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Gresham Computing (GHT)

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Friday 21 July, 2000

Gresham Computing

Interim Results

Gresham Computing PLC
21 July 2000


                     GRESHAM COMPUTING plc
                               
    INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 APRIL 2000
                               
                     CHAIRMAN'S STATEMENT


RESULTS

Gresham's  performance over the past twelve  months  has  been
unsatisfactory. The trading results for the six  months  ended
30  April 2000 show group revenue of £11.2 million (1999 £16.3
million),  an  operating loss before goodwill amortisation  of
£2.25  million (1999 profit £1.6 million) and a loss per share
of 6.06 pence (1999 profit per share of 2.57 pence).

The  twelve months to 30 April 2000 were preceded by a  period
of unprecedented expansion involving acquisitions across three
continents. The losses were the result of a combination of the
issues  associated  with the integration of  those  businesses; 
a particularly severe downturn in the financial services business 
and  the  difficult trading conditions arising from  the  Y2K
microclimate.   In  common with many other  companies  in  our
sector, the Y2K economic conditions affected much of our first
half year, which ended on 30 April 2000.


MANAGEMENT CHANGES

There have been significant board and management changes  over
the last six months.

Following  the  appointment of Andrew  Walton-Green  as  Chief
Executive  Officer  on 11 April 2000 I am  pleased  to  report
that:
* a comprehensive review of the group's business has taken
  place;
* a clear strategy has been developed;
* an extensive restructuring programme is underway, and
* the  new  Board of Directors is united and committed  to
  returning the group to profitability in the short term while
  delivering the longer-term strategy.


STRATEGY

Gresham's   core  business  is  the  provision  of  enterprise
solutions, through niche technologies and specialist services.
Our mission is to provide enterprise solutions that
* deliver value to our customers and
* build stakeholder value.

In  order  to  develop the full potential  and  value  of  our
enterprise solutions the business has been organised into five
business  streams. To retain the niche focus of each division,
each  will  act  as an independent operating  unit  under  the
Gresham   umbrella.   Where   appropriate,   we   will    form
collaborative  relationships,  both  within  and  outside  the
group, to maximise business opportunities.


The operational activities of the five divisions are described
in brief below:


* Enterprise Solutions Software (ESS)

ESS  develops  and derives license income from non-application
related enterprise software. The route to market is either via
direct sales, a Gresham channel or an external channel.  Where
appropriate, ESS will also provide related services.

ESS  is  responsible  for  the  exploitation  of  the  group's
technologies including:
     *    ICL/Compac/Tandem operational products;
     *    Casablanca, a middleware XML object driven legacy systems
          integration tool;
     *    OpenBackup, a back-up system for distributed systems;
     *    Tal2C,  an automated transition process to industry
          standard C for the Compac/Tandem platform;
     *    Autoscriptor Inferno, a cross platform GUI non-invasive
          automated testing solution;
     *    Enterprise Storage division, based in Austin  which
          provides SAN connectivity solutions.

ESS  has  delivered revenue growth in excess of  10%  compared
with  the  equivalent six-month period a year ago.   This  has
been  achieved  in  large part as a result of  the  Enterprise
Storage division which has recorded an increase in turnover in
excess of 100% compared to the six months ended 30 April 1999,
and strong profitability during the period.

* SIM Testing (SIM)

SIM provides automated and bespoke end-to-end testing services
for  web  (50%  of  turnover) and other IT  systems  projects,
independent  of the IT systems provider. It provides  a  value
added service through utilisation of our technical and process
know-how  to facilitate a faster in-depth testing service  and
follow-on automated remote testing services over the web.

The past 12 months has shown no increase in turnover. This  is
due  to  the  change  in  product mix together  with  the  Y2k
microclimate.  SIM has moved a major amount  of  its  business
from contracting type activities to value added activities.

It  is  expected that the next 12 months will show an increase
in both turnover and profitability. This is largely due to the
significant b2b and b2c activities being put into place by the
major blue chip and financial services businesses and improved
access to market via partnerships.

* Financial Services

The  Financial Services division suffered a dramatic  downturn
in  turnover in the 12 months to 30 April 2000. It was a major
cause  of  the losses of the group as a result of  structural,
economic  and  management issues. In particular,  the  UK  was
severely  affected by the Y2K close down and stiff competition
in   what  had  been  our  most  profitable  market  -   Atlas
enhancement  work.  While we still provide  this  service  for
Atlas  legacy systems, it is now a small component in  a  more
comprehensive offering.

With  effect  from  3  July 2000, the  four  elements  of  our
Financial Services division across three continents  have  now
been brought together under one divisional head, Mary Murphy.

As  a  result of the restructuring, we are now able to provide
global  value-added IT solutions using our  specialist  skills
and  knowledge  of financial systems. Key areas  of  expertise
include:
  *    Systems integration and migration
  *    Payment systems
  *    Compact/Tandem transition services
  *    Design and build of bespoke web application solutions
  *    Selection/implementation of application software

Market   conditions   are   showing  rapid   improvement   and
Casablanca, our legacy integration tool, is proving  to  be  a
key  component  in differentiating us from our competitors  in
this  market.  Routes to market will continue to be  developed
through mutually beneficial partnership arrangements.

*    Integration Solutions (IS)

Gresham  has  long  been recognised as an expert  supplier  of
integration  solutions in the ICL market. As our clients  have
moved  to other platforms, so our expertise has grown  and  we
now  have a comprehensive ability to integrate both legacy and
new technology systems.

We offer services to connect both single and/or multiple back-
end  systems so as to providing bespoke b2b and b2c solutions,
bringing  operational  systems to the web.  Our  focus  is  in
performing  the technically challenging integration  services.
We  then  work closely with the client, either to develop  the
right front-end solution or, where one exists already, to work
closely with a best-of-breed application software partner.

IS has considerable experience in:
* Supply Chain Management
* SmartCard  technologies in conjunction  with  specialist
  middleware providers
* ICL integration/migration exercises

The results of this business were significantly affected when,
due  to  Y2K  market conditions, follow-on  business  did  not
materialise when 1999 projects were completed.

Specialist integration services are in high demand due to  the
significant market activity in bringing enterprise systems  to
the  web.  We are in a strong position to capitalise  on  this
demand and anticipate strong growth.

* Contract Staff & Recruitment

Despite  having a business profile that differs from  that  of
the  rest of the group, our recruitment arm has for many years
successfully  provided contract IT staff both to internal  and
external  clients.  Going  forwards,  it  will  specialise  in
recruitment  and contract services for the areas addressed  by
the  other  components of the group.  It  remains  profitable,
although like all our businesses it was adversely affected  by
the market conditions created by the Y2K fears.


OUTLOOK

I  am  also pleased to report that we are now benefiting  from
improved  market  conditions in all aspects of  our  business,
and, with our new focus, are experiencing significantly higher
levels  of enquiries from existing and new customers  in  most
business areas.

The  Directors  and I believe that the new strategy,  combined
with  the  clear  focus  and improved market  conditions  will
enable us to return to monthly operating profitability by  the
end of 2000.


GRESHAM EMPLOYEES

The  Directors  and I would like to take this  opportunity  to
thank our staff for their dedication and support over the past
difficult year.

Sid Green
Chairman


For further information, please contact:

Gresham Computing plc                      020 7653 0200
Andrew Walton-Green, Chief Executive Officer

Square Mile Communications                 020 7601 1000
Kevin Smith 



GRESHAM COMPUTING plc                                                        
GROUP PROFIT AND                                                             
LOSS ACCOUNT
for the six months                                                           
ended
30 April 2000
                          
                         Six months ended            Six months ended         
                           30 April 2000               30 April 1999          
         
                       Before     Goodwill          Before     Goodwill 
                     goodwill amortisation        goodwill amortisation   
                Note    £'000      £'000   £'000     £'000      £'000    £'000

                                  
                                                                             
TURNOVER           2   11,206             11,206    16,301              16,301
                             
                                                                             
Cost of sales           6,754              6,754     5,961               5,961
                   ___________________________________________________________
                                            
                                                                             
GROSS PROFIT            4,452              4,452    10,340              10,340
                                                                             
Administrative            
  expenses              6,032        351   6,383     8,749          78   8,827
                         
Administrative              
  expenses
  - exceptional
  items            3      674                674             
                   ___________________________________________________________
                                                                            
OPERATING (LOSS)         (2,254)    (351) (2,605)    1,591         (78)  1,513
  /PROFIT              
                                                                             
Net interest (payable)   
  receivable               (118)            (118)      (30)               (30)
                   ___________________________________________________________
                            
                                                                             
(LOSS)/PROFIT ON        
  ORDINARY 
  ACTIVITIES                                                  
  BEFORE TAXATION        (2,372)    (351) (2,723)     1,561        (78)  1,483
                 
                                                                             
Taxation on result on   
  ordinary activities      (183)            (183)      492                 492
                   ___________________________________________________________

                    
                                                                             
PROFIT ON ORDINARY        
  ACTIVITIES AFTER 
  TAXATION               (2,189)    (351) (2,540)    1,069         (78)    991
                                                                              
Dividends - non-            
  equity interests            33               33        27                 27  
                
___________________________________________________________                   
                                                         
Retained profit for       
  the year               (2,222)    (351) (2,573)    1,042         (78)    964
                   ===========================================================
                                                       
                                        
                                                                             
Earnings per share 
  (basic)             4                    (6.06)                         2.57
                                   
Earnings per share                 
  (fully diluted)     4                    (6.06)                         2.35
                     
                                                                             
GRESHAM COMPUTING plc
GROUP PROFIT AND LOSS ACCOUNT
for the six months ended 30 April 2000
                          
                                  Year ended 31 October 1999                  
             
                         Before              Goodwill           
                       goodwill          amortisation          
                          £'000                 £'000              £'000      

TURNOVER                 30,350                                   30,350
Cost of sales            11,941                                   11,941
                   ___________________________________________________________
GROSS PROFIT             18,409                                   18,409      

Administrative 
  expenses               18,045                   463             18,508
Administrative 
  expenses -  
  exceptional items         620                                      620
                   ___________________________________________________________
OPERATING (LOSS)
 /PROFIT                  (256)                  (463)              (719)
Net interest (payable)
  receivable              (145)                                     (145)
                   ___________________________________________________________
(LOSS)/PROFIT
  ON ORDINARY ACTIVITIES
  BEFORE TAXATION         (401)                  (463)              (864)
Taxation on result
  on ordinary
  activities              (24)                                       (24)
                   ___________________________________________________________
PROFIT ON ORDINARY
  ACTIVITIES AFTER
  TAXATION                (377)                  (463)               (840)
Dividends - non-            66                                         66
  equity interests                                                            
                   ___________________________________________________________
Retained profit
  for the year            (443)                  (463)               (906)
                   ===========================================================
Earnings per share
  (basic)                                                           (2.29)
Earnings per share
  (fully diluted)                                                   (2.29)
                            





GRESHAM COMPUTING plc                                               
GROUP BALANCE SHEET                                                 
at 30 April 2000                        At 30  At 30    At 31
                                        April  April  October
                                         2000   1999     1999       
                                        £'000  £'000    £'000       
Fixed Assets                                                        
Intangible assets                       8,447 13,115    8,868       
Investments                                       19        -       
Tangible assets                         3,141  3,430    3,345  
                                      _________________________     
                                       11,588 16,564   12,213       
                                      _________________________               
                                                         
Current Assets                                                      
Debtors                                 6,066 10,810    8,270       
Cash at bank and in hand                  105  1,063      231       
                                      _________________________               
                             
                                        6,171 11,873    8,501       
                                                                    
Creditors: amounts falling due          6,309  7,946    6,558       
within one year
                                      _________________________               
                                                         
Net Current (Liabilities) assets        (138)  3,927    1,943       
                                      _________________________               
                                                         
Total Assets Less Current              11,450 20,491   14,156       
Liabilities
                                      _________________________               
                                                         
Creditors: amounts falling due          2,403  2,826    2,430       
after more than one year
                                                                    
Provisions for liabilities and                    68       49       
charges
                                      _________________________               
                                                         
                                        9,047 17,597   11,677       
                                      =========================               
                                                    
Capital and reserves                                                
                                                                    
Called up share capital                 2,664  2,557    2,618       
Shares to be issued                     1,616  8,327    2,925       
Share premium account                   5,230  3,448    3,969       
Special reserve                           313    313      313       
Merger reserve                              -  2,058        -       
Profit and loss account                 (776)    894    1,852       
                                      _________________________               
                             
                                        9,047 17,597   11,677       
                                      =========================               
                                                    
Shareholders' funds                                                 
Equity interests                        8,537 17,087   11,167       
Non-equity interests                      510    510      510  
                                      _________________________          
                                        9,047 17,597   11,677  
                                      =========================     


GRESHAM COMPUTING plc                                            
CASHFLOW STATEMENT                                               
for the six months ended 30 April 2000

                                        Six months ended          Year ended
                                     30 April     30 April        31 October
                                         2000         1999              1999  
    
                                        £'000        £'000             £'000  
    
Operating (Loss)/profit                (2,605)       1,513              (719) 
                                                                 
Depreciation                              479          338               835  
    
Amortisation                              421          176               594  
     
Loss/(profit) on sale of fixed assets      (5)           1                 3  
    
Decrease/(Increase) in debtors          2,206       (1,943)              563  
    
                                                  
Increase/(Decrease) in creditors          420         (350)           (1,381) 
     
                                                         
Foreign exchange movement                 (41)         (26)              (42) 
                                      ________________________________________
       
                                                                 
Net cash inflow/(outflow) from          
  operating activities                    875         (291)             (147) 
                                      ________________________________________
    

                                                                 
Returns on investment and servicing                              
  of finance
Net interest (paid)/received             (118)         (30)             (145) 
     
Preference dividend paid                    -          (54)              (53) 
                                      ________________________________________
    
                                         (118)         (84)             (198) 
                                      ________________________________________
    
                                                                 
Taxation paid                            (164)        (285)             (511) 
                                      ________________________________________
    
                                                                 
Capital expenditure and financial                                
  investment
Payments to acquire tangible fixed 
  assets                                 (298)      (1,140)           (1,573) 
     
                                           
Receipts from sale of tangible fixed    
  assets                                   32            9                67  
                                      ________________________________________
                                         (266)      (1,131)           (1,506)
                                      ________________________________________
      
                                                 
                                                                 
Acquisitions                                                     
Purchase consideration and                     
  acquisition costs of subsidiary                  
  undertakings                            (63)      (3,118)           (3,013) 
                            
Net (overdraft)cash acquired with                
  subsidiary undertakings                   -          (20)              (20)
                                      ________________________________________
                                          (63)      (3,138)           (3,033) 
                                      ________________________________________
    
                                                  
                                                                 
Equity dividends paid                       -            -              (217) 
                                      ________________________________________
    
                                                                 
Financing                                                        
New long term loans                         -        2,250             2,000  
    
Receipts from finance lease facility        -          344               419  
    
Repayments of finance leases and loans   (134)        (203)             (377) 
     

New ordinary shares issued (net of         
  issue costs)                              -       (2,496)            2,432
                                      ________________________________________
Net inflow/(outflow) from financing      (134)       4,887             4,474  
                                      ________________________________________
   
                                                                 
Increase/(Decrease) in net cash in    
  in the period                           130          (42)           (1,138) 
     
                                               
Exchange difference                         -           (8)                -  
    
Opening net cash                          (25)       1,113             1,113  
                                      ________________________________________
   
Closing net cash                          105        1,063               (25) 
                                      ________________________________________
    

NOTES TO THE INTERIM ACCOUNTS
For the six months ended 30 April 2000


1    The interim accounts have been prepared on the basis
  of the accounting policies set out in the group's 1999
  statutory accounts and are unaudited.  The interim
  financial statements do not constitute statutory
  accounts within the meaning of section 240 of the
  Companies Act 1985.


2    Segmental analysis

Analysis of turnover by business segment

                     
                     Six months ended                   Six months ended 
                      30 April 2000                       30 April 1999 
                               Inter                         Inter
                    Segment   segment  External   Segment  segment   External 
                   turnover  turnover  turnover  turnover turnover   turnover 
                      £'000     £'000     £'000     £'000    £'000      £'000
Enterprise                    
  Solutions
  Software            3,772               3,772     3,351               3,351
Financial Services    3,168               3,168     7,511               7,511
SIM Testing           1,830               1,830       380                 380
Contract Staff        2,315      (618)    1,697     4,027   (1,057)     2,970
 & Recruitment                                          
Integration Solutions   739                 739      2,089              2,089
                    ___________________________    ___________________________
                     11,824      (618)   11,206     17,358  (1,057)    16,301
                    ===========================    ===========================
                                                        
                                                                
Analysis of turnover by source and destination
                                                               
                                   Source                  Destination
                             2000         1999          2000          1999    
  
                            £'000        £'000         £'000         £'000    
  
United Kingdom              7,769       13,843         5,701         9,992    
  
Europe                        206          440         2,117         3,993    
  
North America               2,479        1,567         2,626         1,619    
  
Rest of the world             752          613           762           697    
  
Inter-segment elimination       -         (162)             -            - 
                          ______________________    ________________________  
  
                           11,206       16,301         11,206       16,301    
                          ======================    ========================


3    Exceptional items

  Exceptional costs comprise the ongoing costs of reorganising
  and restructuring the group, they include compensation for
  loss of office, redundancy costs and professional fees
  related to group restructuring and employee matters.


4    Earnings per share

  The calculation of earnings per ordinary share has been based
  on the loss attributable to shareholders, adjusted for
  preference dividends of  £2,573,000 (1999 profit £964,000,
  year ended 31 October 1999 loss £906,000) and on a weighted
  average number of shares of  42,469,134 (1999 37,497,320,
  year ended 31 October 1999 39,613,267).  Diluted earnings per
  share are identical to basic earnings per share for the year
  ending 31 October 1999 and six months ending 30 April 2000
  because potential diluting events would have the effect of
  reducing the loss per ordinary share.
  For the six months ended 30 April 1999, diluted earnings per
  share is calculated on a profit of £991,000 after adding back
  preference dividends.  The weighted average number of shares
  used is 42,205,471 after including the dilutive effect of
  potential ordinary shares.


5    Reconciliation of shareholders' funds
                                                        
                                      Six months ended          Year ended
                                   30 April      30 April       31 October
                                       2000          1999             1999
                                      £'000         £'000            £'000

(Loss)/Profit for the period         (2,540)          991             (840)

Exchange difference on            
  retranslation of net
  assets of subsidiary                                     
  undertakings                          (55)         (17)              (45)
                                      ________________________________________
Total recognised gains and losses    (2,595)         974              (885)
Dividends                               (33)         (27)              (66)
Shares issued                         1,307        6,251             7,527
Shares to be issued                  (1,309)       6,558             1,156
Goodwill on acquisitions                  -            -               104
                                      ________________________________________
Total movements during the           (2,630)      13,756             7,836
year
Opening shareholders' funds          11,677        3,841             3,841
                                      ________________________________________
                                                        
Closing shareholders' funds           9,047       17,597            11,677
                                      ========================================
                                                       

6 An interim report will be sent to all shareholders by 4 August 2000
  and will be available to all members of the public during
  normal business hours at the company's registered office:
  Mitchell House, Brook Avenue, Warsash, Southampton, SO31 9ZA.