GHT.L Regulatory News (GHT)

19 Oct 2009 07:01

Gresham Computing plc

("Gresham" or "the Company")

Interim Management Statement

Period 1 July 2009 to 16 October 2009

Gresham Computing plc (LSE: GHT), the specialist provider of real-time financial solutions, today announces its Interim Management Statement for the period 1 July 2009 to 16 October 2009.

As announced on 28 August 2009, in order to achieve our strategic objectives, the Board is restructuring the Group with the aim of significantly de-risking financial performance by matching costs to recurring revenues. We believe that this strategy represents the best way forward for the Group, providing a stable platform from which to continue to build new annuity revenues in real-time financial solutions. We said that we expected to have substantially completed this alignment of cost to revenues during 2009 and are confident that this remains achievable, taking into account the actions already taken and as set out below.

Trading update

In line with the Board's expectations, revenue for the first 9 months of 2009 declined, primarily as a result of our decision to run down the staff placement business and the presence of a major treasury management contract win in 2008 that was not repeated in 2009. The resulting loss after tax for the first 9 months of 2009 was approximately £1.5m with an adjusted EBITDA loss of approximately £1m. Cash balances declined slightly in the period but will benefit from a substantial deferred cash inflow of £800,000 receivable between 31 December 2009 and 30 June 2010 from the capital disposals of Gresham Software Labs (announced in August 2009) and Storage Director (announced today).

Restructuring

In the second half of 2009, and as stated in our interim results, we commenced a series of cost reduction measures, without compromising our ability to deliver core solutions in real-time financial solutions. As a result of these actions, since 1 July 2009 we have reduced Group costs by over £700,000 recurring per annum from November 2009 onwards.

In addition to the above cost savings, the disposal of Storage Director, described below, brings investment in Storage Director to an end. This will result in annual cost savings of approximately £900,000 effective from November 2009.

Taken together, these cost reduction measures will deliver total annual cost savings to the Group of £1,600,000 from November 2009. The one-off second half cost of making these savings is approximately £200,000.

The Board has a target of reducing annual costs by a further £1,000,000 by the end of 2009, bringing the total annual cost savings to £2,600,000 by that time.

Disposal of Storage Director

Our strategy is to build new annuity revenues in real-time financial solutions. Whilst our investment in the Storage Director product continued to show signs of great promise, the Board decided that we could not continue to focus our attention and resources across such a wide range of diverse activities but rather we should focus investment on the real-time financial solutions market. The Board considered its options with respect to the business and decided to accept an offer from an existing business partner to acquire Storage Director whilst retaining the profitable and highly cash generative EnterpriseDistributape storage business.

As a result, today we announced the disposal of Storage Director for a fixed cash consideration of US$1.4m and up to a further US$1.8m of contingent cash consideration, full details of which are included in a separate announcement.

The disposal of Storage Director will impact on the Group's future financial results through the net cash inflows from disposal but also from the realisation of the substantial recurring cost savings discussed above. Overall, from November 2009 we expect the restructured Storage business to contribute very significantly and positively to the Group's future financial results.

Outlook

The Board intends to complete its restructuring by the year end, refocusing the business on the markets which we believe have the largest potential, whilst matching cost and recurring income.  We have already reduced costs significantly and now anticipate making further progress towards our overall target of £2.6m recurring annual savings by the year end. These actions are aimed at providing a sound base from which to grow and, following the disposal of Storage Director, our strategic focus will be on the provision of real-time financial solution products.

The Group has a strong core of products and services that generate substantial revenues with good visibility. The restructuring of our Storage business adds significantly to the contributions generated by these core products and services. In addition, we remain committed to growing our real-time financial solutions that have benefitted from investment in recent years, including in particular the recently won global banking group project where we are developing an exciting pipeline of new business.

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About Gresham Computing plc

Gresham Computing plc is an expert in delivering real-time financial services, specialising in providing banks and their customers with value-added solutions. Founded in 1969, Gresham Computing plc has been listed on the London Stock Exchange (GHT) since 1991 and has offices in Europe, North America and Asia Pacific. Many of the Fortune Global 500 choose Gresham to help improve their competitive edge and bottom line performance in the challenging market sectors of Deposit Acquisition, Real-Time Liquidity, Risk, Cash and Treasury Management, Supply Chain Financing and Electronic Invoicing.

For more information please visit www.gresham-computing.com.