Preliminary Results
Gresham Computing PLC
26 January 2001
Gresham Computing plc
('Gresham' or 'the Group')
Preliminary Results
for the year ended 31 October 2000
Gresham, a leading provider of enterprise products,
services and testing, announces preliminary results for
the year ended 31 October 2000.
Highlights
* Turnover for the year ended 31 October 2000 was
£23.3 million (1999: £30.4m)
* Pre-tax loss before goodwill £3.6 million (1999:£0.4
million)
* Pre-exceptional and goodwill amortisation loss
reduced from first half 2000 from £1.7 million to £0.4
million (Second half 1999 £1.3 million)
* Exceptional items of £1.5 million resulting from
business refocusing
* Operations generate cash of £695,000 despite losses
* Clear strategy and platform for future profitable
growth developed by focusing attention on key account
customers and an effective channel strategy for out IPR
* Prospects for our Enterprise Software Solutions and
Testing business are strong
* A return to operating profitability is expected for
the second half of the year and for the year to 31
October 2001 as a whole.
Andrew Walton Green, Chief Executive commented: 'Trading
conditions remained difficult for the Group throughout
the financial year. However, considerable steps were
taken by the board to develop an effective strategy and
improve the performance of the Group.
As a result of our actions, and given the up-turn in
market conditions for the Group's businesses, we can now
look towards 2001 with some optimism'.
For further information, please contact:
Gresham Computing plc 01489 555 500
Andrew Walton Green, Chief Executive
Square Mile Communications Limited 020 7601 1062
Tim Jackaman / Sally Lewis
Gresham Computing plc
('Gresham' or 'the Group')
Preliminary Results
Chairman's Statement
RESULTS
Group Turnover for the year ended 31 October 2000 was
£23.3 million (1999: £30.4 million), after exceptional
items and before goodwill amortisation there was a pre-
tax loss of £3.6 million (1999: £0.4 million). The
resultant loss per ordinary share was 9.38 pence (1999:
2.29 pence). The second half of the year has seen
considerable restructuring of the business resulting in
exceptional items of £815,000.
Your board and management team have taken significant
steps throughout the year to improve the performance of
the group and also to develop an effective strategy for
the business. I am pleased to be able to report that we
have made considerable progress towards these objectives
in the past six months. The pre-tax loss before
exceptional items and goodwill amortisation for the six
months ended 31 October 2000 was significantly reduced
from £1,698,000 in the first half of the year to £383,000
(1999 H2: loss £1,342,000). In the second half of the
year we recorded an increase in group revenue of eight
percent reversing the decline in revenue reported in the
previous two half years. Also during the second half of
the year gross margin increased from 40% to 42%.
During the year we have placed considerable emphasis on
cash management and despite the level of operating loss
we generated £695,000 of cash from operations and
recorded a small increase in overall indebtedness of
£307,000.
OPERATIONS
As I mentioned in my Interim Statement last July and as a
result of the strategic review of the business undertaken
last year, the current operations of the group have been
organised into five business streams. As the management
team makes progress in the implementation of our agreed
strategy these streams will evolve further to reflect the
most effective and efficient organisation of our business
units.
Enterprise Software Solutions
Turnover increased during the year by 23% to £8.3 million
(1999: £6.7 million), primarily as a result of a 100%
increase in revenue from storage management solutions.
In order to maximise the return from the group's IPR we
are actively pursuing a strategy of expanding our routes
to market through the utilisation of sales channels. In
September, we entered into a worldwide distribution
agreement with ACI Worldwide for our Tandem operational
product (TOPS) and anticipate that further sales channels
will be added during the next year for our products.
Considerable interest is also being shown in Casablanca,
our JAVA Enterprise Application Integration (EAI)
product, through Casablanca Software Limited, a new
subsidiary which has recently been established to fully
exploit the potential of this product. Utility products
continue to provide a strong maintenance revenue stream
and in October we concluded a five year maintenance
agreement with a significant UK outsourcing customer in
excess of £1 million.
SIM Testing
SIM Testing recorded revenue for the full year of £4.5
million compared with £2.7 million in 1999 which
represented the revenue for the first seven months after
acquisition. Our strategy of providing automated
and bespoke end to end testing through long term
relationships with key accounts has proved to be a
significant success. Turnover in the second half of 2000
grew by 48 % over that recorded in the first half and
this trend has continued into 2001.
Specialist Contract Staff
The specialist contract staff business recorded reduced
gross revenues of £4.8 million (1999: £6.6million)
largely as a result of the Y2K microclimate. However,
this division remains profitable and continues to be
an important provider of human resources to the
group and our key accounts.
Financial Services
Financial Services recorded revenue of £5.8 million
(1999: £12.3 million). As previously reported this
division has suffered a significant decline over the past
18 months as a result of the effect of the Y2K close
down and also over capacity in the market we previously
focused on. During the second half of the year it became
apparent that this division would take longer to
turnaround than initially expected. As a result it
has been restructured to focus on IPR-led solutions in
what remains an important vertical market for us.
Integration Solutions
Integration solutions recorded services revenue of £1.3
million (1999: £3.2 million). This division has been
restructured to focus on IPR-led opportunities and also
to provide a range of EAI solutions and services.
The new structure for the group outlined above has been
used as the basis of the segmental analysis shown in
note 2.
STRATEGY
Gresham's core business is the provision of enterprise
solutions through niche technologies and specialist
services. As noted above our Integration Solutions and
Financial Services divisions are taking longer to
turnaround than our other businesses. These two
divisions are increasingly becoming IPR-led niche
solution providers operating within our enterprise
products and services framework. As we further develop
this focus it is likely that we will dispose of non-core
business units when we can maximise shareholder value
from them.
OUTLOOK
I am very pleased to be able to report that the group
returned to operating profitability before goodwill
amortisation in December. Since the year end our
Enterprise Software Solutions and SIM Testing
businesses have continued to perform strongly. The
directors expect that this trend will continue, with a
return to operating profitability in the second half of
the year and for the year as a whole.
EMPLOYEES
The directors and I would like to take this opportunity
to thank our staff. 2000 was a tough year for us all.
Some difficult decisions were made and I would like to
record my gratitude to each of you for your significant
contribution in moving us back into a position to resume
profitability and growth.
Sid Green
Chairman
25 January 2001
Gresham Computing plc
GROUP PROFIT AND LOSS ACCOUNT
for the year ended 31 October 2000
Year ended 31 October 2000
Before
Notes goodwill Goodwill
amortisation amortisation
£'000 £'000 £'000
TURNOVER 2 23,325 - 23,325
Cost of sales 3 13,796 - 13,796
--------------------------------------
GROSS PROFIT 9,529 - 9,529
Administrative expenses 3 11,357 703 12,060
Administrative expenses
- exceptional items 4 1,489 - 1,489
--------------------------------------
OPERATING LOSS (3,317) (703) (4,020)
Net interest payable 253 - 253
LOSS ON ORDINARY ACTIVITIES BEFORE
TAXATION (3,570) (703) (4,273)
Taxation on loss on ordinary activities (267) - (267)
--------------------------------------
LOSS ON ORDINARY ACTIVITIES AFTER
TAXATION (3,303) (703) (4,006)
Dividends - equity interests - - -
- non-equity interests 66 - 66
--------------------------------------
Retained loss for the year (3,369) (703) (4,072)
======================================
Earnings per share basic and diluted 5 -7.76 -1.62 -9.38
Gresham Computing plc
GROUP PROFIT AND LOSS ACCOUNT, continued.
for the year ended 31 October 2000
Year ended 31 October 2000
Before
Notes goodwill Goodwill
amortisation amortisation
£'000 £'000 £'000
TURNOVER 2 30,350 - 30,350
Cost of sales 3 18,373 - 18,373
--------------------------------------
GROSS PROFIT 11,977 - 11,977
Administrative expenses 3 11,613 463 12,076
Administrative expenses
- exceptional items 4 620 - 620
--------------------------------------
OPERATING LOSS (256) (463) (719)
Net interest payable 145 - 145
LOSS ON ORDINARY ACTIVITIES BEFORE
TAXATION (401) (463) (864)
Taxation on loss on ordinary activities (24) - (24)
--------------------------------------
LOSS ON ORDINARY ACTIVITIES AFTER
TAXATION (377) (463) (840)
Dividends - equity interests - - -
- non-equity interests 66 - 66
--------------------------------------
Retained loss for the year (443) (463) (906)
======================================
Earnings per share basic and diluted 5 -1.12 -1.17 -2.29
Gresham Computing plc
GROUP BALANCE SHEET
at 31 October 2000
2000 1999
£'000 £'000
Fixed Assets
Intangible assets 8,047 8,868
Tangible assets 2,737 3,345
-------------------
10,784 12,213
-------------------
Current Assets
Debtors 6,851 8,270
Cash at bank and in hand 343 231
-------------------
7,194 8,501
Creditors: amounts falling due within one year 6,807 6,558
-------------------
Net Current Assets 387 1,943
-------------------
Total Assets Less Current Liabilities 11,171 14,156
-------------------
Creditors: amounts falling due
after more than one year 3,658 2,430
Provisions for liabilities and charges - 49
-------------------
7,513 11,677
===================
Capital and reserves
Called up share capital 2,714 2,618
Shares to be issued - 2,925
Share premium account 5,232 3,969
Special reserve 313 313
Merger reserve 726 -
Profit and loss account (1,472) 1,852
-------------------
7,513 11,677
===================
Shareholders' funds
Equity interests 7,003 11,167
Non-equity interests 510 510
-------------------
7,513 11,677
===================
Gresham Computing plc
GROUP CASH FLOW STATEMENT
for the year ended 31 October 2000
2000 1999
Note £'000 £'000
Net cash inflow/(outflow) from operating activities 7 695 (147)
Returns on investment and servicing of finance
Net interest paid (253) (145)
Preference dividend paid - (53)
-----------------
(253) (198)
-----------------
Taxation paid (288) (511)
-----------------
Capital expenditure and financial investment
Payments to acquire tangible fixed assets (503) (1,573)
Receipts from sale of tangible fixed assets 133 67
-----------------
(370) (1,506)
-----------------
Acquisitions
Purchase consideration and acquisition
costs of subsidiary undertakings (66) (3,013)
Net (overdraft) acquired with subsidiary undertakings - (20)
----------------
(66) (3,033)
----------------
Equity dividends paid - (217)
----------------
Financing
New long term loans 500 2,000
Receipts from finance lease facility - 419
Repayments of finance leases and loans (272) (218)
Repayment of short term loans (4) (159)
New ordinary shares issued (net of issue costs) - 2,432
----------------
Net inflow from financing 224 4,474
----------------
(Decrease) in net cash in the period (58) (1,138)
----------------
RECONCILIATION OF NET CASH FLOWS TO
MOVEMENT IN NET DEBT
2000 1999
£'000 £'000
Decrease in cash (58) (1,138)
Net cash (inflow) from financing (224) (2,042)
----------------
Change in net funds resulting from cash flows (282) (3,180)
Other movements in net funds
Acquisitions - (90)
Other (25) 1
----------------
Movement in net debt (307) (3,269)
Net debt at 1 November (2,910) 359
----------------
Net debt at 31 October (3,217) (2,910)
================
Gresham Computing plc
GROUP STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
for the year ended 31 October 2000
2000 1999
£'000 £'000
Loss for the financial year (4,006) (840)
Exchange difference on retranslation of
net assets of subsidiary undertakings (92) (45)
----------------
Total recognised gains and losses
relating to the year (4,098) (885)
================
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
for the year ended 31 October 2000
2000 1999
£'000 £'000
Total recognised gains and losses (4,098) (885)
Dividends (66) (66)
Shares issued 2,925 7,527
Shares to be issued (2,925) 1,156
Goodwill on acquisitions - 104
----------------
Total movements during the year (4,164) 7,836
Opening shareholders' funds 11,677 3,841
----------------
Closing shareholders' funds 7,513 11,677
================
Gresham Computing plc
NOTES TO THE PRELIMINARY RESULTS ANNOUNCEMENT FOR THE YEAR
ENDED 31 OCTOBER 2000
1. The above financial information does not constitute
statutory accounts as defined in section 240 of the Companies
Act 1985. The results for the year ended 31 October 2000 and
the balance sheet at that date are extracted from the statutory
accounts (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 October 1999 (on which
the auditors have given an unqualified opinion), which have
already been sent to shareholders and filed with the Registrar
of Companies.
2. Turnover and segmental analysis
Turnover 2000 1999
Inter segment External Inter segment External
Turnover turnover turnover Turnover turnover turnover
£'000 £'000 £'000 £'000 £'000 £'000
Enterprise
products and
services
Enterprise
software
solutions 8,288 - 8,288 6,748 - 6,748
Integration
solutions 1,344 - 1,344 3,241 - 3,241
Financial
services 5,768 - 5,768 12,314 - 12,314
----------------------------------------------------------------
15,400 - 15,400 22,303 - 22,303
SIM Testing 4,533 - 4,533 2,714 - 2,714
Specialist
Contract Staff 4,757 (1,365) 3,392 6,571 (1,238) 5,333
----------------------------------------------------------------
24,690 (1,365) 23,325 31,588 (1,238) 30,350
----------------------------------------------------------------
Segment operating profit/(loss)
Operating Goodwill Operating Goodwill
Result Amortisation Result Amortisation
£'000 £'000 £'000 £'000 £'000 £'000
Enterprise
products and
services
Enterprise
software
solutions 1,612 (262) 1,350 1,476 (195) 1,281
Integration
services (526) - (526) 239 - 239
Financial
services (1,907) (60) (1,967) 312 (45) 267
----------------------------------------------------------------
(821) (322) (1,143) 2,027 (240) 1,787
SIM Testing 54 (381) (327) 98 (223) (125)
Specialist
Contract Staff 184 - 184 554 - 554
----------------------------------------------------------------
(583) (703) (1,286) 2,679 (463) 2,216
Common costs (2,734) (2,935)
--------- ---------
Operating (loss) (4,020) (719)
Net interest (payable) (253) (145)
--------- ---------
(Loss)on ordinary
activities before
taxation (4,273) (864)
========= =========
Geographical analysis of turnover by source and destination
Source Destination
2000 1999 2000 1999
£'000 £'000 £'000 £'000
United Kingdom 17,206 26,146 12,317 18,232
Rest of Europe 481 730 3,539 7,161
North America 5,590 3,405 5,669 2,824
Rest of World 1,724 1,558 1,800 2,133
Inter-segment (1,676) (1,489) - -
sales
------------------- ------------------
23,325 30,350 23,325 30,350
=================== ==================
Analysis of profit (loss) on ordinary activities before taxation by source
2000 1999
Operating Goodwill Operating Goodwill
result amortisation result amortisation
£'000 £'000 £'000 £'000 £'000 £'000
United Kingdom (329) (381) (710) 3,485 (222) 3,263
Rest of Europe (103) - (103) 39 - 39
North America 6 (220) (214) (965) (165) 1,130
Rest of World (157) (102) (259) 120 (76) 44
--------------------------------------------------------------
(583) (703)(1,286) 2,679 (463) 2,216
Common costs (2,734) (2,935)
Net interest (253) (145)
------- -------
payable (4,273) (864)
======= =======
Operating segments reflect the current operating structure of
the group and comparatives have been re-stated accordingly.
3. Cost of Sales and Administrative Expenses
In previous years all staff costs were charged to
administrative expenses. In the current year all costs
associated with service delivery have been charged to
cost of sales. The comparative numbers for 1999 have
been re-stated accordingly with £6,432,000 being transferred
from administrative expenses to cost at sales.
4. Exceptional items
2000 1999
£'000 £'000
Compensation for loss of office 237 81
Reorganisation and restructuring costs 982 539
Bad debts 175 -
Provision for diminution in value of 95 -
leasehold property improvements
-----------------
1,489 620
-----------------
5. Earnings per share (EPS)
The calculation of earnings per ordinary share has
been based on the loss attributable to shareholders,
adjusted for preference dividends of £4,072,000 (1999:
£906,000) and on a weighted average number of shares of
43,427,491 (1999:39,613,267). Diluted earnings per share
is identical to basic earnings per share because
potential diluting events would have the effect of
reducing the loss per ordinary share.
6. Dividends
The directors do not propose the payment of an ordinary
dividend in respect of the year ended 31 October 2000.
7. Reconciliation of operating loss to net cash flow from
operating activities
2000 1999
£'000 £'000
Operating Loss (4,020) (719)
Depreciation 1,033 835
Amortisation 821 594
(Profit) / Loss on sale of fixed assets (22) 3
Decrease/(Increase) in debtors 1,406 563
Increase/(Decrease) in creditors 1,580 (1,381)
Foreign exchange movement (103) (42)
------------------
Net cash inflow/(outflow) from operating activities 695 (147)
------------------
8. This preliminary statement of results will not appear as
an advertisement in any newspaper but the annual report
will be sent to all shareholders by 28 February 2001 and
copies will be available to members of the public from
the company's registered office: Mitchell House, Brook
Avenue, Warsash, Southampton SO31 9ZA.
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