Final Results
Gresham Computing PLC
29 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 storage
solutions, today announces preliminary results for the year ended 31 December
2007.
Alan Howarth, having steered the business through a number of key changes steps
down from the Board today and Eric Sepkes joins as Chairman.
Eric, ex-Citigroup, has had a distinguished career to date and is recognised as
a leading innovator in the global banking industry. He joins us to help
accelerate the roll out of our unique solutions to the global finance and
banking markets and further develop Gresham's thought leadership in real-time
financial solutions.
Commenting on his appointment, Eric Sepkes, Chairman, said
'I am delighted to join the Board of Gresham at this point of flux in world
markets because with change, comes opportunity. We are in an age where demand
for real-time information is clear and yet largely unfulfilled in many areas of
both the banking and corporate markets. I am excited to be taking on this new
challenge and joining a team that has a track record of innovation, development
and delivery of market leading real-time financial solutions. Gresham has done
the heavy lifting in getting these solutions to market and I now intend to
rapidly increase Gresham's profile and ensure that the demands for real-time
financial 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 started
2008 with a significantly improved order book, representing around three
quarters of our 2007 turnover. As a result, Q1 2008 trading performance was
significantly better than the like for like period in 2007 with net cash
balances at the end of Q1 2008 being broadly similar to the 2007 year end
position.
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 a
service is now starting to pay off. We made solid progress in taking our core
solutions to market and we have made a solid start to 2008. I am delighted that
Eric has joined Gresham. His knowledge and experience in financial markets is
renowned and the whole team is excited at the opportunity to focus our
attentions on fulfilling the growing demand for our solutions.'
'I would like to thank Alan Howarth on behalf of myself and the Board for his
assistance over the years in steering the business through some key changes,
including the launch of core technologies, and for assisting us in bringing Eric
onto the Board.'
For further information please contact:
Gresham Computing plc
Andrew 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 towards
our strategic objectives.
We have significantly grown our cash reporting business, launched our supply
chain financing solution and successfully installed our storage backup
virtualisation technology in multiple customer sites.
We have invested heavily over the last few years to build an innovative range of
products in the payments, cash management and storage markets with a view to
securing the longer-term benefits of recurring revenues, predominantly from
selling software as a service.
Strategy
Our strategy is to grow the business by focusing on real-time financial and
storage solutions. Our preferred model is to work closely with our customers
and partners globally to add value to their business and hence our own.
The markets for real-time financial solutions and storage solutions are huge and
we believe that Gresham technology is well placed to satisfy a significant part
of the growing demand for both. We have strengthened our businesses with the
addition of new people and increased our sales and marketing capabilities to
achieve growth based on meeting the needs of our customers.
When the time is right, we will seek acquisitions to accelerate our growth in
the real-time financial solutions market. During the year under review, we
identified a number of businesses within the group that do not fit with our core
focus. As a result, we are currently reviewing our options regarding these
businesses and expect this review may give rise to one or more business
disposals in the current financial year.
Real-time financial solutions
Cash reporting
During the year, we further increased the number of providers and currencies
available on the Clareti Cash Reporting Service at the request of our user
banks. We now have 29 major banks (an increase of 7 in 12 months) that have
agreed to provide data to the service of which data from 20 of them is now
available in 19 currencies, with more on the way. There are 9 user banks, some
of which have deeply embedded our solution in their back office environment. We
are currently collating data and building the business case for another 20
banks.
We continue to see transaction traffic with a value in excess of $500 billion
per day passing across our service to users.
We are already seeing significant interest in us delivering this solution to the
broker dealer community via their primary bankers. Our outsourced real-time
information solution provides efficiency and speed to market for banks wishing
to provide this service.
When the service was originally launched the primary targets were the banks as
the end users of the data. Our experience indicates that while the pressure for
real-time data grows, especially in a credit crunch, the most significant driver
of new revenues for us is the demand for intra-day/real-time cash management
information from the banks' corporate customers. This can then be used by the
corporate for intraday decision making and hence drives new revenues for the
bank. It also acts as a differentiator in a globally competitive market. The
visibility of real-time data is a significant enabler to risk management, which
is particularly relevant in uncertain economic times.
As at 31 December 2007, our solutions were enabling 10 corporate customers of a
major UK clearing bank with intraday cash management information. I am pleased
to report that a hosted version of this service went live in the first quarter
of 2008 and the number of customers is now growing. We currently have a pipeline
of several hundred new corporate users and will be working closely with our
partners to bring these onboard during 2008 and beyond.
Supply chain finance
Unlocking the working capital tied up between corporate buyers and their
suppliers is of immense value. We have developed a world leading technology
solution for multiple forms of trade finance and are currently engaged in
rolling 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, a
global bank and Gresham is focused on providing a comprehensive solution for
supply chain financing. The first major corporate buyer, a multi-billion
turnover listed company, went live in Q3 2007 on this service and we are working
to on-board their suppliers. Four more major buyers are currently integrating to
the service. Our banking partner has developed a strong pipeline and has
aggressive 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 to
meet the needs of the largest and most complex businesses but are also equally
effective in the mid market. We focus on ease of use, scalability and
performance and have over 4,000 installations of our software including 90
customers in the global Fortune 500.
Historically we have sold largely through major resellers hence our brand
awareness has been lower than one would expect for a company with such an
established client base. In 2007, we made significant steps to grow our brand
recognition within the global storage technology industry in order to gain more
attention to our newest storage product. We have invested in senior experienced
professionals for major account development, reseller partner management and
global marketing. We also increased our engagement with the press and industry
analyst community to educate our customers, our partners and the market on our
solutions.
During 2007, we successfully launched our Backup Virtualization solution, which
allows multiple backup applications to write to any number of disks or tape. I
am pleased to report that we now have 15 implementations, including a number of
Fortune 500 companies. These solutions are typically running in complex open and
mainframe system environments both in the US and Europe.
Financials
During the year we continued to invest in our three core technologies; cash
reporting, supply chain finance and backup virtualisation. Alongside this we
continue to invest in brand awareness and marketing focused on our core target
markets 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 an
EBITDA 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. We
invested in taking them to market faster and with greater brand awareness.
We saw lower revenues in non core areas, especially our Staff IT contracting arm
and in legacy products. We also saw the deferral of a significant treasury
management contract from 2007 to Q1 2008. A significant proportion of our
revenues are from overseas and the weakened US Dollar has also adversely
impacted revenues.
In aligning the business with our core technologies we have been able to reduce
cost and increase focus going into 2008. During 2007, we incurred one off
restructuring costs of approximately £700,000 in non core areas, with a cash pay
back period of less than six months. The benefits of this restructuring are
already being felt.
EMEA revenues were £8.2m (2006: £8.8m) with growth in our core businesses offset
by lower sales volumes in non core businesses. North American revenues were
steady at £3.9m (2006: £3.9m) with growth in sales of our new technology offset
by unfavourable foreign currency rates. Asia Pacific revenues were £1.3m (2006:
£1.8m) which reflects the focus on establishing longer term revenues from the
supply chain financing service as opposed to short term services/product. Within
this region, we saw one major treasury management deal fall away and one
deferred into 2008. The benefits from this focus on core technologies resulted
in good progress with our supply chain financing technology in Australia and
winning of the deferred treasury management deal in 2008.
EBITDA calculated as earnings before interest, tax, amortisation and
depreciation
Adjusted EBITDA calculated as EBITDA before non-cash share option charges and
one off restructuring charge in 2007 of £700,000
Board change
After several years overseeing the transition of the group to this point, I have
decided that the time is right to step down from my role as Chairman of the
board on announcement of these preliminary results.
I am delighted to announce that Eric Sepkes has agreed to become Chairman of the
Group.
Eric is a very well known figure in the global banking community, with
particular interests in international payments, cash management and trade
finance. Eric completed 38 years with Citigroup where he held various
management positions, including Operations and Treasury and Cash Management, and
most recently held a senior strategic role in Global Transaction Services. Eric
has been involved in Payment Infrastructures since 1985, when he was responsible
for managing Citibank's entry into CHAPS (Clearing House Automatic Payment
System) where he was director for 12 years and Chairman for 3 years. He was
Chairman and Deputy Chairman of the Euro Banking Association between 1994 and
2005. He was the founder and coordinator of the European Payments Group
(formerly Heathrow Group) and was a member of both APACS (the UK trade
association for payments and for those institutions that deliver payment
services to customers) and the European Council. Latterly he was a member of
APACS Senior Sponsors Committee for Faster Payments in the UK.
Eric is a well known industry speaker and event chairman retaining key roles at
many industry events including International Payments Systems week and the
Supply 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 for
2008 in the above mentioned areas of our business. We also have a strong
pipeline of new or incremental revenue in each of our core areas of business. We
are aggressively pursuing these opportunities, which we believe should have a
significant impact on our trading performance in 2008 and beyond. We will
dispose of non-core businesses as the opportunity arises.
I am pleased to report that our trading performance in Q1 2008 was significantly
ahead of that seen in the comparative period with cash balances broadly similar
to those held at 31 December 2007. We are working towards improving these
results further during 2008 and beyond.
Alan Howarth
Chairman
28 April 2008
Group income statement
For the year ended 31 December 2007
Notes 31 December 31 December
2007 2006
£'000 £'000
Revenue 2 13,423 14,522
Cost 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 107 132
Finance costs (23) (16)
Loss before taxation (2,869) (414)
Taxation 449 40
Attributable 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 expense
For 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 sheet
At 31 December 2007
Notes 31 December 31 December
2007 2006
£'000 £'000
ASSETS
Non-current assets
Property, plant and equipment 1,327 1,195
Intangible assets 6,086 5,879
7,413 7,074
Current assets
Trade and other receivables 3,650 3,543
Inventories 100 0
Income tax receivable 374 305
Other financial assets 20 32
Cash and cash equivalents 2,300 3,557
6,444 7,437
TOTAL ASSETS 2 13,857 14,511
EQUITY AND LIABILITIES
Equity attributable to equity holders of the parent
Called up equity share capital 2,643 2,518
Share premium account 12,564 10,037
Other reserves 1,039 1,039
Foreign currency translation reserve (64) (132)
Retained earnings (8,761) (6,383)
5 7,421 7,079
Non-current liabilities
Deferred income 715 1,562
Provisions 0 90
Current liabilities
Income tax payable 61 121
Trade and other payables 5,460 5,659
Provisions 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 £'000
Cash flows from operating activities
Loss before taxation (2,869) (414)
Depreciation, amortisation and impairment 741 481
Share 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) 1,408
Movement in provisions 110 33
Net finance income 84 116
Cash (outflow)/inflow from operations (3,331) 2,925
Net income taxes received 474 -
Net cash (outflow)/inflow from operating activities (2,857) 2,925
Cash flows from investing activities
Interest 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 activities
Proceeds from issue of ordinary share capital 2,750 33
Share issue costs (98) -
Interest paid 11 8
Decrease 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) 1,639
Cash and cash equivalents at beginning of period 3,557 1,973
Exchange 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's
statutory accounts for the years ended 31 December 2007 or 2006 but is derived
from those accounts. Statutory accounts for 2006 have been delivered to the
Registrar of Companies and those for 2007 will be delivered following the
Company's annual general meeting. The auditors have reported on those accounts;
their reports were unqualified, did not include references to any matters to
which the auditors drew attention by way of emphasis without qualifying their
reports 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 accepted
accounting principles requires the use of estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements, and the reported
amounts of revenues and expenses during the reporting period. Although these
estimates are based on the Directors' best knowledge of current events and
actions, actual results ultimately may differ from those estimates.
2 Segmental information
The primary segment reporting format is determined to be geographical segments
as the group's risks and rates of return are affected predominantly by
differences in geography. Secondary segment information is reported by business
segment. The operating businesses are organised and managed separately according
to geography, with each segment representing a strategic business unit that
offers the Clareti range of solutions to market.
The group's geographical segments are based on the location of the group's
assets. Sales to external customers disclosed in geographic segments are based
on the geographical location of its customers and destination. The geographic
segments relate primarily to operations in the following countries: Asia
Pacific: 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 solutions
predominantly to the finance and banking markets. Included within the real time
financial solutions segment is the group's IT staff placement business and,
because this business contributes significant revenues, certain additional
information concerning the results of this business have been provided to aid
understanding of the overall segment results. The storage solutions segment is
a supplier of solutions predominantly to the enterprise level storage market.
Transfer prices between 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.
Primary reporting format - Geographical segments
The following tables present revenue and profit/loss and certain asset and
liability information regarding the group's geographical segments for the years
ended 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 £'000
Asia Pacific 2,034 (755) 1,279 2,384 (613) 1,771
EMEA 8,203 (14) 8,189 8,869 (54) 8,815
North 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 £'000
Segment result (555) (272) (406) (1,233) (81) 95 711 725
Unallocated expenses (1,720) (1,255)
Trading loss (2,953) (530)
Net finance revenue 84 116
Loss before income tax (2,869) (414)
Income tax credit 449 40
Net 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 £'000
Segment assets 1,670 5,684 2,911 10,265 1,438 5,943 2,166 9,547
Unallocated assets 3,592 4,964
Total 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 and
equipment, cash and taxation.
Secondary reporting format - Business segments
The following tables present revenue, expenditure and certain asset information
regarding the group's business segments for the years ended 31 December 2007 and
2006.
Revenue by business segment 2007 2006
£'000 £'000
Real Time Financial Solutions 10,969 11,823
Storage Solutions 2,454 2,699
13,423 14,522
Included in the Real Time Financial Solutions business segment is £2,952,000 of
revenue 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 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 except when such
dilutive instruments would reduce the loss per share.
The following reflects the loss and share data used in the basic and diluted
loss per share computations:
2007 2006
£'000 £'000
Net loss attributable to equity holders of the parent (2,420) (374)
2007 2006
Basic weighted average number of shares 51,042,671 50,293,800
Dilutive 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 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 (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 £'000
At 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)
operations
Share based payment expense 0 0 0 0 (36) (36)
Issue of shares 5 28 0 0 0 33
Share issue costs 0 0 0 0 0 0
Attributable 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 68
operations
Share based payment income 0 0 0 0 42 42
Issue of shares 125 2,625 0 0 0 2,750
Share 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
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