Gresham Technologies Share Discussion Threads

[inforprofit] 15/3/2017 19:47

Report of the PI shareholders presentation - further update.

Sorry I did not cover the non CTC revenues, guess I should have done.

There are two main elements to this, legacy products which have a very high margin due to low support costs and some contract services called I think GCIS. Whilst the legacy products are in slow decline (but also covered by RPI increases) there is an expectation of a gradual decline over a ten year period.

The GCIS services are Australian based and have a low 15% margin but a high turnover, circa £3 million, I think the client is ANZ. According to GHT, this is expected to increase in 2017 and there was no indication of it ending any time soon, even if it did then this low margin business would be replaced by high margin CTC business (because overall turnover still increases) so although the turnover would be adversely effected by losing GCIS I think the profit would actually increase relative to turnover.

All this is I believe explained in the annual report.

Hope that helps.

[double double] 15/3/2017 19:13

Could it be that one or more of the non CTC businesses are sold and therefore most of if not all of the 2018 forecast revenues are expected from CTC only.

[nurdin] 15/3/2017 19:07

Yes thanks inforprofit.

To my mind N Singers 2018 forecasts are absurd....question is are they based on companys guidance?

[mick bell] 15/3/2017 18:40

Ditto, greatly appreciated.

[double double] 15/3/2017 18:31

Thanks inforprofit.

[inforprofit] 15/3/2017 18:19

Report of the PI shareholders presentation.

Well a total of four hardy soles turned up today and we met with the full executive management team - Ian Manocha (CEO), Robb Grubb (CFO) and Jonathan Cathie (Council). The presentation was the same as was made to the analyst community yesterday - 6/7 analysts turned up apparently and GHT were pleased with the attendance.

This meeting and the analyst one are part of the revised communication strategy and Ian Manocha stated that they needed to change from that used in 2016 since they had not been doing it right. Apparently, material announcements will still be subject to RNS, but noteworthy items will be published on the GHT website, ordinary business will not get mentioned.

The presentation is available on the GHT website and is a very good reflection of what was said since the presentation today was essentially a walk through of this, so if you missed out today then you can get very good idea from here - hxxps://www.greshamtech.com/wp-content/uploads/2017/03/AFRA2016-Investors-Presentation-140317.pdf

I have never met Ian Manocha before and he came across as a likeable and very genuine chap. IM reflected upon the good progress made in 2016 (and in 2015 after a disappointing 2014) saying that his only slight disappointment was the slower than expected progress in building a Clareti ARM (Receivables Management) pipeline for Global Transaction Banks, all other targeted actions had been accomplished.

11 new Clareti wins were made in 2016 (same as 2015) and IM is very confident that this (minimum) run rate will be achieved in 2017, already 3 sales have been concluded as of March 13th. The major growth area is expected to be the USA, followed by strong sales in the UK/Europe. Most sales will be On-premise but perhaps Cloud sales will be around 20%.

IM was particularly pleased that Gresham had been awarded the category winner for Data Integrity and Control by Chartis and that GHT had moved up to 38 in their Top 100 list. He pointed out that Gresham was ahead of Smartstream and was grouped in the category leader section with heavy weights Oracle, IBM, FIS. GHT scored very highly for strategy, customer satisfaction, innovation and core technology.

IM stated that C24 integration was essentially complete with the benefits expected being realised. C24 customer satisfaction remains high, there had been no licence cancellations and some four new sales (a true upside from the acquisition) had been made. The acquisition added 35 (CTC) clients and there were only three overlaps with GHT so 32 new customer additions. C24 clients have been included in CTC as Clareti Adapters and provides additional value add to CTC. The C24 technology is mature but the skilled developers have been redeployed onto Clareti Data Accelerator. The success of this acquisition has strengthened the case for further acquisitions, perhaps even in 2017, watch this space I guess!

Looking forward to 2017 additional products (to ARM and CTC) will start to make a contribution, making 5 product offerings in total:-

Clareti Analytics has been developed to provide a management Dashboard function - April 2017

Clareti Loan Control with Mountstreet now live and gaining transtion

Clareti Data Accelerator (using C24 development resources) - Sept 2017.

Now comes what I consider to be the only negative in the presentation, that being the house broker (N1 Singer) forecasts. We were also given a copy of their analyst note which includes comments such as:-

"The shares have performed well, up 37% in the last 3 months, but we believe favourable structural demand drivers, a highly competitive and differentiated product set and a strong management team will continue to drive the shares.

We believe the group's highly competitive product set and strong management team combined with the markets need for agile but highly scalable solutions that can help manage risk will help the group achieve its ambition of becoming a global leader in enterprise data integrity."

The 2017 forecast remains unaltered at £20 million turnover and a PBT of £4 million (2016 was £17.2 and £2.7 respectively), in 2018 the growth slows markedly to £21.5 and £4.6. When asked how the 2018 figures were arrived at, given the strength of opportunity and recent performance of GHT, the reply was that 'it was a measured response'. This in my opinion is a polite way of the GHT management expressing disappointment at such a low number, the 2018 forecast does not reflect the presentation.

So for me the meeting ended on a little bit of a low note but my overriding opinion is that this is a BUY, as always DYOR.

Well not quite, right at the very end IM said that the GHT team has adopted a new tag line - Challenger to Champion in 2017!!!!!!!!!!

Is this the break through year for GHT? As I said above I reckon it is a BUY.

[schytalk] 15/3/2017 10:45

D+H to merge with Misys.

How will this effect GHT, an opportunity?

[4-10] 15/3/2017 09:34

"Finally I am going to the presentation tomorrow and I wondered if others that are attending might want to meet up afterwards for a beer or a coffee. I am a seventy year old grey haired geezer (although in decent shape if I say so myself!).

I will be wearing a dark double breasted blazer and a casual open necked dark blue shirt with narrow white stripes."

Rich sartorial elegance or what, sorry I can't be there my fellow investors too far to come from my Devon country pile, good luck all and let's get this moving forward.
4-10

[nurdin] 14/3/2017 19:35

It is worth rereading SCSW write up on GHT in their February issue,if you subscribe to the newsletter. Some nice nuggets there which would help lift the depression that holders appear to be suffering from after the results today.Here is their conclusion:

Expanding its capabilities
Equally intriguing about Gresham is what the future may hold with Manocha adding a raft of new applications to his Clareti data integrity platform. There are now three new products in the suite.
In 2017, he will launch Clareti Data Accelerator. He says large financial institutions have data flying in so fast that they can’t just use old school thinking to build systems. For instance, a simple example, a bank might use Accelerator to call all its risk data and financial data into the system in order to calculate Basel 3 liquidity risk. It might use it to ensure the transactions are accurate and all the records are complete and valid.
To add to his skillset in this area Manocha also announced the first Clareti-related acquisition, C24 Technologies, for £4.5m last year. It was really a “dream team” combination and comes with £2m of sales, almost all repeat in nature, on which it made an adjusted £0.6m pretax profit. As Manocha says, Swift, the banks’ consortium that sets global standards for interoperability, wants data sent to them in a certain way. C24 has 40 “feed handlers” for converting data from one industry standard financial messaging network to another (eg. Swift MT/MX, ISO 200202, FpML) and having this capability is key to winning Tier 1 work.
Alongside that, Gresham has launched Clareti Accounts Receiveable and ANZ is offering this under its own name on a white label basis. A fourth product, Clareti Loan Control, has also been launched in conjunction with a third party debt servicing company.
For the current year to 31 December, Cantor Fitzgerald forecasts total sales to climb to £20.3m, up from £17.2m in the year just ended. Profit is set to climb from £2.8m to £4.2m if they are anywhere near the mark. Based on eps of 6.4p the shares may look expensive but further tier 1 wins are expected in the current year. The company already has direct sales offices in London, New York, Singapore and Australia and the 80%+ gross margins on software and very high “drop through” create an exciting entry point. Buy.

[double double] 14/3/2017 19:15

Your on fire tonight richjp. Appreciate your analysis. I had adjusted to and am happy for steady as she goes.

I have ticket but wait to see my work commitments tomorrow.

[richjp] 14/3/2017 18:55

Finally I am going to the presentation tomorrow and I wondered if others that are attending might want to meet up afterwards for a beer or a coffee. I am a seventy year old grey haired geezer (although in decent shape if I say so myself!).

I will be wearing a dark double breasted blazer and a casual open necked dark blue shirt with narrow white stripes.

[richjp] 14/3/2017 18:49

Gottafly, I am with miti on this one. N+1 Singer are anyway the house broker and will have probably more data available than Cantor.

Why are you worried about the changes in the spread? That is the sort of thing that can happen with any small cap stock, particularly on something like a results day. I would try not to worry about the share price on a day to day basis, although I know that is easier said than done.

The share price has come a long way since the end of last year and it is not unreasonable to expect a period of consolidation.

[richjp] 14/3/2017 18:41

I was initially a bit disappointed as I thought that the presentations today and tomorrow sort of implied that something major in a strategic sense might be announced.

What the results today have done is to add flesh to the news we already had. By the way it is not unusual for a company’s share price to drop back on a results day. As the old stock market saying goes “Buy on the rumour, sell on the fact”.

What I think we have is a continuation of the steady but unspectacular growth we have seen before. I will also repeat what I have said before, that selling a product like CTC takes time. It is not like selling shrink wrapped software and one or two people on this message board might want to consider if they should be a bit more conservative with their expectations. The report makes clear how selectively they have to use their sales resources.

The house broker forecasts may be cautious however there are positives.

Firstly GHT appear to be on the outlook for further acquisitions which would not be in the broker forecast. I am not always a fan of acquisitions however they got it right with C24 and let us hope they can get it right again.

Secondly I was for a long time cautious about cash flow however they are forecasting £10M for then of 2018. That will be after taking into account that they still have to pay the owners of C24 £1.1M between now and the of 2018 subject to certain criteria being met which I am sure will happen. It seems even more likely that they will pay a divi during the course of 2018 and even if that is initially small, I would have expected the broker to have factored that in. Dare I say it, but the cash position now looks increasingly strong.

[gottafly] 14/3/2017 18:30

miti 1000

I don't think N1 Singer have any appetite for GHT, they are luke warm at best and need to be replaced IMHO. It took Cantor intervention to provide a new insight and lift the share price Brokers exist to make money of course so perhaps N1 Singer are 'doing nicely' somehow, what they are not doing is providing any form of revised opinion as regards the state of GHT. The fact remains that their 2018 (unrevised) is at serious odds to the management forecast so something is wrong somewhere.

[miti 1000] 14/3/2017 18:13

I've read the full Singer note and they have just introduced 2018 figures and barely give much increase in revenues over 2017. Delivery of a few more of those promised Tier 1 contacts will get those upgraded.

Cantor's note makes no estimates for 2018 other than to say they can see GHT producing revenues over £30 million in 5 years .

The investment case is more about FCF now the heavy investment has been done. Good enough for me. Beat low expectations and force them to upgrade. Its a good formula.

[gottafly] 14/3/2017 17:52

So the day ended with an share price of 157 on a bid/offer spread of 157/158.

150k shares traded and then suddenly the bid/offer spread goes to 148/158, what the heck is going on, manipulation to tease shares out of the small PI for major new investors.

You couldn't make this up.

[miti 1000] 14/3/2017 17:51

Gottafly ,
Whilst I understand your point, its better to have lower expectations and beat them and then upgrade them at regular intervals.

[4-10] 14/3/2017 16:18

Richard Holway's firms seems to like the announcement

Gresham Technologies building momentum

Peter Roe, 10:27, 14 March 2017


Full year results today confirm the excellent progress over the past year. This newly-christened provider of real-time transaction control and data integrity solutions (formerly Gresham Computing) returned revenues up 16% to £17.2m and Adjusted EBITDA ahead by 41% to £3.8m.

Central to the growth of Gresham Technologies is the Clareti Transaction Control (CTC) software which delivered 11 new customer wins throughout 2016, with revenues from this solution up 42% to £7.5m. Newly acquired C24 Technologies added £0.3m of revenues, bringing 35 new customers to the Group. Revenues elsewhere in the Group, from the legacy licensing and services business remained stable.

The investment in sales and marketing over the past 2 years is paying off. In the US, the group had success in Financial Services, with a hedge fund becoming the first client for the cloud-delivered version of the Clareti solution, and growth in the asset management sector. In late 2016 a Tier-1 bank bought the CTC offering to support a major transformation of its data operations. The US looks as if it will be the source of significant growth. The Asia-Pac operation is currently focused on a Singaporean bank and on sales to and through ANZ. The UK business remains strong, with growth in the hedge fund and on-line trading sectors as well as growing momentum in insurance broking and now commodities trading. Continental European sales have also advanced strongly in the first part of 2017.

The broad range of use cases for the CTC solution and the "stickiness" of the solution can provide the management with substantial confidence in terms of growth and improved margin throughout 2017. The addition of C24 and the push to develop new applications to extend the capabilities of CTC should ensure further profitable progress, particularly in the financial services sector.

[gottafly] 14/3/2017 15:34

dd

Agree with your logic as regards the growth potential and the extrapolation at circa 40%. Given GHT's ofering(s) in a hot space this is reasonable. Then why or why do N1 Singer come up with a 6/7% increase for 2018? Ok let us allow for a decline in the legacy stuff and double these numbers but 12/14% is still way off the mark! Is it April the 1st.

[double double] 14/3/2017 14:47

My guess is small private investors got bored and sold out early in the morning and drove the share price down sharply.

The headline numbers I believe are a bit misleading of where the company could be in the future. I am happy to see CTC grow over 40% for the last 3 years. The company expects the same this year, it said it expects more than half the revenue to come from CTC this year, i.e. my guesstimate c£11m. Extrapolate that performance for 3-5 years into the future and see where the revenue and profits go. CTC is the future and that is why I invested here and held on for so long.

Most of my holdings is in a SIPP and if the company keeps on performing I will just keep on holding....it all depends on your investment timeframe and investment need.

[philoosh] 14/3/2017 14:17

So surely this must only be a small blip. A quick drop before the next push.

[jadeticl3] 14/3/2017 13:57

If logic alone is applied one would say that "Yes the company is doing well, which is why the share price has risen over recent months, but to rise further with the issue of the results the results would have had to surprise on the plus side. This they have not done. Hence small rise followed by short term large drop, followed by restoration of the status quo."

Other explanations welcome.

And to think that I rose this morning full of excitement/expectation!!

[philoosh] 14/3/2017 13:48

So why has the share price dropped if the company is doing well?

[gottafly] 14/3/2017 13:28

Well what else would you expect with GHT other than another roller coaster ride!

The number are just about ok and of course have been previously released so there is no actual surprise here.

Initially the share price rose and the bid offer spread went to 160/169 but then quickly tumbled to an share price of 140p. It happened so fast I guess these were some form of automated sales linked to the release of the full results which clearly did not hit the mark.

I still think that GHT is in a fantastic position but not with reports like this. I find the report a monotone dialogue full of platitudes - good, solid, confident, well positioned! I am guessing but I suspect this is the reason to the selling activity. Overall a very uninspiring report and mechanical in nature devoid of passion/vision.

It does talk about GHT being a niche player (I have often stated this) and that business expansion has been achieved by exploiting these niche solutions. They do say they are maturing to a main stream player but these 2016 numbers and the published N1 Singer forecasts for 2017/18 (which remain unchanged) do not support this and GHT appear 'stuck' as a niche player. The analysts presentation (available from the GHT website) contains very little new and is for the most part a rehash of what was said at the Capital markets Day in October. It does however confirm a new CTC product extension (CTC Analytics) and Data Accelerator which will be available September time, so there are new products in the portfolio.

In fact the forcast from N1 singer for 2018 is very modest in what should be a dynamic explosive market - revenues up 7% and EPS 6%. As if to excuse these figures as 'nonsense' GHT reproduce a slide from the Capital markets Day - which they stress is not a forecast but an estimate - showing the market potential of the GHT product set which over a 5 year period is over three times the current run rate. So which is right the N1 Singer forcast of the management estimate?

So what are we left with - Confusion, Confusion, Confusion.

One can only hope that GHT deliver a better communication and satifaction level to their customers than they do to the private shareholder community.

[double double] 14/3/2017 08:35

Not the reaction in the share price I was expecting.

N1Singer have released their forecast for 2018, per my post 6316:

Revenue of approx. £22m (2017: £20m), EBITDA of approx. £6m (2017: £5m) and cash of approx. £10m (2017: £8m).