Gresham Technologies Share Discussion Threads

[gottafly] 15/1/2018 08:47

dd, yes just saw the announcement, great news and much work to be done. Welcome Paul you have a real job on your hands!

Inforprofit, your post over the weekend re 'where GHT are at it' is interesting (agree great potential to be realised) particularly your call for better GHT communications, coincidence that we then get the Chief marketing Officer announcement?!

[double double] 15/1/2018 08:36

RNS Reach

15 January 2018

Gresham Technologies plc

Appointment of Chief Marketing Officer

Gresham Technologies plc (LSE: "GHT", "Gresham" or the "Group"), the leading software and services company that specialises in providing real-time transaction control and enterprise data integrity solutions, is pleased to announce the following senior leadership appointment.

Paul White joins Gresham as Chief Marketing Officer with responsibility for marketing strategy, brand management, communications and international programs. Prior to joining Gresham, Paul led marketing at Sword Group, Kana, and Cyber adAPT, successfully growing businesses in risk, compliance, security and data analytics. During his early career, Paul also amassed 10 years of leadership experience directly within the financial services sector with Capital One, Zurich and Travelex.

Ian Manocha, CEO, commented:

"We are delighted to welcome Paul White to the team. Paul brings a wealth of expertise in banking and payments, and in technology marketing, and his deep experience in scale-up and international growth business comes at an exciting time for the Group."

[inforprofit] 14/1/2018 11:27

Spent some time yesterday reading all the recent posts. It seems to have become somewhat heated at times but this would hardly be a discussion board if we all thought the same. I would just ask that we all respect each others opinion even if we disagree.

Having studied the trading update for some time I must say that it does raise a question or two as regards where exactly in the growth cycle CTC and GHT are at.

Firstly, I should say that I think these are a great set of results and that the GHT management team and staff should be warmly congratulated. The headline is very positive quoting a record breaking year due to Clareti performance and we have a confident statement from Ian Manocha about the future profitable growth prospects of the group - great stuff.

It states that the 2017 figures are expected to be in line with market expectations except when you look at the detail (as has been pointed out by Gotafly) they are not quite in line. Both cash and turnover are well ahead and yet profit is slightly below, so I think this deserves an explanation. There has been much discussion on here as regards whether the big end of year Nordic contract is in some way responsible for these variances from forecast and perhaps logic would say that it is.

In the long-term/big scheme these 2017 detailed variances are no big deal, we all know that growth is not a straight line thing although I think accountants try and make it so - 15 new CTC clients in 2017 is pretty good stuff. However, when you set this against the lack of any revised brokers forecasts then short-term you could start to become a little concerned, hence I think the somewhat heated discussion on here. In my view this needs sorting sooner than later and having looked at the past it seems that N1Singer will review/revise their forecast within a couple of weeks of the trading update so we should not have to wait much longer for clarification, certainly not until March.

I had put aside this gloomy January weekend to decide what to do with my GHT holding. I have concluded that despite some uncertainty I will be sticking with my investment. I firmly believe that GHT has considerable unrealised potential and underlying value, the question is how/when will this be made so.

I would however ask GHT and the brokers to do one thing - improve the information flow, whether financial or otherwise, so that we can have a better understanding and make our own judgements as to what is going on - we were promised n Investor Newsletter - where is it? For example, what is the position with the new Data Excellerator product which GHT said has as much growth potential (Capital Markets Day) as the current CTC product set. Also, it would also be great to know how Clarity Loan Control is getting on.

So overall a great set of results but still much work to do regarding investor communications, please GHT management make it so.

[crazycanuck] 13/1/2018 15:07

Dd, I have absolutely no wish to filter you. As a shareholder you are obviously hoping for a higher share price but the market and some shareholders seem to think 2 pounds is fair value at this present time. I'm hoping for another boost when the final numbers come out in march and hopefully several more clients have signed up.

I have no idea on why kestrel sold almost 2% of their holding but they've made a tidy profit on that sale.

Jadeticl3, just an FYI but the share price went over £4 back in the days of real time nostro (RTN) which eventually failed and the share price crashed back down to .25p. this was almost 20 years ago and then a bunch of ceo's failed.

Ian M is definitely steering this company in a solid direction. I think c24 was a great acquisition and now we really need to see continued growth with a lot more sales of CTC. There's a huge mkt out there but for a global company I would really like to see 25+ sales this year.

[double double] 13/1/2018 13:25

Thanks gottafly and others.I have tried the brokers and via the Bloomberg terminal thought I would get a response but no luck. I still feel despite the criticisms this isn't normal and from both brokers in unison.

[journeysend] 13/1/2018 12:11

agree this is the best result the company ever made but do you get the brokers know this or care?anyway it's not mine I am sure dd can speak

[jadeticl3] 13/1/2018 11:47

“There seem to be a lot of company men here” Not sure what journeysend means by this!

With the money I have invested in this company in a sense I am a company man. I desperately want this company to succeed. I want the top group to make wise decisions. I want lots of confidence-boosting information.

However, this does not preclude criticism where criticism is due.

Consequently I read what is said on this site with interest, whether from DD or richjp or others who may have different backgrounds.

I am sad when rancour is evident. Let us remember that this is the best performance this company has ever produced and, as investors, we are all benefiting. It is true that I feel communication is not all that I would wish, but this is not as important as performance. Why are we bickering when we have never had it so good?

[journeysend] 13/1/2018 11:05

hang in there ddthere seems to be a lot of company men herecrazynuke you don't know why kestrel sold do you?

[richjp] 13/1/2018 10:45

crazycanuck, yes I do intend to attend the AGM assuming it is held around the usual time. I hope to see you there.

[gottafly] 13/1/2018 09:04

dd, as you know I too am concerned about the lack of forecasts and don't forget we have two brokers now. The last revised forecast (other than simply a reiteration) is December 2016, when Cantor published their first (and only) note!

Whilst I accept that GHT remains a small cap stock and that perhaps it does not demand too much broker attention, it is on the main market and is not an AIM company. I believe that forecast revisions are urgently needed and I have written to the company requesting that they do all they can to make this happen.

Returning back to the Nordic Nordea deal, I don't think you can assume that just because the revenue is counted in 2017 then the bottom line is effected in the same way. This is a solution sale in my view, albeit with a substantial software licence element, and thus revenue recognition will be very much geared to deployment etc. The announcement uses the word 'will' (i.e. in the future) five times in the statement and it is included in every description of how CTC will be used by the client.

One last point, during my deliberations I went onto the GHT website - Investor Section and Shareholder Information - and I was invited to subscribe for an Investor Newsletter. So GHT acknowledge they are in the process of providing some investor info but this has been the case for about a year now and nothing has happened!

[double double] 12/1/2018 21:26

I seem to have hit a raw nerve here do you know of other brokers that keep as silent as is here? Why are they so silent? The company itself admitted shortcomings in its lack of communication and said it would try to do better. But no change as yet. Yes I did few times in my 12 odd years here.

[jadeticl3] 12/1/2018 21:04

DD, do you normally attend the year end results meeting?

[double double] 12/1/2018 20:56

It is unusual to not comment on trading statements or not have forecasts only a year out. I have been here over a decade and will "rant" if I think either the company or the brokers are not communicating effectively. Feel free to filter me.

[crazycanuck] 12/1/2018 19:29

I'm in the camp that believes the Nordic deal was to enhance 2017 numbers.

Dd - I don't understand your rant about brokers and holding the price down. The big share holders ultimately decide if they'll accept the offer and Ian m has over a million shares. I think the share price is fair and kestrel have just unloaded a big chunk which makes me think it's not about to jump too much in the near future.

The competition in recs is fierce with intellimatch (sungard - now FIS) and smartstream by far the biggest players with revenues in the billions. I've worked with these products and ctc is by far the best product due to the others being quite old but it's still not selling in the numbers that I expected. I think that's why we've yet to see some other investors join the game. I think Ian is doing a very good job which is easy to say as stock has doubled in price since he joined but i would like to know how many clients are performing poc's with the product.

Richjp, I assume you'll be attending the year end results meeting?

[valhamos] 12/1/2018 17:58

Revenue recognition for software as a service (Saas) is simple; you account for the contract over the period you deliver the service. The fact the announcement stated that an amount was "immediately recognisable" would suggest that the element in question was not Saas.

[4-10] 12/1/2018 17:42

All the above is correct unless it is a software licence agreement based on rental (SAS) verses a capital/purchase basis. Then the situation regarding revenue recognition is far more complex and typically auditors will not let you recognise the full value of the agreement if payment is spread over a long period. Do we know what type of sale this was SAS or initial licence fee?

[valhamos] 11/1/2018 18:56

richjp

What you say is correct. In your example the arrangement was for the software licence to be sold in December with the customer's agreement. However ethically the fact that there was an inducement to bring it forward is in reality no different from any other business with discounts offered at year end to meet targets.

According to GHT's accounting policies the revenue on software licences is recognised when all of the following criteria are met:
•• persuasive evidence of an arrangement exists, such as a signed contract or purchase order;
•• delivery has occurred and no future elements to be delivered are essential to the functionality of the delivered element;
•• the fee is fixed or determinable; and
•• collectability is probable

Therefore the around 1 million euro was a software licence granted to the Nordic bank in 2017, and as such "immediately recognisable" which drops to the bottom line in 2017.

[richjp] 11/1/2018 18:34

I think we can go round in circles with the numbers and if a deal was done I hope they did not give too much away. That is why the full results are important to me when we see what the pre tax profits are.

The scale of discounting you mention sounds large, however once a package is developed you have 90% or more gross margin to play with and it can be worth it to get the client signed up then sell lots of consultancy and expand into different areas in the account in the future.

[gottafly] 11/1/2018 18:04

richjp you make some interesting points and I have seen many a 'end of year' deal done in the way you suggest. Some clients not only need an invoice but to actually have paid.

Perhaps it is wishful thinking but I still don't believe this was a full blown 2017 deal. If this is a discounted deal to meet the 2017 numbers then one would expect at least 'a third off' and I have seen as much as 70%. At 2 million Euros over 5 years, if deeply discounted, this is some deal!

Further, if 1 million Euros (nearly £900k) was booked revenue in 2017, and with EBITDA coming in at 5 million (against a forecast of £5,2) then without this deal GHT would have been on a huge miss, making only 80% of the forecast.

On October 4th there was an RNS saying there were two important CTC wins in North America and that trading was in line with the management team confident of the full year outlook. So my view is that the Nordic deal is 2018 business.

[richjp] 11/1/2018 17:24

There are ways in which you most certainly can book as revenue something that is signed late in the year. It is a common ruse to help make numbers at the year end.

Let us say for example the client is ready to sign an order by the year end, but may not be able to commence implementation until say February, due to the fact that they have to have time to organise their own staffing resource. You simply get the client to write a letter to the supplier, or possibly send an email these days, asking that the software be delivered by the end of December and to send a December dated invoice. You almost certainly would have to give the client some fincial inducement to do so. The software gets delivered and the sale is made. The fact that the client has not implemented is irrelevant. It is the same as if I buy a piece of software from PC World in December and I do not get round to implementing it until later. The sale was made in December.

Cost is not an issue because when delivering the standard CTC software, the development cost of the packaged product has already been incurred.

Whether or not the software is paid for in December does not matter. In fact you would almost certainly offer the client deferred terms as part of the deal. The contract will just be added to the year end accounts receivable figure. Alternatively if you wanted to improve the year end cash figure you might strike a deal with the client to do so although again there would be some inducement.

This is something that I have seen carried out many times and has been acceptable to the company auditors concerned. From an accountancy standpoint it is acceptable. From an ethical standpoint that might be different and by bringing forward revenue recognition you are robbing Peter to pay Paul as the saying goes and giving yourself an extra sales burden for 2018.

I doubt if any consultancy work that will almost certainly be part of a major deal could be billed in advance, as that work will only be carried out in the new year.

I have no idea if that has happened in this case, but it is certainly possible.

[double double] 11/1/2018 16:43

Gottafly what if there are 3rd party suppliers invovled? Are they on board with such for 29th Dec? When you book relatively large amounts on the last day there are too many variables and wont be easy to always answer away with the auditors. I am never been convinced by the timing of such announcements.

[gottafly] 11/1/2018 16:20

dd, Yes, in the absence of information, I am second guessing and trying to make sense of some contradictory numbers. I still maintain that the different wording of the announcements is deliberate and has a purpose, GHT are very fond of using similar 'boiler plate' wording in their announcements.

I am not suggesting any accounting misdemeanour, it is simple enough to create a prepayment accrual liability which is released once the 'work' is performed. In any event, you could re right that the revenue overrun is something simple like the Australian contract revenue which apparently is performing very well.

However, the cash is up some £800k which is roughly 1 million Euros. After further thought it is likely that the client bank would not only need an invoice but to make payment also.

[double double] 11/1/2018 13:52

Gottafly you cannot book revenue without the associated cost, I think that is what Tesco did and got into trouble - from memory. I think you are reading too much into the "late" contract win, we cannot have foreseen such a contract when we were highlighting the problem with the 2018 forecast in March of 2017.

I also think you cannot make sense and second guess because as you say we dont get full disclosure, e.g. both brokers have decided indepedently not to comment on the trading statment?

Anyway I will leave this subject alone now the company is in the right direction just wish people around it would get their act together.

[gottafly] 11/1/2018 13:06

dd as you know I have been critical about the lack of information flow both from Gresham and the brokers.

The current 'old' broker forecast for 2018 gives growth of just 7% or so, so way down from what we have experienced in the last couple of years. I suspect this is a minimum number (although of late Gresham has pretty much met the forecasts bang on showing a very high degree of accuracy!) and perhaps the brokers have realistic concerns about sales costs (particularly in the USA ramp up), head-to-head competition with legacy vendors (no easy pickings/long sales cycle) and GHT's ability to scale up implementations.

You and I have both highlighted the 2017 revenue figure (£21.3 million) as being essentially what was forecast by N1Singer for 2018 (£21.5), the 2017 forecast being £20 million. Interesting, the Clareti actual and forecast revenues are both £11.1 million indicating the extra revenue was not directly related to Clareti, but is that the case?

The late December announcement of the Nordic deal indicated that half the two million Euro 'contract value' would immediately recognisable, the actual wording was 'Half of the contract value is immediately recognisable; the rest will be recognised over the initial five-year term of the contract'. So the contract value will be recognised immediately (on the date of signing) and thus the revenue would be included in 2017 but would the profit also be recognised, my bet is that it was not.

You may think that I am splitting hairs but in December 2016 (the 15th) GHT signed an insurance deal for CTC with a minimum contract value of £1.1 million over seven years with approximately one third of this allocated to the 2016 planned revenue i.e. immediately recognised. The wording of this revenue recognition statement is very different from the Nordic bank win - 'The contract has a minimum contract value of more than £1.1 million over the seven year contract term, approximately a third of which will contribute to the Group’s planned revenues for the current year, with the balance contributing evenly over subsequent years'.

I think the Nordic bank deal largely explains the 2017 revenue over achievement. It had to be a December signing/announcement because that is where the client budget 'for half the contract value' resides - budgets tend to be on the basis of use it or lose it, unspent budget does not automatically get added to next year. From a GHT perspective, a December 29th date would require recognition of the contract and presumably an invoice to the client (hence revenue) but the contract as such (and all the benefits thereof) would not commence until January 2018.

[double double] 11/1/2018 08:30

Thanks gottafly. This suggests to me there is coordination and wonder how independent these brokers really are.

People here may be mislead by our resident yes man into thinking whether its the lack of communication/promotion from Gresham or inactivity of the brokers are normal but it isnt if you look at other companies. The consequenses of such action is you issue shares at lower prices or are taken over from a low base. We shareholders lose out not the ceo or the brokers, they will get their fixed fees no matter what.