Interim Results
Gresham Computing PLC
22 September 2005
Embargoed until 07.00 22 September 2005
GRESHAM COMPUTING plc
('Gresham', the 'group' or the 'company')
INTERIMS RESULTS FOR THE PERIOD ENDED 30 JUNE 2005
Gresham, provider of enterprise software and solutions, announces its interim
results for the period ended 30 June 2005. The main results highlights during
the year were as follows:
• Turnover for the period up by 8% to £6.63m (2004: £6.14m);
• Loss before tax £0.7m for the period (2004: £0.6m loss);
• Loss after tax £0.6m for the period (2004: £0.6m loss);
• Net funds of £2.1m at 30 June 2005;
• Continuing positive progress with Cable & Wireless Real Time Nostro ('
CWRTN') service with the 4 largest banks in the world now data providers;
• Disappointing performance from Integration; and
• Storage business performing well.
Andrew Walton-Green, Chief Executive Officer of Gresham, commented:
'Our strategy is increasingly built around the provision of real time solutions
and continues to be targeted at medium to long term opportunities, in particular
around our core business areas of banking and integration. Whilst the first half
shows a disappointing performance from the Integration business we have been
particularly encouraged by the progress that the business is making with the
Cable and Wireless Real Time Nostro service and anticipate improved trading in
the second half of 2005 and thereafter.'
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
Cass Helstrip
International Financial Reporting Standards ('IFRS')
These interim financial statements have been prepared under the new IFRS
accounting regime, which came into force this year. Comparatives have been
restated and a full analysis of the differences between UK Generally Accepted
Accounting Practice ('UK GAAP') and IFRS, together with reconciliations of
previously issued financial statements from UK GAAP to IFRS was issued by the
Company today.
For the period ended 30 June 2005:
• Turnover for the period up by 8% to £6.63m (2004: £6.14m);
• Loss before tax £0.7m for the period (2004: £0.6m loss);
• Loss after tax £0.6m for the period (2004: £0.6m loss);
• Net funds of £2.1m at 30 June 2005;
• Continuing positive progress with Cable & Wireless Real Time Nostro ('
CWRTN') service with the 4 largest banks in the world now data providers;
• Disappointing performance from Integration; and
• Storage business performing well.
International Financial Reporting Standards ('IFRS')
These interim financial statements have been prepared under the new IFRS
accounting regime, which came into force this year. Comparatives have been
restated and a full analysis of the differences between UK Generally Accepted
Accounting Practice ('UK GAAP') and IFRS, together with reconciliations of
previously issued financial statements from UK GAAP to IFRS was issued by the
Company today.
Real Time Nostro
Progress with the Cable & Wireless Real Time Nostro ('CWRTN') service continues
to be very positive. This months Sibos conference in Copenhagen saw CWRTN
gather further momentum with new interest in the service coming from many
parties. A pleasing and important aspect has also been the closer collaboration
with SWIFT in recent months, something that we believe is evident from the
updates provided by Cable and Wireless plc ('Cable & Wireless').
CWRTN Data providers
Data providers are vital to the service because they provide the payment
information that subscribers can utilise and view. In April 2005, I reported
that 11 banks had agreed to provide data to the service, including 4 of the 'top
10' largest banks in the world. At Sibos this month, Cable & Wireless provided
an update on CWRTN confirming that the number of banks having now agreed to be
data providers has increased from 11 to 18. Significantly, with the addition of
HSBC and ABN Amro, the provider banks now include the 4 largest banks in the
world (Citibank, JP Morgan, HSBC and Bank of America) and a total of 7 banks
from the top 20 banks (Mizuho, Barclays and ABN Amro making up the 7).
HSBC has agreed to provide data from 42 currencies, representing all of its
clearing branches worldwide. This will significantly increase the currency
coverage of the service. The addition of ABN Amro as a data provider further
enhances currency coverage with data from a major Euro clearer available to
subscribers. It is our belief that the speed of roll out of CWRTN to
subscribers is directly related to the number of currencies covered by the
service. The recent announcements of new data providers will significantly
enhance the value of the service to subscribers.
CWRTN subscribers
The RTN Browser service allows subscribers real time access to international
payment information from provider banks published from the RTN hub. As of today,
more than 10 banks are using the service.
The RTN direct service differs from the browser service in that data is
transferred directly into a bank's systems from the RTN hub, data being
delivered as soon as it is received. This allows the user bank's systems to
receive a 'pushed' information feed and to process the transaction data in real
time. Barclays went live as the first subscriber to the direct service in early
2005 and a number of other major banks are currently evaluating the service with
a view to adoption.
The number of application vendors, signed up by Cable & Wireless as partners,
continues to grow and now totals eleven. These vendors are important because
they provide software that allows banks to utilise the direct service and to
extract maximum value from the real time information feed provided by the CWRTN
service.
SWIFTNet
Cable & Wireless' preferred method of data delivery to and from the CWRTN 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 secure SWIFTNet
IP infrastructure.
Real Time Nostro User Group
This group continues as a forum for sharing CWRTN service ideas and experiences
as well as key issues associated with cash management. The user group consists
of both banks that have already joined the service and those that anticipate
joining at some future point. The forum reinforces Real Time Nostro as a global
industry initiative. It is notable that SWIFT has recently become a member of
this group.
Integration
In the first half of 2005, progress towards realising opportunities in the
Integration business has been slower than expected, however trading has improved
in the second half.
Progress with our Integrated Client Money Solution between a major UK bank and
its larger corporate customers was slower in the first half of 2005 than hoped.
However, we now expect progress in the second half to be stronger, with the
addition of several more customers for the service and an increasing pipeline.
We continue to invest in developing our patent pending payables financing
solution, Gresham Payables Financing Solution ('GPFS'). GPFS provides suppliers
of large buyers the opportunity for early drawdown of receivables in real time,
making the service analogous to electronic receivables factoring. Our preferred
method of delivery for GPFS is now as a service offering as opposed to a licence
only model. As a result, we expect the rewards to be higher. We are currently
in contractual discussions with a number of parties regarding taking GPFS to
market, with a model of building recurring revenues over time.
In early 2005, we acquired the intellectual property of a business developing
solutions in the instant messaging market. This technology has now been married
with our Casablanca(R) integration technology and we are now taking this newly
developed Real Time Secure Communications ('RTSC') solution, demonstrated at our
AGM in June 2005, to market in partnership with BT. Our RTSC solution integrates
the functionality of instant messaging, such as 'presence' and delivery of real
time information, with existing core systems and facilitates collaborative
working. Although it has taken longer to take the RTSC solution to market than
we initially anticipated, with a consequential adverse impact on 2005 revenue,
RTSC is now progressing well. RTSC is available in the BT technology centre and
initial customer reaction during the market testing phase has been positive. We
are now pursuing a number of significant opportunities with BT.
Casablanca(R) remains a core element of our integration business giving our
clients and partners a serious alternative to more traditional integration
products or approaches. It has increasingly given us access to significant
opportunities, typically alongside major partners, from which we anticipate
long-standing business to develop. Our continued investment in Casablanca(R)
remains considerable, however revenues, particularly through our premium channel
partner, have to date fallen well short of expectations.
Storage
The upturn in market conditions for storage continued into 2005, with Storage
performing strongly in the period compared to 2004, despite increasing market
competition.
We have continued to invest in the development of our storage product line in
order to expand our market reach. I am pleased to announce the release of our
new, patent pending, Storage Consolidation Platform. This new platform will
provide an unprecedented level of interoperability between storage applications,
centralise management of available tape storage resources and will greatly
facilitate the increasing demands for storage consolidation. In addition, the
ability of users to implement specific business rules and policies will enhance
both visibility and control of mainstream storage applications. The
functionality and flexibility of our platform will prove particularly useful to
library vendors but it also has wide market applicability for the enterprise
user and to all concerned in the Storage Area Network (SAN) arena.
Contract staff business
Our staff placement business grew strongly during the period, with revenues
increasing significantly compared with the first half of 2004. The growth arose
from the provision of temporary staff, with higher margin permanent staff
revenues remaining at modest levels.
Future Outlook
Our strategy is increasingly built around the provision of real time solutions
and continues to be targeted at medium to long term opportunities, in particular
around our core business areas of banking and integration. In addition to
growing organically, where appropriate, we will seek to divest non-core
activities and also consider acquisitions that accelerate our growth within core
business areas.
Building a significant base of major bank data providers is central to the
strategy for CWRTN since this broadens the currency coverage over which
subscribers can obtain real time information. Interest in CWRTN was high at
Sibos this month and the Board believes that a critical mass of data providers
is fast approaching. Looking ahead, we expect to see further growth in the
number of data providers to the CWRTN service. While revenues are relatively
modest and, as previously indicated, will take a number of years to build to
their full potential, we expect to see increased growth in the number of
subscribers as the service moves into a wider user adoption phase. Our belief
is that CWRTN can be of assistance to banks in meeting increasing regulatory
pressures around international payments and this factor should encourage take up
of the service.
Integration work in the second half has picked up and significant opportunities
continue to be identified. Direct sales of Casablanca(R) remain disappointingly
slow and, as a result, we intend establishing further channels to market to
broaden our reach.
We expect further development of our real time solutions, GPFS, RTSC and our
Storage Consolidation Platform, in the remainder of 2005, with operational
deployment of these solutions expected in the first half of 2006.
Taking into account all these factors, we anticipate improved trading in the
second half of 2005 compared to the first half, with a more significant
improvement in 2006.
Alan Howarth
Chairman
21 September 2005
Note: Size of bank is measured by Capital (Source: The Banker: 'Top 1000 World
Banks at 31 December 2004', July 2005).
Gresham Computing plc
Group Income Statement
for the period ended 30 June 2005
Notes Unaudited Unaudited Unaudited
6 months ended 6 months ended 12 months ended
30 June 30 June 31 December
2005 2004 2004
£'000 £'000 £'000
Revenue 2 6,634 6,136 12,398
Cost of goods sold (3,471) (2,789) (5,796)
Trading profit 3,163 3,347 6,602
Administrative expenses (3,946) (4,014) (7,867)
Finance income 49 118 217
Finance costs (8) (10) (19)
Loss before tax (742) (559) (1,067)
Taxation 3 110 0 305
Attributable loss for the period (632) (559) (762)
Earnings per share 4
Basic loss per share - pence (1.27) (1.13) (1.54)
Diluted loss per share - pence (1.27) (1.13) (1.54)
Gresham Computing plc
Group Balance Sheet
for the period ended six months ended 30 June 2005
Notes Unaudited Unaudited Unaudited
At At At
30 June 30 June 31 December
2005 2004 2004
£'000 £'000 £'000
ASSETS
Non-current assets
Property, plant and equipment 1,278 1,442 1,400
Intangible assets 1,560 1,156 1,245
2,838 2,598 2,645
Current assets
Trade and other receivables 7,793 7,541 7,640
Cash and cash equivalents 2,105 3,411 3,016
9,898 10,952 10,656
TOTAL ASSETS 12,736 13,550 13,301
EQUITY AND LIABILITIES
Equity attributable to equity holders of the parent
Called up equity share capital 6 2,490 2,470 2,479
Share premium account 6 9,937 9,670 9,713
Foreign currency translation reserve 6 (85) (32) (29)
Retained earnings 6 (4,489) (3,687) (3,875)
7,853 8,421 8,288
Non-current liabilities
Finance leases 38 43 40
Deferred income 118 394 268
Current liabilities
Finance leases 37 67 61
Trade and other payables 4,690 4,625 4,644
Total liabilities 4,883 5,129 5,013
TOTAL EQUITY AND LIABILITIES 12,736 13,550 13,301
Gresham Computing plc
Group Cash Flow Statement
for the period ended six months to 30 June 2005
Notes Unaudited Unaudited Unaudited
At At At
30 June 30 June 31 December
2005 2004 2004
£'000 £'000 £'000
Net cash outflow from operating activities
Loss before tax and financing (783) (667) (1,265)
Depreciation and amortisation 189 203 392
Share based payment expense 18 14 29
Increase in trade and other receivables (371) (1,240) (1,318)
Increase in trade payables and provisions 32 489 241
Cash outflow from operations (915) (1,201) (1,921)
Interest paid (8) (10) (19)
Net income taxes received / (paid) 259 (26) (40)
Net cash inflow from operating activities 251 (36) (59)
Cash flows from investing activities
Interest received 49 103 199
Disposal of associated undertaking 24 0 387
Capital expenditure (307) (361) (512)
Disposal of property, plant and equipment 0 3 0
Net cash (used in) / generated from investing (234) (255) 74
activities
Cash flows from financing activities
Net proceeds from issue of ordinary share capital 33 37 89
Decrease in obligations under finance leases (38) (40) (81)
Net cash (used in) / generated by financing activities (5) (3) 8
Net decrease in cash and cash equivalents (903) (1,495) (1,898)
Cash and cash equivalents at beginning of period 3,016 4,923 4,923
Exchange adjustments (8) (17) (9)
Cash and cash equivalents at end of period 2,105 3,411 3,016
Gresham Computing plc
Group Statement of Recognised Income and Expense
for the period ended six months to 30 June 2005
Unaudited Unaudited Unaudited
6 months ended 6 months ended 12 months ended
30 June 30 June 31 December
2005 2004 2004
£'000 £'000 £'000
Exchange differences on translation of foreign operations (56) (32) (29)
Net expense recognised directly in equity (56) (32) (29)
Attributable loss for the period (632) (559) (762)
Total recognised income and expense for the period (744) (623) (820)
NOTES TO THE INTERIM FINANCIAL STATEMENTS
at 30 June 2005
1 These unaudited interim financial statements have been prepared under
International Financial Reporting Standards ('IFRS') that are expected to
be in issue for the year ending 31 December 2005 and do not constitute
statutory accounts within the meaning of Section 240 of the Companies Act
1985.
The accounting policies applied in preparation of these financial
statements together with reconciliations of previously issued financial
statements from UK Generally Accepted Accounting Practice ('UK GAAP') to
International Financial Reporting Standards ('IFRS') are set out in the
announcement issued by the Company today entitled: Restatement of Financial
Information under International Financial Reporting Standards ('IFRS').
These interim financial statements were approved by the Board on 21
September 2005.
The statutory accounts for the year ended 31 December 2004, prepared under
UK GAAP, 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 Segment reporting
All revenue relates to continuing operations.
Analysis of revenue by business segment
Six months ended 30 June 2005 Six months ended 30 June 2004
Segment Inter-segment External Segment Inter-segment External
revenue revenue revenue revenue revenue revenue
£'000 £'000 £'000 £'000 £'000 £'000
Solutions 1,828 - 1,828 2,280 - 2,280
Specialist contract staff 1,654 (10) 1,644 950 - 950
Enterprise Solutions 3,482 (10) 3,472 3,230 - 3,230
Enterprise Software 3,162 - 3,162 2,910 (4) 2,906
6,644 (10) 6,634 6,140 (4) 6,136
Analysis of loss before tax by business segment:
Six months ended Year ended
30 June 30 June 31 December
2005 2004 2004
£'000 £'000 £'000
Enterprise Solutions (1,313) (831) (2,035)
Enterprise Software 1,070 738 1,754
(243) (93) (281)
Common costs (540) (574) (984)
Net interest receivable 41 108 198
Loss before tax (742) (559) (1,067)
Common costs comprise the costs of all central group services.
3 Taxation
Six months ended Year ended
30 June 30 June 31 December
2005 2004 2004
£'000 £'000 £'000
Adjustments in respect of prior periods:
UK Corporation tax research and development credit 110 - 305
110 - 305
4 Earnings per share
Earnings per share has been calculated using the following earnings and
weighted average shares outstanding:
Six months ended Year ended
30 June 30 June 31 December
2005 2004 2004
Earnings £'000 £'000 £'000
Basic and fully diluted earnings (632) (559) (762)
(632) (559) (762)
For basic weighted average 49,646,035 49,310,700 49,407,419
Potential ordinary shares - - -
Diluted weighted average number of shares 49,646,035 49,310,700 49,407,419
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.
5 Dividends
No interim dividend has been paid or proposed for the period ended 30 June
2005 and no dividends were paid or proposed in the comparative periods.
6 Group Statement of Changes in Equity
Share Share Currency Retained Total
capital premium translation earnings
reserves
£'000 £'000 £'000 £'000 £'000
At 1 January 2004 2,464 9,639 0 (3,142) 8,961
Exchange differences on translation of foreign 0 0 (32) 0 (32)
operations
Share based expense recognised in the income 0 0 0 14 14
statement
Issue of shares 6 31 0 0 37
Attributable loss for the period 0 0 0 (559) (559)
At 30 June 2004 2,470 9,670 (32) (3,687) 8,421
Exchange differences on translation of foreign 0 0 3 0 3
operations
Share based expense recognised in the income 0 0 0 15 15
statement
Issue of shares 9 43 0 0 52
Attributable loss for the period 0 0 0 (203) (203)
At 31 December 2004 2,479 9,713 (29) (3,875) 8,288
Exchange differences on translation of foreign 0 0 (56) 0 (56)
operations
Share based expense recognised in the income 0 0 0 18 18
statement
Issue of shares net of expenses 11 224 0 0 235
Attributable loss for the period 0 0 0 (632) (632)
At 30 June 2005 2,490 9,937 (85) (4,489) 7,853
7 IFRS differences
To aid comparison, the following table summarises the key differences
between the IFRS loss after tax presented in these financial statements and
the loss after tax that would have been presented under UKGAAP.
Six months Year ended
ended
30 June 30 June 31 December
2005 2004 2004
£'000 £'000 £'000
Attributable loss as reported under IFRS 30 June 2005 (632) (559) (762)
Goodwill amortisation reversal (54) (54) (108)
Residual value of property (29) (29) (58)
Lease incentives (15) (15) (30)
Holiday pay 45 56 36
Share options 18 14 29
Research and development expenditure capitalised (250) 0 0
Loss under UK GAAP 30 June 2005 (917) (587) (893)
These unaudited interim financial statements have been prepared under
International Financial Reporting Standards ('IFRS') that are expected to
be in issue for the year ending 31 December 2005 and do not constitute
statutory accounts within the meaning of Section 240 of the Companies Act
1985.
The accounting policies applied in preparation of these financial
statements together with reconciliations of previously issued financial
statements from UK Generally Accepted Accounting Practice ('UK GAAP') to
International Financial Reporting Standards ('IFRS') are set out in the
announcement issued by the Company today entitled: Restatement of Financial
Information under International Financial Reporting Standards ('IFRS').
These interim financial statements were approved by the Board on 21
September 2005.
The statutory accounts for the year ended 31 December 2004, prepared under
UK GAAP, 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.
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