Interim Results
Gresham Computing PLC
14 September 2004
Embargoed until 07.00 14 September 2004
GRESHAM COMPUTING plc
('Gresham' or the 'Group')
INTERIM RESULTS FOR THE 6 MONTHS ENDED 30 JUNE 2004
• Turnover up by 26% and losses reduced by 45%
• Excellent progress with the Cable & Wireless Real Time Nostro ('CWRTN')
service
• Significant improvement in our Integration and Storage businesses
• Generally much improved market conditions
• Group funding position remains strong, with cash resources of £3.4m
Andrew Walton-Green, Chief Executive Officer of Gresham, commented:
'We have seen excellent progress with Cable & Wireless Real Time Nostro with the
addition of Citibank as a data provider and the closer relationship with SWIFT.
While we believe that revenues from the Nostro service will initially be
relatively small and take years to build to their full potential, we couldn't be
more pleased with the progress being made. We have also seen significant
improvements in Integration and Storage and expect this trend to continue.'
Gresham develops and implements software solutions for banking, integration and
storage. Many of the world's most successful organisations choose Gresham to
help improve their competitive edge and bottom line performance in some of the
most challenging market sectors. These include financial services,
manufacturing, healthcare, utilities, telecommunications, and public services.
For further information, please contact:
Gresham Computing plc 01489 555 500
Andrew Walton-Green, Chief Executive Officer
Chris Errington, Finance Director
Weber Shandwick Square Mile 020 7067 0700
Christian Taylor-Wilkinson/Sarah Richardson
CHAIRMAN'S STATEMENT
In my first report to you as Chairman, I am pleased to report:
• Turnover up by 26% and losses reduced by 45%;
• Excellent progress with the Cable & Wireless Real Time Nostro ('CWRTN')
service;
• Significant improvement in our Integration and Storage businesses; and
• Generally much improved market conditions.
First half performance
• Group turnover for the period was £6.14m (6 month period to 30 June 2003
£4.87m);
• Group loss before tax was £0.59m for the period (6 month period to 30
June 2003 £1.07m); and
• The Group funding position remains strong, with cash resources of £3.4m
at 30 June 2004.
Banking
The progress with the CWRTN service during the first half of the year has been
very encouraging.
As you will know, the service went live earlier this year with Royal Bank of
Scotland receiving US Dollar information provided by JP Morgan Chase. This was a
major step forward since it demonstrated that the technology works and that the
service is of commercial value.
Since then we have seen continued progress.
Citibank, the largest provider of payment services in the world, signed up as a
data provider as did Standard Bank of South Africa, joining: ANZ, Barclays,
Bangkok Bank, JP Morgan Chase, Mizuho Corporate Bank and Royal Bank of Canada
Global Services. As of today, Royal Bank of Scotland and Santander Central
Hispano are subscribers to the service and Dresdner Kleinwort Wasserstein has
agreed to be a subscriber to the service.
Cable & Wireless, through a closer relationship with SWIFT, have announced that
the preferred method of data delivery to the RTN hub is via the SWIFTNet IP
infrastructure. SWIFT is the industry-owned co-operative supplying secure,
standardised messaging services and interface software to 7,600 financial
institutions in 200 countries. Co-operation with SWIFT is key, enabling banks to
maximise the value of their investment in the SWIFTNet IP infrastructure and
also conferring a level of industry acceptance for the CWRTN service, which is
most encouraging.
During the period, we were also pleased to see an increasing number of
participants in the Real Time Nostro User Group, chaired by senior industry
figure, Richard Pattinson of Barclays Bank. This group continues as a successful
forum for sharing CWRTN service ideas and experiences as well as key issues
associated with cash management. The forum reinforces Real Time Nostro as a
global industry initiative, again featuring as one of the themes at the SWIFT
sponsored annual global payments industry conference and exhibition, SIBOS,
which this year takes place in Atlanta, Georgia, USA in October.
Market acceptance for CWRTN continues to grow. The ongoing addition of new data
providers is important as the Board believes that the speed of roll out of CWRTN
to subscribers will be determined by the value users can extract from the
service. That value increases in line with the number of major data providers
that sign up to the service since this broadens the currency coverage and value
of funds over which subscribers can obtain real time information.
While revenues will initially be relatively small and take years to build to
their full potential, we continue to believe that CWRTN is our most significant
market opportunity and has the potential to deliver the largest returns in the
Group's history. Progress over the past few months has moved us considerably
closer to realising this potential.
Integration
We experienced solid revenue growth in our Integration business. The most
significant single contract was a bank to corporate contract with a major UK
bank. This contract, announced in April 2004, was to licence Casablanca, our
flagship integration software, in conjunction with a third party's application
software to provide a working capital 'straight through processing' solution
between the Bank and its major corporate customers. We have now successfully
deployed and delivered the software for the first project under this contract,
involving one of the Bank's larger customers and anticipate building on this
success in the future.
The bank to corporate working capital area is becoming a significant focus for
us and is expected to continue to develop.
We are also pleased to report that we are developing a relationship with a major
hardware vendor based on the unique qualities of our integration software. While
this particular relationship has yet to produce first revenues, this new
opportunity helps to underline the increasing value we believe we will derive
from Casablanca. Casablanca underpins our offerings both in our bank to bank and
bank to corporate initiatives giving our clients and partners a significant
advantage over more traditional integration products or approaches.
Storage
The upturn in market conditions for storage seen towards the end of 2003
continued into the first half of 2004, with Storage revenues up significantly in
the period compared to the first half of 2003, despite increasing market
competition and a weak dollar. We have also continued to invest in the
development of our storage products in order to expand their market reach.
We are now rolling out our global agreement with StorageTek, which enables
StorageTek to offer Gresham's advanced storage software to customers, broadening
our route to market and providing StorageTek customers with easy access to the
value added functionality of StorageTek tape solutions.
FUTURE OUTLOOK
Our strategy continues to be to build on opportunities generated in our chosen
markets and delivered by utilising our specialist industry knowledge, know-how,
technology and skills. In particular we intend to continue to focus on the
finance and banking sector to expand our offerings in the rapidly growing bank
to bank and bank to corporate markets.
The Board believes that this will be achieved by continuing to:
• design innovative yet practical solutions;
• maintain the high quality services that will continue to extend our
brand, value and profile;
• enhance the level and maturity of our relationships with clients and
partners; and
• manage our business with vision, leadership and clarity;
The general trend of improved trading is encouraging and has continued into the
second half. CWRTN continues to be well received by the banking community and
recent developments underline the vitality that this service has now gained. The
Integration business continues to gain momentum as our focus has improved.
Established relationships with world class companies such as StorageTek place
our Storage division in a good position to build on its first half performance.
The Board believes that progress made over the last period is therefore
encouraging and that the Group is well placed to continue the improvement in
results into the second half of the year and beyond.
Alan Howarth
Chairman
13 September 2004
GROUP PROFIT AND LOSS ACCOUNT
for the six months
ended 30 June 2004
Six months ended Six months ended Year ended
30 June 2004 30 June 2003 31 December 2003
Unaudited Unaudited Audited
Notes
£'000 £'000 £'000
Group turnover 2 6,136 4,870 10,245
Cost of sales 2,789 2,374 4,535
-----------------------------------------------------
Gross profit 3,347 2,496 5,710
Administrative expenses 4,049 3,680 7,868
-----------------------------------------------------
Operating loss (702) (1,184) (2,158)
Net interest receivable 115 116 203
-----------------------------------------------------
Loss on ordinary
activities before
taxation (587) (1,068) (1,955)
Taxation on loss on
ordinary activities - (11) (12)
-----------------------------------------------------
Loss on ordinary
activities after taxation (587) (1,057) (1,943)
-----------------------------------------------------
Retained loss
for the period (587) (1,057) (1,943)
=====================================================
Basic loss per
share (pence) 3 (1.19) (2.24) (4.05)
Diluted loss
per share
(pence) 3 (1.19) (2.24) (4.05)
GROUP BALANCE SHEET
at 30 June 2004 at 30 June at 30 June at 31 December
2004 2003 2003
Unaudited Unaudited Audited
£'000 £'000 £'000
Fixed assets
Intangible assets 1,102 1,067 1,043
Tangible assets 1,303 1,413 1,336
-----------------------------------------------------
2,405 2,480 2,379
-----------------------------------------------------
Current assets
Debtors 7,541 5,502 6,301
Cash at bank and in hand 3,411 6,327 4,923
-----------------------------------------------------
10,952 11,829 11,224
Creditors: amounts falling due
within one year 4,239 3,478 3,820
-----------------------------------------------------
Net current assets 6,713 8,351 7,404
-----------------------------------------------------
-----------------------------------------------------
Total assets less current
liabilities 9,118 10,831 9,783
-----------------------------------------------------
Creditors: amounts falling due
after more than one year 394 674 477
-----------------------------------------------------
8,724 10,157 9,306
=====================================================
Capital and reserves
Called up share capital 2,470 2,430 2,464
Share premium account 9,670 9,529 9,639
Special reserve 313 313 313
Merger reserve 726 726 726
Profit and loss account (4,455) (2,841) (3,836)
-----------------------------------------------------
Shareholders' funds - equity
interests 8,724 10,157 9,306
=====================================================
GROUP STATEMENT OF CASH FLOW
for the six months ended 30 June 2004
Six months ended Year ended
30 June 30 June 31 December
2004 2003 2003
Unaudited Unaudited Audited
£'000 £'000 £'000
Operating loss (702) (1,184) (2,158)
Depreciation 155 210 390
Amortisation 94 54 132
Increase in debtors (1,240) (630) (1,586)
Increase/(decrease) in creditors 448 (23) 139
---------------------------------------
Net cash outflow from operating activities (1,245) (1,573) (3,083)
---------------------------------------
Returns on investment and servicing of finance
Net interest received 100 113 219
---------------------------------------
100 113 219
---------------------------------------
Taxation paid (26) (13) (9)
---------------------------------------
Capital expenditure and financial investment
Payments to aquire intangible fixed assets (234) - -
Payments to acquire tangible fixed assets (127) (41) (167)
Receipts from sale of tangible fixed assets 3 - -
---------------------------------------
(358) (41) (167)
---------------------------------------
Acquisitions and disposals
Disposal of associated undertaking - - -
Costs of disposal - (16) (25)
---------------------------------------
- (16) (25)
---------------------------------------
Financing
Repayments of finance leases (3) (60) (76)
Net proceeds of shares issued 37 3,908 4,052
---------------------------------------
Net inflow from financing 34 3,848 3,976
---------------------------------------
---------------------------------------
(Decrease) / increase in cash in the period (1,495) 2,318 911
=======================================
Group net funds
Opening net funds 4,918 3,928 3,928
Closing net funds 3,409 6,288 4,918
NOTES TO THE INTERIM FINANCIAL STATEMENTS
at 30 June 2004
1 These unaudited interim financial statements, which do not constitute
statutory accounts within the meaning of Section 240 of the Companies Act
1985, have been prepared using the accounting policies set out in the
Group's 2003 statutory accounts.
The statutory accounts for the year ended 31 December 2003 received an
unqualified auditor's report and have been delivered to the Registrar of
Companies.
The interim report will be sent to shareholders. Further copies may be
obtained from the Company Secretary, Gresham Computing plc, Sopwith House,
Brook Avenue, Warsash, Southampton, SO31 9ZA.
2 Turnover and segmental analysis
All turnover relates to continuing operations.
Analysis of turnover by business segment
Six months ended 30 June 2004 Six months ended 30 June 2003
Segment Inter-segment External Segment Inter-segment External
turnover turnover turnover turnover turnover turnover
£'000 £'000 £'000 £'000 £'000 £'000
Solutions 2,280 - 2,280 1,453 - 1,453
Specialist contract
staff 950 - 950 988 (7) 981
----------------------------------------------------------------------------
Enterprise
Solutions 3,230 - 3,230 2,441 (7) 2,434
Enterprise
Software 2,910 (4) 2,906 2,436 - 2,436
----------------------------------------------------------------------------
6,140 (4) 6,136 4,877 (7) 4,870
----------------------------------------------------------------------------
Geographical analysis of turnover by source
Six months ended 30 June 2004 Six months ended 30 June 2003
Turnover Inter-segment External Turnover Inter-segment External
turnover turnover turnover turnover
£'000 £'000 £'000 £'000 £'000 £'000
United Kingdom 4,092 - 4,092 2,950 (12) 2,938
North America 997 (4) 993 1,128 (24) 1,104
Rest of World 1,491 (440) 1,051 1,198 (370) 828
----------------------------------------------------------------------------------
6,580 (444) 6,136 5,276 (406) 4,870
----------------------------------------------------------------------------------
Geographical analysis of turnover by destination
Six months ended 30 June
2004 2003
£'000 £'000
United Kingdom 3,692 2,675
Europe 707 375
North America 854 774
Rest of the world 883 1,046
---------------------------
6,136 4,870
---------------------------
3 Earnings per share
Earnings per share has been calculated in accordance with FRS 14 using the
following earnings and weighted average shares outstanding:
Six months ended Year ended
30 June 30 June 31 December
2004 2003 2003
£'000 £'000 £'000
Earnings
Basic and fully diluted earnings (587) (1,057) (1,943)
----------------------------------------
(587) (1,057) (1,943)
----------------------------------------
For basic weighted average 49,310,700 47,186,369 48,022,384
Potential ordinary shares - - -
----------------------------------------
Diluted weighted average number of
shares 49,310,700 47,186,369 48,022,384
----------------------------------------
Diluted earnings per share are identical to basic earnings per share in all cases
because potential diluting events would have the effect of reducing the loss per
ordinary share.
4 Reconciliation of shareholders' funds
Six months Year
ended ended
30 June 30 June 31 December
2004 2003 2003
£'000 £'000 £'000
Loss for the period (587) (1,057) (1,943)
Exchange difference on retranslation of net
assets of subsidiary undertakings (32) (1) (110)
----------------------------------
Total recognised gains and losses (619) (1,058) (2,053)
Shares issued 37 3,908 4,052
----------------------------------
Total movements during the year (582) 2,850 1,999
Opening shareholders' funds 9,306 7,307 7,307
----------------------------------
Closing shareholders' funds 8,724 10,157 9,306
----------------------------------
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