Gresham Technologies Share Discussion Threads

[double double] 14/8/2017 10:47

We got told brokers know exactly what private investors know and there are strict rules the company follows, but at the same time we are trying to figure out what reasons may be behind the low forecasts for 2018 or even 2017. Something doesnt add up.

CTC revenue growth is key for me and I will simply wait for the results to follow through in due course. We know from results so far clients wins are up, revenues are up, cash held are up and the management are confident of the future. The share price is strong has been trading near or at 52 week high for a while now.

Gottafly if you are referring to the newsletter which I subscribed to on GHT website months ago... I have received nothing yet.

[gottafly] 13/8/2017 08:43

Thanks for your support guys but I think all comment on here, even when we disagree, is valuable. I am pretty sure that GHT monitor ADVFN closely and perhaps, dare I say it, we have a role to play in the information flow.

I have long been critical of their communications strategy but to be fair they operate in a market segment where confidentiality is the norm, so we never see the general 'customer noise' stories, all information has to be specifically and pro-actively released. Perhaps with this in mind it is easier to understand that GHT will play things safe and release the minimum required. I support the move away from announcing each new signing but we need some news flow to fill the vacuum.

For example, richjp in a recent post told us that GHT were on a four day presentation road show to institutional investors. From what I understand this was further extended to cover additional interested parties. So this road show/level of interest is apparently significantly above what it was last year and I believe this is newsworthy and is a missed communication opportunity. You don't get one-to-one meetings with institutions unless there is a story to tell.

We can speculate on here (and perhaps we should) what this proactive institutional marketing may mean for GHT especially as there does not seem to be any large sellers and therefore any institutional demand could not easily be satisfied. So are GHT preparing the ground for another acquisition, just a thought.

GHT apparently do quarterly staff briefings and I have suggested that perhaps a sanitised version (very helpful for us PI's) could be released on the website. I would not expect there to be any numerical/statistical information but such things as staff morale, development progress, customer satisfaction levels etc. would make an interesting read and help fill the communication void.

[miti 1000] 12/8/2017 12:03

Thanks, Gottafly , one of the best posts I have read on this board.

[jadeticl3] 10/8/2017 17:07

Very incisive article, Gottafly.
Much has been said on this site on this issue, and you have highlighted your points well.

I am sure that we all hope your conclusion is correct and that Management will prove N1 Singer far too conservative.

[gottafly] 10/8/2017 12:53

Gresham performance verses forecasts.

A little while back I wrote to the company saying that I felt there was a potential false market due to the disconnect of the 2018 forecast and the latest half year numbers & management confidence.

Whilst I have been critical on here as regards their communication strategy, GHT were pretty quick to respond. GHT confirmed that if there were a material change to market expectations they would be obliged to announce it. So from this you can assume that the 2017 and 2018 forecast numbers are perceived to be fair and reasonable from a management point of view although, of course, they are broker and not company forecasts.

The 2018 numbers, which have been debated on here and are generally thought of as 'suspect', is the area of concern since the forecast predicts a significant slow down in overall revenue (up 7.5% compared with 16.2% for 2017) and in CTC growth (up 16% compared with up 48% for 2017). So this raises two questions, why the drop in overall revenue growth and why the slow down in CTC growth.


Legacy/Non CTC Revenues


GHT, in their segment analysis divide revenue into CTC and Legacy, GHT further split Legacy into Solutions/Contracting. The most recent segmentation figures would appear to support the GHT statement that the legacy revenue mix has changed.

The Contracting revenues are I believe to support a single long standing customer and the GHT report shows that this (low margin) revenue has increased quite significantly (2764k for the whole of 2016 but 2263k for the first six months of 2017).

If we assume that there is no real difference in revenue profile for contracting revenues in each half year but a continued (20% decline?) in Solutions revenue then we get the following result:-

Solutions Contracting Total Other

2015 7070 2502 9572

2016 6901 2764 9665

2017 4984 4526 9510 verses a broker forecast of 8900!

So it is pretty clear that other/legacy revenues are being marked significantly down but that the contracting piece is expanding to mitigate the drop. Contracting revenues of course can end very rapidly and it does seem that the Solutions recurring revenues are dropping off relatively fast, although it should be noted that there are three separate legacy revenue streams. Further, in the 2018 forecast, these only drop another £300k so this apparent step change is happening in 2017 and not 2018!

Legacy revenues were never going to be long-term (although they seem to outlast their predicted decline) and they are not the future of GHT. This decline happening in 2017 so it makes the 2017 performance pretty remarkable!!!

CTC 2018 Growth of 16%

GHT were kind enough to share with me the N1Singer interim note.

The key point is the expected growth in CTC year-on-year revenues:-

2015 53%

2016 41%

2017 48%

2016 16%.

This drop in growth, is for us shareholders, hugely disappointing. Unless there is a specific reason like market saturation, development costs/timescales or whatever then the drop from 48% to 16% seems overdone and very conservative. A 'drop' to a mere 30% growth rate would add another £1.5 million to turnover, so why the pessimism?

The actual note itself is very positive and supportive of the management team and GHT prospects. It references the Clareti platform as best in class, that current CTC revenues do not reflect the size of the market opportunity, that there is opportunity for strong sustainable growth and GHT is nowhere near delivering their full potential. The words seem to indicate a strong buy yet the forecast (for 2018) would say otherwise.

As always DYOR but the only conclusion I can come to is that N1Singer, at least in the short-term, are concerned that GHT do not have the resources to fully exploit the available market opportunity and that the sales run rate will be largely governed by the ability to deploy/implement new sales/clients.

In this regard the cloud based offering and SaaS is hugely helpful and as I understand it CTC is relatively easy to implement (I suspect C24 is pretty helpful here). However, on a SaaS model you don't get revenue unless the customer is live/operational, there are no upfront licence fees to cushion things. Scaling up is never easy, especially since maintaining quality is essential - unhappy clients is a big No.

Also, since GHT are now directly targeting incumbent supplier solutions then you can expect a tougher and more difficult sales cycle, the wins might e bigger but they will take more time.

As I say, DYOR, but I get the feeling that the GHT management team might just prove N1Singer wrong, e shall see and as DD says patience is needed. Challenger to Champion 2017 is what GHT is aiming for.

[double double] 09/8/2017 14:46

Ok

Lots of trade going through at 180p but not moving the price down. We seem to have this/similar every 10p or so up. Obviously there will be very long term holders who are probably relieved at the current price and taking profits, but equally we know from here new investors also coming in.

[b1ggles] 09/8/2017 14:25

I was referring to the intraday; bid price has been 180 all day

[double double] 09/8/2017 10:23

Good to see another new poster and probably an investor.

[double double] 09/8/2017 10:17

Perhaps you are not seeing the intraday movements. Have a look at the above graph.

[b1ggles] 09/8/2017 09:50

Not share price action, DD, just the difference between a buy trade and a sell trade. No real price change at all.

[double double] 09/8/2017 09:32

Very strange share price action of late up down 0.75p, never seen it here before. Good to see it hold at near 52 week high.

Still very little news perhaps its all piling up for year end like last time.

[4-10] 06/8/2017 09:37

Rich is correct re SaaS revenue - it is slow growth, however compared to traditional licence sales revenue it is, in the longer term, far more predictable. End of contract churn is usually low and is more akin to the revenue resulting from support/maintenance agreements in predictability. So for me the more SaaS revenue the better it helps stable and predictable growth and also improves the companies valuation.

[tacticaltrader] 05/8/2017 12:09

Positive piece in this months Techinvest with regards to Gresham Tech. 'Continue to buy' was their recommendation.

[richjp] 04/8/2017 18:04

I thought I might have a stab at why the 2018 broker forecast is so conservative.

Some of the major contract wins including one of the recent ones, are described as framework agreements. I asked at the recent presentation what commitment the customer actually makes and could they potentially not follow through with the full deployment. I was told that yes that theoretically the customer might not necessarily complete the rollout however in the recent win for example , volume pricing for the full deployment had already been negotiated, a customer project manager was in situ and project milestones had been agreed. So in all probability the rollout(s) will go ahead however in forecasting I think it prudent to factor in a risk element as customer circumstances can always change.

One of those deals took twelve months from start to finish to win and GHT first started talking to the client two years ago. GHT staff from the UK, the US and Australia were all involved in the bidding process. I was involved in a complex bid a bit like that myself years ago and have an idea what it is like.

There are several points that come from this. Firstly when a small company goes after a deal like that, they need to be very confident of winning it. If the deal falls through or gets deferred then that obviously hits the revenue target and of course you have used up a lot of resource for the bid which might have been deployed elsewhere.

It also demonstrates the need for high quality sales staff to qualify the opportunity in the first place and take the time in establishing relationships with the right organisations and the personnel within them. IM said that he wanted sales staff to achieve their targets so that there is no churn in the sales team which would damage the relationship building that had been done.

The positive side is that when you get a year long bidding and evaluation process, the customer has to commit a significant amount of resource from their side, meaning that when you do win, the customer will most likely go ahead with full deployment because they have already put resources into it.

Another factor is the renewal rate of existing customers. It has been very good so far and I think is around 95% or so. The SaaS clients are typically on three year contracts. GHT’s software is usually well imbedded within the client so in all likelihood they will renew however for forecasting again I think you have to factor in that some might not renew.

There is also the mix of sales contracts. They are moving away from up front purchase and the preferred model is SaaS. I have no idea what the traditional mix is. There have been also I think contracts which were for one off migration projects where there will be no recurring revenue. SaaS is better for GHT in the long run, but it does mean that by spreading the revenue over a number of years, 2018 for example may not show the greatest growth.

My feeling is that the brokers are factoring all of this kind of thing into their forecasts, so the 2018 forecasts are a minimum at this stage.

Just some Friday evening ramblings.

[miti 1000] 03/8/2017 16:25

Added another 13k at 183.5 .The seller is determined.

[miti 1000] 02/8/2017 14:52

Actually, there is still a sizeable seller about at 183.5.

[double double] 02/8/2017 14:22

Back to today, buy going at full 185p, could be positive.

[double double] 02/8/2017 14:02

As I keep saying patience is required, there are alot that goes on between companies/mm's/brokers and institions that private investors will not be a party to and we have to accept it. But it would be foolish not realise or acknowledge that it does go on.

If it was directed at me, I dont think the likes of Bloomberg sell conspiracies last time I looked.

[richjp] 02/8/2017 13:41

I also agree with planit2.

I don't seriously believe the conspiracy stuff and even if I did, I think that you have to realise if you put money in the stock market, then you have to accept that certain things might happen from time to time which you might not like.

In the long run I believe the fundamentals of a share will always win out and trying to analyse every movement of a share price, particularly in small caps, is a fools' game.

All of the most frequent posters here seem to be long term holders and not traders, so I fail to see what the problem is given the share price performance since last December. I groan inwardly whenever the share price drops back I must admit, but I keep trying to remind myself of where I think the share price will be in six months time and I feel that is what matters.

[miti 1000] 02/8/2017 11:53

Totally agree with you , planit2.

[double double] 02/8/2017 11:29

I think you are being naive if you think companies, brokers and institions dont share information that is not in the public domain.

Anyone with a Bloomberg system can have a look at their "insider dealing" function to see what happend last year before the placing, we subsequently had that steep rise very soon after that. Its just the way it is and that is why I was advising gottafly to be patient, the company and brokers will promote the share price when they are ready.

[planit2] 02/8/2017 10:43

I feel that you are all being unfair to Gresham and the brokers and "false market" is going a bit far. Accusing them of letting their friends load up is a pretty severe accusation.

At the end of the day a company is going to do positive presentations and it is important for directors to give a positive view of the company's prospects and future so that you can recruit and keep the best staff and motivate them to do great things.

On the other hand none of the future revenues are in the bag and there could be another banking crises or a plethora of other unforeseen circumstances that result in new contracts not getting signed as quickly as they want.

On top of this we have a history of Gresham not delivering and profit warnings. If I was a director of Gresham I would try to make sure that financial expectations were on the safe side and would want to deliver on the up side. For these reasons the brokers are playing safe with real figures and the directors are not going to push for higher valuations.

It actually shows that Gresham is a great company with staff and brokers looking at the long term where value outs anyway rather than a bunch of people out for themselves and their share options. There are way too many companies now buying back their own shares with borrowed money and playing financial games. Here we have a sensible and well run company and we are criticising them for it.

It looks like we have a really good chance on beating the 2018 forecasts and the share price reflects that. Good, investors are doing their research and coming to their own valuations. Gresham pointed out that there are really strict rules about the information that House brokers are privy to and I doubt they would break that, PI's could have nearly the same access by going to the presentation.

I am not going to sell tomorrow and I like the progress that has been made so far, let's hope that Gresham do deliver on their potential and that they don't get bought out for a low valuation.

[gottafly] 02/8/2017 09:53

Guys sorry about the double posting - ADVFN locked the screen and stated that they were having technical difficulties, hence I guess the double post.