REG - Gresham Technologies - Trading Update

Gresham TechnologiesAnnouncement

17/11/2023 07:00

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RNS Number : 7602T  Gresham Technologies PLC  17 November 2023

RNS

17 November 2023

Gresham Technologies plc

Trading Update

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 provide an update on trading and the discontinuation
of its legacy IT contracting services business.

FY23 performance and outlook

The Company expects FY23 Group revenues and earnings to be in-line with market
expectations. At the end of October, the Company had 98% of expected revenues
already recognised or under contract and expected to be recognised prior to
year-end. The Company continues to have a solid pipeline of opportunities from
both new and existing customers and expects to close additional Clareti
subscription business before the end of the year which will contribute to the
Group's Annualised Recurring Revenue ("ARR") and FY24 planned revenues.

Discontinuation of legacy IT contracting services business

The Company benefits from a long-standing relationship with Australia and New
Zealand Banking Group Limited (the "Bank"), the Group's largest customer by
revenue. The Bank was an early adopter of Clareti and continues to expand the
use of this software. In recent years the Bank has also been a development
partner of the Company's Floe product and is also expected to expand the use
of this innovative banking solution.

As previously disclosed, the Bank's contractual arrangements with Gresham also
include lower margin legacy non-Clareti agreements covering: the provision of
IT contractors; the re-selling of third-party software; and the provision of
consulting and managed services. These legacy businesses pre-date the Clareti
business, operate at a lower margin to Clareti, and as previously stated are
not considered strategic to the future development of the Group or the
creation of long-term value for our shareholders. Over recent years the
Company has taken strategic decisions to substantially reduce exposure to
these non-core offerings in order to focus on the high-margin Clareti
opportunity.

The Company has substantially completed negotiations with ANZ regarding the
renewal of existing business through 2024 and expects ANZ to renew all Clareti
Control, Floe and re-sold third party VBT software licences for the period.

In consultation with ANZ, the Company has agreed to completely exit the lower
margin legacy sub-contracting business under which locally based freelance IT
contractors are provided to the Bank on short-term agreements. The Company
expects to recognise £8.5m in revenue from these agreements in FY23 with
fixed margins of 13% and will discontinue the business from January 2024.

The majority of the sub-contracting business has been reported as its own
contracting services business segment, with a smaller proportion being
reported within Clareti non-recurring revenue where a small number of
contractors have been provided specifically as part of the Floe project.

In line with the Group's strategy, these changes will accelerate the Group's
transformation to a pure-play SaaS company and lead to an immediate
improvement in gross and adjusted EBITDA margins.

FY24 Outlook

Except for the reduction to revenues directly attributable to the
discontinuation of the IT contracting line of business, the Company is making
no other material changes to its guidance for FY24 revenues.

Since the move to a Clareti subscription model in 2019, and the acquisition of
Electra in 2021, the Company benefits from a strong base of recurring
revenues. Clareti recurring revenues now account for 75% of FY24 planned Group
revenues on a like for like basis excluding the discontinued contracting
services business. Whilst the macro-environment is expected to remain
challenging, the above factors support management's confidence in the Clareti
business and prospects for on-going growth.

Ian Manocha, CEO commented:

"We are pleased to have supported ANZ for more than a decade to meet their
need for skilled IT resources and will now focus on Clareti solutions where
ANZ continues to be an important partner.

Discontinuing our IT contracting business will further accelerate our plan to
become a pure-play subscription software company and enable us to focus on
creating long-term value through our high-margin Clareti solutions. Whilst it
has been a difficult year for financial markets, and customer budgets are
expected to remain fairly tight, we have a solid pipeline of Clareti
opportunities and a strategic plan aligned to customer priorities."

 

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 Strategic Communications                          +44 (0) 203 405 0205
 Josh Royston / Hilary Buchanan / Matthew Young

 

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.

 

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