Gresham feels Emea slowdown

Source: Gresham Computing

Gresham Computing plc, the specialist provider of software based solutions that enable customers to achieve real-time financial certainty in transaction and cash management, is pleased to report its half-yearly results for the 6 months ended 30 June 2012.

Highlights for the 6 months ended 30 June 2012 are set out below:

· Revenue up 11% to £6.02m driven by continued Real-Time Financial Solutions growth;

· Adjusted EBITDA profit up 16% to £0.94m (H1 2011: £0.81m);

· Profit before tax up 25% to £0.71m (H1 2011: £0.57m);

· Basic EPS up 44% to 1.53 pence (H1 2011: 1.06 pence);

· Cash £2.9m (30 June 2011: £2.9m);

· Confirmed order book and pipeline strong;

· ANZ live with Clareti Transaction Control; and

· Management confident about outlook.

Chris Errington, CEO of Gresham, commented:

"We continue to deliver against our strategy and are making significant progress with Clareti Transaction Control (CTC). We are now well positioned in our pursuit of a number of strategic objectives."

Gresham Computing plc
Chris Errington, CEO
Rob Grubb, CFO


CEO Operational Review

Gresham Computing plc is a specialist provider of software based solutions that enable customers to achieve real-time financial certainty in transaction and cash management. We aim to be the market leader in transaction integrity solutions - giving financial institutions and their customers, real-time financial certainty in their transaction processing. Our strategy is to build long term annuity revenues from existing and new customers to increase the visibility of revenues going into future years.

In summary:

· our financial performance is on track;

· we are making significant progress with our new technology, CTC;

· we are working with ANZ and Barclays to roll out our technology to their customers;

· other lines of business are delivering results; and

· we are well positioned in our pursuit of a number of strategic opportunities.

Results for the 6 months to 30 June 2012 saw revenues up 11% and profit before tax up 25%. The improving results were driven by continued growth in our Real-Time Financial Solutions business.

We are making significant progress with Clareti Transaction Controti Transaction Control (CTC), our easily deployed flagship strategic technology platform. CTC enables customers to quickly and accurately identify and resolve operational risks, reduce financial transaction loss events, quickly reconcile, verify and validate transactions, comply with regulatory requirements and optimize business performance.

Australia and New Zealand Banking Group Ltd (ANZ) went live with CTC in the period, which ANZ offers as a service to their corporate customers under the name ANZ Cashactive Fusion. This solution helps organisations managing large volumes of payments and collections with optimising working capital and finance team efficiency. By streamlining and automating the capturing and reconciliation of financial information to drive insight-led business decisions, it is ideal for organisations in financial services, utilities, telecommunications, health and property sectors.

In addition, our Virtual Bank Accounts technology now underpins two further ANZ solutions, ANZ Cashactive Virtual and ANZ Cashactive Control, introduced in December 2011 and April 2012 respectively. While both solutions provide a robust and efficient way of managing, segregating and reconciling funds, they offer the flexibility of addressing different business needs. ANZ Cashactive Control is specifically targeted at helping organisations in accounting, legal, property, government or specialist financial sectors with the compliance obligations involved in managing client monies. When it comes to managing intra-company funds, ANZ Cashactive Virtual is relevant to any organisation looking to maximise their liquidity in today's challenging environment.

We also made further progress with our existing deployment of Virtual Bank Accounts technology at Barclays, where customer numbers grew significantly in the period. The solution provides a robust and efficient way of managing, segregating and reconciling funds targeted at helping organisations in accounting, legal, property, government or specialist financial sectors with the compliance obligations involved in managing client monies.

All other parts of the business delivered a creditable performance enabling us to grow both revenues and profits overall. We continued to make good progress with our Clareti Banking and Clareti Lending solutions, targeted at financial institutions in the Caribbean region, winning several new assignments and receiving excellent feedback on our relevance and delivery capabilities.

Financial Review

Revenues grew 11% to £6.02m in the first half with growth mainly attributable to our Real-Time Financial Solutions business, which grew 15% to £4.40m from £3.84m in H1 2011. This growth was driven by license revenues associated with the launch of the ANZ products and growth in SaaS revenues. The Software business performed slightly ahead of our expectations through higher license sales.

Overall, 53% of revenues arose from annuity maintenance and SaaS contracts, with a further 31% from professional services work and the remaining 16% from sales of licenses.

In our Real-Time Financial Solutions business, 44% of revenues arose from annuity maintenance and SaaS contracts, 42% from professional services and 14% from license sales. The new line of revenue arising from our ANZ contract contributed strongly to results in the period and lifted the performance of our Asia Pacific business generally through increases in license, professional services and annuity SaaS based revenues. This new line of income now provides a good balance for our existing, and similar, contract with Barclays.

In our Software business, 78% of revenues arose from annuity maintenance and SaaS contracts and the remaining 22% from sales of licenses. Licenses were slightly higher than we had expected in the period.

During the period, we completed the restructuring of a loss making business unit. The cost of this restructuring was charged against a provision made in the prior year.

Cash was in line with our expectations taking into account the seasonality of maintenance incomes, non-recurring payments made in the period and our continued investment in tangible and intangible assets associated with new product development. The business restructuring gave rise to a £0.3m operating cash outflow in the period.

Taxation

At 30 June 2012, the Group had total tax losses carried forward for offset against future trading profits of approximately £12m. As a result, the Group has no material tax charge or liability and should be sheltered from UK tax in particular for quite some time.

For the period to 30 June 2012, the Group has recorded a tax credit of £0.13m in connection with a research and development tax credit related to new product development, and a further £0.05m in connection of recognition of certain trading losses as a deferred tax asset.

Investment in development of new solutions

We continue to invest a proportion of near term operating cash in the development of new solutions to improve the growth opportunities available to us both from new offerings but also from upgrades to our existing products for the benefit of customers. Alongside this, we are investing in our sales and marketing capabilities ahead of bringing this new technology to market.

Clareti Transaction Control (CTC) is our flagship technology platform arising from this investment, providing the core of our transaction control solutions around which we are able to add packaged modules that offer additional functionality. Central to our solutions is a robust integration technology that brings the necessary data in from often disparate systems.

Outlook

We are now well positioned in our pursuit of a number of strategic objectives and remain confident of meeting full year expectations.


Based on feedback from customers and successful proof of concepts, we expect to make significant progress with our CTC platform technology in the second half of 2012 and beyond.

Chris Errington
CEO
6 August 2012

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