Gresham Technologies Share Discussion Threads

[gottafly] 27/3/2021 10:43

Qantas - thanks for pointing this out.

A very interesting and very relative blog post from GHT. It addresses the issue of legacy systems and explains that that it doesn't have to be a huge problem to replace them. I personally know how tough it can be dealing with historical data and legacy systems, the 'easy bit' being the new system the really 'hard bit' being the cut-over from 'old'.

Specifically GHT state:-

"But in the current complex environment, large scale transformation projects are not necessarily appealing. Budgets and resources are under pressure. And with such a big challenge, there’s a risk of failure. Who wants to put their neck on the line with a high risk, complex undertaking?

The process of tackling legacy technology has come on leaps and bounds over the past couple of years. A truly data agnostic platform can take a lot of the initial project pain away, working with what you have rather than requiring months or even years of slow, costly transformation work before you start seeing results.

Modern, cloud-native technology gives you the power and scale to ensure results that grow with your business, not something that you have to repeat in five years."

So it seems that perhaps rolling over the installed legacy system base isn't quite as daunting or time consuming as I had thought. It really does seem that GHT with Clareti have all the pieces in place, very encouraging indeed, time to make it happen.

[richjp] 24/3/2021 19:46

I was not very impressed with the yahoo analysis and not just because I am trying to view GHT through rose coloured spectacles. It looks to me as though they probably fed the data from a large number of companies through a modelling programme to find out any with statistical anomalies.

I agree that the SaaS model is different but in the longer term should be beneficial. Most industry pundits seem to be in favour of SaaS but not many seem to know how to put a value on it. One downside is that you still have the cost of sale which will be high in a twelve month sales cycle. Sales staff will have some sort of commission incentive and sales support staff used to receive sales bonuses in my day as well. The result is that although the cost of sale is largely incurred up front, the revenue comes over a number of years. The first year licence income may not be very profitable but the subsequent years will be extremely profitable and most GHT customers renew after the initial period. In the first year however you can expect a significant amount of consultancy income concerning from implementation.

The article also pays scant attention to GHT's position in the marketplace. In summary this is not much to be concerned about.

[planit2] 24/3/2021 19:29

I really need to read the account properly but thanks ZipStuck for this

"high levels of contracted backlog of Clareti services for ongoing implementations and innovation services"

That is the first time I have seen this which is a good problem to have, hopefully they can increase capacity quickly to capitalise, we don't want potential customers being put off due to waiting times.

[planit2] 24/3/2021 19:26

The article was garbage, they just used some accounting tools but didn't adjust anything for the company.

The change to SAAS screws up the figures because accounts are only good if you can compare like for like across year. The more that changes the more problematic the comparisons. Moving to a completely different charging model is a huge change and you lose a complete sales cycle moving to SAAS.

SAAS usually has a higher valuation because the income is very predictable in the future.
As soon as there are a couple of years of consistent growth with the SAAS model it is much easier to value the company and it will be clearer to people and algorithms whether the company is undervalued or not.
If the forward predictions match the backwards performance (as GottaFly's post addresses) this will add further to confidence and higher valuation.


We should all probably read up on an X times sales valuation model and how to build in the growth.

As mentioned before, I find it hard to believe that they won't be taken over if this product is as good as they say.

[gottafly] 24/3/2021 14:11

zipstuck agree that the analysis is somehwat historical and not forward looking as per my earlier note. The problem is however that this has some negativity about it, albeit the members on this board I am sure would not agree. My point is that because there is some negativity about and 'mud sticks'. Also, I would repeat that an SAAS valuation is complicated and open to judgement/interpretation so again this has an unsettling effect. Totally agree however that with the new board GHT is well positioned either by way of organic growth or M&A.

[zipstuck] 24/3/2021 13:43

The simply wall street article looks at historic figures. The companies outlook suggested a number of deals in the pipeline. The recent contract awards together with the December contract award underpin the growth story using SAAS and reliability of earnings. With promised M & A it should not be valued on historical earnings.

"Overall, we have further increased levels of revenue predictability throughout the Group. This predictability comes from the significantly increased Clareti recurring revenue base, which has been complemented by the Inforalgo acquisition, high levels of contracted backlog of Clareti services for ongoing implementations and innovation services and a high portion of the non-Clareti portfolio already being under contract for 2021. This was the case as we entered 2020 and is the case to an even greater degree as we enter 2021. With this in mind, we continue to invest in the Clareti business, namely in distribution, product and customer success, in order to ensure that we are best placed to take advantage of the significant market opportunities."

[gottafly] 24/3/2021 10:57

Jadeticl3, surprised you see my last notes as ominous, it was certainly not meant to be. I think most people on here believe, as apparently house broker N1Singer does, that GHT is undervalued and should have a higher share price I have been highlighting some industry coverage which shows that GHT does not have 'universal support' whch perhaps, in part, explains the share price level.

planit2 made a very good point about the switch to SAAS/ARR was a major cause of the headline non performance, so with the switch completed in theory the share price should be higher baxsed on a SAAS model. Whilst I am certainly not an expert the valuation of an SAAS company is complicated and takes into account a number of measures. so I reckon it is very subjective.

The fact (sadly) remains that the headline GHT growth has been behind the industry average and that growth in the last five years under IM's leadership has been below par. However, GHT now state that they have everything in place - product offering and sales team - to drive the business forwards, hence the statement that no further bolt-on acqusitions are planned.

Further, the new board appears to have a plan B with the statement that transformative M&A will be considered. This underlines the new boards determination to deliver shareholder value (at last) so I think prospects are very good but as has been mentioned previously some continued patience, as regards the SP, will be required.

As always DYOR

[4-10] 24/3/2021 08:28

Qantas poor garbage I love it what we need is rich garbage. LOL

[qantas] 24/3/2021 07:59

Jade I rate it as very poor garbage.

[jadeticl3] 24/3/2021 07:52

QANTAS, how do you rate the article shown by GottaFly above? It sounds very ominous to me!!

[planit2] 23/3/2021 16:47

The last 5 years has seen the move over to SAAS under IM's watch.

Moving to SAAS is painful for the share price as the company can't show increased profits but will still be rated by the markets under the old system for a while.

Now this transition has been completed the share price can be rated as a multiple of sales. This is why N1Singer thinks the share price is undervalued, they are working completely using SAAS valuation metrics as they know the company well.

I was surprised that the share price dropped back so quickly from the 175p peak, in my opinion the recent news is worth considerably more than the 5p per share increase.

[gottafly] 23/3/2021 14:03

Just been sent this link which is a GHT analysis report dated just 2 days ago, a good read in my view.



The headline is "Gresham Technologies plc's (LON:GHT) Stock is Soaring But Financials Seem Inconsistent: Will The Uptrend Continue?".

The analysis is quite comprehensive and highlights the lack of performance in the past and concludes with the statement - mixed feelings about Gresham Technologies.

With GHT, IMHO it is all about what GHT can deliver in the future with the Clareti (industry leading) product set. And, as if to underline the share price volatility, today we have had one share trade on one share!

[gottafly] 23/3/2021 10:31

Well another positive signing announced yesterday and the second new 'fresh' deal this month and a new usage to boot. I think this clearly shows that if you have no legacy system then Clariti is the product of choice.

planet2, you are correct that GHT stopped posting each new deal as an RNS some time back. They moved, thankfully in my view, to a more measured approach, with only significant wins being individually announced. The problem with this change though was that because GHT provide 'enabling software' (and therefore are not naturally front page news) this exposed the poor level of their other news channels - social media, blogs, white papers etc. GHT went from 'overkill' to largely 'radio silence'. Getting the right message to the market is not something that GHT has been particularly good at (which doesn't help share price stability) but as I posted earlier I get the sense of a significant change of 'mood music' and determination from the new board.

Borisjohnson, you are correct about the GHT share price being circa 110p when IM took over and yes no great progress, despite the strong product offering, over his 5 year tenure. This is really time to deliver and I say again, I think the new board are very focused on achieving share holder value, hence the transformative M&A statement.

Getting back to the share price I believe it is at a crossroads, apparently somewhat stuck in the 150's yet with N1Singer stating they believe it is undervalued. As an example, Yahoo finance are predicting 180p within the next 12 months, good but not earth shattering.

Whilst it is great to see these two new significant deals, they did not replace an existing legacy system, which is where I beleive the real prize is and I believe is the basis for the transformative M&A statement. IM has stated that replacing legacy systems takes considerable effort and has protracted time scales, so this is a long hard slog hence the search for a better way. Watch this space!

As always DYOR.

[qantas] 22/3/2021 21:45

Planit2 So sorry I don't know.

[planit2] 22/3/2021 20:29

Qantas, do you know which company it was?

[qantas] 22/3/2021 18:35

News alert: Gresham Technologies partners with one of the world’s largest professional services firms to #digitize its #audit practice in the US

Well done dear US colleagues!!! Keep the pace!

Deloitte remains world's largest firm
The top 10 in full:
Deloitte - £27.67bn.
PwC - £26.81bn.
EY - £22.34bn.
KPMG – £18.78bn.
BDO - £5.78bn.
RSM - £3.62bn. Grant Thornton - £3.56bn.
Crowe Horwath International - £2.71bn.

Please do your own research as always.

[planit2] 22/3/2021 07:56

I am assuming it is more than that, it's 2 strategically important contracts in a month.

They stopped reporting run-of-the-mill contracts a couple of years ago didn't they?


This also looks like a new use case. If this goes well then Gresham's market will be much wider.

I think this will be a huge market in the future and if Gresham's data control has wide ranging applications as the RNS implies and is hard to develop for the large software companies then it will be taken over at some point.

We must hope for a bidding war as I don't want this taken over on the cheap.

[crazycanuck] 22/3/2021 07:27

2 contracts in a month. Fabulous news.

[qantas] 22/3/2021 07:15

22/03/2021 7:00am
UK Regulatory (RNS & others)

TIDMGHT

RNS Number : 9392S

Gresham Technologies PLC

22 March 2021

RNS

22 March 2021

Gresham Technologies plc

Clareti contract win with global professional services firm

Gresham Technologies plc (LSE: "GHT", "Gresham"), the leading software and services company that specialises in providing solutions for data integrity and control, banking integration, payments and cash management, is pleased to announce a new Clareti contract win.

One of the world's largest professional services firms has selected Gresham as a strategic partner to provide advanced technology to its audit practice in the US. Clareti Control will be used to digitise key field audit activities and provide enhanced assurance as to the integrity of the audit process.

This new contract, signed on 19 March 2021, is expected to generate total software subscription fees of USD 2.8m over a committed five-year term, with the annual subscription fee starting at USD 0.25m and committed to rise to USD 0.7m from the third year of the term, in addition to services revenue to deploy the solution.

Ian Manocha, CEO, commented:

"This is another excellent example of the versatility of our Clareti technology. Our partner is committed to delivering an innovative, efficient and effective audit experience to its clients, and needed a robust automation platform that could handle 'any and all' data. We look forward to sharing further details of this use case for Clareti in the near future."

[jadeticl3] 19/3/2021 07:31

Thanks GottaFly and richjp for these encouraging posts. I feel more relaxed now! Over the last 20 years I have had strong ups and downs with this company, but overall have never sold and have added several times. For a small company they are in my top three investments so they matter significantly.

[richjp] 18/3/2021 18:14

According to the London Stock Exchange website there were 12 trades today involving 40,000 shares. Quite a busy day for GHT but not much in the greater scheme of things. All were described as "off book" which I assume means they were matched trades. The latest this afternoon were at 157.5. I think we just have to keep our nerve.

N1 Singer came in for some criticism on this board a couple of years ago because of their cautious forecasting however at the end of the year they turned out to be correct. Let us hope they are also correct with their more ambitious forecast for this year.

[gottafly] 18/3/2021 11:44

richjp - you make a good point about GHT share movement on minimal trades.

jadeticl3 - I believe that some 80% plus of GHT shares are in the hands of institutional/large holders/insiders so the level of freely available/traded shares for 'public consumption' is limited which can cause exagerated movements, both up and down. The good news however is that the underlying share price trend seems to be very much in the upwards direction.

The last major trades I can find, ones which are greater than 100k shares and so are unlikely to be private investor dealings, are back in early March which went through at circa 152p. So I would suggest that the share price rise from that level has been caused of 'day trades' and is therefore potentially subject to some volatility.

GHT is also an unusual beast in that yes it is small cap but it is on the main market. Also, pretty unusually for a tech stock, it is debt free and all Clareti investment has been performed without additional finance, this is something that IM appears to be very proud of! Further, GHT also tends to be fairly conservative as regards press/news so there is not a steady flow of information to continually feed price activity.

However, N1 Singer released a revised note, as per below, on 9th March when the share price was sitting at the 152p level which then jumped to 162p.

"After producing impressive 17% organic growth in Clareti ARR in FY20, despite COVID headwinds, we expect ARR growth to accelerate to >25% in FY21, with 85% plus of this revenue already visible given the recurring revenue model. We introduce forecasts today of a further 20% ARR growth in FY22. Stripping out cash of £9m, valuing legacy revenues at 1x (£9m) and Clareti Services at 2x (£11m), the residual £78m is 4.9x FY21 Clareti ARR, falling to 4.1x FY22 ARR. This looks too low to us: a key reason GHT is one of our top picks for 2021."

So, house broker N1 Singer, believe that GHT is under valued and it is one their top picks for 2021. Personally, I am pretty relaxed about the current share price level and the direction of travel, especially given the N1 Singer support which has not always been the case in the past.

[borisjohnson] 18/3/2021 11:44

I hope they can deliver some share price performance this year or next as some of us are not getting any younger and have been waiting for over 20 years.

What was the share price when IM took over I think it was around 110p so not much to shout about there.