1,101) (762)
parent
2005 2004
Basic weighted average number of shares 49,945,603 49,407,419
Dilutive 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 loss
per share in both years.
There have been no other transactions involving ordinary shares or potential
ordinary shares between the reporting date and the date of completion of these
financial statements.
4 Dividends paid and proposed
No dividends were declared or paid during the year and no dividends are proposed
for 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 foreign
operations
Share based expense 0 0 0 0 29 29
recognised in the income
statement
Issue of shares 15 76 0 0 0 91
Share 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 0
translation of foreign
operations
Share based expense 0 0 0 0 42 42
recognised in the income
statement
Issue of shares 34 306 0 0 0 340
Share 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 to
the arrangement between the parties concerning the Cable & Wireless Real Time
Nostro Service ('CWRTN'). Further details of these amendments and their impact
can be found in the Chairman's Statement.
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