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Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
---|---|---|---|---|---|
Gresham Technologies Plc | AQSE:GHT.GB | Aquis Stock Exchange | Ordinary Share | GB0008808825 |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 162.50 | 160.00 | 165.00 | 162.50 | 162.50 | 162.50 | 0.00 | 06:51:11 |
Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
---|---|---|---|---|---|
0 | 0 | N/A | 0 |
TIDMGHT
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'
F inancial 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 GBP3.8m 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 HY Growth Growth 2023 2022 % (Actual) % GBPm GBPm (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 GBP50.2m and adjusted EBITDA of GBP11.0m, with GBP53.9m and GBP13.5m; and GBP59.4m 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 GBP48 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
+44 (0) 207 653 Gresham Technologies plc 0200 Ian Manocha / Tom Mullan Singer Capital Markets (Financial Adviser and +44 (0) 207 496 Broker) 3000 Shaun Dobson / Tom Salvesen / Jen Boorer +44 (0) 203 405 Alma PR 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 .
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 GBP1.1m (GBP0.5m 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 H1 Variance % 2023 2022 Clareti Clareti ARR at ARR start of period GBPm 28.1 24.0 4.1 17% Increase in ARR GBPm 1.1 1.1 - - Currency impact GBPm (0.6) 1.0 (1.6) (160)% ------ ------ --------- ------- Clareti ARR at end of period KPI GBPm 28.6 26.1 2.5 10% ------ ------ --------- ------- Other ARR Other ARR GBPm 3.2 3.3 (0.1) (3)% ------ ------ --------- ------- Group ARR Group ARR GBPm 31.8 29.4 2.4 8%
Clareti ARR experienced growth of GBP2.5m or 10% (12% cc) over the previous 12 months. Excluding currency fluctuations, growth in both the first half of 2023 and 2022 was GBP1.1m. 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. GBP24.2m of current ARR is recognised monthly with GBP4.4m 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 GBP48.0m 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 GBP0.3m and earnings less than GBP0.1m.
H1 2023 H1 2022 Variance % on constant currency basis Actual Constant basis currency basis Group revenue GBPm 23.9 24.2 23.0 1.2 5% ------- ---------- -------- ------------- ---- Group gross margin GBPm 17.2 17.3 15.7 1.6 10% Group gross margin % % 72% 71% 68% 3% ------- ---------- -------- ------------- ---- Group Adjusted EBITDA GBPm 4.6 4.7 4.5 0.2 4 % Group Adjusted EBITDA % % 19% 19% 20% (1)% ------- ---------- -------- ------------- ---- Cash adjusted EBITDA GBPm 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 GBPm 13.8 12.5 1.3 10% Non-recurring GBPm 4.2 3.9 0.3 8% ---------------------- -------------------------- -------- -------- --------- ------ Total Clareti revenues KPI GBPm 18.0 16.4 1.6 10% Other solutions & services Recurring GBPm 2.1 2.0 0.1 5% Non-recurring GBPm 3.8 4.6 (0.8) (17)% ---------------------- --------------------------- -------- -------- --------- ------ Total GBPm 5.9 6.6 (0.7) (11)% ---------------------- -------------------------- -------- -------- --------- ------ Group Total KPI GBPm 23.9 23.0 0.9 4% --------------- ----- ------- -------- -------- --------- ------
Clareti Solutions
Clareti recurring revenues increased by 10%, up from GBP12.5m to GBP13.8m 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 GBP0.3m 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 GBP0.2m 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 GBP2.1m.
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 GBP4.6m to GBP3.8m 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 H1 2022 Variance % 2023 Clareti Solutions Gross margin GBPm 15.6 14.0 1.6 11% Gross margin % 86% 85% 1% N/a Other solutions & services Gross margin GBPm 1.6 1.7 (0.1) (6)% Gross margin % 27% 26% 1% N/a Group Gross margin GBPm 17.2 15.7 1.5 10% Gross margin % 72% 68% 4% N/a Adjusted EBITDA KPI GBPm 4.6 4.5 0.1 2% Adjusted EBITDA KPI % 19% 20% (1)% N/a ------------------------ ------ ------------------------- ---------- -------- --------- ------ Cash Adjusted EBITDA KPI GBPm 1.7 1.8 (0.1) (6)% Cash Adjusted EBITDA KPI % 7% 8% (1)% N/a ------------------------ ------ ------------------------- ---------- -------- --------- ------ Statutory profit after tax GBPm 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 GBP0.1m, 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 GBP1.5m, 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 GBP0.1m, 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 GBP0.1m since the first half in the prior year, the GBP0.1m 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 GBP1.1m from GBP1.5m 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 (GBP0.2m impact in H1 2023) and a GBP0.2m 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 GBP0.1m, GBP0.1m lower than the prior first half; amortisation of acquired intangibles were consistent with the previous first half at GBP1.2m; and the share-based payment charges increased to GBP0.6m from GBP0.4m 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 H1 Variance % 2023 2022 Opening cash & cash equivalents at 1 January GBPm 6.3 9.1 (2.8) (31)% Operating cash flow excluding exceptional items GBPm 4.5 4.5 - - Operating cash flow from exceptional items GBPm - (0.2) 0.2 100% Total operating cash flow excluding working capital GBPm 4.5 4.3 0.2 5% Movement in working capital GBPm (2.3) (3.2) 0.9 28% ------------------------------------------ ------ ------ ------ --------- -------- Cash inflow from operations GBPm 2.2 1.1 1.1 100% Capital expenditure - development costs GBPm (2.5) (2.4) (0.1) (4)% Capital expenditure - other GBPm (0.1) (0.3) 0.2 66% Principal paid on lease liabilities GBPm (0.3) (0.3) - - ------------------------------------------ ------ ------ ------ --------- -------- Cash outflow from operations excluding tax GBPm (0.7) (1.9) 1.2 (63)% Net tax payments GBPm (1.1) (0.1) (1.0) (1000)% Inforalgo acquisition (contingent consideration) GBPm - (0.4) 0.4 100% Dividend GBPm (0.6) (0.6) - - Other GBPm (0.1) 0.4 (0.5) (125)% ------------------------------------------ ------ ------ ------ --------- -------- Net decrease in cash and cash equivalents GBPm (2.5) (2.6) 0.1 4% ------------------------------------------ ------ ------ ------ --------- -------- Closing cash & cash equivalents at 30 June KPI GBPm 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 GBP1.1m were made during the first half (2022: net tax payments of GBP0.1m). Gross tax payments were made in the period of GBP1.1m (2022: GBP1.2m), 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: GBP1.1m) 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 GBP0.4m 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 GBP2.7m to GBP2.6m.
Other cashflow items in the prior period include a gain on currency revaluations of GBP0.4m.
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 GBP3.8m (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 6 months 12 months ended ended ended 30 June 30 June 31 December 2023 2022 2022 Unaudited Unaudited Audited GBP'000 GBP'000 GBP'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 6 months 12 months ended ended ended 30 June 30 June 31 December 2023 2022 2022 Unaudited Unaudited Audited GBP'000 GBP'000 GBP'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: Exchange differences on translating foreign operations 171 (907) (937) -------------------------------------------- ----------- ----------- ------------- 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 30 June 31 December 2023 2022 2022 Unaudited Unaudited Audited GBP'000 GBP'000 GBP'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 Share Own Other Currency Retained Total capital premium shares reserves translation earnings GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'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 6 months 12 months ended ended ended 30 June 30 June 31 December 2023 2022 2022 Unaudited Unaudited Audited GBP'000 GBP'000 GBP'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 Contracting Solutions Software Services Consolidated 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 Contracting Solutions Software Services Consolidated 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 30 June 30 June 31 December 2023 2022 2022 Unaudited Unaudited Audited GBP'000 GBP'000 GBP'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 12 months ended ended ended 30 June 30 June 31 December 2023 2022 2022 Unaudited Unaudited Audited GBP'000 GBP'000 GBP'000 ------------------------------------------ ----------- ----------- ------------- Acquisition and associated integration costs - 145 153 Costs associated with the closure of EDT 36 - - business ------------------------------------------ ----------- ----------- ------------- 36 145 153 ------------------------------------------ ----------- ----------- ------------- 3. Taxation 6 months 6 months 12 months ended ended ended 30 June 30 June 31 December 2023 2022 2022 Unaudited Unaudited Audited GBP'000 GBP'000 GBP'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 30 June 30 June 31 December 2023 2022 2022 Unaudited Unaudited Audited 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 30 June 30 June 31 December 2023 2022 2022 Unaudited Unaudited Audited GBP'000 GBP'000 GBP'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 12 months ended ended ended 30 June 30 June 31 December 2023 2022 2022 Unaudited Unaudited Audited GBP'000 GBP'000 GBP'000 ------------------------------------- ----------- ----------- -------------- Final dividend Final dividend for the year ended 626 - - 31 December 2022 of 0.75 pence per share 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 .
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 12 months ended ended ended 30 June 30 June 31 December 2023 2022 2022 Unaudited Unaudited Audited GBP'000 GBP'000 GBP'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 ----------------------------- ----------- ----------- --------------
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