Sale of VME mainframe software business

RNS Number : 9382M

Gresham Technologies PLC

14 January 2019

 

RNS

14 January 2019

Gresham Technologies plc

Sale of VME mainframe software business

Gresham Technologies plc (LSE: "GHT", "Gresham" or the "Group"), the leading software and services company that specialises in providing real-time data integrity and control solutions, is pleased to announce that it has entered into a definitive agreement (the "Agreement") with Fujitsu Services Limited ("Fujitsu") for the sale of its VME mainframe software business for £2 million (the "Transaction").

Background to the Transaction

The Virtual Machine Environment ("VME") operating system was originally developed in the mid-1970's by UK company ICL, later acquired by the Fujitsu group. Gresham responded to the introduction of ICL mainframes by developing a portfolio of complementary software development tools for the VME operating system, some of which are currently still licenced, maintained and supported for a small number of UK customers.

In recent years, many of Gresham's VME customers have discontinued their use of Gresham's VME software tools, with a residual base of 13 customers now remaining. As a consequence, Gresham's VME revenues have been steadily declining. Furthermore, the associated business risks to Gresham are increasing due to the limited technical resources available to support the business, and the investments in further software development that may be required as Fujitsu develops a strategy to extend and enhance its platform.

During the first part of 2018, Fujitsu and Gresham engaged in a technical feasibility study regarding the compatibility of Gresham's VME products with Fujitsu's successor platform and to quantify the product upgrade requirements and associated benefits and risks. This study led to strategic discussions regarding the transfer of Gresham's VME business and assets to Fujitsu on the terms of the Transaction.

Details of the Transaction

Under the terms of the Agreement, Gresham's VME customer contracts will be assigned to Fujitsu and the intellectual property rights in the relevant software products will be transferred to Fujitsu with effect as of 31 January 2019 ("Business").

The consideration for the Transaction is £2 million which will be settled in full in cash on completion, offset against advance receipts, resulting in net cash inflow to the Group of approximately £1.7 million which will be applied to further support Gresham's Clareti-led strategy.

For the year ended 31 December 2017 ("2017"), the revenue and profit attributable to the Business was £0.87m and £0.70m, respectively. In-line with the declining trend in recent years, the 2018 revenue and profit attributable is expected to be lower than 2017. The consideration for the Transaction represents approximately 2.3 times and 2.9 times the 2017 revenue and profit attributable to the Business, respectively. The gross assets of the Business subject to the Transaction are immaterial as the intangible assets have been fully amortised.

The Transaction constitutes a Class 2 transaction for the purposes of the UK Financial Conduct Authority's Listing Rules and, as such, shareholder approval is not required. The Transaction has been approved by the Gresham Board of Directors and will complete on 31 January 2019.

Ian Manocha, CEO, commented:

"This sale continues the business transformation process initiated several years ago towards establishing Gresham as a global financial technology business, and also reflects the Board's confidence in our longer-term Clareti-led growth strategy.

 The ICL VME platform was an extraordinary British innovation in its day and has been an important line of business for Gresham over three decades. 

Taking into account the evolving VME marketplace dynamics, our ongoing customer support obligations, and the investment required to support product upgrades and customer migrations, we believe that it is in the best interests of our shareholders and our VME customers that we transition our VME business to Fujitsu, as we continue to focus our efforts and investments on Clareti-led growth. Fujitsu is ideally placed to assist customers wishing to migrate to their next generation service and provide good continuity of operational software support and maintenance."

Enquiries

Gresham Technologies plc	[phone]
Ian Manocha
Tom Mullan
N+1 Singer (Joint Broker)	[phone]
Shaun Dobson / Lauren Kettle (Corporate Finance)
Tom Salvesen (Corporate Broking)
Cantor Fitzgerald Europe (Joint Broker)	[phone]
Philip Davies
Catherine Leftley

Inside information

The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulation (EU) No. 596/2014 ("MAR").  Upon the publication of this announcement via a Regulatory Information Service ("RIS"), this inside information is now considered to be in the public domain.

Note to editors

Gresham Technologies plc is a leading software and services company that specialises in providing real-time data integrity and control solutions. Listed on the main market of the London Stock Exchange (GHT.L) and headquartered in the City of London, its customers include some of the world's largest financial institutions, all of whom are served locally from offices located in Europe, North America and Asia Pacific.

Gresham's award-winning Clareti software platform has been designed to provide financial institutions with complete certainty in their data processing. Clareti is a highly flexible and fully scalable platform for ensuring the integrity of data across an enterprise. It is designed to address today's most challenging financial control, risk management, data governance and regulatory compliance problems.

 

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