Gresham Regulatory News (GHT)

29 March 2011

Gresham Computing plc("Gresham", or the "Group" or the "Company")Annual Financial Report AnnouncementYear ended 31 December 2010

Gresham Computing plc, the specialist provider of software based solutions that enable customers to achieve real-time financial certainty in transaction and cash management, reports its result for the financial year ended 31 December 2010.

Highlights for 2010

·; Underlying revenues up 8% year on year;

·; Adjusted EBITDA profit £0.6m (2009: £3.7m loss);

·; Profit before tax £0.3m (2009: £7.7m loss);

·; Profit after tax £0.6m (2009: £7.4m loss);

·; Cash £3.1m (2009 £0.7m);

·; Confirmed order book and pipeline strong going into 2011;

·; Strong trading in the first two months of 2011;

·; Management confident about continued improvement to trading and outlook; and

·; Expect trading for 2011 to be materially ahead of market expectations.

Chris Errington, CEO of Gresham, commented:

"I am pleased with our performance in 2010 and am excited about our prospects for 2011, buoyed by strong trading so far in 2011 and a large confirmed order book. As a result of these improvements, we now expect trading for 2011 to be materially ahead of market expectations.

On the back of what is a strong profitable platform, we have established and staffed a new product development centre, charged with delivering new transaction and cash management processing software for both existing and new customers in the Bank to Bank and Bank to Corporate markets.

Our investment in product combined with improving financial performance across the business gives us great confidence in the future prospects of the Group."

- Ends -

A copy of this announcement has been submitted to the National Storage Mechanism and will shortly be available for inspection at http://www.hemscott.com/nsm.do and www.gresham-computing.com. Printed copies of the Annual Financial Report will be posted to shareholders in due course.

For further information please contact:

ANNUAL FINANCIAL REPORT ANNOUNCEMENT

In accordance with the Disclosure and Transparency Rules, we set out below the extracts from the 2010 Annual Financial Report in un-edited full text. In order to comply with the regulatory requirement to include un-edited text in this Annual Financial Report Announcement, page and note references refer to page and note numbers in the 2010 Annual Financial Report. 

CHAIRMAN'S STATEMENT

Fiscal 2010 was a year of consolidation and stabilisation of the company following concerted actions to strengthen the balance sheet and cut costs - thereby laying the foundations for profitable growth. Financial Services continues to be our primary market and despite broader economic conditions weighing heavily on IT spending plans, our focus on key business drivers of improved efficiency and reduced risk has allowed us to perform slightly ahead of market forecasts.

Looking ahead, the Board took the decision to carry out an in-depth review of its positioning and strategy for future growth in the markets we serve. This included a comprehensive review of our product and service portfolio taking into account the current market environment, feedback from our customers and our competitive position. As a result of this work we have established and staffed a new product development centre in Bristol UK charged with delivering new offerings, including upgrades to our existing products, focused on bringing greater transparency and reduced transaction risk in customers' operations. We are confident that these initiatives will drive future profitable growth for our Company. At the same time, we maintain our commitment to serve our current clients many of whom will benefit from this investment in the future.

We have dealt with the additional challenges to the organisation of combining the needs of current operations and at the same time repositioning for growth and I would like to express my thanks to our management and staff for their dedication to excellent service and their patience and support as we embark upon this transition.

I look forward to us working as a team to turn the vision into reality in 2011 and beyond.

Ken Archer

Chairman

28 March 2011

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 leader in reducing control failure risk and optimising business performance through the integration and use of real-time financial transaction data in core business processes.

Results for the year ended 31 December 2010 were significantly improved on prior years, with a return to profitability and much strengthened balance sheet. Profit after tax was £0.6m on revenues of £9.1m with year-end cash of £3.1m. We entered 2011 with a solid order book and trading for the first two months of 2011 was significantly improved on the prior year. Our financial position remains strong with cash continuing to track ahead of our expectations from strong trading. As a result of these improvements, we now expect trading for 2011 to be materially ahead of market expectations.

We are currently investing a proportion of near term operating cash in the development of new solutions and upgrades to our existing products to provide the Group with a platform for long term profitable growth.

Financial Review

Trading

The following table summarises the Group's financial performance in 2010:

Underlying revenues grew 8% in 2010 to £8.8m and this growth was wholly attributable to our core real-time financial solutions business, which grew by 15% year on year. Within the real-time financial solutions business, we achieved near 30% growth other than in the Asia Pacific region where underlying revenues were reduced by about 30% as expected (following the restructuring) although the impact of this reduction was less pronounced because of positive foreign exchange movements. Revenues from our software business remained stable across the year as planned.

In 2010, approximately 60% of our revenues arose from annuity maintenance and Software as a Service (SaaS) contracts, a further 30% from professional services work performed for existing customers and the remaining 10% from sales of licences.

In our Software business, approximately 80% of our revenues arose from annuity maintenance and SaaS contracts and the remaining 20% from sales of licences.

In our Real-time financial solutions business, just less than 50% of our revenue arose from annuity maintenance and SaaS contracts, just under 50% from professional services work and a small amount from sales of licences.

We have restated the presentation of cost of sales and gross margin within these results. In prior years, we included elements of direct internal cost in cost of sales together with third party costs of sale which we do not believe presented a clear picture of our underlying margins. Going forward, we will show only third party costs in the costs of sales line with the 2009 comparatives restated accordingly. On this basis, we achieved a mixed gross margin of 81% in 2010 compared to 75% in 2009, the improvement arising from our focus on higher margin work.

Following the restructuring commenced in 2009, staff costs in 2010 fell by over 20% (from £6.5m to £5.1m) with the main driver being a headcount reduction, from an average of 100 in 2009 down to an average of 80 in 2010, and we enter 2011 with 84 employees.

Other administration costs were also reduced in 2010 across many areas of the business, including a substantial reduction in property costs from negotiations on rent and sub-letting of empty space.

Adjusted EBITDA profit was £0.6m (2009: £3.7m loss), which includes the impact of a net £0.2m restructuring cost incurred in 2010.

Working capital and funding

Cash reserves increased substantially during the year due to a combination of improved trading and a placing of new shares in June 2010. I am pleased to say that our net cash inflow from operations was £1.7m in 2010 compared with a £1.2m outflow in 2009. After taking into account the advance payment of £1.3m, received in connection with the VME Software deal announced in October 2010, and noted below, the profit generated for 2010 is represented by a corresponding increase in cash.

We remain focused on managing cash during 2011 with an objective of funding our product development and growth plans from cash generated by the business, thereby at least sustaining our underlying cash reserves through into 2012.

Asset impairment charge

Whilst we continue to invest in the Asia Pacific region for growth, we have cautiously re-assessed our business following the restructuring in 2009 / 2010 leading to a write down in the carrying value of goodwill associated with this region of £0.3m.

Share option charges

In December 2010, we gained approval for a new share option scheme, which led to the termination of the 2007 Executive Option Plan. As a result of the business restructuring and a number of other one-off factors, we had experienced a very high level of leavers from this 2007 Plan and as a result, on termination of the Plan, the charge already recorded in the income statement for 2010 and prior years exceeded the charge required. This led to a reversal of prior charges associated with the 2007 Plan in 2010 and a resulting credit to the income statement of £0.2m.

Foreign exchange

The weakness of the pound continued to have a positive impact on our reported results, predominantly across our US$ and C$ businesses where strong profits generated more currency for conversion to GBP at good rates.

We have continued a program of future cash flow hedges through HSBC to exchange surplus US$ for GBP, primarily because of the significant volume of US$ now being generated by our highly profitable Storage software business.

Taxation

At 31 December 2010, the Group had total tax losses carried forward for offset against future trading profits of £15m. As a result, the Group has no material tax charge or liability and will be sheltered from UK tax in particular for quite some time. 

For the year ended 31 December 2010, the Group has recorded a net tax credit of £0.3m comprising: a deferred tax credit of £0.2m arising from the recognition of prior trading tax losses and a research and development tax credit of £0.1m.

Strategy and vision

During 2010, we carried out an in depth review of the Group's market positioning and strategy for future growth. This included a comprehensive review of our product and service portfolio taking into account the current market environment, feedback from our customers and our competitive position. 

As a result of this review, we are investing 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.

We have also decided to invest in our sales and marketing capabilities ahead of bringing this new technology to market, a decision that began taking effect in late 2010 and has continued into 2011.

Our vision is to provide software based solutions that enable customers to achieve real-time financial certainty. We aim to be the leader in reducing control failure risk and optimising business performance through the integration and use of real-time financial transaction data in core business processes.

Investment in development of new solutions

In Q4 2010, we established and staffed a new product development centre in Bristol UK, charged with delivering new transaction and cash management Processors for both existing and new customers in the Bank to Bank and Bank to Corporate markets.

The cash costs of this development investment are now running at approximately £70,000 per month net of tax credits and are being capitalised in the balance sheet prior to amortisation against future revenues.

Real-time financial solutions

We provide software based solutions that enable customers to achieve real-time financial certainty in cash and transaction management. 

Our solutions reduce control failure risk and optimise business performance and comprise an Integration and Processor component.

Gresham's Integration component captures real-time financial transactions and comprises our own proprietary software, implementation methodology and know-how developed over many years working with some of the largest banks and corporates in the world. Real-time financial transactions are passed from the Gresham Integration component into the appropriate Gresham Processor component.

Gresham's Processor components accept real-time financial transactions and the software performs the processing necessary to solve the selected industry, corporate and bank issues. We typically develop and own each Processor but will on occasion make use of a partner's application alongside the Gresham Integration component where this provides an efficient route to market. 

When combined, our Integration and Processor components form a powerful working solution that provides significant value to our customers on a long term basis.

Business performance

Real-time financial solutions:

Gresham Cash Reporting

Revenues grew slightly during the year as we increased the number of currencies available to user banks in line with plan, although this area of our business still remains relatively small. Two major banks continue to use CCRS on a daily basis and we are working towards increased currency usage in 2011. We are also looking to increase the number of users on the service and to increase the functionality available in line with customer demand.

Gresham Banking and Lending

These core banking system solutions are sold predominantly into the Caribbean banking market where we hold a significant market share. We saw solid growth in 2010, with revenues up over 30% compared to 2009 from a combination of professional services work, new licensing and to an extent the strengthening of the C$.

Gresham Virtual Bank Accounts

A UK bank sells our market leading integrated cash management solution to its corporate customers to assist them in managing client monies effectively and efficiently. 

Revenues through this UK bank grew by over 30% during the year, driven by strong levels of professional services work to implement new customers and from a growing annuity base. The majority of this growth arose in the second half and the trend has continued into 2011 building to a near £1m confirmed order book for new customer implementations to be delivered in 2011. 

Once a customer is live, we earn revenue as a 'per transaction' fee and during 2010 such fees grew on average by 10% per month as customer numbers grew, leading to annuity revenues more than doubling from this source in the year.

As a result of these high current levels of activity, strong confirmed order book and trading so far in 2011, we expect further and significant growth from this solution in 2011. This growth will come from continued expansion within our existing customer base together with opportunities to expand the customer base into new territories.

Gresham Supply Chain Financing

Our work in Australia alongside a major bank continued in the year. In the second half of the year, we secured a new bank partner in the Caribbean region, themselves a long-term user of our Banking solution. We have now completed the paid for on-boarding of two of the bank's customers for roll out of the solution to their supplier base in 2011.

New Processors

We have identified a demand in the Bank to Bank and Bank to Corporate market for improved control and management of financial transactions. Our newly formed development team is currently writing new Processors that when combined with our Integration layer will provide customers with significantly enhanced real-time control over financial transaction workflows. We expect these Processors to be available in the second half of the year and we are currently gearing up our sales and marketing effort accordingly.

Software

Our EDT and VME software businesses generated strong revenues, profitability and cash flows during the year. In Q4 2010, we renewed a major contract with a VME customer worth £1.3m over 4.5 years (paid up front in full), a 30% increase on the prior contract value with a corresponding increase in our annual revenue run rate going forwards. In the same quarter, we also renewed a major contract with an EDT customer resulting in an initial license and increased maintenance revenues.

Market and Geographies

Our target market for real-time financial solutions falls into two main areas: Bank to Bank and Bank to Corporate. In the Bank to Bank market, we sell our solutions to banks for use by banks, whereas in the Bank to Corporate market, we typically sell our solutions to banks who in turn sell a service involving our solution to their corporate customers.

Our solutions appeal to all geographies and our current focus is on those regions where we have a local presence.

We see the market for integrated cash and transaction management solutions growing as banks focus their attention on transaction and cash areas alongside risk and liquidity management. 

Customers

Our strategy is to build long term annuity revenues from existing and new customers to increase the visibility of revenues going into future years.

Whilst we typically sell our solutions to banks and financial institutions, we often then roll-out the solution to the corporate customers of these banks and financial institutions (Bank to Corporate).

Gresham has a loyal and diversified customer base with a number of our key software customers having now been on maintenance with Gresham for over 30 years. Even our more typical relationships are in the 5 to 20 year range, which is relatively long lived compared to our competitors. Typical contract periods for Software maintenance are in the 1 year to 5 year band, with a weighting towards the 1 to 2 year period. Banking contracts for a deployed solution tend to be in the 3 to 10 year band. Our general experience over the years is one of automatic contract renewal at the end of the term and this has not been significantly affected by the economic downturn.

Board changes

Chris Errington took on the role of Chief Executive Officer on an interim basis from 28 April 2010, an appointment that was made permanent on 2 November 2010.

Ken Archer joined the Board as Non-Executive Director on 9 June 2010 and was appointed Non-Executive Chairman on 2 November 2010.

Rob Grubb has been Interim Finance Director since 28 April 2010 and will be appointed Finance Director on a permanent basis with effect from 29 March 2011.

Andrew Walton-Green and Eric Sepkes resigned as directors on 28 April 2010 and 2 November 2010 respectively.

From 29 March 2011, the Board will comprise:

Ken Archer (Non-Executive Chairman)

Chris Errington (Chief Executive Officer)

Rob Grubb (Finance Director and Company Secretary)

Max Royde (Non-Executive Director)

Outlook

We entered 2011 with a large order book, which has continued to grow. Trading for the first two months of 2011 was ahead of our expectations and we expect to report a significantly improved trading performance for the first quarter of 2011. Our financial position remains solid with cash continuing to track ahead of our expectations from resilient trading. As a result of these improvements, we now expect trading for 2011 to be materially ahead of market expectations.

During 2011, we will continue to invest a proportion of near term operating cash in the development of new and existing solutions, whilst also carefully increasing our expenditure on sales and marketing slightly ahead of trading.

We are currently recruiting new professional services staff to meet existing demand for delivery of solutions and have commenced a graduate recruitment program to bring in and train new talent to support future growth.

I am pleased to say that our growth plans are on track and more importantly we are beginning to see the results of our strategic focus being delivered in 2011. The management team is excited about the future prospects for the Company.

Chris Errington

Chief Executive Officer

28 March 2011

All activities during the year were continuing.

All activities during the year were continuing.

The tax effect of exchange differences recorded within the Consolidated Statement of Comprehensive Income is a charge of £24,000 (2009: charge of £21,000).

The financial statements were approved by the Board of Directors and authorised for issue on 28 March 2011.

On behalf of the Board

CM Errington

28 March 2011

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

1. Basis of preparation

The financial information contained in these condensed financial statements does not constitute the Company's statutory accounts within the meaning of the Companies Act 2006. Statutory accounts for the years ended 31 December 2010 and 31 December 2009 have been reported on, without qualification or drawing attention to any matters by way of emphasis, by the Company's auditors and do not contain a statement under s.498 (2) or s.498 (3) of the Companies Act 2006. Whilst the financial information included in this Annual Financial Report Announcement has been computed in accordance with International Financial Reporting Standards ('IFRS') this announcement, due to its condensed nature, does not itself contain sufficient information to comply with IFRS.

In order to comply with the regulatory requirement to include un-edited text in this Annual Financial Report Announcement, page and note references refer to page and note numbers in the Annual Financial Report. 

Statutory accounts for the year ended 31 December 2009 have been delivered to the Registrar of Companies. The statutory accounts for the year ended 31 December 2010, prepared under IFRS, will be delivered to the Registrar in due course. The Group's principal accounting policies as set out in the 2009 statutory accounts have been applied consistently in all material respects.

This Annual Financial Report Announcement was approved by the Board of Directors on 28 March 2011 and signed on its behalf by CM Errington, CEO.

2. Responsibility statements under the disclosure and transparency rules

The Annual Financial Report for the year ended 31 December 2009 contains the following statements:

The directors confirm that to the best of their knowledge:

·; The financial statements, prepared in accordance with IFRS as adopted by the European Union, give a true and fair view of the assets, liabilities, financial position and profit of the Company and the undertakings included in the consolidation taken as a whole; and

·; The Directors' Report Chairman's Statement and Operational Review include a fair review of the development and performance of the business and position of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face.

3. Segment information

The segmental disclosures reflect the analysis presented on a monthly basis to the chief operating decision maker of the business, the Chief Executive Officer and the Board of Directors.

In addition split of revenues and non-current assets by UK and overseas have been included as they are specifically required by IFRS 8 Operating Segments.

During the six-months ended 30 June 2010 the Group re-evaluated the internal presentation of its operating segments to more appropriately aggregate the differing sets of risks the Group's businesses face.

The change has had the following impact on classification of operating segments:

"RTFS" refers to Real Time Financial Reporting, and "EMEA" refers to Europe, Middle East and Africa.

The Group's Fujitsu/ICL Virtual Machine Environment ("VME") business previously included in EMEA RTFS is now included within Software, which previously only included the Group's Enterprise DistribuTape ("EDT") business. Disclosures is respect of the year ended 31 December 2009 have been updated accordingly.

For management purposes, the Group is organised into the following reportable segments as follows:

·; Software

·; EMEA - RTFS

·; North America - RTFS

·; Asia Pacific - RTFS

The Software solutions segment is a supplier of solutions predominantly to the enterprise level storage market. The RTFS segments are suppliers of solutions predominantly to the finance and banking markets. Included within the RTFS segments are the Group's IT staff placement business.

Transfer prices between segments are set on an arm's length basis in a manner similar to transactions with third parties. Segment revenue, segment expense and segment result include transfers between business segments. Those transfers are eliminated in consolidation.

The results of Gresham Software Labs Pty Limited, a subsidiary of the Group disposed of on 27 August 2009 (see note 15), consolidated by the Group prior to the disposal are included in the Asia Pacific - RTFS segment shown in the following analysis for 2009.

The results of Storage Director, a business of the Group disposed of on 16 October 2009 (see note 15), consolidated by the Group prior to the disposal are included in the Software Solutions segment shown in the following analysis for 2009.

Year Ended 31 December 2010

Year Ended 31 December 2009 (restated)

Included in the RTFS business segments are:

·; EMEA - £nil charge (2009: £2,796,000) in respect of impaired development costs capitalised;

·; Asia Pacific - £250,000 charge (2009: £nil) in respect of impaired goodwill;

·; Asia Pacific - £nil (2009: £249,000) of revenue in respect of Gresham Software Labs Pty Limited, which was disposed of on 27 August 2009;

Included in the Software Solutions business segment is:

·; £nil (2009: £158,000) of revenue in respect of the Storage Director business, which was disposed of on 16 October 2009.

The Group has a customer relationship with a banking customer within its EMEA RTFS segment which is considered by the directors to be a significant relationship; revenue from this relationship exceeds 10% of the Group's turnover.

Included in the Adjustments, central & eliminations segments is £309,000 (2009: £998,000) of revenue in respect of the IT staff placement business which was previously categorised with EMEA RTFS.

Segment profit / (loss) represents segment profit after tax, prior to adjustments for the reallocation of share option charges and prior to capitalisation and amortisation of development costs.

Adjustments, central & eliminations

Adjustments, central & eliminations to segment profit/(loss) represent IT staff placement profit of £36,000 (2009: £nil), central management functions of £132,000 (2009: £1,153,000), including the Board of Directors, Group finance, HR, IT and marketing in addition to adjustments made to reflect share option credit of £213,000 (2009: charge of £157,000), capitalisation of development costs of £270,000 (2009: £550,000) and amortisation and impairment of capitalised development costs of £342,000 (2009: £3,476,000) and taxation credit of £285,000 (2009: £355,000).

Adjustments, central & eliminations to segment assets represent capitalised development costs of £964,000 (2009: £786,000), cash of £3,146,000 (2009: £745,000), taxation of £345,000 (2009: £340,000) and other assets of £57,000 (2009: £nil).

Geographic information

Non-current assets consist of tangible and intangible fixed assets.

4. Taxation

(a) Tax on loss on ordinary activities

Tax (credited) / charged in the income statement

 (b) Reconciliation of the total tax charge

The tax credit in the income statement for the year is lower than the standard rate of corporation tax in the UK of 28% (2009 - 28%). The differences are reconciled below:

(c) Unrecognised tax losses

The Group has tax losses that are available indefinitely for offset against future taxable profits of the companies in which the losses arose as analysed in (e) below. Deferred tax assets have not been recognised in respect of these losses as they may not be used to offset taxable profits elsewhere in the Group and they have arisen in subsidiaries that have been loss-making for some time.

The tax effect of exchange differences recorded within the Consolidated Statement of Comprehensive Income is a charge of £24,000 (2009: charge of £21,000).

 (d) Temporary differences associated with Group investments

At 31 December 2010, there was no recognised deferred tax liability (2009: Nil) for taxes that would be payable on the un-remitted earnings of certain of the Group's subsidiaries, as the Group has determined that undistributed profits of its subsidiaries will not be distributed in the foreseeable future.

The temporary differences associated with investments in subsidiaries for which deferred tax liability has not been recognised aggregate to £nil (2009: £nil).

(e) Deferred tax

Recognised deferred tax

Deferred tax of £200,000 has been recognised during the year in respect of our profitable US Software operations for which there are unutilised losses available to relieve profits (2009: £nil).

Unrecognised potential deferred tax assets

The deferred tax not recognised in the Group statement of financial position is as follows:

5. Earnings / (Loss) per ordinary share

Basic earnings / (loss) per share amounts are calculated by dividing net profit or loss for the year attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the year.

Diluted earnings / (loss) per share amounts are calculated by dividing the net profit or loss attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the year plus the weighted average number of ordinary shares that would be issued on the conversion of all the dilutive potential ordinary shares into ordinary shares except when such dilutive instruments would reduce the loss per share.

The following reflects the earnings / (loss) and share data used in the basic and diluted earnings / (loss) per share computations:

On 9 June 2010, shareholders approved the allotment and issue of 5,285,088 new ordinary shares (ranking pari passu with existing shares in issue) via a placing to existing institutional shareholders. This has been reflected in the basic and diluted weighted average number of shares.

The employee share options in 2009 were not dilutive as at that time it was considered unlikely any outstanding options will be exercised. During the year ended 31 December 2010, grants issued under the Employee Share Option Plan 2007 were cancelled and new grants were issued under the Share Options Schemes 2010 adopted on 30 December 2010. Refer to note 22.

There have been no other transactions involving ordinary shares or potential ordinary shares between the reporting date and the date of completion of this Annual Financial Report.

6. Dividends paid and proposed

No dividends were declared or paid during the year and no dividends are proposed for approval at the AGM (2009: None).

7. Principal risks and uncertainties

Liquidity

In the current economy, liquidity risk is something that all companies are seeking to control because access to cash has become a real driver for business compared with prior years. Gresham monitors its liquidity very closely and regularly as discussed in note 20.

Regulation

The financial services market is highly regulated and this regulation continues to evolve in line with the perceived risks in the market. Regulation is typically effected by government, regulatory bodies and industry bodies. Whilst such regulation is generally good news for a solution provider such as Gresham, it is possible that regulation could lead to a change in the market that limits our ability to continue selling. We keep a close track on regulation and seek to ensure that our solutions evolve slightly ahead of regulation so as to mitigate the risk of a regulator limiting our market potential.

People

People are key to Gresham's expertise and ability to deliver on a global basis. Retaining people and allowing them to fulfil their potential is important. Loss of key people could slow our ability to grow the business and we seek to provide rewards and job fulfilment that mitigates this risk. In 2011, we are embarking on a graduate intake scheme to bring new ideas and skills into the business.

Technology

Gresham is an innovative Group that develops valuable technology and there is a risk that such technology will be made redundant through copying, further advances in technology or dominant competitive pressures. We aim to keep our technology updated so as to meet both existing and emerging requirements and remain vigilant to changes in market trends. Whilst we carefully assess whether to address emerging trends with new technology there is a risk that the market will ultimately move in a different direction leaving us with technology that no longer addresses the needs of the market. 

Wherever possible we seek to protect our technology through patent applications. We also rely on trade secret, copyright and trademark laws, as well as the confidentiality and other restrictions contained in our respective sales contracts and confidentiality agreements to protect our proprietary rights. These legal protections afford only limited protection.

8. Additional information

The following additional information is not extracted from the Annual Financial Report:

Related party transactions

No related parties transactions have taken place during the year that have materially affected the financial position or performance of the Company.

Adjusted EBITDA reconciliation

Adjusted EBITDA is calculated as EBITDA before non-cash share option charges, reconciled as follows: