REG - Gresham Technologies - Final Results
14/03/2023 07:00
For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20230314:nRSN8208Sa&default-theme=true
RNS Number : 8208S Gresham Technologies PLC 14 March 2023
14 March 2023
Gresham Technologies plc
Annual Financial Report Announcement
Gresham Technologies plc (LSE: "GHT", "Gresham", "Group", "Company"), the
leading software and services company that specialises in providing solutions
for data integrity and control, banking integration, payments and cash
management, is pleased to announce its audited results for the financial year
ended 31 December 2022 ("FY22").
Financial Highlights
· Forward-looking Clareti Annualised Recurring Revenue ("ARR") up 17% to £28.1m
as at 31 December 2022
· Group revenues up 32% to £48.7m
· Clareti revenues up 39% to £35.5m
· Clareti recurring revenues up 46% to £27.4m
· Adjusted EBITDA((1)) up 43% to £10.3m (2021: £7.2m)
· Cash adjusted EBITDA((2)) up 76% to £4.4m (2021: £2.5m)
· Profit before tax as reported up £2.8m to £3.2m (2021: £0.4m), including
expenses adjusted in EBITDA metrics above of £3.5m (2021: £3.5m)
· Adjusted diluted earnings per share((3)) up 50% to 7.5 pence (2021: 5.0 pence)
· Cash at 31 December 2022 of £6.3m and no debt after payment of £4.4m in
contingent consideration for previous acquisitions (2021: £9.1m and no
debt)((4))
· Final dividend proposed at 0.75 pence per share (2021: 0.75 pence)
Operational Highlights
· Standalone Clareti business cash profitable for the first time, generating
cash EBITDA((2)) of £1.1m, as growth, scale and operating leverage begin to
take effect.
· 12 new-name wins, including several Tier 1 financial institutions, bringing
total customers to more than 275 across 30 countries.
· Electra business integration completed and delivering initial cross-sells and
operating synergies.
· Strong growth in cloud and other recurring revenues.
· Net ARR retention for the year of 102%, highlighting growth within existing
customer base.
· Continued growth and development of key accounts.
· Excellent economic returns being realised by Tier 1 firms replacing legacy
reconciliation software with Control.
· Digital corporate banking product developed with Australia and New Zealand
Banking Group now deployed into production use.
Outlook
· Larger, more resilient Group, with more than £42m of FY23 revenues under
contract; providing significant visibility and a robust platform to execute
growth strategy.
· Management confident about the prospects for the Group.
((1)) Adjusted EBITDA refers to earnings before interest, tax, depreciation
and amortisation, adjusted for one-off exceptional charges and share-based
payments. (see note 5 of the Group financial statements).
((2)) Adjusted EBITDA less capitalised development spend and any IFRS16
lease-related cash payments.
((3)) Diluted earnings per share, adjusted to add back share-based payment
charges, deferred tax charge on the intra-group sale of IP, exceptional items
and amortisation from acquired intangible assets.
((4)) Excludes any IFRS16 lease-related payables.
((5)) The Electra acquisition completed on 22 June 2021.
((6)) Percentage increases stated above are based on rounding to the nearest
£'000 as disclosed at detailed level within this report.
Ian Manocha, CEO, commented:
"We are pleased to report on a year of profitable growth and operational
advancements that have delivered a step-change in the Group's strategic
position as a primary software partner in financial markets. The Group's
financial performance for the year, ahead of initial expectations, reflects
the building blocks put in place over the last three years, with benefits from
cross-selling momentum, operational synergies and a greatly expanded market
opportunity starting to be realised.
As the macro environment remains challenging for many businesses within the
financial sector, it has served to highlight the necessity for digital
transformation and automation to streamline processes and ultimately achieve
cost saving synergies whilst also complying with increasing regulation. With a
core customer base spanning more than 275 organisations across 30 countries
and significant visibility of revenues with £42m of FY23 orders already under
contract, the Board looks ahead with confidence in the Group's continued
success."
Presentations and Documents
A presentation for analysts will be held at 9am GMT today via conference call
and a separate presentation for existing and potential shareholders will be
held at 12.30pm GMT today via the Investor Meet Company ("IMC") platform,
details of which are set out in the Company's announcement dated 14 February
2023.
A copy of the presentation to be tabled at both sessions is available on
Gresham's website: www.greshamtech.com (http://www.greshamtech.com) .
A copy of this announcement has been submitted to the National Storage
Mechanism and will shortly be available for inspection at
https://data.fca.org.uk/#/nsm/nationalstoragemechanism
(https://data.fca.org.uk/#/nsm/nationalstoragemechanism) and
www.greshamtech.com/investors (http://www.greshamtech.com/investors) .
The Annual Financial Report 2022 will be sent to shareholders in due course.
Enquiries
Gresham Technologies plc +44 (0) 207 653 0200
Ian Manocha / Tom Mullan investorrelations@greshamtech.com (mailto:investorrelations@greshamtech.com)
Singer Capital Markets (Financial Adviser and Broker) +44 (0) 207 496 3000
Shaun Dobson / Tom Salvesen / Jen Boorer
Alma PR +44 (0) 203 405 0205
Josh Royston / Hilary Buchanan /Matthew Young greshamtech@almapr.co.uk (mailto:greshamtech@almapr.co.uk)
Inside information
The information contained within this announcement is deemed by the Company to
constitute inside information as stipulated under the Market Abuse Regulation
(EU) No. 596/2014 ("MAR"). Upon the publication of this announcement via a
Regulatory Information Service ("RIS"), this inside information is now
considered to be in the public domain.
Note to editors
Gresham Technologies plc is a leading software and services company that
specialises in providing real-time solutions for data integrity and control,
banking integration, payments and cash management. Listed on the main market
of the London Stock Exchange (GHT.L) and headquartered in the City of London,
its customers include some of the world's largest financial institutions and
corporates, all of whom are served locally from offices located in the UK,
Europe, North America and Asia Pacific.
Gresham's award-winning Clareti software platform is a highly flexible and
scalable platform, available on-site or in the cloud, designed to address
today's most challenging financial control, risk management, data governance
and regulatory compliance problems. Learn more at www.greshamtech.com.
ANNUAL FINANCIAL REPORT ANNOUNCEMENT
In accordance with the Disclosure and Transparency Rules, the extracts below
are from the Annual Financial Report 2022 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 Annual Financial Report 2022.
The financial information contained herein for the year ended 31 December 2022
and the year ended 31 December 2021 does not constitute the Company's
statutory accounts for those years. The statutory accounts for the year ended
31 December 2022 will be delivered to the Registrar of Companies following the
Company's Annual General Meeting in due course.
The auditor's reports on the accounts for the years ending 31 December 2022
and 31 December 2021 were unqualified, did not draw attention to any matters
by way of emphasis, and did not contain a statement under 498(2) or 498(3) of
the Companies Act 2006.
CHAIR'S STATEMENT
Dear shareholder
Overview
I am pleased to report on another period of sustained progress for Gresham
Technologies. This year has seen the full benefits of our M&A and
integration programme being realised through the transformational acquisition
of Electra, while the optimisation of our sales team has meant that core
product lines have performed consistently across a mixture of industries and
geographies as more global financial institutions invest in Gresham's expanded
suite of solutions. The Group's progression against its strategic vision has
been a result of strong leadership, market-leading solutions and a highly
committed and talented global team.
Throughout the period under review, we have built upon the momentum delivered
in FY21 and continued to execute effectively against our growth strategy. We
secured 12 new Clareti customers, including substantial long-term agreements
with three global Tier 1 financial institutions, and successfully executed on
our land and expand strategy by winning new projects with existing clients and
resulting in ARR net retention levels in excess of 100%.
Overall, the Group's performance has been strong with two upgrades to
forecasts during the year. Revenue for the period was significantly up 32% to
£48.7m (2021: £37.0m), adjusted EBITDA increasing 43% to £10.3m (2021:
£7.2m), and operating profit increasing by £3m to £3.5m (2021: £0.5m). In
a year that has seen a number of challenging macroeconomic headwinds impacting
the wider sector, this is an outstanding achievement for the Group.
Based on the overall financial performance and the cash within the business,
the Board will be recommending a final dividend of 0.75 pence per share (2021:
0.75 pence) at the forthcoming AGM.
Delivery against our strategic vision
2022 saw strong progress against the major strategic goals identified by the
Board, including:
· The full integration of Electra, and the realisation of its impact on
improving customer stickiness and incrementally increasing ARR;
· Very good revenue visibility across both Clareti and non-Clareti, with over
£42m of 2023 Group revenues already under contract; and
· Increased investment in global sales and marketing teams to capitalise on the
market opportunity.
People and culture
I am delighted to report that we have had another "best ever" result from our
annual Employee Engagement Survey. This continues a six-year trend of
improvement in overall engagement, with a response rate increase to 72% and an
overall engagement score of 82% (2021: 78%).
Gresham's excellent culture is exemplified by our high staff retention rate,
something of an anomaly for the sector. As a people-oriented business, Gresham
goes to great lengths to remain competitive as an employer and ensure that it
is a welcoming and rewarding environment for all of its staff.
I would like to take this opportunity to thank our team across the globe for
their hard work and dedication throughout the year, without whom the successes
during the year would not have been possible.
ESG
The Board is committed to operating the business in a sustainable way, which
includes managing our impact on the environment, our social responsibilities
to our people and those within our communities, improving outcomes for our
customers, and operating as an ethical business through direct and indirect
practices. Further details of the Group's ESG strategy can be found starting
on page 27.
During the period, Gresham released a comprehensive statement regarding the
Task Force on Climate-Related Financial Disclosures ("TCFD") for financial
year 2021. Disclosure for 2022 can be found starting on page 30.
Outlook
Following another successful year, which has seen the Group build on the
momentum of previous periods, I am pleased to say that Gresham has finished
2022 as a stronger company. Despite the challenges that macro headwinds have
brought to most industries and businesses, we have continued to deliver
against our strategic priorities and established a strong foundation upon
which to achieve scalable growth and fully capitalise on the opportunities
available in the market.
As we continue to progress, the Group will focus on:
· Optimising our global sales and marketing capabilities via strategic
investments;
· Continuing to grow and diversify ARR by leveraging the platform we have built;
and
· Remaining cognisant of further M&A opportunities that meet Gresham's
financial criteria and enhance existing operational capabilities.
The Board remains confident in the year ahead and the medium-term opportunity
for Gresham to address the expanded market opportunity in front of us.
Peter Simmonds
Non-Executive Chair
13 March 2023
CEO'S STATEMENT
Dear shareholder
Overview: step-change in strategic opportunity
2022 has been a very pleasing year, with operational progress right across the
Group and a step-change in strategic opportunity, reflecting all the building
blocks we have put in place over the last three years. In particular, the
successful integration of the 2021 Electra acquisition has not only delivered
initial contract successes but, combined with our established Clareti team and
roadmap, is opening up far more extensive client conversations. The proof
points of that progress includes the high retention rate of Electra clients, a
number of cross-sell wins, and upgrades in our trading performance through the
year; resulting in positive Clareti cash EBITDA as operating synergies have
materialised.
Our Clareti technology solutions now provide major banking and investment
management clients with the tools to connect, reconcile and control their
data, enabling them to automate their post-trade business processes and have
confidence in their digital operations. In the year, we signed 12 new clients
to reach more than 275 across 30 countries and successfully added some of the
world's largest financial companies. This included one of world's largest
asset managers that signed a contract for Control and Data Services in the
cloud to replace a legacy reconciliation product and to streamline its data
aggregation processes. The US-based firm, consistently ranked in the top five
global asset managers by AUM, will partner with Gresham to consolidate all
market-facing reconciliations and data controls for their corporate business
onto a modern cloud platform with an initial order value of $1.9 million.
We have also won key contracts in Europe and Asia Pacific, highlighting the
global challenges facing the financial sector, the repeatability of our
solutions and the increasing maturity of our sales efforts. During the period,
we also saw wins in the payments, energy and digital asset sectors, as well as
our core capital markets segments.
Clareti ARR grew £4.1m, or 17%, to £28.1m and recurring revenues increased
by 46%, up £8.6m, to £27.4m, highlighting the significant scale-up of the
business over the last year. Higher gross margins, as well as the growth in
revenues, contributed to Clareti Cash EBITDA of £1.1m and, at Group level,
cash EBITDA up 76% to £4.4m. We finished the year with a strong balance
sheet, including cash balances of £6.3m after making the first deferred
consideration payment for Electra.
Market: continuous waves of regulation and digital optimisation
A number of key drivers continue to support our growth outlook:
Managing risk and regulation
All businesses need to invest in their core processing systems and data
platforms to create more intelligent and automated solutions that reduce the
need for manual interventions and the risk of error. Within the financial
services sector, this has been compounded over the last 15 years by growing
regulatory pressures and scrutiny. This increases the need for financial
institutions and banks to have timely and accurate processing, coupled with
greater transparency and accountability. Our software helps companies connect,
reconcile and control the many disparate sources of transaction, finance, and
risk data to ensure accurate day to day processing, and to satisfy and report
on new and existing regulations.
Given the size of our client base, this underpins a steady flow of up-sell
contracts and services opportunities for Gresham. New regulation drivers in
2022 included The European Market Infrastructure Regulation ("EMIR") Refit
which is designed to amend and simplify European markets infrastructure and
brings with it major changes, including an uplift in the number of reportable
data items.
In the US, the Securities and Exchange Commission have proposed shortening the
standard settlement cycle for most broker-dealer securities transactions from
two business days following the trade date (T+2) to one business day (T+1),
with implications for how broker-dealers, investment advisers and clearing
agencies process institutional trades.
The pressure on public finances globally has also meant there is now an even
greater focus by government departments and regulators on maximising their
collection of taxes, with implications right across the eco-systems of many
financial companies. Further regulation and heightened scrutiny increase the
need for banks and fund managers to review, simplify and potentially upgrade
their systems. The global market for regulatory reporting solutions is
expected to reach USD $1.16bn by the end of 2026, with a CAGR of 19.5%.
Digital automation and platform modernisation
Aligned with the above, we are part of our clients' investment to digitise
their processes, reduce their operating costs through automation, and serve
their customers better. We are part of programmes globally aimed at improving
the quality, connectivity and exploitation of data to deliver more intelligent
business outcomes. Of particular note are the ageing legacy reconciliation
systems implemented on-premise throughout the industry during the 1990s and
early 2000s, which are expected to be replaced by modern, more flexible, often
cloud-based alternatives, over the coming years.
Underpinning business success
Our software not only enables businesses to survive in the modern era, but
importantly, to become more competitive through access to information and
agile decision-making, which underpins the launch of new products and
innovative customer propositions. Given the tightening economy and ever
competitive nature of financial markets, the operating efficiencies we deliver
are greatly valued by our clients.
Expanding market
The factors above underpin growth from our existing base and traditional
markets. However, the overall size of the addressable market for Clareti
solutions and the competitiveness of our offerings are continually expanding,
and we are increasingly looking for opportunities to diversify further into
new markets such as retail banking and payments, energy and the control of
digital asset data processing. At a high level, the risk management software
market is valued at around $35bn and is expected to grow at a CAGR of 10%+ in
the medium-term.
Helping our clients manage macro headwinds
The macro and market backdrop will mean that banks and fund management
companies are mindful of ensuring value for money as they review their IT
budgets. Consequently, decision-making cycles are likely to increase. However,
these large enterprises have often patched together legacy solutions or relied
on in-house teams to build and maintain software, with the obvious challenges
of retaining know-how. The result is often inaccurate, incomplete and
poor-quality data, frequent breakages, a black-box of manual workarounds and
quick fixes, and platforms that struggle in terms of volume and speed as new
regulations layer on further demand and complexity.
In addition, as companies, CIOs and COOs pause for breath, they are under
pressure to focus on remaining agile and competitive, as well as compliant,
and are faced with dealing with unexpected challenges such as remote working.
In many cases we will respond to RFPs to replace legacy systems, and in 2022
we won a number of contracts where we replaced older competing technology,
processes and platforms built in-house over time. This all provides
opportunity for Gresham and adds to our own operational protection even as
economies struggle. Within banking, there are business and product lines where
a higher interest rate environment is in fact favourable to financial success,
and here there will be a desire to reinvest in technology along the way.
Operational progress: executing on our strategy
Post the transformative acquisition of Electra, we have been focused on
integrating the business, processes and people, and building a go-to-market
platform and optimising our product roadmap. This will propel us towards our
ambition of creating a leading £100m ARR fintech with high margins, strong
cash generation, and attractive valuation multiples typical of large mature
enterprise software firms.
Products and solutions: optimising our roadmap and branding
During the year we have seen the benefits of re-packaging our platform
capabilities, including Electra assets, into three Clareti product lines:
Control, Data and Connect; each with its own roadmap to encourage agility and
innovation. Our products can be combined to quickly deliver complete digital
solutions for customers into environments where generic solutions are
inadequate. They are available on a subscription basis in the customers' data
centres, or on a software-as-a-service basis in a Gresham-hosted cloud.
Optional subscriptions for the collection and aggregation of external data
and/or the provision of managed services are also available as routes to ARR
up-sell.
Control
Clareti Control, our flagship offering, is an "out-of-the-box"
enterprise-grade business self-service platform for the reconciliation,
exception management and control of "any and all" transaction data in
financial markets. Clareti Control is now well established in the market for
"non-core" data problems such as inter-systems reconciliations, with dozens of
successful implementations. Over the last few years, we have invested heavily
into developing functionality for the "core" cash and securities
reconciliations market, which legacy vendors have dominated for nearly three
decades. We have now completed large-scale legacy vendor product migrations in
the US, Asia and Europe; delivering exceptional improvements in match rates,
operating efficiencies, and total cost of ownership. A high-performance
upgrade loading and matching technology went live at several customers,
providing a path to solving the next generation of problems as financial
markets move to ever tighter processing cycles.
Whilst many of our earlier customers chose to deploy Control on-premise, our
Clareti-as-a-Service cloud offering is gaining traction in the market, and
during the year we processed over 4.4 billion records in the cloud on behalf
of our customers. We continue to invest in cloud-native architecture,
thin-client user interfaces, and self-service functionality.
Data and Connect
Our Data and Connect solutions allow customers to participate in the complex
inter-connected global financial system without needing to be concerned with
third party data access, integration risk, cost, and time to market.
Our Data solution provides a cloud data collection and aggregation service for
investment managers and fund administrators. On average, a US medium-sized
buy-side firm uses 59 data feeds, and we collect over 2,500 sources of data
across our cloud, highlighting the complexity for the client and the breadth
of our solution. Last year, our Data service processed over 14.5 billion
records from our secure data centres and operated with exceptionally high
levels of service and support. We now retrieve, process and deliver data to
over 275 investment managers. Our goal is to become the leading independent
provider of bank and custodian account data to the investment management
industry. We are investing to streamline the tooling that underpins the Data
service which will enable us to further improve margins as we scale.
Our Connect solutions enable customers to interact with their bank partners
for payments and statements, support straight through processing to trading
venues, connectivity to regulatory reporting venues, and interoperability with
other industry applications. Connect provides not only connectivity but
intelligent control over highly complex real-time data flows. During 2022 we
went live with several customers on our latest cloud native platform and will
progressively migrate our installed base across to the new technology.
Digital Banking
Over the last few years, we have reported regularly on the progress of our
strategic innovation partnership with ANZ. I am pleased to confirm that the
first product deliverable from the partnership, a cloud-native bank account
platform, successfully progressed into first production use at the end of the
year. ANZ continues to fund the product development work via a chargeable
Innovation Service, and an exciting roadmap for future funded releases has
been jointly mapped out. We intend to promote this solution in the global
market in 2023 under a new product brand. Launch plans are prepared and we
look forward to sharing further details in due course.
New contract wins
In addition to our Control and Data contract win with the top five global
asset manager and the Connect win with Tier 1 bank announced in December 2022,
we have had other notable new customer wins in the year. This included one of
Europe's largest privately held banking and financial services firms that
signed a contract for Clareti Control to replace legacy vendor products across
its global asset management business, consolidating all reconciliations and
data controls onto a single modern cloud platform. The initial contract has a
minimum five-year term with total committed subscription fees in excess of
£1m. In Asia, we signed one of Singapore's newest digital banks, and there
were multiple new names in Europe, several of which are public references
available on our website.
Customer success - expanding within current clients
In May we were pleased to announce one of our largest ever contracts, a
significant subscription agreement for Clareti software with an existing
customer, one of the world's largest commercial and retail banks, for £6.3m
(over five years). This followed an initial contract for the first deployment
of Clareti Control within its UK operations in June 2020. As a result of the
success of the initial project, the bank has chosen to adopt our technology as
its single enterprise control platform across the entire UK business including
retail accounts, cards, payments, and commercial banking. The platform will be
used to deploy a range of new controls, as well as replace existing manual
processes and legacy vendor solutions.
In December, we announced an initial $1.3m enterprise agreement with one of
world's largest banks, to extend the use of Connect across their entire
post-trade prime brokerage business. The solution will replace legacy FIX
processing infrastructure to streamline market connectivity and client
onboarding. The contract has a five-year committed term, with minimum
incremental subscription fees and additional recurring usage-based fees. This
award was particularly pleasing as we have been working directly with this
client since our acquisition of Inforalgo in July 2020.
The two Tier 1 bank early adopters of our Control for Cash and Securities
product are now live at scale and realising the benefits of replacing legacy
systems. One of these implementations has delivered a 35% improvement in
automated match rates, giving the client a substantial economic benefit in
terms of headcount.
We continue to maintain and grow our relationship with long-standing client,
ANZ Bank. In September, we signed contracts totalling over AUD $19m to cover
the period until September 2023. This contributed to account growth of
approximately 15%, with uplifts in both the Clareti and non-Clareti businesses
from recurring software, recurring managed services, consulting and
contracting services.
During the year, our professional service teams supported 64 new go-lives with
customers and were engaged in over 150 active projects. We now have reference
clients in all of our targeted industry segments and key geographies across
the breadth of our solution portfolio.
People
Gresham's commitment to its people is at the centre of what we do. We continue
to invest in both our team and our community to ensure we remain both an
attractive and enjoyable work environment for current and future employees.
These investments have focused on optimising operational efficiencies
post-Electra through upskilling and consolidating, while providing all of the
resources required to support our people in their work through collaboration
tooling, on-line training, internal events, leadership and mental health
accreditations.
A stand-out in the year has been our success in hiring and building out our
sales and marketing team. We now have a strong team in place across Europe, US
and Asia; and, given the global breadth of our client wins over the last year,
we believe this leaves us very well placed to expand within our current client
base as well as win new ones.
These investments in our people have been a success and I am pleased to report
a sixth consecutive record result from our annual employee engagement survey.
It was hugely pleasing to see the total response rate increase to 72%, while
our overall engagement score increased to 82%. We are particularly pleased to
report that our newly added questions on diversity and inclusion scored very
well and validate our efforts in that area.
Brand and vision
In the decade since commencing the Clareti business, Gresham has transformed
into a respected provider of data and process control solutions to global
financial markets. Our programme of acquisitions has further strengthened our
market presence and extended our product portfolio and customer base. Our
vision is for Gresham to become a world-leading provider of cloud-based
post-trade solutions aligned with our mission of making business flow and
reducing friction in financial markets.
Acquisitions
Over the last few years we have successfully made three small bolt-on
acquisitions, C24, B2, and Inforalgo; each with c.£1m ARR when acquired. We
have now fully integrated the transformational acquisition of Electra, which
we made in 2021, contributing over £9m of ARR. All four acquisitions have
been financially and strategically accretive and the average 3x ARR we have
paid for these businesses highlights our discipline, track record and return
for shareholders. We continue to look at acquisitions that are in-line with
our strategic vision. However, we will remain focused on how we allocate
capital and be selective in making further acquisitions.
Current trading and outlook: robust foundations and positioned to grow
Our success reflects our research, planning and focus on delivering value to
our clients. The team's years of hard-work, together with significant
investments in people and infrastructure, have put in place the building
blocks of a diversified and scalable fintech platform with a market-leading
product portfolio, highly invested cloud architecture, established blue-chip
global customer base, and an ambitious, proven management team.
We have started 2023 well, and, while macro challenges persist, we have
highlighted that the pressure for efficiency and competitiveness means our
clients and target clients have a need to engage with us in tougher times as
well as good ones. We have a business today which has a good balance between
Europe and the US, and a growing presence in Asia, with a core addressable
market greater than c.$500m and opportunity to expand further across the wider
financial services sector.
We entered 2023 with very good visibility across both Clareti and non-Clareti,
with over £42m of Group revenues already under contract and confidence in our
growth outlook. We have a good pipeline of new clients in our core markets,
and we also have demand in the insurance, energy, government and other sectors
which we continuously look at how best to service. With the difficult economic
backdrop, we continue to carefully manage product and people investments and
ensure that, as the operating leverage of our model becomes increasingly
evident, we can deliver sustained growth over the next few years.
With the support of shareholders in building our platform, and the hard work
of our talented global team, we have created the foundations for success and
remain confident in our ambition to build a £100m ARR SaaS business with
best-in-class performance metrics expected of a valuable global financial
technology company of substantial scale.
Ian Manocha
Chief Executive
13 March 2023
FINANCIAL REVIEW
Forward-looking annualised recurring revenue ("ARR")
Our ARR is an aggregated value of all recurring revenues that are either fully
or partially contracted for the next twelve months and/or are highly expected
to renew in the next twelve months. Future uplifts in variable usage or
contingent recurring fees are not included in ARR, unless they are
contractually certain with all deliverables having already been met.
2022 2021 Variance %
Clareti ARR Clareti ARR at start of year £m 24.0 12.3 N/a
Acquired with Electra £m - 9.2 N/a
Organic increase in ARR £m 4.1 2.5 1.6 64%
Clareti ARR at end of year KPI £m 28.1 24.0 4.1 17%
Other ARR Other ARR £m 3.5 4.1 (0.6) (15%)
Group ARR Group ARR £m 31.6 28.1 3.5 12%
Our ARR from our strategic growth business, Clareti, is a critical KPI for the
Group as it provides a forward-looking view of the minimum expected revenues
in the next twelve months; which gives confidence to business planning and
investment decisions. The organic Clareti ARR growth in 2022 was £4.1m, an
increase of 17% on the opening Clareti ARR position. Included within this
organic growth is the impact of the foreign exchange movements in the year,
which contributed £1.8m, the prior year benefitting by £0.3m; therefore the
constant currency organic ARR growth grew from £2.2m in the prior year to
£2.3m in 2022. Whilst still strong double digit constant currency organic
growth, this is behind our target rate of 20%+. Our retention and upsell
measures remain strong, with the trailing twelve-month net Clareti ARR
retention rate being 102%, a reduction from the 106% rate in the prior year
(both on a constant currency basis). We calculate our net ARR retention rate
as ARR from the end of the period from customers existing at the start of the
period, divided by ARR at the start of the period. There remains a significant
market opportunity to both upsell and cross-sell to our continually growing
existing customer base that we are strategically investing in capturing. Going
forward, we expect to improve these rates to at least 2021 levels.
ARR from our Other businesses have fallen by £0.6m to £3.5m in 2022, largely
as a result of our decision to discontinue supporting the last remaining line
from our own high-margin legacy solutions. It remains encouraging to see the
ongoing longevity of these business lines continuing to provide predictability
and further ability to invest with confidence in the Clareti business.
In addition to Group ARR of £31.6m, expected revenues from non-recurring
contracts in place as at 31 December 2022 total £10.4m, giving visibility
over £42.0m of revenue for 2023 before any new or incremental contracts are
won.
Income Statement
Constant currency Income Statement headlines
Due to the levels of transactions occurring in currencies other than the
Group's functional reporting currency of GBP, largely USD and AUD, the Group
has benefitted to a material degree from the weakness experienced in the GBP
throughout the year. The table below shows 2022 performance if transactions
had been reported on the same average exchange rates for the year as 2021 had
been.
2022 2021 Variance on constant currency basis %
Actual basis Constant currency basis
Group revenue £m 48.7 46.6 37.0 9.6 26%
Group gross margin £m 33.9 32.4 25.2 7.2 29%
Group gross margin % % 70% 70% 68% 2%
Group adjusted EBITDA £m 10.3 10.2 7.2 3.0 42%
Group adjusted EBITDA % % 21% 22% 19% 3%
Cash adjusted EBITDA £m 4.4 4.2 2.5 1.7 68%
Cash adjusted EBITDA % % 9% 9% 7% 2%
Revenues
Our income is analysed between revenues from Clareti Solutions and from our
'Other' non-strategic solutions and services, revenues from each business of
these business segments are then broken into:
· Recurring revenues - which are generated for software and software-related
services such as support, maintenance, and other ongoing managed services; all
of which are contracted or expected to continue for the foreseeable future.
· Non-recurring revenues - include professional services, contracting, training
and other services that are expected to be one-off or periodic in nature.
Given the transformational nature of the Electra acquisition, we have also
broken out the Clareti business to show Electra revenues (and gross margin in
the Earnings section below) as individual line items within the Clareti
business.
2022 2021 Variance %
Clareti solutions Recurring £m 15.8 13.5 2.3 17%
Recurring - Electra £m 11.6 5.3 6.3 119%
Recurring - Clareti total KPI £m 27.4 18.8 8.6 46%
Non-recurring 7.5 6.4 1.1 17%
Non-recurring - Electra 0.6 0.3 0.3 100%
Non-recurring - Clareti total £m 8.1 6.7 1.4 21%
Total Clareti revenues KPI £m 35.5 25.5 10.0 39%
Other solutions & services Recurring £m 4.3 4.6 (0.3) (7%)
Non-recurring £m 8.9 6.9 2.0 29%
Total £m 13.2 11.5 1.7 15%
Group Total KPI £m 48.7 37.0 11.7 32%
Clareti Solutions
Clareti recurring revenues increased by 46%, up £8.6m on 2021, which included
a full year contribution of £11.6m from Electra against a £5.3m contribution
in 2021 (since the acquisition late in June 2021). Excluding the impact of
Electra, Clareti recurring revenues increased by 17%, or £2.3m since the
prior year. These increases were as a result of new recurring revenue sales,
increased consumption of Clareti solutions from our existing customers, and
currency gains of £1.4m; £1.2m of which coming from predominantly USD-based
Electra business.
Clareti non-recurring revenues increased by 21%, up £1.4m on the prior year,
with a relatively small services contribution from Electra in both years.
Excluding the impact of Electra, the increase was 17%. This increase is being
driven by new implementations associated with the increase in Clareti
recurring revenues and £0.3m of currency gains.
Other Solutions & Services
Total revenues from Other solutions and services increased by 15% to £13.2m,
exceeding our original expectations. This business line includes revenues from
a legacy partner relationship where we act as a reseller of third party
software; our sole remaining, own IP, legacy software product (EDT) which we
discontinued support for on 31 December 2022; and our contracting services
business where we provide fixed margin services at a margin of 13% under
twelve-month contractual terms.
Recurring revenues within the Other solutions and services portfolio decreased
by 7% to £4.3m as a result of own-IP software customers not renewing
contracts and slightly lower end-user consumption fees from existing customers
of our reseller arrangement. Non-recurring Other revenues, the vast majority
of which is our contracting services business, increased by £2.0m compared to
2021. The mix of revenues within the Other solutions and services portfolio
continues to evolve, being increasingly weighted towards lower margin business
lines. We continue to manage the portfolio carefully benefitting from good
visibility of customer intentions.
Earnings
2022 2021 Variance %
Clareti Solutions Gross margin £m 19.9 16.6 3.3 20%
Gross margin - Electra £m 10.6 4.9 5.7 116%
Gross margin - Clareti total £m 30.5 21.5 9.0 42%
Gross margin % 85% 83% 2% N/a
Gross margin - Electra % 87% 88% (1%) N/a
Gross margin - Clareti total % 86% 84% 2% N/a
Other solutions & services Gross margin £m 3.5 3.7 (0.2) (5%)
Gross margin % 27% 37% (5%) N/a
Group Gross margin £m 34.0 25.2 8.8 35%
Gross margin % 70% 68% 2% N/a
Adjusted EBITDA KPI £m 10.3 7.2 3.1 43%
Adjusted EBITDA KPI % 21% 19% 2% N/a
Cash Adjusted EBITDA KPI £m 4.4 2.5 1.9 76%
Cash Adjusted EBITDA KPI % 9% 7% 2% N/a
Statutory profit/(loss) after tax £m 2.9 (1.0) 3.9 N/a
Adjusted diluted EPS KPI Pence 7.54 5.02 2.52 50%
Gross margin
Across all business segments, the majority of our cost of sales is made up of:
(i) customer-specific third party costs incurred in providing our hosted cloud
solutions; (ii) third party contractor costs incurred by our contracting
services business; and (iii) fixed-term payrolled employees that provide fixed
margin contracting/recruitment services to ANZ.
In line with long-standing Group strategy, the growth in the high margin
Clareti business has offset the continued and expected decline in gross margin
being generated from the legacy Other solutions and services businesses. At a
Group level, gross margins have increased from 68% to 70%. These percentage
margins are not changed to any material degree when considered on a constant
currency basis.
The gross margin within Clareti business (including Electra) has increased
from 84% to 86%, due to the continued growth of the high margin recurring
revenues.
As planned and described in the revenue section above, the Other solutions and
services business mix has continued to move in balance towards the lower
margin software reselling and contracting services business lines from our
higher margin legacy owned IP (EDT), which we discontinued support of on 31
December 2022.
Adjusted EBITDA
Adjusted EBITDA (earnings before interest, tax, depreciation and amortisation)
is analysed excluding exceptional items and share-based payment charges; which
is consistent with the way in which the Board reviews the financial results of
the Group. We also consider this to be consistent with the manner in which
similar small-cap LSE (or AIM) listed companies present their results and how
we understand the global investment community assesses performance, with this
particularly being the case for growth shares in which the recurring cash
performance is considered important. However, whilst we consider them
consistent and appropriate, this EBITDA measure and the cash adjusted EBITDA
measure below are not necessarily directly comparable to other companies as
they are not strictly governed IFRS accounting measures, nor should they be
considered as a substitute for, or superior to, any IFRS measures.
Group adjusted EBITDA has improved by £3.1m, or 43%, since the prior year
with margin improving by 2% to 21% in 2022. This is as a result of the
existing higher margin Clareti business continuing to grow and beginning to
drive improved operational leverage as it scales along with the impact of the
Electra acquisition, which offset the continued reducing margin of the Other
solutions and services business lines. Whilst we will ensure that we maximise
the current market opportunity through appropriate strategic investments, we
do expect to continue to see improvements to these margins in future years.
Cash Adjusted EBITDA
Cash adjusted EBITDA refers to adjusted EBITDA reduced by the value of
capitalised development spend and any IFRS16 lease-related cash expenses
classified as depreciation and interest. We consider this a good measure of
cash profitability for a modern SaaS business who continue to invest in
product development to ensure they remain market leading.
Group cash adjusted EBITDA has also improved on the prior year, with £1.9m of
the £3.1m improvement in adjusted EBITDA (mentioned above) dropping through
to improvement cash EBITDA. The £1.2m difference between the improvements in
the two EBITDA measures is as a result of a full year of capitalised
development spend and IFRS 16 lease-related cash expenses in the acquired
Electra business. This has resulted in a cash adjusted EBITDA margin of 9%, an
improvement of 2% on the prior year. Like adjusted EBITDA, we expect to see
continued improvements in these margins in future years.
The Clareti standalone business reached an important milestone during 2022,
becoming cash adjusted EBITDA positive for the first time, generating a margin
of 3%. As the Clareti business continues to scale this will continue to drive
Group cash adjusted EBITDA improvements.
Statutory profit/(loss) after tax and Adjusted diluted EPS
There has been an increase in statutory profit after tax to a profit of £2.9m
from a loss of £1.0m in the prior year. This increase of £3.9m is due to the
combination of: improved adjusted operating profit of £2.9m as a result of
the growth and improved profitability of the Group; offset by: reduced
exceptional expenses of £1.3m (see below); increased share-based payment
charges of £0.6m; increased amortisation on acquired intangibles largely due
to a full year of amortisation of the intangibles acquired through the Electra
acquisition in June 2021 of £0.6m; and a reduced tax charge of £1.0m.
Adjusted diluted EPS has improved by 50% to 7.5 pence per share. Adjusted
earnings used in this calculation adjust the statutory result after tax for:
exceptional items; amortisation of acquired intangibles, share-based payments
and the deferred tax charge in relation to the sale of the IP acquired with
Electra from the US to the UK business (see taxation below).
Exceptional items
During the year, the Group recognised exceptional costs of £0.2m, all of
which were one-off costs in relation to the integration of the Electra
business. In 2021, £1.8m of exceptional costs were recognised, of which: (i)
£1.3m were acquisition costs in relation to the acquisition of Electra on 22
June 2021; and (ii) £0.5m related to various integration expenses in relation
to the same acquisition. Offsetting the exceptional costs in 2021 was
exceptional income of £0.3m, which occurred from currency hedging activities
taking place to fund the USD denominated Electra acquisition. There was no
such exceptional income in 2022.
Taxation
For the year ended 31 December 2022, the Group has recorded a net tax charge
of £0.4m (2021: £1.4m). The material drivers for the variance from the prior
year being: an increase in overseas current tax charges of £0.5m as a result
of the increased profits from our US and Australian operations as those
businesses continue to grow, with US taxes also increasing as a result of the
Electra acquisition; and the prior year including a one-off deferred US tax
charge of £1.4m as a result of the Group's long-term global tax planning,
part of which included the sale of the IP acquired in the Electra acquisition
from our US business to our UK business to ensure the UK remains the
centralised IP generating entrepreneur within the Group.
Cashflow
The Group's financial position remained very strong throughout 2022. At a
headline level, the cash balance at the year-end of £6.3m was behind that of
the prior year-end of £9.1m. Whilst the total deferred consideration payments
from acquisitions made during the year of £4.4m explains much of this, there
are also a number of other movements beneath the headline balances which are
described below.
Operating cashflow, excluding working capital and exceptional items, has
increased by £3.1m to £10.3m in the year as a result of the improved cash
EBITDA of the Group; including the Clareti business becoming cash EBITDA
generative for the first time.
Operating cash outflow from exceptional items has reduced by £1.3m to £0.2m.
The prior year included increases that were one-off in nature, with the
significant majority being advisory and integration fees in respect of the
Electra acquisition; the outflow during 2022 being the finalisation of the
Electra integration.
The movement in working capital has reduced by £2.1m to negative £0.8m.
There are a number of one-off items causing this swing, including a £0.5m
payment of US sales tax in relation to the acquired Electra business which had
originally been held back from the acquisition fees paid, and £1.0m of
customer payments made early in December 2021 with early payment not occurring
in 2022.
The Group received net tax of £0.6m in 2022, whereas during 2021 a net
payment of £1.1m was made. Gross tax payments were made in the year of £1.9m
(2021: £1.1m), the increase on the prior year largely as a result of
increased profitability in Australia and the US; the latter also benefitting
from a full year of the Electra business. During 2022 the Group also received
gross tax receipts of £2.5m as a result of research and development
activities performed during 2020 and 2021, where enhanced relief was
available. No such reclaim was received in 2021, with the 2020 claim which was
made during 2021 not being received from HMRC until January 2022.
The capitalised development expenditure of £5.2m has increased by £1.0m from
the prior year, the increase coming from a full year of such expenditure from
the acquired Electra business, as well as movements in foreign exchange rates
and inflationary increases.
During 2022 the Group spent £0.8m on other capital spend, an increase of
£0.7m. £0.6m of this increase was one-off in nature, in relation to the
complete refurbishment of our New York office which re-opened in the third
quarter.
During the year the Group paid £0.4m of contingent consideration in relation
to the July 2020 Inforalgo acquisition, in the prior year the initial
consideration of £0.9m was paid. The Inforalgo contingent consideration
payments are now complete and were paid in full as the target metrics agreed
with the sellers were fully met.
The Group paid £19.6m (net of cash acquired) of initial consideration to
acquire Electra in June 2021, which was funded through a £20.2m (net of
costs) capital raise. During the third quarter of 2022, upon meeting the
success criteria measured on the first anniversary of the acquisition, the
first contingent consideration payment was made in full of £4.0m.
The Group received £0.1m upon the exercise of share options during the year
(2021: £0.1m).
Included within "Other" is the recording of negative effect of foreign
exchange rate changes of £1.1m, arising upon the revaluation of Group's the
non-GBP entity opening balance sheets upon consolidation, the equivalent in
the prior year was a positive £0.2m.
As has been the strategy of the Group for a number of years, with increasing
Clareti sales (now including Electra) from the growing annuity base and new
customer wins, coupled with carefully selected and controlled investments, we
expect the cash-generation capacity of the business to continue and are
looking at opportunities to best utilise excess cash generated. In order to
maximise our returns, we plan to increase levels of investment in distribution
and customer success, whilst continuing to invest excess cash efficiently in
bank deposits and giving appropriate consideration to M&A opportunities.
2022 2021 Variance %
Opening cash and cash equivalents at 1 January £m 9.1 8.9 0.2 2%
Operating cashflow excluding exceptional items £m 10.3 7.2 3.1 43%
Operating cashflow from exceptional items £m (0.2) (1.5) 1.3 87%
Total operating cashflow excluding working capital £m 10.1 5.7 4.4 77%
Movement in working capital £m (0.8) 1.3 (2.1) (162%)
Cash inflow from operations £m 9.3 7.0 2.3 33%
Net tax receipts/(payments) £m 0.6 (1.1) 1.7 155%
Capital expenditure - development costs £m (5.2) (4.2) (1.0) (24%)
Capital expenditure - other £m (0.8) (0.1) (0.7) (700%)
Principal paid on lease liabilities £m (0.6) (0.6) - -
Inforalgo acquisition (net of cash acquired) £m (0.4) (0.9) 0.5 56%
Electra acquisition £m (4.0) (19.6) 15.6 80%
Shares issued - Electra acquisition (net of costs) £m - 20.2 (20.2) (100%)
Shares issued - upon option exercises £m 0.1 0.1 - -
Dividend £m (0.6) (0.5) (0.1) (20%)
Other £m (1.2) (0.1) (1.1) (1100%)
Net increase/(decrease) in cash and cash equivalents £m (2.8) 0.2 (3.0) N/a
Closing cash and cash equivalents at 31 December KPI £m 6.3 9.1 (2.8) (31%)
Consolidated statement of financial position
Property, plant and equipment and right-of use assets have increased to £0.9m
and £1.6m, from £0.2m and £1.5m respectively, largely as a result of the
extension of our Sydney office lease and New York office refurbishment. Our
lease liabilities have also increased by equivalent amounts due to this lease
extension.
Intangible fixed assets remain the largest item on the balance sheet at
£62.8m (2021: £62.3m), consisting of software development assets of £23.6m;
separately identified assets acquired with previous acquisitions of £19.5m
and goodwill of £19.7m.
Trade receivables increased from £3.8m to £4.8m and accrued income (a
contract asset) have increased from £1.2m to £1.8m. Trade receivables have
increased due to a combination of increased revenues and the prior year's cash
balance benefitting from early receipts from a customer that did not reoccur
in December 2022. Accrued income has also increased due to the increased
revenues in 2022 as well as timing differences in December invoicing.
Income tax receivable has reduced from £1.1m to nil due to a timing
difference in the receipt of funds from HMRC in relation to R&D credits,
in which the cash from the 2021 claim in relation to 2020 activity was
received in January 2022, whereas the cash from the 2022 in relation to 2021
activity was received in December 2022.
Deferred tax liabilities have decreased by £0.7m to £6.1m as a result of
further research and development spend qualifying for enhanced tax relief
increasing the liability by £1.1m offset by a reduction of £0.5m from the
unwinding of timing difference arising on acquired intangibles, a £0.4m
increase in tax losses available and a £0.5m increase in deferred tax on
share options.
Non-current contingent consideration has reduced from £3.6m to nil and
current contingent consideration has increased by £3.9m to £4.0m. The prior
year current contingent consideration was in relation to the final contingent
consideration payment due on the 2020 Inforalgo of £0.4m and the first
contingent consideration payment of US$4.8m due on the 2021 Electra
acquisition - both were paid in full during 2022. The remaining contingent
consideration payment, now classed as current, is in relation to the final
amount of US$4.8m due on the Electra acquisition, which is also expected to be
paid in full during 2023.
Trade payables increased from £1.1m to £1.5m, which is largely aligned with
the increased size of the business. Accruals increased to £4.3m (2021:
£3.9m) with the increase largely being in relation to an increased bonus
provision due to both a strong performance against set targets and reflecting
a full years bonus at full rates for the former Electra employees. Contract
liabilities have decreased from £12.0m to £11.1m largely due to the timing
of and size of prepayments made in the non-Clareti business.
Financial outlook
Management are very pleased with the overall financial progress of the Group
during 2022, delivering two upgrades to Group numbers. We are delivering
growth which in turn is driving improved profitability, aided by synergies
gained through the Electra acquisition. The constant currency organic growth
in Clareti ARR was 10% for 2022, a respectable result but below our stated
target of 20%+. Similarly, both net retention and new business generation
growth rates were lower than in 2021, although the Group expects to return to
target levels in 2023 and future years.
Whilst the strategic decision was taken to discontinue support for the Group's
one remaining own-IP software product (EDT), the other (non-Clareti) software
portfolio as a whole has continued to surpass expectations, although without
the own-IP software revenues the general trend towards lower margin products
and services will continue. We expect our contracting services business to
remain relatively stable in 2023.
As has been the strategy for many years, we are successfully continuing to
increase the levels of revenue predictability throughout the Group. In
addition to the significantly increased Clareti recurring revenue base, we
have high levels of contracted backlog of Clareti services for ongoing
implementations and innovation services, and a high portion of the non-Clareti
portfolio already is already under contract for 2023. Nevertheless, given the
uncertain macro-economic environment, we intend to invest prudently in 2023,
prioritising distribution, product and customer success, to ensure we are best
placed to take advantage of the significant market opportunities.
Tom Mullan
Chief Financial Officer
13 March 2023
CONSOLIDATED INCOME STATEMENT
Notes Year ended 31 December 2022 Year ended 31 December 2021
£'000 £'000
Revenue 4,5 48,719 37,026
Cost of sales (14,774) (11,799)
Gross profit 33,945 25,227
Adjusted administrative expenses (26,999) (21,146)
Adjusted operating profit 6,946 4,081
Adjusting administrative items:
Exceptional costs 5 (153) (1,821)
Exceptional income 5 - 330
Amortisation of acquired intangibles 14 (2,315) (1,673)
Share-based payments 23 (1,027) (369)
(3,495) (3,533)
Total administrative expenses (30,494) (24,679)
Operating profit 5,6 3,451 548
Finance revenue 9 6 4
Finance costs 9 (219) (121)
Profit before taxation 3,238 431
Taxation 10 (356) (1,443)
Profit/(loss) after taxation attributable to the equity holders of the Parent 2,882 (1,012)
Earnings per share
Statutory pence pence
Basic earnings per share 11 3.46 (1.31)
Diluted earnings per share 11 3.41 (1.31)
Adjusted
Basic earnings per share 11 7.65 5.08
Diluted earnings per share 11 7.54 5.02
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Notes Year ended 31 December 2022 Year ended 31 December 2021
£'000 £'000
Profit/(loss) after taxation attributable to the equity holders of the Parent 2,882 (1,012)
Other comprehensive expenses
Items that will or may be re-classified into profit or loss: 24 (937) (184)
Exchange differences on translating foreign operations
Total other comprehensive expenses (937) (184)
Total comprehensive income/(expense) for the year 1,945 (1,196)
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Notes At 31 December 2021
At 31 December 2022
£'000 £'000
Assets
Non-current assets
Property, plant and equipment 13 899 218
Right-of-use assets 16 1,592 1,466
Intangible assets 14 62,788 62,267
Deferred tax assets 10 - 232
65,279 64,183
Current assets
Trade and other receivables 18 6,515 5,403
Contract assets 18 2,558 1,665
Income tax receivable 18 - 1,204
Cash and cash equivalents 19 6,280 9,139
15,353 17,411
Total assets 80,632 81,594
Equity and liabilities
Equity attributable to owners of the Parent
Called up equity share capital 22 4,172 4,168
Share premium account 24 23,941 23,876
Own share reserve 22 (296) (609)
Other reserves 24 536 536
Foreign currency translation reserve 24 (1,315) (378)
Retained earnings 24 21,968 18,288
Total equity attributable to owners of the Parent 49,006 45,881
Non-current liabilities
Contract liabilities 20 354 60
Lease liabilities 16 953 770
Deferred tax liability 10 6,067 6,831
Provisions 20 146 144
Contingent consideration 20 - 3,575
7,520 11,380
Current liabilities
Trade and other payables 20 19,166 19,616
Lease liabilities 16 709 642
Income tax payable 20 244 131
Contingent consideration 20 3,987 3,944
24,106 24,333
Total liabilities 31,626 35,713
Total equity and liabilities 80,632 81,594
The financial statements were approved by the Board of Directors and
authorised for issue on 13 March 2023.
On behalf of the Board
Ian
Manocha
Tom Mullan
Chief
Executive
Chief Financial Officer
13 March
2023
13 March 2023
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Notes Share capital Share premium account Own share reserve Other reserves Foreign currency translation reserve Retained earnings Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000
At 1 January 2021 3,508 4,341 (778) 536 (194) 19,453 26,866
Attributable loss for the period - - - - - (1,012) (1,012)
Other comprehensive expenses - - - - (184) - (184)
Total comprehensive (expenses)/income - - - - (184) (1,012) (1,196)
Issue of equity shares 22 656 20,344 - - - - 21,000
Share issue costs 22 - (870) - - - - (870)
Exercise of share options 22 4 61 - - - - 65
Transfer of own shares held by Employee Share Ownership Trust to employees 22 - - 169 - - - 169
Share-based payments 23 - - - - - 369 369
Dividend paid - - - - - (522) (522)
At 31 December 2021 4,168 23,876 (609) 536 (378) 18,288 45,881
Attributable profit for the period - - - - - 2,882 2,882
Other comprehensive expenses - - - - (937) - (937)
Total comprehensive (expenses)/income - - - - (937) 2,882 1,945
Exercise of share options 22 4 65 - - - - 69
Transfer of own shares held by Employee Share Ownership Trust to employees 22 - - 313 - - 92 405
Deferred tax movement in respect of share options 10 - - - - - 301 301
Share-based payments 23 - - - - - 1,027 1,027
Dividend paid 12 - - - - - (622) (622)
At 31 December 2022 4,172 23,941 (296) 536 (1,315) 21,968 49,006
CONSOLIDATED STATEMENT OF CASH FLOW
Notes Year ended 31 December 2022 Year ended 31 December 2021
£'000 £'000
Cash flows from operating activities
Profit/(loss) after taxation 2,882 (1,012)
Depreciation of property, plant and equipment 13 191 175
Amortisation of intangible assets 14 4,723 4,042
Amortisation of right-of-use assets 16 714 581
Share-based payments 23 1,027 369
Increase in trade and other receivables (886) (776)
Increase in contract assets (775) (220)
Increase in trade and other payables 1,560 1,996
(Decrease)/increase in contract liabilities (199) 256
Decrease in sales tax provision arising on acquisition (496) -
Taxation 10 356 1,443
Exchange gain on financial instrument 5 - (330)
Net finance costs 9 213 117
Cash inflow from operations 9,310 6,641
Income taxes received 2,473 -
Income taxes paid (1,893) (1,114)
Net cash inflow from operating activities 9,890 5,527
Cash flows from investing activities
Interest received 9 6 4
Exchange gain on financial instrument 5 - 330
Purchase of property, plant and equipment 13 (806) (145)
Payments to acquire subsidiary undertaking (net of cash) - (19,639)
Payment of contingent consideration on acquisition of Inforalgo 20 (369) (923)
Payment of contingent consideration on acquisition of Electra 20 (3,987) -
Payments to acquire intangible fixed assets 14 (5,195) (4,150)
Net cash used in investing activities (10,351) (24,523)
Cash flows from financing activities
Interest paid 9 (138) (39)
Principal paid on lease liabilities 16 (645) (590)
Dividends paid 12 (622) (522)
Share issue proceeds (net of costs) 22 69 20,195
Net cash (used in)/from financing activities (1,336) 19,044
Net (decrease)/increase in cash and cash equivalents (1,797) 48
Cash and cash equivalents at beginning of year 9,139 8,876
Effect of foreign exchange rate changes (1,062) 215
Cash and cash equivalents at end of year 19 6,280 9,139
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
1. Basis of preparation
The Group's financial statements have been prepared in accordance with UK
adopted international accounting standards in conformity with the requirements
of the Companies Act 2006 and in accordance with international financial
reporting standards and international accounting standards as issued by the
International Accounting Standards Board ("IASB") and Interpretations
(collectively "IFRSs"). The accounting policies which follow set out those
policies which apply in preparing the financial statements for the year ended
31 December 2022.
The Group's financial statements have been prepared on a historical cost basis
except contingent consideration.
The Group financial statements are presented in Sterling, which is also the
Group's functional currency. All values are rounded to the nearest thousand
pounds (£'000) except when otherwise indicated.
2. Responsibility statements under the disclosure and transparency rules
The Annual Financial Report for the year ended 31 December 2022 contains the
following statements:
The directors confirm that to the best of their knowledge:
· the Group financial statements have been prepared in accordance with IFRS as
issued by IASB and Article 4 of the IAS Regulation, and give a true and fair
view of the assets, liabilities, financial position and profit and loss of the
Group; and
· the Annual Financial Report 2022 includes a fair review of the development and
performance of the business and the financial position of the Group and the
Parent Company, together with a description of the principal risks and
uncertainties that they face.
The name and function of each of the directors for the year ended 31 December
2022 are set out in the Annual Financial Report 2022.
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, the split of revenues and non-current assets by the UK and
overseas have been included as they are specifically required by IFRS 8
"Operating Segments".
For management purposes, the Group is organised into the following reportable
segments:
· Clareti Solutions - supply of solutions predominantly to the
finance and banking markets across Asia Pacific, EMEA and North America.
Includes both software and services that can be accessed in the cloud,
on-premise or deployed into hybrid environments. These primary offerings
within this segment include:
o Clareti Control products
o Clareti Connect products
· Other Solutions - supply of a range of well-established solutions
to enterprise-level customers in a variety of end markets
· Contracting Services - Supply of IT contracting services to one
banking customer
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 on consolidation.
Other
Notes Clareti Solutions Solutions Contracting Adjustments, central overheads and elimination Consolidated
Services
2022 £'000 £'000 £'000 £'000 £'000
Revenue 4 35,519 4,976 8,224 48,719
Cost of sales (5,032) (2,546) (7,196) (14,774)
Gross profit 30,487 2,430 1,028 33,945
Gross profit % 86% 49% 13% 70%
Adjusted administrative expenses (26,898) (101) - (26,999)
Adjusted operating profit 3,589 2,329 1,028 6,946
Adjusting administrative items:
Exceptional costs 5 (153) (153)
Amortisation of acquired intangibles 14 (2,315) (2,315)
Share-based payments 23 (1,027) (1,027)
Adjusting administrative expenses (3,495) (3,495)
Operating profit 3,451
Finance revenue 9 6
Finance costs 9 (219)
Profit before taxation 3,238
Taxation 10 (356)
Profit after taxation 2,882
Adjusted operating profit 6,946
Amortisation of intangibles 14 2,408
Depreciation of property, plant and equipment 13 191
Amortisation of right-of-use assets 16 714
Adjusted EBITDA 10,259
Development costs capitalised 14 (5,195)
Principal paid on lease liabilities 16 (645)
Cash adjusted EBITDA 4,419
Segment assets 80,632
Segment liabilities (31,626)
Other
Notes Clareti Solutions Solutions Contracting Adjustments, central overheads and elimination Consolidated
Services
2021 £'000 £'000 £'000 £'000 £'000
Revenue 4 25,470 5,222 6,334 - 37,026
Cost of sales (3,978) (2,338) (5,483) - (11,799)
Gross profit 21,492 2,884 851 - 25,227
Gross profit % 84% 55% 13% 68%
Adjusted administrative expenses (20,996) (150) - - (21,146)
Adjusted operating profit 496 2,734 851 - 4,081
Adjusting administrative items:
Exceptional costs 5 (1,491) (1,491)
Amortisation of acquired intangibles 14 (1,673) (1,673)
Share-based payments 23 (369) (369)
Adjusting administrative expenses (3,533) (3,533)
Operating profit 548
Finance revenue 9 4
Finance costs 9 (121)
Profit before taxation 431
Taxation 10 (1,443)
Loss after taxation (1,012)
Adjusted operating profit 4,081
Amortisation of intangibles 14 2,369
Depreciation of property, plant and equipment 13 175
Amortisation of right-of-use assets 16 581
Adjusted EBITDA 7,206
Development costs capitalised 14 (4,105)
Principal paid on lease liabilities 16 (590)
Cash adjusted EBITDA 2,511
Segment assets 81,594
Segment liabilities (35,713)
The Group has a customer relationship with one banking customer which is
considered by the Directors to be individually significant; revenue from this
relationship exceeded 10% of the Group's revenue, totalling £20,593,000
(2021: £17,618,000) which includes low margin contracting revenue of
£10,229,000 (2021: £8,442,000).
Adjusting administrative items
Operating performance is analysed excluding exceptional items, share-based
payment charges and amortisation from acquired intangibles which is consistent
in with the way in which the Board and most stakeholders review the financial
performance of the Group. These adjusting items are all either non-cash or
non-recurring IFRS expenses (or income) that do not reflect the underlying
performance of the business. In the case of share-based payment charges,
management acknowledge that these awards are potentially paid in "lieu" of
cash salary or bonuses, however the actual charge represents a non-cash
expense. Adjusting for these items is also consistent with the manner in which
similar small and mid cap LSE (or AIM) listed present their results and how we
understand the investment community to assess performance, where, for growth
shares the recurring cash performance of the business is considered most
important. In addition, these adjustments are also aligned with the
performance methodology used by the panel of debt providers that tendered for
the revolving credit facility established during the year in order to assess
and continually monitor credit worthiness, risk and upon which covenants are
set.
The adjusting administrative items are:
2022 2021
£'000 £'000
Acquisition and associated integration costs 153 1,814
Advisory fees for new share option scheme - 7
Exceptional costs 153 1,821
Exceptional income - (330)
Total exceptional items 153 1,491
Amortisation on acquired intangibles 2,315 1,673
Share-based payments 1,027 369
Total adjusting administrative items 3,495 3,533
During the year the Group incurred £153,000 exceptional costs relating to
legal and professional fees for the integration costs of prior year
acquisitions.
During the year ended 31 December 2021 the Group incurred exceptional costs of
£1,814,000 which included legal, due diligence and professional fees for the
acquisition of Electra Information Systems and associated integration costs.
Exceptional legal and tax advisory costs were incurred in the year ended 31
December 2021 of £7,000 associated with implementation of a new ten-year
share option incentive scheme. These costs are not expected to occur for a
further ten years.
Exceptional income of £330,000 was recognised in the year ended 31 December
2021 on realising a gain on the completion of a contract to forward purchase
US dollars. The contract was entered into to minimise the currency risk on the
acquisition of Electra Information Systems. This income has been treated as
exceptional as it is non-recurring.
Due to the amount and nature of amortisation of acquired intangibles and
share-based payments both costs were treated as an adjusting administrative
item.
Adjusted EBITDA
Adjusted EBITDA is disclosed within the financial statements to show the
underlying performance of the group on a consistent basis and to aid
understanding of the financial performance during the year.
Notes 2022 2021
£'000 £'000
Profit before taxation 3,238 431
Adjusting items:
Amortisation of intangibles 14 4,723 4,042
Depreciation of property, plant and equipment 13 191 175
Amortisation of right-to-use assets 16 714 581
Notional interest on lease liabilities 9 45 43
Finance revenue 9 (6) (4)
Interest payable 9 174 78
EBITDA 9,079 5,346
Exceptional items 5 153 1,491
Share-based payments 23 1,027 369
Adjusted EBITDA 10,259 7,206
Adjusted EBITDA is not an IFRS measure or not considered to be a substitute
for or superior to any IFRS measures. It is not directly comparable to other
companies.
Geographic information 2022 2021
£'000 £'000
Revenues from external customers (by destination)
UK 6,953 5,998
EMEA 4,460 3,151
United States 14,607 9,096
Americas 1,307 517
Australia 20,840 17,738
Asia Pacific 552 526
48,719 37,026
EMEA includes revenue from external customers located primarily in the
Netherlands, Luxembourg, Switzerland, Finland and South Africa. Americas
includes revenue primarily from Canada. Asia Pacific includes revenue from
external customers located primarily in Malaysia and Singapore.
2022 2021
£'000 £'000
Non-current assets
UK 63,077 62,777
EMEA 425 448
North America 740 396
Asia Pacific 1,037 562
65,279 64,183
Non-current assets consist of property, plant and equipment, right-of-use
assets, intangible assets and deferred tax assets.
4. Taxation
Tax on profit on ordinary activities
Tax charge in the income statement
2022 2021
£'000 £'000
Current income tax
Overseas tax charge/(credit) - adjustment to prior years 45 (93)
Overseas tax charge - current year 1,570 1,118
UK corporation tax credit - adjustment to prior years (1,293) (1,045)
Total current income tax 322 (20)
Deferred income tax
Movement in net deferred tax liability 34 1,231
Tax rate change adjustments - 232
Total deferred income tax 34 1,463
Total charge in the income statement 356 1,443
The UK corporation tax credit included £1,273,000 (2021: £1,045,000)
relating to the surrender of prior year tax losses under the HMRC R&D tax
credit scheme.
Reconciliation of the total tax charge
The tax charge in the income statement for the year is lower (2021: higher)
than the standard rate of corporation tax in the UK of 19.0% (2021: 19.0%).
The differences are reconciled below:
2022 2021
£'000 £'000
Profit before taxation 3,238 431
Profit before taxation multiplied by the UK standard rate of corporation tax 615 82
of 19.0% (2021: 19.0%)
Effects of:
Expenses not deductible for tax purposes 573 288
Impact of tax rate change on timing differences 139 234
Difference in overseas tax rates 375 785
Movement in unprovided deferred tax losses (86) (305)
Adjustments to prior years in respect of current tax (1,248) (1,138)
Adjustments to prior years in respect of deferred tax 2,165 1,802
Research and development enhanced relief claim (2,177) (1,703)
Deferred tax on the inter-group sale of intellectual property - 1,398
Total tax charge reported in the income statement 356 1,443
Tax credit recognised in equity:
2022 2021
£'000 £'000
Deferred tax credit recognised directly in equity 301 -
Total tax credit recognised directly in equity 301 -
Deferred tax
Deferred tax liabilities
The movement on the deferred tax liability is shown below:
2022 2021
£'000 £'000
At 1 January (6,599) (737)
Recognised in income (34) (1,463)
Recognised in equity 301 -
Arising on acquisition of intangibles in subsidiaries - (4,055)
Foreign exchange 265 (344)
At 31 December (6,067) (6,599)
Deferred tax recognised relates to the following:
2022 2021
£'000 £'000
Tax losses available for offset against future taxable income 3,979 3,639
Employee share award schemes 766 310
Capitalised development costs (5,577) (4,545)
Accelerated depreciation for tax purposes on fixed assets 540 828
Other timing differences 379 -
Inter-group sale of intellectual property (1,300) (1,398)
Acquired intangibles - software and customer relationships (4,854) (5,433)
31 December (6,067) (6,599)
Comprising: 2022 2021
£'000 £'000
Asset - 232
Liability (6,067) (6,831)
31 December (6,067) (6,599)
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
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 credit of £178,000 (2021: £35,000).
Temporary differences associated with Group investments
At 31 December 2022, there was no recognised deferred tax liability (2021:
£nil) for taxes that would be payable on the unremitted 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.
Unrecognised potential deferred tax assets
The deferred tax not recognised in the consolidated statement of financial 2022 2021
position is as follows:
£'000 £'000
Gresham Technologies (Luxembourg) S.A. 793 816
Gresham Technologies (Holdings) SARL 109 103
Inforalgo Information Technology Limited - 243
Gresham Technologies (Singapore) Limited 137 125
Gresham Technologies (TDI) Limited 119 116
Tax losses 1,158 1,403
Gross tax losses unrecognised 5,155 5,857
Future tax rates
The main UK corporation tax rate is due to increase to 25% from 1 April 2023
as substantively enacted by the Finance Act 2021. Therefore, the rate used to
calculate deferred tax balances at 31 December 2022 is 25%.
The Group's recognised and unrecognised deferred tax assets in the UK,
Luxembourg, Australian and US subsidiaries have been shown at the rates in the
following table, being the substantively enacted rates in these countries.
2022 2021
% %
UK 25 25
Luxembourg 25 25
Australia 30 30
US 27 27
5. Earnings
Earnings per share
Basic earnings per share amounts are calculated by dividing profit or loss for
the year attributable to owners of the Parent by the weighted average number
of ordinary shares outstanding during the year.
Diluted earnings per share amounts are calculated by dividing profit or loss
attributable to owners 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 and share data used in the basic and
diluted earnings per share computations:
2022 2021
Basic weighted average number of shares 83,393,061 77,132,796
Employee share options - weighted (note 23) 1,133,957 890,100
Diluted weighted average number of shares 84,527,018 78,022,896
Notes 2022 2021
£'000 £'000
Adjusted earnings attributable to owners of the Parent 6,377 3,919
Adjusting items:
Exceptional items 5 (153) (1,491)
Amortisation of acquired intangibles 14 (2,315) (1,673)
Deferred tax charge on inter-group sale of intellectual property 10 - (1,398)
Share-based payments 23 (1,027) (369)
Statutory earnings attributable to owners of the Parent 2,882 (1,012)
Earnings per share
Statutory pence pence
Basic earnings per share 3.46 (1.31)
Diluted earnings per share 3.41 (1.31)
Adjusted
Basic earnings per share 7.65 5.08
Diluted earnings per share 7.54 5.02
During the year ended 31 December 2022, share options granted under share
option schemes were exercised and the Group issued 85,000 (2021: 83,000)
ordinary shares accordingly (ranking pari passu with existing shares in
issue). See note 22 for further details.
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 2022.
6. Dividends paid and proposed
The final dividend for the year ended 31 December 2021 was approved at the
Company Annual General Meeting on 10 May 2022 and paid on 19 May 2022 of 0.75
pence per share, equating to a total of £622,000. The Company will be
proposing a final dividend for approval at the AGM for the year ended 31
December 2022 of 0.75 pence per share.
7. Intangible assets
Separately identified intangibles on acquisition
Development costs Patents and licences Software Customer relationships Goodwill Total
2022 £'000 £'000 £'000 £'000 £'000 £'000
Cost
At 1 January 31,072 858 12,120 14,210 19,848 78,108
Additions 5,195 - - - - 5,195
Disposals - (91) - - - (91)
Exchange adjustment 34 10 - - 55 99
At 31 December 36,301 777 12,120 14,210 19,903 83,311
At 1 January (10,378) (763) (3,105) (1,378) (217) (15,841)
Charge for year (2,360) (48) (1,212) (1,103) - (4,723)
Eliminated on disposal - 91 - - - 91
Exchange adjustment (7) (10) - - (33) (50)
At 31 December (12,745) (730) (4,317) (2,481) (250) (20,523)
Net carrying amount
At 31 December 23,556 47 7,803 11,729 19,653 62,788
At 1 January 20,694 95 9,015 12,832 19,631 62,267
Separately identified intangibles on acquisition
Development costs Patents and licences Software Customer relationships Goodwill Total
2021 £'000 £'000 £'000 £'000 £'000 £'000
Cost
At 1 January 26,996 832 7,161 2,410 5,625 43,024
Additions 4,105 45 4,959 11,800 14,279 35,188
Disposals - (6) - - - (6)
Exchange adjustment (29) (13) - - (56) (98)
At 31 December 31,072 858 12,120 14,210 19,848 78,108
At 1 January (8,117) (739) (2,141) (669) (250) (11,916)
Charge for year (2,326) (43) (964) (709) - (4,042)
Eliminated on disposal - 6 - - - 6
Exchange adjustment 65 13 - - 33 111
At 31 December (10,378) (763) (3,105) (1,378) (217) (15,841)
Net carrying amount
At 31 December 20,694 95 9,015 12,832 19,631 62,267
At 1 January 18,879 93 5,020 1,741 5,375 31,108
Development costs
Development costs are internally generated and are capitalised at cost. These
intangible assets have been assessed as having a finite life and are amortised
on a straight-line basis over their useful lives of two to eleven years. These
assets are tested for impairment where an indicator of impairment arises and
annually prior to them being made available for use.
For the years ended 31 December 2022 and 31 December 2021 the Group has
capitalised development costs in respect of individual Clareti applications
which have been individually assessed against the required capitalisation
criteria and been individually assigned useful economic lives reflecting the
maturity and availability of comparable applications in our markets. These
useful economic lives are assessed to be between two and eleven years.
No changes have been made to development costs capitalised in prior years in
respect of the Clareti platform, which continue to be amortised on a
systematic basis over the existing useful economic life of eleven years.
Patents and licences
Patents and licences are the third-party costs incurred in seeking and
obtaining protection for certain of the Group's products and services. These
intangible assets have been assessed as having a finite life and are being
amortised evenly over their useful economic life, to a maximum of ten years.
Patents have a remaining life of three years and licences have a remaining
life of one to ten years.
Separately identified acquired intangibles
Separately identified intangibles acquired through business combinations
represent software and customer relationships which arose through the
acquisitions of C24 Technologies Limited, B2 Group, Inforalgo and Electra
Information Systems.
Software is amortised over its useful economic life, which is deemed to be ten
years.
Customer relationships acquired in the year are amortised over their useful
economic life, which is deemed to be twelve years for the Electra acquisition,
eight years for the Inforalgo and C24 Technologies Limited acquisitions and
six years for B2 Group.
Goodwill
Goodwill arose on the acquisition of our Asia Pacific real-time financial
solutions business, C24 Technologies Limited, B2 Group, Inforalgo and Electra
Information Systems. It is assessed as having an indefinite life and is
assessed for impairment at least annually.
8. Related party transactions
Key management compensation (including Directors)
2022 2021
£'000 £'000
Directors' emoluments
Remuneration 652 648
Social security costs 137 145
Bonuses 298 401
Pension 22 22
Share-based payments 406 116
1,515 1,332
Details of Directors' compensation are included in the Directors' Remuneration
Report.
There is no single party known that the Directors consider to be a controlling
shareholder or ultimate parent undertaking. Refer to page 80 for details of
all significant shareholders that the Company has been notified of.
9. Events after the reporting date
A dividend of 0.75 pence per share has been approved by the Board to propose
to shareholders at the Annual General Meeting.
10. Additional information
Principal risks and uncertainties
The principal risks and uncertainties facing the Group together with actions
being taken to mitigate them and future potential items for consideration are
set out in the Strategic Report section of the Annual Financial Report 2022.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
or visit
www.rns.com (http://www.rns.com/)
.
RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
. END FR SFDEFDEDSEEDRecent news on Gresham Technologies
See all newsREG - Jefferies Int Ltd. Gresham Technologies - Form 8.3 - Gresham Technologies Plc
AnnouncementREG - Official List Gresham Technologies - Removal - GRESHAM TECHNOLOGIES PLC
AnnouncementREG - Stock Exch Notice Gresham Technologies - Cancellation - GRESHAM TECHNOLOGIES PLC
AnnouncementREG - Takeover Panel - Disclosure Table
AnnouncementREG - Takeover Panel - Disclosure Table
Announcement