REG - Gresham Technologies - Interim Report Announcement and Board Changes
26/07/2023 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:20230726:nRSZ1800Ha&default-theme=true
RNS Number : 1800H Gresham Technologies PLC 26 July 2023
RNS
26 July 2023
Gresham Technologies plc
Interim Report Announcement and Board Changes
Double-digit Clareti growth and increasing recurring revenues
Gresham Technologies plc (LSE: "GHT", "Gresham", "Company" or the "Group"),
the leading software and services company that specialises in providing
solutions for data integrity and control, banking integration, payments and
cash management, announces its unaudited, half year results for the six months
ended 30 June 2023.
Operational highlights
· Strong H1 close, in line with market expectations for full year
· 5 new name Clareti contract wins
· 16 upgrade contracts with existing customers evidences our land and expand
strategy
· Growth in existing customers driving improvement in net ARR retention to 103%
on a constant currency basis
· Senior leadership hires in North America and Marketing to drive go to market
plans
· New product offering 'Floe' developed with ANZ Bank now ready for market
launch
· Leading industry award recognition, including 'Best Sell-Side Reconciliation
Platform', 'Best Regulatory Reporting Solution' and 'Best Institutional
Investment Solution'
Financial highlights
· Clareti revenue growth of 10% (11% on a constant currency basis, "cc"),
driving Group revenue growth of 4% (5% cc), both on the first half of 2022 in
line with plans for full year Group revenues
· Forward-looking Clareti ARR growth of 10% (12% cc) on 30 June 2022, driven by
both new name customer wins and growth in the installed base
· All margins broadly consistent with the first half of 2022, with improvements
expected in the second half aligned with the traditional second half weighting
of the business
· Cash of £3.8m as at 30 June 2023 is in line with Board's expectations after
taking into account the USD 4.8m payment of contingent consideration in the
second half of 2022 in relation to the Electra acquisition
HY 2023 £m HY 2022 £m Growth % (Actual) Growth %
(Constant currency)
Group annualised recurring revenues 31.8 29.4 8% 10%
Clareti annualised recurring revenues 28.6 26.1 10% 12%
Group revenues 23.9 23.0 4% 5%
Clareti revenues 18.0 16.4 10% 11%
Clareti recurring revenues 13.8 12.5 10% 11%
Group Adjusted EBITDA 4.6 4.5 2% 4%
Group cash EBITDA 1.7 1.8 (6)% -
Cash 3.8 6.5 (42)% (40)%
Outlook
· 95% contracted visibility at the half year over full-year market expectations
for Group revenues
· Solid pipeline of new opportunities giving confidence the Company can meet
full year market expectations
Adjusted EBITDA refers to earnings before interest, tax, depreciation and
amortisation, adjusted for one-off exceptional items and share-based payments.
Cash EBITDA refers to adjusted EBITDA less capitalised development spend and
any IFRS 16 lease related cash payments.
By their nature, forward looking annualised recurring revenue metrics included
12 months impact in both reported periods.
The Company believes that current market expectations for the year ending 31
December 2023 are revenues of £50.2m and adjusted EBITDA of £11.0m,
with £53.9m and £13.5m; and £59.4m and 16.3m respectively for the years
ending 31 December 2024 and 2025.
Ian Manocha, Gresham CEO, commented:
"We are pleased to have closed the first half in line with our plans following
a strong June which reflects the improving momentum we are seeing in the
financial services sector.
"This positive forward momentum coupled with a strong financial position
underpins our continued investment in our growth strategy, centred on building
our high-quality recurring revenue business at scale. We enter the second half
with excellent revenue visibility of almost £48 million and a strong pipeline
of opportunities, giving us confidence in a successful outcome for the full
year."
As announced on 29 June 2023, a presentation for analysts will be held today
at 8.30 a.m. (BST) via conference call, with a separate presentation for
private and retail investors to be held today at 3.30 p.m. (BST) via the
Investor Meet Company platform. Admittance for these events is strictly
limited to those who register their participation in advance.
For analyst conference call details and to register attendance, please email
gresham@almapr.co.uk. Information on how to register attendance for the
private and retail investor presentation is set out in the Company's
announcement of 29 June 2023. A copy of the presentation to be tabled at both
sessions will be made available on Gresham's website at 9.00 a.m. (BST) today.
Board Changes
Peter Anthony Simmonds, Non-Executive Chair and Chair of the Nomination
Committee, retired from the Board effective 25 July 2023 to spend more time on
his interests in earlier stage private companies. In addition, Dr. Ruth
Wandhöfer, Non-Executive Director, has retired from the Board effective 25
July 2023 to concentrate on her other portfolio interests and author career.
Andy Balchin, Senior Independent Non-Executive Director and Chair of the Audit
Committee, has assumed the role of Non-Executive Chair on an interim basis.
Jenny Knott will continue in her role as Non-Executive Director and Chair of
the Remuneration Committee.
The Board is taking the opportunity to review the non-executive skills and
experience needed for the Company for the next stage of its development, and a
process is already underway for the selection and appointment of a permanent
Non-Executive Chair and a Non-Executive Director. Further announcements will
be made in due course.
Andy Balchin, Interim Non-Executive Chair, commented:
"I would like to thank Peter, who so ably chaired the business over the last
three years, and Ruth, for their contribution to the Company. During this
period the Company successfully navigated the challenges of Covid and
completed the transformational acquisition of Electra in the United States
resulting in a stronger and more resilient global business."
Enquiries
Gresham Technologies plc +44 (0) 207 653 0200
Ian Manocha / Tom Mullan
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
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
(http://www.greshamtech.com/) .
Chief Executive Review
Introduction
We are pleased to report an encouraging performance for the six months ended
30 June 2023, in line with market expectations for the full year.
The increasing need for efficiency, trust and competitiveness within the
financial sector requires customers to engage with us in difficult times as
well as positive ones. This is amply evidenced by the good progress made
during the period, including several new name contract wins, and serves to
highlight the resilience of our business model and the ongoing demand for our
services. As the momentum seen in the latter half of H1 continues into H2
FY23, we have confidence in our near-term prospects as we work to become a
leading technology partner to the financial services sector.
First Half Trading
In the six months to 30 June 2023, Clareti revenues increased by 11% and on an
FX adjusted basis ARR increased by £1.1m (£0.5m on a reported basis). Whilst
we continued to deliver high service levels to clients and engage with
prospects, the first half was characterised by the impact of macro uncertainty
on decision cycles. I am pleased to say this appears to have been fairly
short-lived, and we have seen improving conditions in our markets reflected in
stronger growth in the second quarter, a major contract win announced at the
end of June and an encouraging pipeline of new business opportunities as we
enter the second half.
During this period, we have remained very focused on controlling our costs and
optimising our investments reflected in a small improvement in the gross
margin and a solid increase in Clareti profitability.
Business Overview
Throughout the first half of FY23 we have continued to invest in our people
and operations as we further consolidate our competitive position and drive
greater market share in our core financial services sector. The repackaging of
our platform capabilities, including Electra, into three Clareti product lines
of Control, Data and Connect has continued to resonate well with customers,
and as the structural market drivers necessitating financial institutions to
invest in their processes, we expect this trend to build momentum in H2 and
into FY24.
· Clareti Control
o As our flagship solution, this is a ready-to-use, high-quality business
self-service platform designed for the efficient management, reconciliation,
and control of all types of transaction data in financial markets.
o Our Clareti-as-a-Service cloud offering continues to gain traction in the
market with further investments increasing our competitive advantage within
the sector.
o We continue to invest in cloud-native architectures, user-friendly
thin-client interfaces, and in empowering our users with seamless self-service
capabilities.
· Clareti Data and Connect
o With our Data and Connect solutions, customers can seamlessly engage in
the complex and interconnected global financial system, free from concerns
about third-party data access, integration risks, expenses, and time required
to enter the market.
o Our Data solution offers investment managers and fund administrators a
comprehensive cloud-based data collection and aggregation service, supporting
over 2,500 data sources across our platform and addressing the intricate data
needs of clients; as evidenced by the average usage of 59 data feeds by a
medium-sized buy-side firm in the US.
o Our Connect solutions empower customers with seamless interactions with
bank partners, facilitate straight-through processing to trading and
regulatory reporting venues, ensure interoperability with other industry
applications, and offer intelligent control over complex real-time data flows.
Our Control platform has leveraged AI technology in data matching from its
initial release and our use of AI has been broadened into other functional
areas over the last few years. We now process more than 20bn client records
per year in our cloud and see further opportunity to leverage AI and our data
assets in the future.
Our strategic innovation partnership with ANZ has progressed well and I am
pleased to report that the bank and their first end-customer has completed
testing and all parties are preparing for market launch. ANZ remains committed
to supporting product development efforts through a chargeable Innovation
Service, and a collaborative roadmap has been established to unveil exciting
future funded releases. The Gresham offering will be launched under a new
brand, Floe. We look forward to updating the market in the second half.
Operating Review
Contract wins
In the six months to 30 June 2023, we secured five new name clients. This
strong momentum of pipeline conversion highlights the demand for our offering
as contracts were successfully won following a competitive RFP process,
showing the increasing value placed in our proven and highly differentiated
solutions as well as our deep sector expertise.
In addition, we were pleased to add a new name Clareti contract win in the US
investment management industry announced in July 2023. The agreement will see
Gresham help automate and reduce costs in the customer's investment operations
with a cloud solution covering data collection from custodians and brokers,
data aggregation, reconciliation against internal books and records, and
exception management processes.
Alongside these new business wins, we have achieved 16 incremental growth
contracts during the period with existing customers, demonstrating the
significant opportunity available through both our new client acquisition and
land and expand strategies. This is further evidenced in our increasing
Clareti ARR net retention of 103% on a constant currency basis, showing the
stickiness of our installed customer base.
Strategic investment to capitalise on significant market opportunity
Throughout the period we have remained committed to investing in our sales and
marketing capabilities to further consolidate our market position and fully
capitalise on the long-term opportunity.
We have strengthened our already industry-leading team with the recruitment of
Dan Kennedy as Senior Vice President of Sales, North America; and Geneva
Loader as Chief Marketing Officer. These appointments are expected to support
the Company's continued expansion in the North American market and drive
further improvements in the effectiveness of our go-to-market operations. In
addition, we will be executing on a brand refresh and investing further in
digital marketing in order to deliver on our mission to lead the global
reconciliation and control market in financial services.
ESG
In line with our three-pillar ESG strategy, we remain committed to scaling up
responsibly, and we are maintaining a strong focus on a range of initiatives
within our ESG programme. We have made good progress on our TCFD programme
roadmap, as disclosed in our FY22 annual report, and we are pleased to have
scored higher than the average within the technology sector in an independent
ESG benchmark analysis(1). Our priority for the remainder of this year is to
lay the groundwork for future Scope 3 emissions reporting and double
materiality reporting.
Outlook
Good sales momentum has continued into the second half which has started
positively, and we have a growing pipeline of opportunities with new and
existing clients.
While the economic backdrop remains somewhat uncertain, there are a number of
factors that give us confidence over second-half revenues and earnings. We
expect the period to have the typical seasonal weighting of ARR recognised as
revenue and collected as cash in relation to the varied contract terms and
patterns across our client base. In total, we started the second half with 95%
contracted revenue visibility of our expected full-year outturn. We also have
a strong pipeline of new client discussions and upsells, which will further
contribute to both ARR and recurring revenue recognised in the period. This
visibility gives us the ability to maintain our investment in our products,
colleagues and the addition of new key hires, and provides confidence for a
good second half and strong FY24.
Thank you for your support.
Ian Manocha
Chief Executive Officer
26 July 2023
1 Overall score of 64/100 in EthiFinance, a 53% increase on 2021.
Financial review
Forward-looking annualised recurring revenue "ARR"
Our ARR is an aggregated value of all recurring revenues, both those
recognised annually and those recognised monthly, 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. 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.
H1 2023 H1 2022 Variance %
Clareti ARR Clareti ARR at start of period £m 28.1 24.0 4.1 17%
Increase in ARR £m 1.1 1.1 - -
Currency impact £m (0.6) 1.0 (1.6) (160)%
Clareti ARR at end of period KPI £m 28.6 26.1 2.5 10%
Other ARR Other ARR £m 3.2 3.3 (0.1) (3)%
Group ARR Group ARR £m 31.8 29.4 2.4 8%
Clareti ARR experienced growth of £2.5m or 10% (12% cc) over the previous 12
months. Excluding currency fluctuations, growth in both the first half of 2023
and 2022 was £1.1m. On an actual currency basis Clareti ARR was significantly
impacted by currency headwinds in the first half of 2023, whereas tailwinds
assisted in 2022. Our retention and upsell measures remain strong, with the
trailing 12 month net Clareti ARR retention rate being 103%; up from 102% at
December 2022 and expected to increase further in the second half.
Clareti ARR consists of recurring revenues that are contracted to be
recognised through the Income Statement. £24.2m of current ARR is
recognised monthly with £4.4m recognised annually As was the case in 2022,
those contracts recognised annually are heavily second half weighted with
recognition being aligned with the anniversary date of individual customer
contracts. This weighting is even more pronounced towards the second half in
2023 (68%) than 2022 (65%) which provides significant confidence in the full
year Income Statement.
ARR from our Other businesses has decreased as planned, 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 the remaining non-Clareti recurring business line as it continues
to provide predictability and further ability to invest with confidence in the
Clareti business.
Year to date revenues, Group ARR and expected revenues from non-recurring
contracts in place as at 30 June 2023 give near contractual certainty over
almost £48.0m of revenue for 2023 before any new or incremental contracts are
won.
Income Statement
Constant currency Income Statement headlines
The level of transactions occurring in currencies other than the Group's
functional reporting currency of GBP, largely USD and AUD, have negatively
impacted the Group in the first half of 2023, albeit not to a material degree.
The table below shows HY 2023 performance if transactions had been reported on
the same average exchange rates as the first half of 2022, the headlines of
this being impacts to Group revenue of £0.3m and earnings less than £0.1m.
H1 2023 H1 2022 Variance on constant currency basis %
Actual basis Constant currency basis
Group revenue £m 23.9 24.2 23.0 1.2 5%
Group gross margin £m 17.2 17.3 15.7 1.6 10%
Group gross margin % % 72% 71% 68% 3%
Group Adjusted EBITDA £m 4.6 4.7 4.5 0.2 4%
Group Adjusted EBITDA % % 19% 19% 20% (1)%
Cash adjusted EBITDA £m 1.7 1.8 1.8 - -%
Cash adjusted EBITDA % % 7% 7% 8% (1)%
All further analysis is on an actual currency exchange basis unless explicitly
stated.
Revenue
Our income is analysed between revenues from Clareti Solutions and from our
'Other' non-strategic solutions and services, revenues from each of these
business segments are then broken into:
- Recurring revenues: 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: professional services, contracting,
training and other services that are expected to be one-off or periodic in
nature.
H1 2023 H1 2022 Variance %
Clareti solutions Recurring £m 13.8 12.5 1.3 10%
Non-recurring £m 4.2 3.9 0.3 8%
Total Clareti revenues KPI £m 18.0 16.4 1.6 10%
Other solutions & services Recurring £m 2.1 2.0 0.1 5%
Non-recurring £m 3.8 4.6 (0.8) (17)%
Total £m 5.9 6.6 (0.7) (11)%
Group Total KPI £m 23.9 23.0 0.9 4%
Clareti Solutions
Clareti recurring revenues increased by 10%, up from £12.5m to £13.8m on the
first half of 2022. These increases were as a result of new recurring revenue
sales and increased consumption of Clareti solutions from our existing
customers, this increase is slightly offset by the foreign exchange headwinds
experienced.
Clareti non-recurring revenues increased by 8%, up £0.3m on the prior first
half. This increase is being driven by new implementations associated with the
increase in Clareti recurring revenues and improved services efficiencies.
Other Solutions & Services
After the closure of our high margin, own IP 'EDT' business on 31 December
2022 which generated £0.2m revenue in its last year of operation, recurring
revenues within the Other solutions and services portfolio now only includes
revenues from a legacy partner relationship where we act as a reseller of
third-party software. These remaining revenues experienced some growth which
more than offset the EDT closure, resulting in recurring revenues from Other
Solutions increasing by 5% to £2.1m.
Non-recurring revenues from Other Solutions and Services now include one off
services in relation to the reselling business and our fixed margin
contracting business with ANZ bank. These non-recurring revenues decreased by
17% from £4.6m to £3.8m as less demand occurred in both lines of non-core
business.
The mix of revenues within the Other solutions and services portfolio
continues to evolve, and we continue to manage the portfolio carefully
benefitting from good visibility of customer intentions.
Earnings
H1 2023 H1 2022 Variance %
Clareti Solutions Gross margin £m 15.6 14.0 1.6 11%
Gross margin % 86% 85% 1% N/a
Other solutions & services Gross margin £m 1.6 1.7 (0.1) (6)%
Gross margin % 27% 26% 1% N/a
Group Gross margin £m 17.2 15.7 1.5 10%
Gross margin % 72% 68% 4% N/a
Adjusted EBITDA KPI £m 4.6 4.5 0.1 2%
Adjusted EBITDA KPI % 19% 20% (1)% N/a
Cash Adjusted EBITDA KPI £m 1.7 1.8 (0.1) (6)%
Cash Adjusted EBITDA KPI % 7% 8% (1)% N/a
Statutory profit after tax £m 1.1 1.5 (0.4) (27)%
Adjusted diluted EPS KPI pence 3.4 3.9 (0.5) (13)%
Gross margin
The Clareti gross margin has continued to improve, growing from 85% in the
first half of 2022 to 86% in the first half of 2023. This is in line with our
strategy to grow high margin recurring revenues at a faster rate than our
non-recurring services business. Whilst in absolute terms the gross margin
from our legacy Other solutions & services business has reduced by £0.1m,
in percentage term this has also improved due to the change in business mix
described in the revenue section above. This combination of which has resulted
in the Group gross profit improving by £1.5m, or as a percentage of sales,
from 68% to 72%.
Adjusted EBITDA
Adjusted EBITDA (earnings before interest, tax, depreciation and amortisation)
is analysed excluding exceptional items, share-based payment charges and
amortisation from acquired intangible assets; which is consistent with the way
in which the Board reviews the financial results of the Group.
Group adjusted EBITDA has improved by £0.1m, or 2%, since the first half of
the prior year, however the margin has reduced by 1% to 19% versus the first
half of 2022. This margin reduction is as a result of our already contracted
Clareti ARR being increasingly second half weighted (as described in the ARR
section above), there having been some delays in new Clareti contracts being
signed, the impact of investments made over the last twelve months and
currency movements. We have confidence that the operational leverage,
generated by the scale and continued growth of the Clareti business, along
with the second half weighting of revenue recognition from Clareti ARR and the
strong pipeline will result in full year-on-year margin improvement as
experienced in prior years.
Cash Adjusted EBITDA
Cash adjusted EBITDA refers to adjusted EBITDA reduced by the value of
capitalised development spend and any IFRS 16 lease-related cash expenses
classified as depreciation and interest. We consider this a good measure of
cash profitability for a modern SaaS business that continues to invest in
product development to ensure it remains market leading.
Group cash adjusted EBITDA has reduced by £0.1m since the first half in the
prior year, the £0.1m improvement in Adjusted EBITDA mentioned above did not
drop straight through to cash adjusted EBITDA due to offsetting increases in
capitalised development spend and IFRS 16 lease-related cash expenses. This
resulted in the cash EBITDA margin reducing from 8% in the first half of 2022
to 7% in the first half of 2023. Like adjusted EBITDA, we expect to see
continued improvements in these margins in future years.
Statutory profit after tax and adjusted diluted EPS
There has been a decrease in statutory profit after tax of £1.1m from £1.5m
in the prior year. In addition to the performance variances discussed in
EBITDA narrative above, this is as a result of the reductions to UK government
R&D tax incentives taking effect (£0.2m impact in H1 2023) and a £0.2m
increase in the share-based payment charge as a result of ongoing share award
grants.
Adjusted diluted EPS has reduced by 13% to 3.4 pence per share. Adjusted
earnings used in this calculation adjust the statutory result after tax for
exceptional items; amortisation of acquired intangibles and share-based
payments. Exceptional expenses in the period were less than £0.1m, £0.1m
lower than the prior first half; amortisation of acquired intangibles were
consistent with the previous first half at £1.2m; and the share-based payment
charges increased to £0.6m from £0.4m as a result of grants being made under
the discretionary performance share plan in October 2022 and ongoing annual
grants under the deferred annual bonus share plan.
Cashflow
H1 2023 H1 2022 Variance %
Opening cash & cash equivalents at 1 January £m 6.3 9.1 (2.8) (31)%
Operating cash flow excluding exceptional items £m 4.5 4.5 - -
Operating cash flow from exceptional items £m - (0.2) 0.2 100%
Total operating cash flow excluding working capital £m 4.5 4.3 0.2 5%
Movement in working capital £m (2.3) (3.2) 0.9 28%
Cash inflow from operations £m 2.2 1.1 1.1 100%
Capital expenditure - development costs £m (2.5) (2.4) (0.1) (4)%
Capital expenditure - other £m (0.1) (0.3) 0.2 66%
Principal paid on lease liabilities £m (0.3) (0.3) - -
Cash outflow from operations excluding tax £m (0.7) (1.9) 1.2 (63)%
Net tax payments £m (1.1) (0.1) (1.0) (1000)%
Inforalgo acquisition (contingent consideration) £m - (0.4) 0.4 100%
Dividend £m (0.6) (0.6) - -
Other £m (0.1) 0.4 (0.5) (125)%
Net decrease in cash and cash equivalents £m (2.5) (2.6) 0.1 4%
Closing cash & cash equivalents at 30 June KPI £m 3.8 6.5 (2.7) (42)%
The Group continues to be funded from operating cash and currently has no
debt, with the cash performance of the business being aligned with
management's expectations.
Operating cashflow remains reasonably consistent with the prior first half.
The negative movement in working capital for the first half is aligned with
the traditional half year working capital cycle due to the unwinding of the
significant deferred revenue position that builds up during the fourth quarter
each year.
Net tax payments of £1.1m were made during the first half (2022: net tax
payments of £0.1m). Gross tax payments were made in the period of £1.1m
(2022: £1.2m), there were not any gross tax receipts received in the first
half in relation to the surrender of tax losses generated from R&D
activity (2022: £1.1m) although a surrender may be made in the second half.
There were no contingent consideration payments made in the first half of
2023, whereas in the first half of 2022 the final payment of £0.4m was made
in relation to the Inforalgo acquisition of July 2020.
At the time of the Electra acquisition, the Group established a USD 15m
multi-currency revolving debt facility. As announced at the time, this
facility was put in place in case required to satisfy contingent consideration
payments in relation to the Electra acquisition totalling USD 9.6m. The first
contingent consideration payment of USD 4.8m was made in full during the third
quarter of 2022, with an equivalent amount expected to be paid in the third
quarter of 2023. This payment coincides with our low cash point in our annual
working capital cycle, therefore the facility is expected to be drawn upon to
a limited extent, for a short period of time, to ensure sufficient currency
holdings are maintained before the annual build-up of cash reserves occurs.
Capital expenditure in relation to development and tangible items reduced from
£2.7m to £2.6m.
Other cashflow items in the prior period include a gain on currency
revaluations of £0.4m.
Balance Sheet
The balance sheet remains strong and consistent with management expectations
and the prior year. The significant year on year change is the contingent
consideration in respect of the Electra acquisition of £3.8m (USD 4.8m). This
movement was as a result of the first tranche being paid in full during the
third quarter of 2022, with the remaining contingent consideration expected to
be paid in the third quarter of 2023.
Financial Outlook
The strong finish to the first half, the second half weighting of recognition
of contracted Clareti ARR and the strength of the Clareti pipeline all provide
confidence in our ability to meet market expectations for Group performance
for the year.
The Group's forward-looking ARR and to a lesser degree Revenues have been
impacted by foreign exchange headwinds in the first half after a period of
significant benefit from mid-2021 until the end of 2022. Within the Income
Statement a level of natural foreign exchange hedging exists at earnings level
due to the significant portion of the cost base being denominated in USD and
AUD. The Group will monitor fluctuations and consider whether the use of
hedging instruments may be appropriate.
We have invested and will continue to further invest for growth in the Clareti
business. This investment will continue to be focused on distribution, product
and customer success to ensure we are best placed to take advantage of the
significant market opportunities. At a Group level we plan to continue to
balance this investment with ongoing incremental improvements to all earnings
margins, with our main focus being on the cash EBITDA margin. We look forward
to providing further updates throughout the year and remain confident in our
long-term strategy and outlook.
Tom Mullan
Chief Financial Officer
26 July 2023
Consolidated income statement
Notes 6 months ended 6 months ended 12 months
30 June 30 June ended
2023 2022 31 December 2022
Unaudited Unaudited Audited
£'000 £'000 £'000
Revenue 2 23,899 22,979 48,719
Cost of sales (6,673) (7,244) (14,774)
Gross profit 17,226 15,735 33,945
Adjusted administrative expenses (14,537) (12,837) (26,999)
Adjusted operating profit 2,689 2,898 6,946
Adjusting administrative items:
Exceptional costs 2 (36) (145) (153)
Amortisation on acquired intangibles (1,157) (1,157) (2,315)
Share-based payments (598) (436) (1,027)
(1,791) (1,738) (3,495)
Total administrative expenses (16,328) (14,575) (30,494)
Operating profit 898 1,160 3,451
Finance revenue 1 3 6
Finance costs (104) (99) (219)
Profit before taxation 795 1,064 3,238
Taxation 3 326 480 (356)
Profit after taxation - Attributable to owners of the Parent 1,121 1,544 2,882
Earnings per share
Statutory
Basic earnings per share - pence 4 1.34 1.85 3.46
Diluted earnings per share - pence 4 1.32 1.81 3.41
Adjusted
Basic earnings per share - pence 4 3.49 3.94 7.65
Diluted earnings per share - pence 4 3.44 3.85 7.54
Consolidated statement of comprehensive income
6 months ended 6 months ended 12 months
30 June 30 June ended
2023 2022 31 December 2022
Unaudited Unaudited Audited
£'000 £'000 £'000
Profit after taxation attributable to the Parent 1,121 1,544 2,882
Other comprehensive expense
Items that will or may be re-classified into profit or loss: 171 (907) (937)
Exchange differences on translating foreign operations
Total other comprehensive income/(expense) 171 (907) (937)
Total comprehensive income for the period 1,292 637 1,945
Consolidated statement of financial position
30 June 2023 30 June 2022 31 December 2022
Unaudited Unaudited Audited
£'000 £'000 £'000
Assets
Non-current assets
Property, plant and equipment 843 415 899
Right-of-use assets 1,334 1,181 1,592
Intangible assets 62,724 62,356 62,788
Deferred tax assets 135 1,239 -
65,036 65,191 65,279
Current assets
Trade and other receivables 6,967 5,851 6,515
Contract assets 1,938 1,922 2,558
Income tax receivable 483 417 -
Cash and cash equivalents 3,801 6,504 6,280
13,189 14,694 15,353
Total assets 78,225 79,885 80,632
Equity and liabilities
Equity attributable to owners of the Parent
Called up equity share capital 4,182 4,168 4,172
Share premium account 23,991 23,876 23,941
Own share reserve (67) (298) (296)
Other reserves 536 536 536
Foreign currency translation reserve (1,144) (1,285) (1,315)
Retained earnings 23,282 19,798 21,968
Total equity attributable to owners of the Parent 50,780 46,795 49,006
Non-current liabilities
Contract liabilities 295 571 354
Lease liabilities 738 545 953
Deferred tax liability 5,408 6,639 6,067
Provisions 143 146 146
Contingent consideration - 3,978 -
6,584 11,879 7,520
Current liabilities
Trade and other payables 16,406 16,619 19,166
Lease liabilities 632 614 709
Income tax payable - - 244
Contingent consideration 3,823 3,978 3,987
20,861 21,211 24,106
Total liabilities 27,445 33,090 31,626
Total equity and liabilities 78,225 79,885 80,632
Consolidated statement of changes in equity
Share capital Share premium Own shares Other reserves Currency translation Retained earnings Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000
At 1 January 2022 4,168 23,876 (609) 536 (378) 18,288 45,881
Attributable profit for the period - - - - - 1,544 1,544
Other comprehensive expense - - - - (907) - (907)
Total comprehensive (expense)/income - - - - (907) 1,544 637
Share-based payment expense - - - - - 436 436
Transfer of own shares held by Employee Share Ownership Trust to employees - - 311 - - 152 463
Dividend - - - - - (622) (622)
At 30 June 2022 4,168 23,876 (298) 536 (1,285) 19,798 46,795
At 1 January 2022 4,168 23,876 (609) 536 (378) 18,288 45,881
Attributable profit for the period - - - - - 2,882 2,882
Other comprehensive expense - - - - (937) - (937)
Total comprehensive (expense)/income - - - - (937) 2,882 1,945
Exercise of share options 4 65 - - - - 69
Share-based payment expense - - - - - 1,027 1,027
Deferred tax movement in respect of share options - - - - - 301 301
Transfer of own shares held by Employee Share Ownership Trust to employees - - 313 - - 92 405
Dividend - - - - - (622) (622)
At 31 December 2022 4,172 23,941 (296) 536 (1,315) 21,968 49,006
Attributable profit for the period - - - - - 1,121 1,121
Other comprehensive income - - - - 171 - 171
Total comprehensive income - - - - 171 1,121 1,292
Exercise of share options 10 50 - - - - 60
Share-based payment expense - - - - - 598 598
Transfer of own shares held by Employee Share Ownership Trust to employees - - 229 - - 221 450
Dividend - - - - - (626) (626)
At 30 June 2023 4,182 23,991 (67) 536 (1,144) 23,282 50,780
Consolidated statement of cashflows
6 months ended 6 months ended 12 months ended
30 June 30 June 31 December 2022
2023 2022 Audited
Unaudited Unaudited
£'000 £'000 £'000
Cashflows from operating activities
Profit after taxation 1,121 1,544 2,882
Depreciation of property, plant and equipment 163 71 191
Amortisation of intangible assets 2,578 2,348 4,723
Amortisation of right-to-use assets 281 313 714
Share-based payments 598 436 1,027
(Increase)/decrease in trade and other receivables (638) 68 (886)
Decrease/(increase) in contract assets 564 (139) (775)
(Decrease)/increase in trade and other payables (2,028) (1,271) 1,560
Decrease in contract liabilities (238) (1,874) (199)
Decrease in sales tax provision arising on acquisition - - (496)
Taxation (326) (480) 356
Net finance costs 103 96 213
Cash inflow from operations 2,178 1,112 9,310
Income taxes received 3 1,103 2,473
Income taxes paid (1,144) (1,199) (1,893)
Net cash inflow from operating activities 1,037 1,016 9,890
Cash flows from investing activities
Interest received 1 3 6
Purchase of property, plant and equipment (133) (295) (806)
Payments of contingent consideration on acquisition of Inforalgo - (369) (369)
Payments of contingent consideration on acquisition of Electra - - (3,987)
Payments to acquire intangible fixed assets (2,521) (2,392) (5,195)
Net cash used in investing activities (2,653) (3,053) (10,351)
Cash flows from financing activities
Interest paid (63) (48) (138)
Principal paid on lease liabilities (309) (329) (645)
Dividends paid (626) (622) (622)
Share issue proceeds (net of costs) 53 - 69
Net cash used in financing activities (945) (999) (1,336)
Net decrease in cash and cash equivalents (2,561) (3,036) (1,797)
Cash and cash equivalents at beginning of period 6,280 9,139 9,139
Exchange adjustments 82 401 (1,062)
Cash and cash equivalents at end of period 3,801 6,504 6,280
Notes to the interim report
1. Basis of preparation
Gresham Technologies plc (LSE: "GHT", "Gresham" or the "Company" or the
"Group" or the "Parent") is a Public limited company and is listed on the
London Stock Exchange. The Company's registered address is Aldermary House, 10
- 15 Queen Street, London, EC4N 1TX and the Company's registration number is
1072032.
These condensed interim financial statements are unaudited, have not been
reviewed by the Group's auditors, and do not constitute statutory accounts
within the meaning of the Companies Act 2006.
These condensed interim financial statements have been prepared on a going
concern basis and in accordance with IAS 34 'Interim Financial Reporting', the
Disclosure and Transparency Rules and the Listing Rules of the Financial
Conduct Authority, and were approved on behalf of the Board by the Chief
Executive Officer Ian Manocha and Chief Financial Officer Tom Mullan on 26
July 2023.
The accounting policies and methods of computation applied in these condensed
interim financial statements are consistent with those applied in the Group's
most recent annual financial statements for the year ended 31 December 2022.
The financial statements for the year ended 31 December 2022, which were
prepared in accordance with UK adopted International Financial Reporting
Standards ("IFRSs"). The auditors' opinion on those financial statements was
unqualified and did not contain a statement made under s498(2) or (3) of the
Companies Act 2006.
Copies of these condensed interim financial statements and the Group's most
recent annual financial statements are available from the Group's website
www.greshamtech.com or by writing to the Company Secretary at the Company's
registered office.
2. Segmental information
The segmental disclosures reflect the analysis presented on a monthly basis to
the chief operating decision maker of the business, the Chief Executive and
the Board of Directors.
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; and
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.
6 months ended 30 June 2023 (unaudited) - Segmental Information
Other Solutions
Clareti Solutions Software Contracting Consolidated
Services
Revenue 18,028 2,419 3,452 23,899
Cost of sales (2,457) (1,183) (3,033) (6,673)
Gross profit 15,571 1,236 419 17,226
Gross profit % 86% 51% 12% 72%
Adjusted administrative expenses (14,467) (70) - (14,537)
Adjusted operating profit 1,104 1,166 419 2,689
Adjusted operating margin % 6% 48% 12% 11%
Adjusting items:
Exceptional costs (36)
Amortisation of acquired intangibles (1,157)
Share-based payments (598)
Adjusting administrative expenses (1,791)
Operating profit 898
Finance revenue 1
Finance costs (104)
Profit before taxation 795
Taxation 326
Profit after taxation 1,121
Adjusted operating profit 2,689
Amortisation of intangibles 1,421
Depreciation of property, plant and equipment 163
Amortisation of right-of-use assets 281
Adjusted EBITDA 4,554
Development costs capitalised (2,521)
Principal paid on lease liabilities (309)
Cash adjusted EBITDA 1,724
Segment assets 78,225
Segment liabilities (27,445)
6 months ended 30 June 2022 (unaudited) - Segmental Information
Other Solutions
Clareti Solutions Software Contracting Consolidated
Services
Revenue 16,381 2,430 4,168 22,979
Cost of sales (2,381) (1,218) (3,645) (7,244)
Gross profit 14,000 1,212 523 15,735
Gross profit % 85% 50% 13% 68%
Adjusted administrative expenses (12,782) (55) - (12,837)
Adjusted operating profit 1,218 1,157 523 2,898
Adjusted operating margin % 7% 48% 13% 13%
Adjusting items:
Exceptional costs (145)
Amortisation of acquired intangibles (1,157)
Share-based payments (436)
Adjusting administrative expenses (1,738)
Operating profit 1,160
Finance revenue 3
Finance costs (99)
Profit before taxation 1,064
Taxation 480
Profit after taxation 1,544
Adjusted operating profit 2,898
Amortisation of intangibles 1,191
Depreciation of property, plant and equipment 71
Amortisation of right-of-use assets 313
Adjusted EBITDA 4,473
Development costs capitalised (2,392)
Principal paid on lease liabilities (329)
Cash adjusted EBITDA 1,752
Segment assets 79,885
Segment liabilities (33,090)
Adjusted EBITDA
Adjusted EBITDA is calculated as EBITDA excluding exceptional items and
share-based payments, reconciled as follows:
6 months 6 months 12 months ended
ended ended 31 December 2022
30 June 30 June Audited
2023 2022
Unaudited Unaudited
£'000 £'000 £'000
Profit before taxation 795 1,064 3,238
Adjusting items:
Amortisation of intangibles 2,578 2,348 4,723
Depreciation of property, plant and equipment 163 71 191
Amortisation of right-to-use assets 281 313 714
Notional interest on lease liabilities 23 20 45
Finance revenue (1) (3) (6)
Interest payable 81 79 174
EBITDA 3,920 3,892 9,079
Exceptional items 36 145 153
Share-based payments 598 436 1,027
Adjusted EBITDA 4,554 4,473 10,259
Exceptional items
An analysis of exceptional items included within the Income statement is
disclosed below:
6 months 6 months ended 12 months ended
ended 30 June 31 December 2022
30 June 2022 Audited
2023 Unaudited
Unaudited
£'000 £'000 £'000
Acquisition and associated integration costs - 145 153
Costs associated with the closure of EDT business 36 - -
36 145 153
3. Taxation
6 months 6 months ended 12 months ended
ended 30 June 31 December 2022
30 June 2022 Audited
2023 Unaudited
Unaudited
£'000 £'000 £'000
Current income tax
Overseas tax credit - adjustment to previous periods - - 45
Overseas tax charge - current period 743 719 1,570
UK corporation tax credit - adjustment to previous periods - - (1,293)
Total current income tax 743 719 322
Deferred income tax
Movement in net deferred tax asset (1,069) (1,199) 34
Total deferred income tax (1,069) (1,199) 34
Total (credit)/charge in the income statement (326) (480) 356
The prior period UK corporation tax prior period adjustment to prior periods
relates to the cash credit received upon the surrender of losses.
4. Earnings per ordinary share
Basic earnings per share amounts are calculated by dividing net profit for the
period attributable to ordinary equity holders of the Parent by the weighted
average number of ordinary shares outstanding during the period.
Diluted earnings per share amounts are calculated by dividing the net profit
attributable to ordinary equity holders of the Parent by the weighted average
number of ordinary shares outstanding during the period 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.
The following reflects the earnings and share data used in the basic and
diluted earnings per share computations:
6 months 6 months 12 months ended
ended ended 31 December 2022
30 June 30 June Audited
2023 2022
Unaudited Unaudited
Basic weighted average number of shares 83,549,651 83,364,458 83,393,061
Dilutive potential ordinary shares
Employee share options - weighted 1,179,432 1,799,004 1,133,957
Diluted weighted average number of shares 84,729,083 85,163,462 84,527,018
6 months 6 months 12 months ended
ended ended 31 December 2022
30 June 30 June Audited
2023 2022
Unaudited Unaudited
£'000 £'000 £'000
Adjusted earnings attributable to owners of the Parent 2,912 3,282 6,377
Adjusting items:
Exceptional items (36) (145) (153)
Amortisation of acquired intangibles (1,157) (1,157) (2,315)
Share-based payments (598) (436) (1,027)
Statutory earnings attributable to owners of the Parent 1,121 1,544 2,882
Earnings per share:
Statutory
Basic earnings per share - pence 1.34 1.85 3.46
Diluted earnings per share - pence 1.32 1.81 3.41
Adjusted
Basic earnings per share - pence 3.49 3.94 7.65
Diluted earnings per share - pence 3.44 3.85 7.54
There have been no transactions involving ordinary shares or potential
ordinary shares between the reporting date and the date of completion of this
interim statement.
5. Dividends paid and proposed
Amounts recognised as distributions to equity holders during the period:
6 months 6 months ended 12 months ended
ended 30 June 31 December 2022
30 June 2022 Audited
2023 Unaudited
Unaudited
£'000 £'000 £'000
Final dividend
Final dividend for the year ended 31 December 2022 of 0.75 pence per share 626 - -
Final dividend for the year ended 31 December 2021 of 0.75 pence per share - 622 622
626 622 622
6. Statement of directors' responsibilities
The Directors are responsible for preparing the half-yearly financial report,
in accordance with applicable law and regulations.
The Directors confirm, to the best of their knowledge, that this condensed set
of financial statements:
· has been prepared in accordance with IAS 34; and
· includes a fair review of the information required by Rules 4.2.7
and 4.2.8 of the Disclosure and Transparency Rules of the United Kingdom
Financial Conduct Authority (as detailed in the Chief Executive review).
The principal risks and uncertainties facing the Group for the period ending
30 June 2023 and anticipated for the remainder of the year ended 31 December
2023; remain consistent with those disclosed in the Group's financial
statements for the year ended 31 December 2022, which are available from
www.greshamtech.com (http://www.greshamtech.com) .
7. Related party transactions
No related party transactions have taken place during the first six months of
the year that have materially affected the financial position or performance
of the Company.
Key management compensation
6 months 6 months ended 12 months ended
ended 30 June 31 December 2022
30 June 2022 Audited
2023 Unaudited
Unaudited
£'000 £'000 £'000
Directors' emoluments
Remuneration 334 326 652
Bonuses 69 129 298
Pension 11 11 22
Share-based payment charges 296 151 406
710 617 1,378
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 IR FELLLXDLEBBXRecent 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