Interim Results
Gresham Computing PLC
05 September 2006
Embargoed until 07.00
05 September 2006
GRESHAM COMPUTING plc
('Gresham', the 'group' or the 'company')
Interim results for the 6 months ended 30 june 2006
Gresham, provider of real-time financial solutions and storage solutions,
announces its unaudited interim results for the 6 months ended 30 June 2006. The
main results highlights are as follows:
• Assumed primary responsibility for Real Time Nostro service from Cable &
Wireless and continued progress with users and providers
• Revenue up 5% to £7.0m (2005: £6.6m);
• Loss before tax reduced by 42% to £0.4m (2005: £0.7m loss)
• Cash up at £5.3m (31 December 2005 £2.1m)
• Launched our Virtual Tape Library solution
• Ranked 2nd in the world by independent storage analysts
• First OEM channel deal secured with partner
• Proposed launch of Gresham Payables Financing Service H2 2006
• A number of strategic hires focused on growing the business more quickly
Financial Highlights
H1 2006 H1 2005
£'000 £'000
Revenue 6,967 6,634
Trading loss (484) (783)
Loss before tax (433) (742)
Attributable to equity holders of the parent (383) (632)
Loss per share (pence) (0.76) (1.27)
Cash 5,327 2,105
Andrew Walton-Green, Chief Executive Officer of Gresham, commented:
'The first half of 2006 has been a period of significant change and activity for
Gresham. Since taking the primary sales and marketing role for the Real Time
Nostro service in April, we have restructured our business and are making
strategic hires to enable us to fully engage with the banking community. Our
strategic focus is very clearly now on delivering real-time financial solutions
to the global banking community and wider. I am also pleased with developments
in our storage business where today we provide core storage software to over
half of the Fortune 500. Our new product, a Virtual Tape Library solution, has
significant potential and has been assessed as a leading solution by independent
storage analysts. We have emerged from the first half stronger and better
capable of driving the business forward and are focused on improving trading for
the second half of 2006 and beyond.'
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
Matt Dixon
Chairman's Statement
I am pleased to present my report on the group's activities and results for the
six months ended 30 June 2006.
Introduction
The period to the date of this report has been one of significant change and
activity for Gresham.
• Assumed primary responsibility for Real Time Nostro service from Cable &
Wireless and continued progress with users and providers;
• Revenue up 5% to £7.0m (2005: £6.6m)
• Loss before tax reduced by 42% to £0.4m (2005: £0.7m loss);
• Cash up at £5.3m (31 December 2005 £2.1m);
• Launched our Virtual Tape Library solution;
• Ranked 2nd in the world by independent storage analysts
• First OEM channel deal secured with partner
• Proposed launch of Gresham Payables Financing Service H2 2006; and
• A number of strategic hires focused on growing the business more quickly.
CWRTN
In April, Gresham and Cable & Wireless announced a revision to operating
responsibilities in the delivery of the collaborative CWRTN service. Gresham
assumed primary responsibility for the sales, marketing, integration and
application software management. Cable & Wireless continue to support the roll
out globally and in particular are 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 continue to share net subscription revenues
generated by CWRTN with the shares amended to reflect ongoing operating
responsibilities. Gresham now receives a significant majority of revenues
arising from the service. Cable & Wireless continue to provide the ongoing
hosting and infrastructure services for CWRTN, have made a substantial up-front
cash payment to Gresham in the first half and are making an ongoing contribution
to the costs of taking CWRTN to market.
Since April, the primary sales and marketing responsibility has been
successfully transferred to Gresham and we increased our team accordingly. We
initiated a period of customer consultation and engagement to ensure that the
strategy for CWRTN is properly aligned to customer needs. Feedback from the
major banks around Gresham assuming the primary role has been generally
positive. The following progress was achieved in the period:
• A total of 5 major banks have now agreed to take the CWRTN Direct service,
3 of which are top 20 banks. Several other major banks are currently
evaluating the CWRTN Direct service and in particular the SWIFTNet delivery
route;
• The number of banks subscribed to the CWRTN Browser service remained at 4,
including 2 of the world's top 10 banks, with an increase in the number of
currencies under subscription. We are engaged with several new potential
subscriber banks for the Browser service;
• A total of 21 banks have now agreed to provide data, including 7 of the
top 20 banks in the world and all of the top 4. Work has continued on
integrating more of these Provider banks into the service, increasing the
number of currencies available and improving user subscription interest; and
• We are in detailed discussion with a number of other major banks with a
view to becoming Providers as well as seeking to accelerate integration of
existing Providers using the preferred SWIFTNet method and application.
Enterprise Solutions
Our Enterprise Solutions business results were much improved on H1 05 with
revenues up 23% and losses down by 59%. Cost control played a major part in
reducing first half losses for this business segment. We saw growth from our
Integrated Client Money Solution working alongside Barclays Bank as we jointly
roll the solution out to a strong customer pipeline.
We continue to invest in developing our patent pending payables financing
solution, Gresham Payables Financing Solution ('GPFS'), and are currently
working on launching services in both Asia and Europe.
Our IT recruitment services business delivered a solid performance in the first
half with revenue up 20% on H1 2005 and profitability improved.
Enterprise Software
Revenue in our Enterprise Software business was down 15% compared to H1 2005
with profits also reduced. Our French storage business underperformed and
accounted for the majority of the decrease in revenue and profitability with the
balance accounted for by an expected slower start for our well established
storage products. We have restructured the French storage business to reduce
our exposure in that market, reducing headcount from 14 to 3 supporting our
French customer base, which will significantly reduce costs going into H2 2006.
We have continued to make significant investment in our new Virtual Tape Library
solution (Storage Consolidation Platform - 'SCP') and were delighted to receive
glowing results in an independent product test performed by Diogenes Analytical
Labs ranking us in the global top two Virtual Tape Library storage products. A
key route to market for SCP is through OEM channels and in July we signed our
first OEM deal with Tributary Systems Inc, targeted at the HP Non-Stop platform
market. TSI have indicated that they expect first live users in the second half
of 2006.
In October, we will be showcasing our Storage Solutions at Storage Networking
World (Orlando, USA).
Summary of financial performance
Revenues for the first six months increased 5% to £7.0m (2005: £6.6m) and the
loss before tax was reduced by 42% to £0.43m (2005: £0.74m loss).
Period end cash was £5.3m, a significant increase on the prior balance of £2.1m
at 31 December 2005 as a result of payments received from Cable & Wireless under
the new RTN arrangement and a major receipt in January from Q4 2005 trading.
People Changes
We have taken steps to strengthen our sales and marketing resources, both in
response to the CWRTN announcement and also to improve our approach to market in
the real-time payments and storage solutions markets generally. These changes
were mostly implemented in June and July and will increase the market's
awareness of Gresham solutions through direct customer facing activities.
Whilst this represents a substantial investment we believe that such investment
is justified to now engage strongly with customers and prospects.
Future Outlook
We have solutions intended to deliver short, medium and long term returns in the
real-time financial and storage solutions markets. Initiatives such as Real
Time Secure Communications and SCP provide the opportunity to grow revenues in
the short term, complementing revenues from our existing legacy products.
Solutions such as GPFS are expected to begin generating revenues in the short to
medium term. CWRTN is already delivering revenue and we anticipate that these
revenues will continue to grow over time with the opportunity to earn
substantial revenues in the long term.
The revised CWRTN agreement gives us the continuing support of Cable & Wireless
and the opportunity to derive a greater share of the revenue from the service.
The regulatory demands for real-time information have increased. From our
existing pipeline, we anticipate further growth in CWRTN users and providers in
the second half, building from our presence at SIBOS and ongoing activity.
The market interest for GPFS is high and we are working with potential customers
and partners towards having our first GPFS installation live in the second half
of 2006.
SCP brings significant value to customers especially those with multiple storage
platforms and we will continue to seek further OEM deals in the second half and
at the same time adopting a direct sales approach to existing customers.
Taking into account all these factors, I believe that we have emerged from the
first half stronger and better capable of driving the business forward. We are
focused on improving trading for 2006 and beyond.
Alan Howarth
Chairman
4 September 2006
Group income statement
For the period ended 30 June 2006
6 months 6 months 12 months
ended ended ended
30 June 30 June 31 December
2006 2005 2005
Unaudited Unaudited Audited
Notes £'000 £'000 £'000
Revenue 2 6,967 6,634 13,982
Cost of goods sold (3,924) (3,471) (7,205)
Gross profit 3,043 3,163 6,777
Administrative expenses (3,527) (3,946) (8,133)
Trading loss 2 (484) (783) (1,356)
Finance revenue 56 49 124
Finance costs (5) (8) (14)
Loss before tax 2 (433) (742) (1,246)
Taxation 3 50 110 145
Attributable to equity holders of the parent 6 (383) (632) (1,101)
Loss per share (total and continuing)
Basic loss per share - pence 4 (0.76) (1.27) (2.20)
Diluted loss per share - pence 4 (0.76) (1.27) (2.20)
Group statement of recognised income and expense
For the period ended 30 June 2006
6 months 6 months 12 months
ended ended ended
30 June 30 June 31 December
2006 2005 2005
Unaudited Unaudited Audited
£'000 £'000 £'000
Exchange differences on translation of foreign operations (81) (56) -
Net expense recognised directly in equity (81) (56) 0
Attributable loss for the period (383) (632) (1,101)
Total recognised income and expense for the period (464) (688) (1,101)
Group balance sheet
At 30 June 2006
At At At
30 June 30 June 31 December
2006 2005 2005
Unaudited Unaudited Audited
Notes £'000 £'000 £'000
ASSETS
Non-current assets
Property, plant and equipment 1,205 1,278 1,271
Intangible assets 7 5,334 1,560 1,879
6,539 2,838 3,150
Current assets
Trade and other receivables 7 2,634 7,579 8,175
Income tax receivable 302 214 252
Other financial assets 36 0 40
Cash and cash equivalents 5,327 2,105 1,973
8,299 9,898 10,440
TOTAL ASSETS 14,838 12,736 13,590
EQUITY AND LIABILITIES
Equity attributable to equity holders of the
parent
Called up equity share capital 6 2,513 2,490 2,513
Share premium account 6 10,009 9,937 10,009
Other reserves 6 1,039 1,039 1,039
Foreign currency translation reserve 6 (110) (85) (29)
Retained earnings 6 (6,365) (5,528) (5,973)
6 7,086 7,853 7,559
Non-current liabilities
Financial liabilities 0 38 21
Deferred income 7 2,058 118 680
Current liabilities
Financial liabilities 28 37 43
Income tax payable 109 20 109
Trade, other payables and deferred income 7 5,557 4,670 5,178
Total liabilities 7,752 4,883 6,031
TOTAL EQUITY AND LIABILITIES 14,838 12,736 13,590
Group cashflow statement
For the period ended 30 June 2006
At At At
30 June 30 June 31 December
2006 2005 2005
Unaudited Unaudited Audited
Notes £'000 £'000 £'000
Cashflows from operating activities
Trading loss (484) (783) (1,356)
Depreciation and amortisation 152 189 586
Share based payment (credit) / expense (9) 18 42
Decrease/(Increase) in trade and other receivables 2,104 (371) (1,424)
Increase in trade and other payables 7 1,903 32 976
Cash inflow / (outflow) from operations 7 3,666 (915) (1,176)
Net income taxes received 0 259 431
Net cash inflow / (outflow) from operating activities 3,666 (656) (745)
Cash flows from investing activities
Interest received 56 49 84
Repayment of convertible bonds 0 24 400
Purchase of property, plant and equipment (42) (57) (155)
Disposal of property, plant and equipment 0 0 4
Payments to acquire intangible fixed assets (262) (250) (709)
Net cash used in investing activities (248) (234) (376)
Cash flows from financing activities
Proceeds from issue of ordinary share capital 0 33 140
Share issue costs 0 0 (10)
Interest paid (5) (8) (14)
Decrease in obligations under finance leases (30) (38) (65)
Net cash (used in) / generated by financing activities (35) (13) 51
Net increase / (decrease) in cash and cash equivalents 3,383 (903) (1,070)
Cash and cash equivalents at beginning of period 1,973 3,016 3,016
Exchange adjustments (29) (8) 27
Cash and cash equivalents at end of period 5,327 2,105 1,973
Notes to the financial information
1 Basis of preparation
These interim financial statements are unaudited and do not constitute statutory
accounts within the meaning of s240 of the Companies Act 1985.
The interim financial statements have been prepared in accordance with IAS 34
'Interim Financial Reporting' and the Listing Rules of the Financial Services
Authority ('FSA'). The accounting polices applied in these interim financial
statements are consistent with those applied in the Group's most recent annual
financial statements. The interim financial statements were approved by the
Board on 4 September 2006.
The financial statements for the year ended 31 December 2005, which were
prepared in accordance with International Financial Reporting Standards, as
endorsed by the European Union ('IFRS'), and with those parts of the Companies
Act 1985 applicable to companies reporting under IFRS, have been delivered to
the Registrar of Companies. The auditors' opinion on these financial statements
was unqualified and did not contain a statement made under s237 (2) or (3) of
the Companies Act 1985.
These interim financial statements will be forwarded to shareholders shortly.
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. 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.
Primary reporting format - Business segments
The following tables present revenue and profit/loss information regarding the
group's business segments for the periods ended 30 June 2006 and 30 June 2005,
all of which are continuing.
Revenue Six months ended 30 June 2006 Six months ended 30 June 2005
Inter- Sales to Inter- Sales to
Segment segment external Segment segment external
revenue revenue customers revenue revenue customers
£'000 £'000 £'000 £'000 £'000 £'000
Solutions 2,301 - 2,301 1,828 - 1,828
IT recruitment services 1,984 (19) 1,965 1,654 (10) 1,644
Enterprise Solutions 4,285 (19) 4,266 3,482 (10) 3,472
Enterprise Software 2,701 - 2,701 3,162 - 3,162
6,986 (19) 6,967 6,644 (10) 6,634
Result by segment Six months ended 30 June 2006 Six months ended 30 June 2005
Enterprise Enterprise Total Enterprise Enterprise Total
Solutions Software Solutions Software
£'000 £'000 £'000 £'000 £'000 £'000
Segment result (541) 614 73 (1,313) 1,070 (243)
Unallocated expenses (557) (540)
Trading loss (484) (783)
Net finance revenue 51 41
Loss before income tax (433) (742)
3 Taxation
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2006 2005 2005
UK tax
Research and development credit 50 110 234
Foreign tax
Witholding tax charge - - (89)
50 110 145
4 Loss per ordinary share
Basic loss per share amounts are calculated by dividing net loss or profit for
the period attributable to ordinary equity holders of the parent by the weighted
average number of ordinary shares outstanding during the period.
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 period 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:
Six months ended Year ended
30 June 30 June 31 December
2006 2005 2005
£'000 £'000 £'000
Net loss attributable to equity holders of the parent (383) (632) (1,101)
Number Number Number
Basic weighted average number of shares
Dilutive potential ordinary shares: 50,269,809 49,646,035 49,945,603
Employee share options - - -
Diluted weighted average number of shares 50,269,809 49,646,035 49,945,603
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 this
interim statement.
5 Dividends paid and proposed
No dividends were declared or paid during the period or comparative periods.
6 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 2005 2,479 9,713 1,039 (29) (4,914) 8,288
Exchange differences on translation of
foreign operations 0 0 0 (56) 0 (56)
Share based expense recognised in the
income statement 0 0 0 0 18 18
Issue of shares 11 232 0 0 0 243
Share issue costs 0 (8) 0 0 0 (8)
Attributable loss for the period 0 0 0 0 (632) (632)
At 30 June 2005 2,490 9,937 1,039 (85) (5,528) 7,853
Exchange differences on translation of
foreign operations 0 0 0 56 0 56
Share based expense recognised in the
income statement 0 0 0 0 24 24
Issue of shares 23 74 0 0 0 97
Share issue costs 0 (2) 0 0 0 (2)
Attributable loss for the period 0 0 0 0 (469) (469)
At 31 December 2005 2,513 10,009 1,039 (29) (5,973) 7,559
Exchange differences on translation of
foreign operations 0 0 0 (81) 0 (81)
Share based expense recognised in the
income statement 0 0 0 0 (9) (9)
Issue of shares 0 0 0 0 0 0
Share issue costs 0 0 0 0 0 0
Attributable loss for the period 0 0 0 0 (383) (383)
At 30 June 2006 2,513 10,009 1,039 (110) (6,365) 7,086
7 Change of arrangement with Cable & Wireless
As a result of the new arrangement agreed with Cable & Wireless in April 2006, a
one off payment of cash was made to Gresham by Cable & Wireless in the period.
In addition, from April 2006 additional fixed quarterly payments are being made
to Gresham by Cable & Wireless. The initial one off payment is being deferred
in the balance sheet and released on a straight line basis as a credit to
administrative expenses over a period of 3 years from May 2006 to be matched
against additional costs incurred by Gresham under the new arrangement. The
further fixed quarterly payments are also being deferred in the balance sheet
and released on a straight line basis as a credit to administrative expenses
over the quarters to which they relate. In the six months to 30 June 2006 the
credit to administrative expenses totalled approximately £200,000, with no
impact on the comparative figures. As a consequence of the new arrangement with
Cable & Wireless, £3.3m of costs previously reported in the balance sheet as
contract costs within current assets have been reclassified as research and
development expenditure and included within intangible assets where they
continue to be amortised over their useful life against associated revenues,
with no impact on the comparative figures.
The payments noted above led to a gross operating cash receipt during the period
of £3.3m, inclusive of £0.5m of output VAT which was subsequently paid to HM
Revenue and Customs in August 2006.
This information is provided by RNS
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