nCipher to return £65m in cash to shareholders

The technology security company nCipher yesterday pledged to return £65m of cash to shareholders, admitting it only needed about a third of its £101m cash pile to reach profitability.

"We have identified that our cash needs to provide sufficient working capital funding to bring the group to profitability, to provide funds for acquisitions and to ensure it retains a strong balance sheet, have reduced to approximately £35m," nCipher said.

Shares in the company, which had traded as high as 425p a share in November of 2000, rose 12 per cent, or 7p, yesterday to close at 65p a share.

The company said it was still investigating the most effective method of returning the cash to shareholders – a move, it predicted, that would happen in the first half of next year.

The pledge came as nCipher announced a pre-tax loss of £718,000 in the third quarter to 30 September compared with a loss of £1.1m in the same quarter a year before.

Sales fell to £2.8m from £3m from a year earlier but were 1.5 per cent higher than the figure reported in the second quarter. A 42 per cent jump in sales over the second quarter from the US helped offset an 18 per cent fall from Europe and a 20 per cent drop from Asia.

A cost-cutting programme, however, meant nCipher burnt through less than £100,000 of its cash in the quarter – well beneath the previous level of a burn rate of about £1m every three months.

The company said: "Continued downward pressure on all overhead costs has resulted in a reduced operating loss and very low cash burn rate during the quarter, despite flat sales revenues."

The company admitted that trading in the second half of the year had been "challenging" and also predicted that trend would continue over the next six months. It cut overheads, however, to £3.9m in the three-month-period from £4.4m in the second quarter and from the £4.7m it reported in the same quarter a year before.

Alex van Someren, the chief executive, said: "We remain focussed on making nCipher profitable. We have made substantial progress this quarter through reducing our overhead cost base, developing new products and implementing initiatives that will yield revenue growth in 2003."