Gresham Technologies Share Discussion Threads

[gnnmartin] 17/11/2023 15:29

A fair comment. It is hard to see without some guidance why it is good to lose a chunk of business. OK it was legacy, going to shrink, low margin, but it was profitable. If the loss of profit is balanced by consequential savings elsewhere, why not say so? If there is no consequential saving, why close the business? I can guess possible justifications, but why are we left to guess?

[redwing1] 17/11/2023 14:57

Frankly, I can't understand how the bulls on this forum are so relaxed about developments. This was a solid cash generative part of the business making a respectable 13% margin and accounting for 17% of group sales, which has suddenly disappeared in a puff of smoke.

What about the remaining legacy revenues? There are £12.8m of those. When do they become obsolete? This leaves Clareti and Floe having to do a huge part of the lifting just to get back to where revenues started.

A reminder: don't forget that for all its growth, Clareti has only just turned profitable at the operating level and cashflow positive. Floe has one customer at the moment (and presumably will be loss making for some time).

It may well be that both Clareti and Floe have very bright futures but you are taking a lot on trust. Good luck to all the optimistic holders.

[amt] 17/11/2023 11:39

It's clear from some of the posts that there is a lack of understanding of the business. I shouldn't complain its great to buy more at a bargain price.

[amt] 17/11/2023 11:34

Jimmy It makes no sense for them trying to pick up contracting business elsewhere. They have been getting rid of that part of the business for years. So good to get rid of it and concentrate on the real business which is Clareti and potentially Floe.

[amt] 17/11/2023 11:31

The contracting business was irrelevant. It had no longterm value and now suddenly the market gives it a value of 18m, bonkers

[jimmywilson612] 17/11/2023 11:20

13% Margin isn't bad for a contractor service. It sounds like they were doing this for only one client though, so if they're not being renewed, I can understand them not trying to obtain work elsewhere, or keep that part of the business running.

£100M business for what should be circa £30M ARR in Clareti. FLOE will take time to develop and grow.

[cloudwars] 17/11/2023 10:49

This will be bought out now. Do you realise how valuable via being very sticky / longterm these contracts are?

[scepticalinvestor] 17/11/2023 10:28

Luckily i dumped everything first thing this am in multiple trades, with only a 5% loss.Condolences to holders now - this is only going one way for a very long time.

[amt] 17/11/2023 09:46

2.20 is realistic in decent market conditions.
Barriers to entry are very difficult so a safe and reliable business on a low p/e with another potentially highly valuable product just been released.
Plus a takeover target for a quick return

[amt] 17/11/2023 09:32

The share price is back to where it was ten years ago when Claretti revenues were 1 million.

[wjccghcc] 17/11/2023 09:14

Floe isn't about cash management. It's a product for mid sized banks (like ANZ) to allow creation and management of multiple bank accounts for clients like wealth managers (who need segregated accounts for each of their clients) far more simply and cheaply than is possible at the moment. The development and rollout are self funding so it offers large upside with very limited downside if take up is slow. They're only targeting one new client for FY24 so it will be a slow build.

Agreed re new signings but in this uncertain environment, most companies are deferring decisions. Things should pick up next year as interest rates begin to drop and the outlook becomes clearer. In the mean time, positive NRR, particularly among their larger clients should keep them growing.

[amt] 17/11/2023 09:06

The Company continues to have a solid pipeline of opportunities from both new and existing customers and expects to close additional Clareti subscription business before the end of the year which will contribute to the Group's Annualised Recurring Revenue ("ARR") and FY24 planned revenues.

[volsung] 17/11/2023 09:05

Caught my attention this morning. Seems to be a quality business. Will pore for a while

[crazycanuck] 17/11/2023 09:03

It would have been better if they could have tied this into a new signing but nothing for 3 months. Their reconciliation product should be selling more but it isn't. They're struggling to interrupt the big players in this field.

as for Floe, I'll believe the hype when I see it. Most financial institutions already have real time cash mgmt as it's a reg requirement to know your liquidity positions.

There is not 1 good thing to read in that TU.

They tend to sign a new Clareti customer in dec so can only hope otherwise we're stuck down at these numbers.

[amt] 17/11/2023 09:03

It summarises the small cap market at the moment. No buyers so when irrational sellers come along no understanding a business it pushes the price down to any level without any kind of logic

[wjccghcc] 17/11/2023 08:56

redwing, of course it's a profit warning. ANZ, like most banks, are clearly rationalising their IT spend in the downturn. The legacy business was supposed to tail off over a few years rather than end now.

However, as NChanning says, 1mm GP for arranging 3rd party subcontractors is worth 2-3x tops so contributed less than 3mm to the valuation.

They are no.3 in the reconciliation market with the only cloud solution vs 20 year old legacy products. ARR is growing at 10%, they're cash generative, and that doesn't include any contribution from FLOE.

The odds on them being independent in 12 months time are mininmal IMHO.

However that doesn't stop the market overreacting in the short-term.

[amt] 17/11/2023 08:54

Nchanning yes but not a saleable business anyway so a very little value other than to boost turnover a bit.
Don't forget Floe which could be worth as much as Clareti. So even your lowest value of 3x sales would be 150m a 50% premium. If 5x then 250m add in Floe and its a business with perhaps 3 times its current value. Anyway its very cheap and low risk whichever way you look at it. I am loading up

[gnnmartin] 17/11/2023 08:49

I'm surprised at the market reaction, though when I read the RNS I was a little surprised that they couldn't say that the service gross & net revenue would be made up elsewhere. I just assumed (hoped) they were being unduly cautious.

[amt] 17/11/2023 08:42

redwing they have been exiting the legacy business in stages for years . It had no future. It would end at some stage. I agree they probably would rather have let it trundle on but the valuation of the legacy business was perhaps a couple of million and wasn't a saleable business anyway. The market has wiped off about 17 million which is ludicrous. The price was already very cheap and no doubt a US company will probably take it out given the new Floe product to add to Clareti. They clearly have great software engineers and a very deep understanding of the banking system

[amt] 17/11/2023 08:36

They obviously have a good relationship with NZ bank since they are supporting the Floe rollout so they can concentrate on that aswell as Clareti.
A few months ago we knew nothing of Floe now its got the potential of Clareti which is growing steadily and undetpines the valuation on its own.
So perfect opportunity to pick it up on the cheap.

[redwing1] 17/11/2023 08:34

Get real amt. A company with revenues of £49m doesn't voluntarily axe £8.5m of its sales that are earning a 13% margin. That is £1.1m profit out of a total of £3.2m op profit. By all means sell the business but don't shut it down.

Other posters here are right - profit warning.

[amt] 17/11/2023 08:32

Yes Takeover inevitable since it has a reliable business model and the Floe business could match Clareti. So a great catch as not much complexity.
I should think around about 2 quid given what happened to Sopheon.

[weatherman] 17/11/2023 08:28

We don't know the further details of the NZ contract, but we read: "... lead to an immediate improvement in gross and adjusted EBITDA margins."