Interim Results
Gresham Computing PLC
18 September 2002
Embargoed until 07.00 18 September 2002
GRESHAM COMPUTING PLC
('Gresham' or the 'Group')
Interim Results for the Six Months ended 30 June 2002:
Chairman's Statement
I am pleased to report the Group's interim results for the six-month period
ended 30 June 2002. Comparative figures are for the six months ended 30 June
2001 instead of the six months to 30 April 2001, which were shown in the 2001
interim report due to the change in year-end in 2001 from October to December.
Trading conditions throughout the period have remained difficult across all
areas of the business. Notwithstanding this, we have continued to invest in the
development of the business in line with our strategy. The operating results
reflect these factors.
The Group's recorded turnover for the period was £6.2 million (2001: £13 million
of which £7.8 million was from ongoing operations). The total operating loss
was £2.3 million (2001: £0.8 million). After the disposal of SIM Group Limited
(see below) profit before taxation for the period was £2.7 million (2001: £1.7
million) with retained profits for the period of £2.3 million (2001: £1.2
million). The resultant basic earnings per share is 4.94 pence (2001: 2.67
pence).
Disposal of SIM Group
On 15 April 2002 the group completed the disposal of its remaining shares in SIM
Group Limited for total estimated proceeds of £7.4 million resulting in a profit
on disposal in the period of £4.9 million. The proceeds include an amount of
£0.7 million in the form of convertible bonds which are redeemable after 31 July
2003 and a further amount currently anticipated to be £0.5 million, based on the
turnover achieved by SIM Group Limited in the year ending 31 October 2002 which
is expected to be received from escrow in December 2002.
From the date of the disposal of the first tranche of shares on 25 June 2001
until the disposal of the remaining shares on 15 April 2002, financial
information relating to SIM Group Limited has been included in Gresham's results
as an associate undertaking. The total operating loss for the period to 30 June
2002 includes a £0.4 million loss attributable to the trading activities and
goodwill amortisation of SIM Group Limited as an associate (2001: £0.6 million
profit as a subsidiary undertaking).
The Group's financial position has been strengthened during the period with a
net cash position at 30 June 2002 of £5.2 million compared with £0.5 million at
31 December 2001.
Strategy
As I stated in my report in April, our strategy is to focus on and invest in the
three areas of the business that we consider to have significant growth
prospects; Finance and Banking Systems, Integration and Storage Management.
The Board believes that this strategy has the potential to deliver substantial
shareholder returns over the medium and long term. We have continued to make a
considerable investment in the restructuring and refocus of the business and,
during the last six months, I believe that we have made considerable progress
towards our strategic objectives.
Finance and Banking Systems
Our primary focus in this area is the delivery of the Cable & Wireless Real Time
Nostro ('RTN') service to the market. The proposed service has been well
received by the market. Detailed discussions are underway with a number of
potential clients of the service and we expect commitment from the initial users
of RTN during this calendar year. We continue to believe that revenue from RTN
will build as the service is rolled out and that RTN will provide the Group with
the potential for significant recurring profitable revenue growth in 2003 and
beyond.
Integration
Considerable investment has been made in Casablanca, our flagship integration
product, to develop it into a world-class offering. Casablanca rapidly and
effectively integrates legacy and open systems without the need for large-scale
system redevelopment. The release of Casablanca version 3.2 in September 2002
has moved us considerably closer to our aim of providing near code-free
integration. Casablanca is now generating widespread interest, particularly in
the Finance and Banking sector where legacy systems predominate. In order to
fully develop the market potential of this product we have recently
significantly strengthened our Integration team.
Storage Management
The market for storage products has not improved over the first half of this
year. It remains a highly competitive market with price competition being one of
the key differentiators. Although the results achieved by our Storage division
have been disappointing, our client base of blue chip storage customers is now
in excess of 150 users. Our current storage product family, EDT, is a niche
offering with a finite number of potential users. We are continuing to invest in
expanding the scope and functionality of our range of storage products in order
to enhance our offering to the wider storage market. We anticipate bringing our
new product set to market in H1 of 2003, which we believe will address a
significantly wider market.
Outlook
Over the past six months considerable progress has been made towards the
achievement of the Group's objectives, namely the development and realisation of
the long-term growth potential of the business. This has involved considerable
ongoing investment and a strategic refocusing of the business into our three
core areas. We believe that the potential of these areas will start to be
delivered in the coming months and provide the Group with a platform for
sustainable growth in 2003 and beyond.
The progress of the past few months has only been possible as a result of the
enthusiasm, dedication and innovative approach of our staff and I extend my
thanks and appreciation to every one of them.
Sid Green
Chairman
-Ends-
For further information, please contact:
Gresham Computing plc 020 7653 0220
Andrew Walton-Green, Chief Executive
Weber Shandwick Square Mile 020 7950 2800
Tim Jackaman
Christian Taylor Wilkinson
Gresham Computing plc
Group Profit and Loss Account
For the six months ended 30 June 2002
Six months ended 30 June 2002 Six months ended 30 June 2001 14 months ended 31 December 2001
Before Goodwill Before Goodwill Before Goodwill
goodwill amortisation goodwill amortisation goodwill amortisation
Notes £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Turnover
Continuing
operations 2 6,152 6,152 7,845 7,845 18,321 18,321
Discontinued
operations 2 - - 5,181 5,181 6,440 6,440
--------- --------- --------- --------- --------- --------- --------- --------- ---------
Group turnover 6,152 6,152 13,026 13,026 24,761 24,761
Cost of sales 3,853 3,853 7,338 7,338 13,988 13,988
--------- --------- --------- --------- --------- --------- --------- --------- ---------
Gross profit 2,299 2,299 5,688 5,688 10,773 10,773
Administrative
expenses-
pre-exceptional
items 4,178 54 4,232 6,118 346 6,464 12,643 627 13,270
Administrative
expenses-
exceptional
items - - 71 71 260 1,155 1,415
--------- --------- --------- --------- --------- --------- --------- --------- ---------
Operating loss (1,879) (54) (1,933) (501) (346) (847) (2,130) (1,782) (3,912)
--------- --------- --------- --------- --------- --------- --------- --------- ---------
Continuing
operations (1,879) (54) (1,933) (1,271) (162) (1,433) (3,034) (1,533) (4,567)
Discontinued
operations - - 770 (184) 586 904 (249) 655
--------- --------- --------- --------- --------- --------- --------- --------- ---------
Share of
operating
(loss)/profit
in associate (340) (56) (396) 12 12 450 (88) 362
--------- --------- --------- --------- --------- --------- --------- --------- ---------
Total operating
loss: group
and share of
associate (2,219) (110) (2,329) (489) (346) (835) (1,680) (1,870) (3,550)
(Loss)/Profit
on disposal of
tangible fixed
assets
(continuing
operations) (3) (3) - - 84 - 84
Profit on sale
of operations
(discontinued
operations) 4,902 4,902 2,647 2,647 2,647 - 2,647
--------- --------- --------- --------- --------- --------- --------- --------- ---------
4,899 - 4,899 2,647 - 2,647 2,731 - 2,731
--------- --------- --------- --------- --------- --------- --------- --------- ---------
Profit/(loss)
on ordinary
activities
before interest
and taxation 2,680 (110) 2,570 2,158 (346) 1,812 1,051 (1,870) (819)
Net interest
receivable/
payable) 104 104 (137) (137) (154) (154)
--------- --------- --------- --------- --------- --------- --------- --------- ---------
Profit/(loss)
on ordinary
activities
before taxation 2,784 (110) 2,674 2,021 (346) 1,675 897 (1,870) (973)
Taxation on result
on ordinary
activities 3 371 371 465 465 444 444
--------- --------- --------- --------- --------- --------- --------- --------- ---------
Profit/(loss) on
ordinary
activities
after taxation 2,413 (110) 2,303 1,556 (346) 1,210 453 (1,870) (1,417)
Dividends -
non-equity
interests - - 33 33 66 66
--------- --------- --------- --------- --------- --------- --------- --------- ---------
Retained profit/
(loss) for the
period 2,413 (110) 2,303 1,523 (346) 1,177 387 (1,870) (1,483)
========= ========= ========= ========= ========= ========= ========= ========= =========
Basic earnings
per share
(pence) 4 4.94 2.67 (3.32)
Fully diluted
earnings
per share
(pence) 4 4.87 2.59 (3.32)
Gresham Computing plc
Group Balance Sheet
at 30 June 2002
At 30 June At 30 June At 31 December
2002 2001 2001
£'000 £'000 £'000
Fixed Assets
Intangible assets 1,190 2,622 1,274
Tangible assets 1,648 2,162 1,832
Investment in Associate - 2,650 2,865
--------- --------- ---------
2,838 7,434 5,971
--------- --------- ---------
Current Assets
Debtors 5,251 5,191 4,008
Cash at bank and in hand 5,284 1,811 958
--------- --------- ---------
10,535 7,002 4,966
Creditors: amounts falling due within one year 4,350 5,142 4,146
--------- --------- ---------
Net Current Assets 6,185 1,860 820
--------- --------- ---------
--------- --------- ---------
Total Assets Less Current Liabilities 9,023 9,294 6,791
--------- --------- ---------
Creditors: amounts falling due after more
than one year 588 949 763
--------- --------- ---------
8,435 8,345 6,028
========= ========= =========
Capital and reserves
Called up share capital 2,349 2,714 2,332
Share premium account 5,699 5,232 5,614
Special reserve 313 313 313
Merger reserve 726 726 726
Profit and loss account (652) (640) (2,957)
--------- --------- ---------
8,435 8,345 6,028
========= ========= =========
Shareholders' funds
Equity interests 8,435 7,835 6,028
Non-equity interests - 510 -
--------- --------- ---------
8,435 8,345 6,028
========= ========= =========
Gresham Computing plc
Cashflow Statement
for the six months ended 30 June 2002
Six months ended 14 months ended
30 June 30 June 31 December
2002 2001 2001
£'000 £'000 £'000
Operating loss (1,933) (847) (3,912)
Depreciation 288 439 887
Amortisation and provision for impairment
in value of intangible assets 84 411 1,903
(Increase)/decrease in debtors (141) (624) 1,150
Increase/(decrease) in creditors 113 921 (876)
Foreign exchange movement (9) (32) -
--------- --------- ---------
Net cash (outflow)/inflow from operating
activities (1,598) 268 (848)
--------- --------- ---------
Returns on investment and servicing of
finance
Net interest received (paid) 112 (137) (168)
Dividends paid to preference shareholders (66) - (132)
--------- --------- ---------
46 (137) (300)
--------- --------- ---------
Taxation paid (27) (81) (144)
--------- --------- ---------
Capital expenditure and financial
investment
Payments to acquire tangible fixed assets (140) (137) (477)
Receipts from sale of tangible fixed assets 44 27 442
--------- --------- ---------
(96) (110) (35)
--------- --------- ---------
Acquisitions and disposals
Sale of subsidiary undertaking 6,220 5,250 5,850
Costs of disposal (3) (255) (434)
Net cash disposed of with subsidiary
undertaking - (363) (363)
--------- --------- ---------
6,217 4,632 5,053
--------- --------- ---------
Financing
Repayment of long-term loans - (2,500) (2,500)
Receipt of short-term loans - - 250
Repayment of short-term loans (250) (284) (219)
Repayments of finance leases (68) (144) (216)
Net proceeds of shares issued 102 - -
--------- --------- ---------
Net (outflow) from financing (216) (2,928) (2,685)
--------- --------- ---------
--------- --------- ---------
Increase in cash in the period 4,326 1,644 1,041
========= ========= =========
GROUP NET FUNDS/(DEBT)
Opening net funds/(debt) 513 (3,053) (3,217)
Closing net funds 5,157 1,523 513
NOTES TO THE INTERIM ACCOUNTS
for the six months ended 30 June 2002
1 The interim accounts have been prepared on the basis of the accounting
policies set out in the group's 2001 statutory accounts and are unaudited.
The interim financial statements do not constitute statutory accounts within
the meaning of section 240 of the companies Act 1985.
2 Turnover and segmental analysis
Analysis of turnover by business segment
Six months ended 30 June 2002 Six months ended 30 June 2001
Inter- Inter-
Segment segment External Segment segment External
Turnover Turnover Turnover Turnover Turnover Turnover
£'000 £'000 £'000 £'000 £'000 £'000
Solutions 1,518 (18) 1,500 2,318 - 2,318
Specialist contract staff 2,026 (36) 1,990 2,724 (887) 1,837
-------- -------- -------- -------- -------- --------
Enterprise Solutions 3,544 (54) 3,490 5,042 (887) 4,155
Enterprise Software 2,694 (32) 2,662 3,690 - 3,690
-------- -------- -------- -------- -------- --------
Continuing operations 6,238 (86) 6,152 8,732 (887) 7,845
SIM Testing (discontinued) - - - 5,181 - 5,181
-------- -------- -------- -------- -------- --------
6,238 (86) 6,152 13,913 (887) 13,026
-------- -------- -------- -------- -------- --------
Geographical analysis of turnover by source
Six months ended 30 June 2002 Six months ended 30 June 2001
Inter- Inter-
segment External segment External
Turnover turnover turnover Turnover turnover turnover
£'000 £'000 £'000 £'000 £'000 £'000
United Kingdom -
continuing operations 4,030 (11) 4,019 5,680 (931) 4,749
United Kingdom -
discontinued operations - - - 5,181 - 5,181
North America 1,055 (9) 1,046 2,113 (72) 2,041
Rest of world 1,693 (606) 1,087 1,055 - 1,055
-------- -------- -------- -------- -------- --------
6,778 (626) 6,152 14,029 (1,003) 13,026
-------- -------- -------- -------- -------- --------
Geographical analysis of turnover by destination
Six months ended 30 June
2002 2001
£'000 £'000
United Kingdom - continuing operations 3,876 4,365
United Kingdom - discontinued operations - 5,181
Europe - continuing operations 802 543
Europe - discontinued operations - -
North America 702 2,025
Rest of world 772 912
-------- --------
6,152 13,026
-------- --------
3 Taxation
The taxation charge for the six months ended 30 June 2002 is based on the
estimated effective tax rate for the full year, together with the estimated
taxation payable in respect of the disposal, net of applicable loss relief.
The taxation charge is net of a credit of £104,000 in respect of the
associate undertaking for the period prior to its disposal.
4 Earnings per Share
Earnings per share has been calculated in accordance with FRS 14 using the
following earnings and weighted average shares outstanding:
14 months
Six months ended ended
30 June 30 June 31 December
2002 2001 2001
£'000 £'000 £'000
Earnings:
Basic 2,303 1,177 (1,483)
Preference dividends - 33 -
---------- ---------- ----------
Fully diluted earnings 2,303 1,210 (1,483)
---------- ---------- ----------
Weighted average number of shares:
Basic weighted average 46,636,479 44,078,778 44,625,110
Potential ordinary shares 688,605 2,563,949 -
---------- ---------- ----------
Fully diluted weighted average 47,325,084 46,642,727 44,625,110
---------- ---------- ----------
Diluted earnings per share is identical to basic earnings per share for the
14 months ended 31 December 2001 because potential diluting events would
have the effect of reducing loss per ordinary share
5 Reconciliation of shareholders' funds
14 months
Six months ended ended
30 June 30 June 31 December
2002 2001 2001
£'000 £'000 £'000
Profit/(loss) for the period 2,303 1,210 (1,417)
Exchange difference on retranslation of net assets of
subsidiary undertakings 2 (25) (2)
-------- -------- --------
Total recognised gains and losses 2,305 1,185 (1,419)
Dividends - (33) (66)
Shares issued 102 - -
-------- -------- --------
Total movements during the year 2,407 1,152 (1,485)
Opening shareholders' funds 6,028 7,193 7,513
-------- -------- --------
Closing shareholders funds 8,435 8,345 6,028
======== ======== ========
6 Discontinued Operations
Discontinued operations comprise the activities of the SIM Group prior to
the group's disposal of a first tranche of shares of 50.01% of the issued
share capital of SIM Group on 25 June 2001. The group's share of the
results of SIM Group subsequent to that date until the disposal of the
group's remaining shares in SIM Group which was completed on 15 April 2002
are accounted for as an associate undertaking.
The profit on disposal of SIM in the six months ended 30 June 2001 and 14
months ended 31 December 2001 included deferred proceeds of £600,000 which
was dependant on the performance of SIM Group and was received on
24 December 2001. The profit on disposal of SIM Group for the six months
ended 30 June 2002 includes estimated net proceeds of £487,000 which are
dependent on the turnover achieved by the SIM Group in the 12 months ending
31 October 2002 which is expected to be received by 31 December 2002 and
£692,000 of interest bearing convertible bonds which are redeemable after
1 August 2003
7 An interim report will be sent to all shareholders by 30 September 2002 and
will be available to all members of the public during normal business hours
at the company's registered office: Sopwith House, Brook Avenue, Warsash,
Southampton, SO31 9ZA.
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