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Gresham Technologies PLC Interim Report Announcement

26/07/2022 7:00am

UK Regulatory (RNS & others)


Gresham Technologies (LSE:GHT)
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RNS Number : 6866T

Gresham Technologies PLC

26 July 2022

26 July 2022

Gresham Technologies plc

Interim Report Announcement

Gresham Technologies plc (LSE: "GHT", "Gresham", "Company" or the "Group"), the leading software and services company that specialises in providing solutions for data integrity and control, banking integration, payments and cash management, announces its unaudited half year results for the six months ended 30 June 2022.

The Group is pleased to report 66% growth in Clareti revenues, driving 55% growth in total Group revenues and 125% growth in Group cash EBITDA against the first half of 2021. Forward-looking Clareti ARR growth of 18% driven by new customer wins, growth within the installed base, and favourable currency movements.

Financial highlights

 
                                 HY 2022   HY 2021   Growth          Like for 
                                    GBPm      GBPm        %    like growth(i) 
                                                                            % 
------------------------------  --------  --------  -------  ---------------- 
 Clareti annualised recurring 
  revenues                          26.1      22.1      18%           N/a(ii) 
 Group annualised recurring 
  revenues                          29.4      25.7      14%           N/a(ii) 
==============================  ========  ========  =======  ================ 
 Group revenues                     23.0      14.8      55%               19% 
 Clareti revenues                   16.4       9.9      66%                8% 
 Clareti recurring revenues         12.5       6.9      81%                8% 
 Group Adjusted EBITDA               4.5       2.8      61%          N/a(iii) 
 Group cash EBITDA                  1 .8       0.8     125%          N/a(iii) 
==============================  ========  ========  =======  ================ 
 Cash                                6.5       8.1    (20)%               N/a 
 

Operational highlights

   --      Six new name Clareti customers in H1, with a seventh signed early in H2 

-- Incremental contract win with tier 1 banking customer, lifting customer ARR from GBP0.6m to GBP1.1m with

further increase to GBP1.4m expected as project progresses

   --      20+ other contract wins with existing customers driving incremental ARR 
   --      Net Clareti ARR retention rate of 105% (on a constant currency basis) 
   --      Transformative Electra acquisition of June 2021 now creating new opportunities 

-- Other (non-Clareti) portfolio continuing to prove resilient and has outperformed original expectations

Outlook

   --      Management confident in the strategy and outlook for the Group 

-- Demand remains robust, with a strong Clareti pipeline, supported by a structurally growing addressable market

   --       On track to comfortably meet full year market expectations 

Adjusted EBITDA refers to earnings before interest, tax, depreciation and amortisation, adjusted for one-off exceptional items and share-based payments. Cash EBITDA refers to adjusted EBITDA less capitalised development spend and any IFRS 16 lease related cash payments.

(i) Growth rates stated on a like-for-like basis have been adjusted to remove the contribution from both periods of the Electra business, acquired on 22 June 2021.

(ii) By their nature, forward looking annualised recurring revenue metrics included 12 months impact in both reported periods.

(iii) Post-acquisition, the integration of the Electra business into the Clareti business does not allow for meaningful standalone EBITDA measures to be reported.

Ian Manocha, Gresham CEO, commented:

"This has been another strong period of growth driven by a combination of new customer wins and growth within our installed base. The acquisition of Electra a year ago has been transformational in building operating scale and a more complete and competitive solution set for our joint customers, and we are clearly seeing the benefits in the market."

"Looking to the second half, we see a substantial opportunity to take further market share in our core financial services segments. We now have excellent visibility into full year revenues and are focussed on continuing the significant progress made building recurring revenues in line with our aspirations to create a global financial technology company of substantial scale."

As announced on 15 July 2022, a presentation for analysts will be held today at 9.30 a.m. (BST) via conference call, with a separate presentation for private and retail investors to be held today at 2 p.m. (BST) via the Investor Meet Company platform. Admittance for these events is strictly limited to those who register their participation in advance.

For analyst conference call details and to register attendance, please email gresham@almapr.co.uk. Information on how to register attendance for the private and retail investor presentation is set out in the Company's announcement of 15 July 2022. A copy of the presentation to be tabled at both sessions will be made available on Gresham's website at 9.00 a.m. (BST) today.

Enquiries

 
                                                   +44 (0) 207 653 
Gresham Technologies plc                            0200 
Ian Manocha / Tom Mullan 
Singer Capital Markets (Financial Adviser and      +44 (0) 207 496 
 Broker)                                            3000 
Shaun Dobson / Tom Salvesen / Jen Boorer 
                                                   +44 (0) 203 405 
Alma PR                                             0205 
Josh Royston / Hilary Buchanan / Hannah Campbell 
 

Note to editors

Gresham Technologies plc is a leading software and services company that specialises in providing real-time solutions for data integrity and control, banking integration, payments and cash management. Listed on the main market of the London Stock Exchange (GHT.L) and headquartered in the City of London, its customers include some of the world's largest financial institutions and corporates, all of whom are served locally from offices located in the UK, Europe, North America and Asia Pacific.

Gresham's award-winning Clareti software platform is a highly flexible and scalable platform, available on-site or in the cloud, designed to address today's most challenging financial control, risk management, data governance and regulatory compliance problems. Learn more at www.greshamtech.com .

Chief Executive review

Introduction

We are pleased with the progress made in the first half of this financial year as we continue to strengthen our position as the leading provider of reconciliation software to the financial sector, and drive organic growth across the Group, which now benefits from additional scale as a result of the Electra acquisition a year ago. This has been highlighted by the number of new client wins throughout the period as well as consistent growth within the installed base growth, which together with currency tailwinds delivered an 18% organic increase in forward looking ARR. The record levels of recurring revenue, a pipeline of new and up-sell contract opportunities, as well as a healthy renewal cycle across the non-Clareti businesses provide the Board with confidence in the second half outlook.

Business overview

In the first half of 2022 we continued to invest in our operations and people to grow our international footprint and take further market share in our core financial services market. Our Clareti technology solutions provide major banking and investment management clients with the tools to connect, reconcile and control their data, enabling them to automate their business processes and improve operational efficiency, giving them confidence in their digital operations and helping manage risk, regulation and reputation.

Clareti

Our Clareti platform is packaged into two primary offerings, Control and Connect. The acquired Electra offerings for investment managers have been similarly re-branded and provide for a more complete solution for our customers, as well bringing market share in North America. All our solutions are available in a customer's data centre or in a Gresham hosted cloud on a software-as-a-service basis, along with optional subscriptions for the collection and aggregation of external data and/or the provision of managed services.

Clareti Control

Control is an enterprise-grade business self-service platform for the reconciliation and control of "any and all" transaction data in financial markets. Control is now well established in the market for "non-core" problems such as inter-systems reconciliations, with a track-record of successful implementations since the initial release a decade ago. Our investment into additional "core" cash and securities processing functionality over the last three years means we have the only solution in the market that can handle all types of data reconciliations and controls on a single self-service platform that has been proven at scale.

Clareti Connect

Our Connect solutions allow customers to participate in the complex inter-connected global financial system without needing to be concerned with third party data access, integration risk, and cost and time to market. Our Connect solutions enable customers to interact with their bank partners, custodians, trading venues, regulatory reporting venues and other industry applications, and provide intelligent control over complex data and financial messaging flows. Our Connect Data solution is focused on the needs of the buy-side community and is used by fund managers and service providers to collect and aggregate data from third parties such as custodians.

Other (non-Clareti) business

The non-Clareti business now essentially comprises two distinct commercial arrangements under our long-standing prime-contractor relationship with ANZ. We provide on-going sub-contracting services on a fixed margin basis and re-sell and support a third-party virtual banking solution that generates highly predictable and profitable recurring revenues. ANZ are also a key customer and innovation partner for the Clareti business and provide us with very good visibility into their overall plans.

Strategy and ambition

During the period, we expanded the capability of our software platform, completed the integration of Electra, invested in our sales and marketing efforts and delivered further growth in our key financial KPIs. Our continued success reflects the investment and efforts of our talented team in delivering differentiated solutions to major financial institutions that are proven at scale and backed by a high-quality global service capability.

Looking forward, the Board and management team remain focused on fostering a culture of innovation, supported by investment in our products, people and client relationships. This ensures we continue to deliver market-leading solutions to some of the largest companies in the world who engage with us to solve critical challenges within their businesses and licence our software solutions to remain agile, competitive and compliant. Our strategy is not only to grow our footprint of financial clients globally, but to expand and deepen engagement across our existing customer base of over 270 clients across 30 countries.

This provides the building blocks of a scalable fintech platform with a market-leading product portfolio, highly invested cloud architecture and an ambitious, proven management team. We are ideally placed to pursue our growth aspirations, underpinned organically by a repeatable, high margin revenue model and a track record of identifying strategically valuable acquisitions. We are focused on a GBP0.5bn financial services data control market opportunity and our medium-term target remains a 25% market share and building a GBP100m ARR business.

Half year results

The Group delivered strong revenue growth of 55% to GBP23.0m (GBP22.5m on a constant currency basis), including a positive contribution from Electra Information Systems Inc which became part of the Group on 22 June 2021. Excluding the contribution from Electra, year-on-year Group organic revenue growth was 19% (constant currency also 19%), representing an improvement on the organic growth rate in the equivalent period last year of 14%.

In line with the Board's strategy to build sticky subscription revenues, forward looking Clareti Annual Recurring Revenue increased to GBP26.1m at period end, representing an organic increase of 18% on the position as at 30 June 2021.

The non-Clareti business has performed slightly ahead of plan in the first half of the year and we are confident in comfortably meeting expectations for the remainder of the financial year.

The Group retains a strong balance sheet with net cash of GBP6.5m and no debt as at 30 June 2022 (GBP8.1m 30 June 2021).

The financial performance in the first six months of the year reflects the strength of our growth strategy and we confidently expect this to continue into the second half.

Operating review

Contract wins

In the first six months we secured six new names, and a further new name was signed in the first week of July.These wins came from our targeted segments of banking and investment management in the UK, Europe and North America. As is typical, these wins involved competitive RFP processes during which we were able to differentiate with our unique technology and deep industry expertise.

In addition to these new names wins, we signed more than 20 upgrade or cross-sell contracts within the existing installed base. One of these contracts related to the significant Tier 1 bank win announced in May 2022. W e first engaged with the client, one of the world's largest commercial and retail banks, to deploy Clareti Control within its UK operations in 2020. As a result of the success of the initial project, the bank has chosen to adopt the technology as its single enterprise control platform across the entirety of its UK business, including retail accounts, cards, payments and commercial banking. The platform will be used to deploy a range of new controls, as well as replace existing manual processes and legacy vendor solutions. The contract extends and significantly upgrades existing software subscription commitments for a minimum period of approximately five years, with a total contract value of GBP6.3m, including an expected GBP3.5m of new incremental subscriptions over the term. This win is a clear endorsement of our unique technology offering as we continue to consolidate our leading market position.

Our success is reflected in our Clareti ARR net retention of 105% on a constant currency basis. This strong net retention rate was across all customers; despite being slightly suppressed by the cancellation of two sanctioned Russian owned businesses. The transformational building blocks put in place last year with the acquisition of Electra, which brought us scale and a greater international footprint, have enabled us to drive these new growth opportunities and build high-quality subscription earnings.

Electra

As previously reported, the integration of the sales and marketing, consulting, customer support and business operations teams, the re-branding of our solutions, and the development of a strategic R&D roadmap was materially completed at the end of last year in line with our stated plans.

The enlarged Gresham now operates as one team in the global market and, in the first year since the acquisition, we have successfully signed several new clients for Electra products in the US, Canada and Europe; and we have seen very good levels of retention across the acquired client base. The joint product set is highly complementary, in particular the combination of Connect Data and Control, where our pipeline now contains a number of such opportunities. This brings further competitive differentiation to our offering and enables us to solve a greater proportion of our customers' data challenges.

Innovation

The current focus for our Control solutions is in two primary areas. Firstly, to meet the extreme performance requirements that we are starting to see in the market as customers seek to deploy data controls at scale for use cases such as faster payments, or intra-day risk management. Use cases such as these are not currently supported by third party products in the market and provide us with further differentiation, particularly in banking. Secondly, we are investing to enable greater business self-service, and introducing enhanced investigations and exception management functionality, all delivered through easy-to-use web interfaces. As this work progresses, the Control solution acquired with Electra will evolve to share common micro-services and components with the rest of our platform, thereby reducing our maintenance costs and speeding up the cycle of new feature delivery.

Our Connect and Data offerings are already functionally rich across a variety of use cases. In the first six months of the year, we added connectivity to additional trading venues, completed a full suite of ISO 20022 transformations and introduced a natural language rules engine to offer customers a greater level of self-service. We are progressively migrating our customers to a consolidated cloud service, utilizing a next generation of tooling originally prototyped within the acquired Inforalgo business. Of note, we have introduced an API for our Data service which is now being tested by two customers and readied for market launch.

Over the last three years our partnership with ANZ Banking Group to develop a new digital corporate banking solution leveraging our innovation model and technology experience has progressed extremely well. Gresham owns the IP for the jointly developed technology, which provides the foundations of a new generation of client monies and corporate cash management solutions. ANZ's first customer is moving towards go-live, and we expect to announce the general availability of the offering to other institutions in H2. We are currently developing the launch plans for the solution under a new product brand which we expect to drive further growth for the Group on top of current Clareti offerings.

People

We continue to leverage our technology infrastructure and investment in our people and have maintained a hybrid working approach in the first half of this year. We have implemented a "trust first, customer first" approach, where our teams work where best for clients and colleagues as well as themselves, making use of the Group's hubs around the world. This, together with our supportive management culture, competitive remuneration and share-based retention schemes, has had a positive impact and helped us navigate on-going sector-wide recruitment and cost challenges. During the first half we have refined our post-integration operating model and prioritised incremental hiring into sales, marketing and revenue-generating product development. Our experienced team is very well regarded in the market and, mindful of inflationary pressures and the war for tech talent, we continue to invest in our people and aim to provide an outstanding environment for them to develop their careers. Following the easing of travel restrictions across our international operations, regional and global internal events will take place to align our team, drive collaboration across our new hybrid-workforce, as well as support various learning and development initiatives

ESG

We are also committed to ensuring we grow responsibly, to enhance the long-term value generated by our business for all of our stakeholders aligned to our three-pillar ESG strategy focused on our customers, people and the world around us. In the second half of the year, we are expanding on our initial ESG work, focusing on governance, KPIs and TCFD. We look forward to providing further updates in the annual report.

We continue to invest in our culture and education throughout the group. All our people now have access to unlimited training via the Udemy platform. This year we are running our leadership development programmes and training all our people in business ethics and standards of conduct. We have taken on a further graduate intake into development and consulting. We took swift action to cancel projects and software licences with two Russian owned entities and continue to monitor sanctions developments. Our people also responded to the Ukraine crisis raising a total of GBP8,000 for humanitarian causes which was matched by the Group.

Markets

Despite the wider backdrop of economic uncertainty, our core markets remain robust, driven by the continued structural shift to digital infrastructures and greater automation within the financial services sector. These drivers have been compounded by growing regulatory pressures and scrutiny, increasing our customers' needs for timely and accurate processing coupled with greater transparency and accountability. This means our customers need to have complete confidence in their data and processes in order to make good decisions and ensure optimal outcomes, including protecting their reputations.

An initial wave of regulation around the world over the last five years has forced all banks to find quick fixes to close risk and control gaps, ensure compliance and improve visibility. Medium-term there is a second wave of opportunity as institutions seek proven, industrialised solutions that can deliver operational efficiencies and greater agility across their enterprise. Firms are looking to upgrade these quick fixes and replace previous generations of batch-based reconciliation systems and automate their remaining manual processes. In addition, a new class of opportunity is emerging in digital banking and payments.

These drivers support a structural growth in the overall size of the addressable market for our Clareti software, and as the competitiveness of our offerings continually improves and expands, we are well placed to participate in a growing market opportunity.

Outlook

In the first half we have helped boards of some of the largest companies in the world manage their financial, operational and reputational risk by providing timely insight into their data and processes. The up-sell and cross-sell contract wins with some of these clients has evidenced the value of our solutions and this, together with the overwhelming market drivers, underpins our medium-term ambitions.

We start the second half in a strong position with products well aligned with market requirements, an experienced and motivated management team, a record level of contracted revenue, and most importantly, a strong pipeline of opportunities.

This position, coupled with our robust balance sheet and growing recurring revenues, provide the Board with confidence in the remainder of the year and beyond.

Thank you for your support,

Ian Manocha

Chief Executive Officer

25 July 2022

Financial review

Forward-looking annualised recurring revenue "ARR"

Our ARR is an aggregated value of all recurring revenues that are either fully or partially contracted for the next twelve months and/or are highly expected to renew in the next twelve months. Future uplifts in variable usage or contingent recurring fees are not included in ARR, unless they are contractually certain with all deliverables having already been met.

Our ARR from our strategic growth business, Clareti, is a critical KPI for the Group as it provides a forward-looking view of the minimum expected revenues in the next twelve months which gives confidence to business planning and investment decisions.

 
  ARR                                                 H1      H1   Variance        % 
                                                    2022    2021 
 
                Clareti ARR at 
 Clareti ARR     start of period            GBPm    24.0    12.3       11.7      95% 
  Acquired with 
   Electra                           GBPm              -     9.2      (9.2)   (100%) 
  Organic increase 
   in ARR                            GBPm            2.1     0.6        1.5     250% 
                                                  ------  ------  ---------  ------- 
  Clareti ARR at 
   end of period      KPI           GBPm            26.1    22.1        4.0      18% 
                                                  ------  ------  ---------  ------- 
 Other ARR      Other ARR                   GBPm     3.3     3.6      (0.3)     (8)% 
                                                  ------  ------  ---------  ------- 
 Group ARR      Group ARR                   GBPm    29.4    25.7        3.7      14% 
 

The Electra acquisition was completed in June 2021 and was transformative to our Clareti ARR. The focus since then has been on driving organic growth and lifting the Electra ARR growth rate up from c. 10% pre acquisition to levels comparable with the existing Clareti business. It is therefore pleasing to see the combined Clareti ARR growth rate at 18% (GBP4.0m) year on year, which includes the effect of foreign exchange tailwinds experienced over that period that significantly impact the Electra, largely USD denominated, business. The foreign exchange tailwinds contributed approximately a third of the Clareti ARR growth rate of 18%. Our retention and upsell measures remain strong, with the trailing twelve-month net Clareti ARR retention rate being 105%, a reduction of 1% from 31 December 2021, which is largely as a result of our cancellation of agreements with two sanctioned Russian customers. We calculate our net ARR retention rate, on a constant currency basis, as ARR at the end of period from customers existing at the start of the period divided by ARR at the start of the period. There remains a significant market opportunity to both upsell and cross-sell to our continually growing existing customer base that we're strategically investing in capturing; and it is worth noting that the trailing 12 months net retention rates from our six largest customers is 123% (on a constant currency basis). Coincidentally, these retention rates are the same as those reported as at 31 December 2021.

ARR from our Other businesses has also reduced to GBP3.3m from GBP3.6m at 30 June 2022 as expected. Part of this reduction comes from the ongoing reduction of our last remaining legacy IP software business called 'EDT' which will cease altogether at the end of FY22, which contributed approximately GBP0.3m of ARR twelve months ago. The remaining Other ARR comes from our long-standing software reselling business. The Group has benefitted from the longevity of these business lines for many years and the remaining ARR from our reselling business continues to provide predictability and further ability to invest with confidence in the Clareti business.

Income Statement

Revenue

Our income is analysed between revenues from Clareti Solutions and from our 'Other' non-strategic solutions and services, revenues from each business of these business segments are then broken into:

- Recurring revenues - generated for software and software-related services such as support, maintenance, and other ongoing managed services; all of which are contracted or expected to continue for the foreseeable future.

- Non-recurring revenues - professional services, contracting, training and other services that are expected to be one-off or periodic in nature.

Given the transformational nature of the Electra acquisition, we have also broken out the Clareti business to show the Electra revenues (and gross margin in the Earnings section below) as individual line items within the Clareti business.

 
                                                                H1      H1   Variance      % 
                                                              2022    2021 
 
 Clareti solutions    Recurring                      GBPm      7.1     6.6        0.5     8% 
  Recurring - Electra                      GBPm                5.4     0.3        5.1    N/a 
                                --------------------------  ------  ------  ---------  ----- 
  Recurring - Clareti 
   total                 KPI               GBPm               12.5     6.9        5.6    81% 
  Non-recurring                            GBPm                3.6     3.0        0.6    20% 
  Non-recurring - 
   Electra                                 GBPm                0.3       -        0.3    N/a 
                                --------------------------  ------  ------  ---------  ----- 
  Non-recurring - 
   Clareti total                           GBPm                3.9     3.0        0.9    30% 
                                --------------------------  ------  ------  ---------  ----- 
  Total Clareti 
   revenues              KPI               GBPm               16.4     9.9        6.5    66% 
                        -----  ---------------------------  ------  ------  ---------  ----- 
 
 Other solutions 
  & services          Recurring                      GBPm      2.0     2.2      (0.2)   (9)% 
  Non-recurring                            GBPm                4.6     2.7        1.9    70% 
 ----------------------------  ---------------------------  ------  ------  ---------  ----- 
  Total                                    GBPm                6.6     4.9        1.7    35% 
 ----------------------------   --------------------------  ------  ------  ---------  ----- 
 Group                Total                  KPI     GBPm     23.0    14.8        8.2    55% 
                     ---------------------  -----  -------  ------  ------  ---------  ----- 
 

Clareti Solutions

Clareti recurring revenues increased by 81%, up from GBP6.9m to GBP12.5m on the first half of 2021. This included a contribution of GBP5.4m from Electra in the period which only contributed GBP0.3m in the prior year equivalent period, representing the nine days since the acquisition occurred in late June 2021. Excluding the impact of Electra, Clareti recurring revenues increased by 8%, or GBP0.5m, since the prior half year. These increases were as a result of new recurring revenue sales, increased consumption of Clareti solutions from our existing customers, and the foreign exchange tailwinds that provided assistance to the USD denominated Electra business.

Clareti non-recurring revenues increased by 30%, up GBP0.9m on the prior first half, which did not contain any material revenue from Electra. Excluding the impact of Electra, the increase was 20%. This increase is being driven by new implementations associated with the increase in Clareti recurring revenues and a return to more 'normal' levels of services work, in comparison with the first half of 2021 that remained somewhat depressed due to the pandemic.

Other Solutions & Services

Total revenues from Other solutions and services increased by 35% to GBP6.6m, exceeding our original expectations. This business line includes revenues from a legacy partner relationship where we act as a reseller of third-party software; our sole remaining, own IP, legacy software product; and our contracting services business where we provide services at a fixed margin of 13% under twelve-month contractual terms. Recurring revenues within the Other solutions and services portfolio decreased by 9% to GBP2.0m, largely as a result of expected reductions in our high margin own-IP revenues, a business which is no longer material (full year 2022 expected revenues of GBP0.2m) and which we plan to close at the end of this fiscal year. The increase since the first half of 2021 in non-recurring revenues of 70%, or GBP1.9m, came from our fixed margin contracting business revenues, as our single customer in this business segment ramped up post pandemic. The mix of revenues within the Other solutions and services portfolio continues to evolve, and we continue to manage the portfolio carefully benefitting from good visibility of customer intentions.

Earnings

 
                                                                    H1   H1 2021   Variance      % 
                                                                  2022 
 Clareti 
  Solutions         Gross margin (*)                  GBPm         9.0       8.1        0.9    15% 
  Gross margin - 
   Electra                                   GBPm                  5.0       0.3        4.7    N/a 
 ---------------------------   -------------------------------  ------  --------  ---------  ----- 
  Gross margin - 
   Clareti total 
   (*)                                       GBPm                 14.0       8.4        5.6    70% 
  Gross margin (*)                            %                    85%       85%          -      - 
                    Gross margin -                        %        86%       N/a        N/a    N/a 
                     Electra 
                   ---------------------------  -----  -------  ------  --------  ---------  ----- 
  Gross margin - 
   Clareti total 
   (*)                                        %                    85%       85%         -%    N/a 
 
 Other solutions 
  & services        Gross margin (*)                     GBPm      1.7       1.6        0.1     6% 
  Gross margin (*)                               %                 26%       33%       (6)%      - 
 
 Group              Gross margin (*)                  GBPm        15.7      10.0        5.7    57% 
  Gross margin (*)                             %                   68%       68%         -%    N/a 
  Adjusted EBITDA              KPI              GBPm               4.5       2.8        1.7    61% 
  Adjusted EBITDA              KPI               %                 20%       19%         1%    N/a 
 ---------------------------  -----  -------------------------  ------  --------  ---------  ----- 
  Cash Adjusted 
   EBITDA                      KPI              GBPm               1.8       0.8        1.0   125% 
  Cash Adjusted 
   EBITDA                      KPI               %                  8%        6%         2%    N/a 
 ---------------------------  -----  -------------------------  ------  --------  ---------  ----- 
  Statutory profit/(loss) 
  after tax                                  GBPm                  1.5     (0.6)        2.1   350% 
 ---------------------------   -------------------------------  ------  --------  ---------  ----- 
  Adjusted diluted 
   EPS                         KPI             pence               3.9       2.2        1.7    77% 
 
 

Gross margin and reporting reclassification - note, reclassification as reported in the 31 December 2021 Annual Report for the full year (*)

Across all business segments, the majority of our cost of sales is made up of: (i) the customer-specific third party costs incurred in providing our hosted cloud solutions; (ii) third party contractor costs incurred by our contracting services business; and (iii) in the 2021 Annual Report we reclassified fixed-term payrolled employees that provide fixed margin contracting/recruitment services to ANZ from operating expenses to cost of sales as we consider this a better reflection of our gross margin. The full year 2021 comparative was restated and explained in the 2021 Annual report. The impact of this restatement to the H1 2021 comparatives stated above was GBP1.1m, GBP0.3m in Clareti and GBP0.8m within the Other Solutions and Services, the value of this of H1 2021 gross margin is GBP0.8m.

The acquisition of Electra has accelerated the growth of our high gross margin Clareti business, which in line with long standing Group strategy, offsets the continued and expected decline in gross margin being generated from the legacy Other solutions and services businesses. At a group level, including the impact of the Electra acquisition, gross margins have remained static at 68%. The gross margin within Clareti and Electra are consistent at 85%-86% both across businesses and first half reporting periods.

As planned and described in the revenue section above, the Other solutions and services business mix has continued to move in balance towards the lower margin software reselling and contracting services business lines from our higher margin legacy owned IP, which is no longer material, and we plan to close at the end of this fiscal year.

Adjusted EBITDA

Adjusted EBITDA (earnings before interest, tax, depreciation and amortisation) is analysed excluding exceptional items, share-based payment charges, amortisation from acquired intangible assets and impairment of development costs; which is consistent with the way in which the Board reviews the financial results of the Group.

Group adjusted EBITDA has improved by GBP1.7m, or 61%, since the prior year with the margin improving by 1% to 20% in 2022. This is as a result of the existing higher margin Clareti business continuing to grow and beginning to drive improved operational leverage as it scales along with the impact of the Electra acquisition, which offset the continued reducing margin of the Other solutions and services business lines. Whilst we will ensure that we maximise the current market opportunity through appropriate strategic investments, we do expect to continue to see improvements to these margins in future years.

Cash Adjusted EBITDA

Cash adjusted EBITDA refers to adjusted EBITDA reduced by the value of capitalised development spend and any IFRS16 lease-related cash expenses classified as depreciation and interest. We consider this a good measure of cash profitability for modern SaaS business who continue to invest in product development to ensure they remain market leading.

Group cash adjusted EBITDA has also improved since the prior year, with GBP1.0m of the GBP1.7m improvement in adjusted EBITDA (mentioned above) dropping through to improvement cash EBITDA. The GBP0.7m difference between the improvements in the two EBITDA measures is as a result of capitalised development spend and IFRS 16 lease-related cash expenses in the acquired Electra business as well as increased customer-funded investment in our Clareti innovation initiatives with ANZ. This has resulted in a cash adjusted EBITDA margin of 8%, an improvement of 2% from a margin of 6% in the prior year. Like adjusted EBITDA, we expect to see continued improvements in these margins in future years.

Due to the natural hedging that exists throughout the Group, the impact of foreign exchange tailwinds on all earning measures was immaterial totalling GBP0.1m at both an adjusted EBITDA and cash adjusted EBITDA level.

Statutory profit/(loss) after tax and Adjusted diluted EPS

There has been an increase in statutory profit after tax to profit of GBP1.5m from a prior year loss of GBP0.6m. This improvement of GBP2.1m is largely due to the growth and improved profitability of the Group discussed above.

Adjusted diluted EPS has improved by 77% to 3.9 pence per share. Adjusted earnings used in this calculation adjust the statutory result after tax for exceptional items; amortisation of acquired intangibles and share-based payments. Exceptional expenses in the period were GBP0.1m, GBP1.4m lower than the prior first half which included significant Electra acquisition related one-off costs; amortisation of acquired intangibles increased to GBP1.2m from GBP0.5m, again as a result of the Electra acquisition; and the share-based payment charges have increased to GBP0.4m from GBP0.2m largely as a result of the inaugural use of the discretionary performance share plan in October 2021.

Cashflow

 
                                                         H1       H1   Variance        % 
                                                       2022     2021 
 
 Opening cash & cash equivalents 
  at 1 January                                GBPm      9.1      8.9        0.2       2% 
 
 Operating cash flow excluding 
  exceptional items                           GBPm      4.5      2.3        2.2      95% 
 Operating cash flow from 
  exceptional items                           GBPm    (0.2)    (0.5)        0.3      60% 
 Total operating cash flow 
  excluding working capital                   GBPm      4.3      1.8        2.5     161% 
 Movement in working capital                  GBPm    (3.2)    (1.7)      (1.5)    (88)% 
------------------------------------------   ------  ------  -------  ---------  ------- 
 Cash inflow from operations                  GBPm      1.1      0.1        1.0    1000% 
 Net tax (payments)/receipts                  GBPm    (0.1)    (0.6)        0.5      83% 
 Capital expenditure - development 
  costs                                       GBPm    (2.4)    (1.8)      (0.6)      33% 
 Capital expenditure - other                  GBPm    (0.3)        -      (0.3)        - 
 Principal paid on lease 
  liabilities                                 GBPm    (0.3)    (0.3)          -        - 
 Inforalgo acquisition (deferred 
  consideration)                              GBPm    (0.4)        -      (0.4)        - 
 Electra acquisition (net 
  of cash acquired)                           GBPm        -   (17.7)       17.7        - 
 Shares issued - Electra 
  acquisition (net of costs)                  GBPm        -     20.2     (20.2)        - 
 Shares issued - upon option                  GBPm        -        -          -        - 
  exercises 
 Dividend                                     GBPm    (0.6)    (0.5)      (0.1)    (20)% 
 Other                                         GBPm     0.4    (0.2)        0.6     300% 
------------------------------------------   ------  ------  -------  ---------  ------- 
 Net increase/(decrease) 
  in cash and cash equivalents                 GBPm   (2.6)    (0.8)      (1.6)   (200)% 
------------------------------------------   ------  ------  -------  ---------  ------- 
 Closing cash & cash equivalents 
  at 30 June                          KPI     GBPm      6.5      8.1      (1.6)    (20)% 
 

The Group continues to be funded from operating cash and has no debt, with the cash performance of the business being aligned with management's expectations.

Operating cashflow remains strong with the improvement on the equivalent period in the prior year, being consistent with the improvement in cash EBITDA (see Income Statement narrative above). Exceptional items were significantly lower than the prior period which included costs associated with the Electra acquisition.

The movement in working capital remains negative for the first half, which is aligned with the traditional half year working capital cycle due to the unwinding of the significant deferred revenue position that builds up during the fourth quarter each year.

Net tax payments of GBP0.1m were made during the first half (2021: net tax payments of GBP0.6m). Gross tax payments were made in the period of GBP1.2m (2021: GBP0.6m), the increase on the prior first half largely as a result of increased profitability in the US and Australia, with gross tax receipt of GBP1.1m received in the first half in relation to the surrender of tax losses generated from R&D activity (2021: nil, with the equivalent amount being received from HMRC during late 2020).

The final deferred consideration payment in relation to the Inforalgo acquisition of July 2020 was made in full during the first quarter of 2022.

At the time of the Electra acquisition, the Group established a USD 15m multi-currency revolving debt facility. This facility was put in place in case required to satisfy deferred consideration payments in relation to the Electra acquisition. It is likely that the first deferred consideration payment of approximately GBP4m will be made in full during the third quarter of 2022. This payment coincides with our low cash point in our annual working capital cycle, therefore is expected to be drawn upon to a small degree, for a short period of time, to ensure sufficient currency holdings are maintained before the annual build-up of cash reserves occurs, although this currently remains under review.

Capital expenditure in relation to development and tangible items increased from GBP1.8m to GBP2.7m, largely in relation to development activities at Electra, which was not acquired until late June 2021.

Currency revaluations in the first half amounted to a gain of GBP0.4m (2021: a loss of GBP0.2m).

Balance Sheet

The balance sheet remains strong, with the only significant movement that is not explained above being trade and other payables of GBP16.6m (2021: GBP19.7m) which is due to the prior half year including GBP3.2m of one-off accruals in relation to the acquisition of Electra that were paid in Q3 of 2021.

Financial Outlook

The ongoing strong growth in the high margin recurring Clareti business and the outperformance in the non-Clareti business gives management confidence in comfortably meeting expectations for the year. The low margin contracting line of non-Clareti business has the potential to continue performing well, the extent to which is dependent upon the value of significant annual renewals, which we expect to finalise in late Q3 and early Q4. The Clareti pipeline is in a stronger position than ever before at this stage in the year.

The Group's revenues and forward-looking ARR have benefitted from foreign exchange tailwinds over the past 12 months. Whilst a level of natural foreign exchange hedging exists at earnings level due to the significant portion of the cost base being denominated in USD and AUD, the Group will monitor fluctuations and consider whether the use of hedging instruments may be appropriate.

We have invested and will continue to further invest for growth in the Clareti business. This investment will continue to be focussed on distribution, product and customer success; to drive revenue synergies to ensure we are best placed to take advantage of the significant market opportunities. At a Group level we plan to balance this investment with ongoing incremental improvements to all earnings margins, with our main focus being on the cash EBITDA margin. We look forward to providing further updates throughout the year and remain confident in our long-term strategy and outlook

Tom Mullan

Chief Financial Officer

25 July 2022

Consolidated income statement

 
                                         Notes     6 months    As restated 
                                                      ended       6 months           12 months 
                                                    30 June          ended               ended 
                                                       2022        30 June         31 December 
                                                  Unaudited           2021                2021 
                                                                 Unaudited             Audited 
                                                    GBP'000        GBP'000             GBP'000 
--------------------------------------  ------  -----------  -------------  ------------------ 
 Revenue                                     2       22,979         14,791              37,026 
 Cost of sales                                      (7,244)        (4,746)            (11,799) 
--------------------------------------  ------  -----------  -------------  ------------------ 
 Gross profit                                        15,735         10,045              25,227 
 Adjusted administrative expenses                  (12,837)        (8,685)            (21,146) 
--------------------------------------  ------  -----------  -------------  ------------------ 
 Adjusted operating profit                            2,898          1,360               4,081 
--------------------------------------  ------  -----------  -------------  ------------------ 
 Adjusting administrative items: 
 Exceptional costs                           2        (145)        (1,482)             (1,821) 
 Exceptional income                          2            -              -                 330 
 Amortisation on acquired intangibles               (1,157)          (516)             (1,673) 
 Share-based payments                                 (436)          (174)               (369) 
--------------------------------------  ------  -----------  -------------  ------------------ 
                                                    (1,738)        (2,172)             (3,533) 
--------------------------------------  ------  -----------  -------------  ------------------ 
 Total administrative expenses                     (14,575)       (10,857)            (24,679) 
--------------------------------------  ------  -----------  -------------  ------------------ 
 Operating profit/(loss)                              1,160          (812)                 548 
 
 Finance revenue                                          3              3                   4 
 Finance costs                                         (99)           (28)               (121) 
--------------------------------------  ------  -----------  -------------  ------------------ 
 Profit/(loss) before taxation                        1,064          (837)                 431 
 Taxation                                    3          480            256             (1,443) 
--------------------------------------  ------  -----------  -------------  ------------------ 
 Profit/(loss) after taxation - 
  Attributable to owners of the 
  Parent                                              1,544          (581)             (1,012) 
--------------------------------------  ------  -----------  -------------  ------------------ 
 
 Earnings per share 
 Statutory 
 Basic earnings per share - pence            4         1.85         (0.82)                (1.31) 
 Diluted earnings per share - pence          4         1.81         (0.82)                (1.31) 
--------------------------------------  ------  -----------  -------------  -------------------- 
 Adjusted 
 Basic earnings per share - pence            4         3.94           2.25                  5.08 
 Diluted earnings per share - pence          4         3.85           2.21                  5.02 
--------------------------------------  ------  -----------  -------------  -------------------- 
 
 

Consolidated statement of comprehensive income

 
                                                 6 months     6 months      12 months 
                                                    ended        ended          ended 
                                                  30 June      30 June    31 December 
                                                     2022         2021           2021 
                                                Unaudited    Unaudited        Audited 
                                                  GBP'000      GBP'000        GBP'000 
--------------------------------------------  -----------  -----------  ------------- 
 Profit/(loss) after taxation attributable 
  to the Parent                                     1,544        (581)        (1,012) 
--------------------------------------------  -----------  -----------  ------------- 
 
 Other comprehensive (expense)/income 
 Items that will or may be re-classified 
  into profit or loss: 
  Exchange differences on translating 
  foreign operations                                (907)           11          (184) 
--------------------------------------------  -----------  -----------  ------------- 
 Total other comprehensive (expense)/income         (907)           11          (184) 
--------------------------------------------  -----------  -----------  ------------- 
 
 Total comprehensive income/(expense) 
  for the period                                      637        (570)        (1,196) 
--------------------------------------------  -----------  -----------  ------------- 
 

Consolidated statement of financial position

 
                                       30 June      30 June   31 December 
                                          2022         2021          2021 
                                     Unaudited    Unaudited       Audited 
                                       GBP'000      GBP'000       GBP'000 
--------------------------------   -----------  -----------  ------------ 
 Assets 
 Non-current assets 
 Property, plant and equipment             415          191           218 
 Right-of-use assets                     1,181        1,657         1,466 
 Intangible assets                      62,356       61,568        62,267 
 Deferred tax assets                     1,239        1,010           232 
---------------------------------  -----------  -----------  ------------ 
                                        65,191       64,426        64,183 
 Current assets 
 Trade and other receivables             5,851        5,364         5,403 
 Contract assets                         1,922        2,617         1,665 
 Income tax receivable                     417            -         1,204 
 Cash and cash equivalents               6,504        8,084         9,139 
---------------------------------  -----------  -----------  ------------ 
                                        14,694       16,065        17,411 
 Total assets                           79,885       80,491        81,594 
---------------------------------  -----------  -----------  ------------ 
 
 Equity and liabilities 
 Equity attributable to owners 
  of the Parent 
 Called up equity share capital          4,168        4,166         4,168 
 Share premium account                  23,876       23,856        23,876 
 Own share reserve                       (298)        (510)         (609) 
 Other reserves                            536          536           536 
 Foreign currency translation 
  reserve                              (1,285)        (183)         (378) 
 Retained earnings                      19,798       18,524        18,288 
 Total equity attributable to 
  owners of the Parent                  46,795       46,389        45,881 
---------------------------------  -----------  -----------  ------------ 
 Non-current liabilities 
 Contract liabilities                      571            -            60 
 Lease liabilities                         545          923           770 
 Deferred tax liability                  6,639        5,214         6,831 
 Provisions                                146          146           144 
 Contingent consideration                3,978        2,581         3,575 
                                        11,879        8,864        11,380 
 --------------------------------  -----------  -----------  ------------ 
 Current liabilities 
 Trade and other payables               16,619       19,706        19,616 
 Lease liabilities                         614          662           642 
 Income tax payable                          -          117           131 
 Contingent consideration                3,978        4,753         3,944 
                                        21,211       25,238        24,333 
 --------------------------------  -----------  -----------  ------------ 
 Total liabilities                      33,090       34,102        35,713 
---------------------------------  -----------  -----------  ------------ 
 Total equity and liabilities           79,885       80,491        81,594 
---------------------------------  -----------  -----------  ------------ 
 

Consolidated statement of changes in equity

 
                                 Share      Share       Own       Other       Currency    Retained     Total 
                               capital    premium    shares    reserves    translation    earnings 
                               GBP'000    GBP'000   GBP'000     GBP'000        GBP'000     GBP'000   GBP'000 
----------------------   -------------  ---------  --------  ----------  -------------  ----------  -------- 
 
 At 1 January 2021               3,508      4,341     (778)         536          (194)      19,453    26,866 
 
 Attributable loss 
  for the period                     -          -         -           -              -       (581)     (581) 
 Other comprehensive 
  income                             -          -         -           -             11           -        11 
-----------------------  -------------  ---------  --------  ----------  -------------  ----------  -------- 
 Total comprehensive 
  expense                            -          -         -           -             11       (581)     (570) 
 Issue of equity shares            656     20,344         -           -              -           -    21,000 
 Share issue costs                   -      (870)         -           -              -           -     (870) 
 Exercise of share 
  options                            2         41         -           -              -           -        43 
 Share-based payment 
  expense                            -          -         -           -              -         174       174 
 Issue of shares held 
  by Employee Share 
  Ownership Trust                    -          -       268           -              -           -       268 
 Dividend                            -          -         -           -              -       (522)     (522) 
 At 30 June 2021                 4,166     23,856     (510)         536          (183)      18,524    46,389 
-----------------------  -------------  ---------  --------  ----------  -------------  ----------  -------- 
 
 Attributable loss 
  for the period                     -          -         -           -              -       (431)     (431) 
 Other comprehensive 
  expense                            -          -         -           -          (195)           -     (195) 
-----------------------  -------------  ---------  --------  ----------  -------------  ----------  -------- 
 Total comprehensive 
  expense                            -          -         -           -          (195)       (431)     (626) 
 Exercise of share 
  options                            2         20         -           -              -           -        22 
 Share-based payment 
  expense                            -          -         -           -              -         195       195 
 Issue of shares held 
  by Employee Share 
  Ownership Trust                    -          -      (99)           -              -           -      (99) 
 At 31 December 2021             4,168     23,876     (609)         536          (378)      18,288    45,881 
-----------------------  -------------  ---------  --------  ----------  -------------  ----------  -------- 
 
 Attributable profit 
  for the period                     -          -         -           -              -       1,544     1,544 
 Other comprehensive 
  expense                            -          -         -           -          (907)           -     (907) 
-----------------------  -------------  ---------  --------  ----------  -------------  ----------  -------- 
 Total comprehensive 
  (expense)/income                   -          -         -           -          (907)       1,544       637 
 Share-based payment 
  expense                            -          -         -           -              -         436       436 
 Issue of shares held 
  by Employee Share 
  Ownership Trust                    -          -       311           -              -         152       463 
 Dividend                            -          -         -           -              -       (622)     (622) 
 At 30 June 2022                 4,168     23,876     (298)         536        (1,285)      19,798    46,795 
-----------------------  -------------  ---------  --------  ----------  -------------  ----------  -------- 
 
 
 

Consolidated statement of cashflows

 
                                                    6 months     6 months      12 months 
                                                       ended        ended          ended 
                                                     30 June      30 June    31 December 
                                                        2022         2021           2021 
                                                   Unaudited    Unaudited        Audited 
                                                     GBP'000      GBP'000        GBP'000 
-----------------------------------------------  -----------  -----------  ------------- 
 Cashflows from operating activities 
 Profit/(loss) after taxation                          1,544        (581)        (1,012) 
 Depreciation of property, plant and equipment            71           84            175 
 Amortisation of intangible assets                     2,348        1,633          4,042 
 Amortisation of right-to-use assets                     313          261            581 
 Share-based payments                                    436          174            369 
 Increase/(decrease) in trade and other 
  receivables                                             68        (756)          (776) 
 Increase in contract assets                           (139)      (1,172)          (220) 
 (Decrease)/increase in trade and other 
  payables                                           (1,271)          525          1,996 
 (Decrease)/increase in contract liabilities         (1,874)        (340)            256 
 Taxation                                              (480)          256          1,443 
 Exchange gain on financial instrument                     -            -          (330) 
 Net finance costs                                        96           25            117 
-----------------------------------------------  -----------  -----------  ------------- 
 Cash inflow from operations                           1,112          109          6,641 
 Income taxes received                                 1,103            -              - 
 Income taxes paid                                   (1,199)        (663)        (1,114) 
-----------------------------------------------  -----------  -----------  ------------- 
 Net cash inflow/(outflow) from operating 
  activities                                           1,016        (554)          5,527 
 Cash flows from investing activities 
 Exchange gain on financial instrument                     -            -            330 
 Interest received                                         3            3              4 
 Purchase of property, plant and equipment             (295)         (22)          (145) 
 Payments to acquire subsidiary undertakings 
  (net of cash)                                            -     (17,676)       (19,639) 
 Payments of contingent consideration                  (369)            -          (923) 
 Payments to acquire intangible fixed assets         (2,392)      (1,745)        (4,150) 
-----------------------------------------------  -----------  -----------  ------------- 
 Net cash used in investing activities               (3,053)     (19,440)       (24,523) 
 Cash flows from financing activities 
 Interest paid                                          (48)            -           (39) 
 Principal paid on lease liabilities                   (329)        (270)          (590) 
 Dividends paid                                        (622)        (522)          (522) 
 Share issue proceeds (net of costs)                       -       20,173         20,195 
 Net cash (used in)/from financing activities          (999)       19,381         19,044 
 
 Net decrease in cash and cash equivalents           (3,036)        (613)             48 
 Cash and cash equivalents at beginning 
  of period                                            9,139        8,876          8,876 
 Exchange adjustments                                    401        (179)            215 
 Cash and cash equivalents at end of period            6,504        8,084          9,139 
-----------------------------------------------  -----------  -----------  ------------- 
 

Notes to the interim report

   1.      Basis of preparation 

Gresham Technologies plc (LSE: "GHT", "Gresham" or the "Company" or the "Group" or the "Parent") is a Public limited company and is listed on the London Stock Exchange. The Company's registered address is Aldermary House, 10 - 15 Queen Street, London, EC4N 1TX and the Company's registration number is 1072032.

These condensed interim financial statements are unaudited, have not been reviewed by the Group's auditors, and do not constitute statutory accounts within the meaning of the Companies Act 2006.

These condensed interim financial statements have been prepared on a going concern basis and in accordance with IAS 34 'Interim Financial Reporting', the Disclosure and Transparency Rules and the Listing Rules of the Financial Conduct Authority, and were approved on behalf of the Board by the Chief Executive Officer Ian Manocha and Chief Financial Officer Tom Mullan on 25 July 2022.

The accounting policies and methods of computation applied in these condensed interim financial statements are consistent with those applied in the Group's most recent annual financial statements for the year ended 31 December 2021.

The financial statements for the year ended 31 December 2021, which were prepared in accordance with UK adopted International Financial Reporting Standards ("IFRSs"). The auditors' opinion on those financial statements was unqualified and did not contain a statement made under s498(2) or (3) of the Companies Act 2006.

Copies of these condensed interim financial statements and the Group's most recent annual financial statements are available from the Group's website www.greshamtech.com or by writing to the Company Secretary at the Company's registered office.

   2.      Segmental information 

The segmental disclosures reflect the analysis presented on a monthly basis to the chief operating decision maker of the business, the Chief Executive and the Board of Directors.

For management purposes, the Group is organised into the following reportable segments:

-- Clareti Solutions - supply of solutions predominantly to the finance and banking markets across Asia Pacific, EMEA and North America. Includes both software and services that can be accessed in the cloud, on-premise or deployed into hybrid environments. These primary offerings within this segment include:

o Clareti Control products (including the acquired Electra 'Reconciliation' products)

o Clareti Connect products (including the acquired Electra products except for 'Reconciliation')

-- Other Solutions - supply of a range of well-established solutions to enterprise-level customers in a variety of end markets

   --      Contracting Services - supply of IT contracting services to one banking customer. 

Transfer prices between segments are set on an arm's length basis in a manner similar to transactions with third parties. Segment revenue, segment expense and segment result include transfers between business segments. Those transfers are eliminated on consolidation

6 months ended 30 June 2022 (unaudited) - Segmental Information

 
                                                    Other Solutions 
                                                ----------------------- 
                                       Clareti              Contracting 
                                     Solutions   Software      Services   Consolidated 
 
 Revenue                                16,381      2,430         4,168         22,979 
 Cost of sales                         (2,381)    (1,218)       (3,645)        (7,244) 
 Gross profit                           14,000      1,212           523         15,735 
--------------------------------   -----------  ---------  ------------  ------------- 
 Gross profit %                            85%        50%           13%            68% 
--------------------------------   -----------  ---------  ------------  ------------- 
 Adjusted administrative 
  expenses                            (12,782)       (55)             -       (12,837) 
--------------------------------   -----------  ---------  ------------  ------------- 
 Adjusted operating profit               1,218      1,157           523          2,898 
 Adjusted operating margin 
  %                                         7%        48%           13%            13% 
 
 Adjusting items: 
 Exceptional costs                                                               (145) 
 Amortisation of acquired 
  intangibles                                                                  (1,157) 
 Share-based payments                                                            (436) 
--------------------------------   -----------  ---------  ------------  ------------- 
 Adjusting administrative 
  expenses                                                                     (1,738) 
 
 Operating profit                                                                1,160 
 
 Finance revenue                                                                     3 
 Finance costs                                                                    (99) 
--------------------------------   ----------- 
 Profit before taxation                                                          1,064 
 Taxation                                                                          480 
--------------------------------   -----------  ---------  ------------  ------------- 
 Profit after taxation                                                           1,544 
--------------------------------   -----------  ---------  ------------  ------------- 
 
 Adjusted operating profit                                                       2,898 
 Amortisation of intangibles                                                     1,191 
 Depreciation of property, 
  plant and equipment                                                               71 
 Amortisation of right-of-use 
  assets                                                                           313 
 Adjusted EBITDA                                                                 4,473 
 Development costs capitalised                                                 (2,392) 
 Principal paid on lease 
  liabilities                                                                    (329) 
--------------------------------   -----------  ---------  ------------  ------------- 
 Cash adjusted EBITDA                                                            1,752 
--------------------------------   -----------  ---------  ------------  ------------- 
 
 Segment assets                                                                 79,885 
 Segment liabilities                                                          (33,090) 
--------------------------------   -----------  ---------  ------------  ------------- 
 
 

6 months ended 30 June 2021 (unaudited) - Segmental Information

 
                                                       Other Solutions 
                                                   ----------------------- 
                                          Clareti              Contracting 
                                        Solutions   Software      Services   Consolidated 
                                          GBP'000    GBP'000       GBP'000        GBP'000 
 -----------------------------------  -----------  ---------  ------------  ------------- 
 Revenue                                    9,856      2,468         2,467         14,791 
 Cost of sales                            (1,414)    (1,181)       (2,151)        (4,746) 
 Gross profit                               8,442      1,287           316         10,045 
-----------------------------------   -----------  ---------  ------------  ------------- 
 Gross profit %                               86%        52%           13%            68% 
 Adjusted administrative 
  expenses                                (8,614)       (71)             -        (8,685) 
-----------------------------------   -----------  ---------  ------------  ------------- 
 Adjusted operating (loss)/profit           (172)      1,216           316          1,360 
 Adjusted operating margin 
  %                                          (2%)        49%           13%             9% 
 Adjusting items: 
 Exceptional costs                                                                (1,482) 
 Amortisation of acquired 
  intangibles                                                                       (516) 
 Share-based payments                                                               (174) 
-----------------------------------   -----------  ---------  ------------  ------------- 
 Adjusting administrative 
  expenses                                                                        (2,172) 
 
 Operating loss                                                                     (812) 
 
 Finance revenue                                                                        3 
 Finance costs                                                                       (28) 
-----------------------------------   -----------  ---------  ------------ 
 Loss before taxation                                                               (837) 
 Taxation                                                                             256 
-----------------------------------   -----------  ---------  ------------  ------------- 
 Loss after taxation                                                                (581) 
-----------------------------------   -----------  ---------  ------------  ------------- 
 
 Adjusted operating profit                                                          1,360 
 Amortisation of intangibles                                                        1,117 
 Depreciation of property, 
  plant and equipment                                                                  84 
 Amortisation of right-of-use 
  assets                                                                              261 
 Bank charges                                                                         (9) 
-----------------------------------   -----------  ---------  ------------  ------------- 
 Adjusted EBITDA                                                                    2,813 
 Development costs capitalised                                                    (1,745) 
 Principal paid on lease 
  liabilities                                                                       (270) 
-----------------------------------   -----------  ---------  ------------  ------------- 
 Cash adjusted EBITDA                                                                 798 
                                                                            ------------- 
 
 Segment assets                                                                    80,491 
 Segment liabilities                                                             (34,102) 
-----------------------------------   -----------  ---------  ------------  ------------- 
 
 

Gross margin and reporting reclassification

The interim statement for the period ended 30 June 2021 included the Group's fixed margin contracting services business with third party contractor costs included within cost of sales and fixed term contractors paid through the Groups' payrolls being disclosed as administrative expenses. To provide more relevant and reliable information for the year ended 31 December 2021 all contractor costs incurred under the Group's contracting business were disclosed as cost of sales regardless of how the contractor was paid. This adjustment was disclosed as a prior year restatement in the Group's financial statement for the year ended 31 December 2021.

As a result, the comparative information for the period to 30 June 2021 included within this statement have been restated for this change in accounting treatment. The effect of this change is that cost of sales increased by GBP1,054,000 to GBP4,746,000 with administrative expenses decreasing by GBP1,054,000 to GBP8,685,000. There was no impact to retained earnings.

Adjusted EBITDA

Adjusted EBITDA is calculated as EBITDA excluding exceptional items and share-based payments, reconciled as follows:

 
                                               6 months     6 months      12 months 
                                                  ended        ended          ended 
                                                30 June      30 June    31 December 
                                                   2022         2021           2021 
                                              Unaudited    Unaudited        Audited 
                                                GBP'000      GBP'000        GBP'000 
----------------------------------------  -------------  -----------  ------------- 
 Profit/(loss) before taxation                    1,064        (837)            431 
----------------------------------------  -------------  -----------  ------------- 
 Adjusting items: 
 Amortisation of intangibles                      2,348        1,633          4,042 
 Depreciation of property, plant and 
  equipment                                          71           84            175 
 Amortisation of right-to-use assets                313          261            581 
 Notional interest on lease liabilities              20           19             43 
 Finance revenue                                    (3)          (3)            (4) 
 Interest payable                                    79            -             78 
----------------------------------------  -------------  -----------  ------------- 
 EBITDA                                           3,892        1,157          5,346 
----------------------------------------  -------------  -----------  ------------- 
 
 Exceptional items                                  145        1,482          1,491 
 Share-based payments                               436          174            369 
----------------------------------------  -------------  -----------  ------------- 
 Adjusted EBITDA                                  4,473        2,813          7,206 
----------------------------------------  -------------  -----------  ------------- 
 

Exceptional items

An analysis of exceptional items included within the Income statement is disclosed below:

 
                                                  6 months     6 months      12 months 
                                                     ended        ended          ended 
                                                   30 June      30 June    31 December 
                                                      2022         2021           2021 
                                                 Unaudited    Unaudited        Audited 
                                                   GBP'000      GBP'000        GBP'000 
---------------------------------------------  -----------  -----------  ------------- 
 Acquisition and associated integration 
  costs                                                145        1,805          1,814 
 Implementation of new ten-year share option 
  scheme                                                 -            7              7 
---------------------------------------------  -----------  -----------  ------------- 
                                                       145        1,812          1,821 
 Gain on forward foreign exchange contract               -        (330)          (330) 
                                                       145        1,482          1,491 
---------------------------------------------  -----------  -----------  ------------- 
 
   3.      Taxation 
 
                                                    6 months     6 months      12 months 
                                                       ended        ended          ended 
                                                     30 June      30 June    31 December 
                                                        2022         2021           2021 
                                                   Unaudited    Unaudited        Audited 
                                                     GBP'000      GBP'000        GBP'000 
-----------------------------------------------  -----------  -----------  ------------- 
 Current income tax 
 Overseas tax credit - adjustment to previous 
  periods                                                  -         (99)           (93) 
 Overseas tax charge - current period                    719          433          1,118 
 UK corporation tax credit - adjustment 
  to previous periods                                      -            -        (1,045) 
 Total current income tax                                719          334           (20) 
 
 Deferred income tax 
 Movement in net deferred tax asset                  (1,199)        (467)          1,231 
 Tax rate change adjustments                               -        (123)            232 
 Total deferred income tax                           (1,199)        (590)          1,483 
 
 Total (credit)/charge in the income statement         (480)        (256)          1,443 
-----------------------------------------------  -----------  -----------  ------------- 
 

The prior period UK corporation tax prior period adjustment to prior periods relates to the cash credit received upon the surrender of losses.

   4.      Earnings per ordinary share 

Basic earnings per share amounts are calculated by dividing net profit for the period attributable to ordinary equity holders of the Parent by the weighted average number of ordinary shares outstanding during the period.

Diluted earnings per share amounts are calculated by dividing the net profit attributable to ordinary equity holders of the Parent by the weighted average number of ordinary shares outstanding during the period plus the weighted average number of ordinary shares that would be issued on the conversion of all the dilutive potential ordinary shares into ordinary shares.

The following reflects the earnings and share data used in the basic and diluted earnings per share computations:

 
                                                   6 months     6 months       12 months 
                                                      ended        ended           ended 
                                                    30 June      30 June     31 December 
                                                       2022         2021            2021 
                                                  Unaudited    Unaudited         Audited 
 
 Basic weighted average number of 
  shares                                         83,364,458   70,763,791      77,132,796 
 Dilutive potential ordinary shares 
           Employee share options - weighted      1,799,004    1,361,641         890,100 
 Diluted weighted average number 
  of shares                                      85,163,462   72,125,432      78,022,896 
----------------------------------------------  -----------  -----------  -------------- 
 
 
                                                 6 months     6 months      12 months 
                                                    ended        ended          ended 
                                                  30 June      30 June    31 December 
                                                     2022         2021           2021 
                                                Unaudited    Unaudited        Audited 
                                                  GBP'000      GBP'000        GBP'000 
-------------------------------------------   -----------  -----------  ------------- 
 Adjusted earnings attributable to owners 
  of the Parent                                     3,282        1,591          3,919 
 Adjusting items: 
 Exceptional items                                  (145)      (1,482)        (1,491) 
 Amortisation of acquired intangibles             (1,157)        (516)        (1,673) 
 Deferred tax charge on inter-group sale 
  of intellectual property                              -            -        (1,398) 
 Share-based payments                               (436)        (174)          (369) 
 Statutory earnings attributable to owners 
  of the Parent                                     1,544        (581)        (1,012) 
--------------------------------------------  -----------  -----------  ------------- 
 
 Earnings per share: 
 Statutory 
 Basic earnings per share - pence                    1.85       (0.82)         (1.31) 
 Diluted earnings per share - pence                  1.81       (0.82)         (1.31) 
--------------------------------------------  -----------  -----------  ------------- 
 
 Adjusted 
 Basic earnings per share - pence                    3.94         2.25           5.08 
 Diluted earnings per share - pence                  3.85         2.21           5.02 
--------------------------------------------  -----------  -----------  ------------- 
 

There have been no transactions involving ordinary shares or potential ordinary shares between the reporting date and the date of completion of this interim statement.

   5.      Dividends paid and proposed 

Amounts recognised as distributions to equity holders during the period:

 
                                           6 months     6 months       12 months 
                                              ended        ended           ended 
                                            30 June      30 June     31 December 
                                               2022         2021            2021 
                                          Unaudited    Unaudited         Audited 
                                            GBP'000      GBP'000         GBP'000 
-------------------------------------   -----------  -----------  -------------- 
 Final dividend 
 Final dividend for the year ended              622            -               - 
  31 December 2021 of 0.75 pence per 
  share 
 Final dividend for the year ended 
  31 December 2020 of 0.75 pence per 
  share                                           -          522             522 
                                                622          522             522 
 -------------------------------------  -----------  -----------  -------------- 
 
   6.      Statement of directors' responsibilities 

The Directors are responsible for preparing the half-yearly financial report, in accordance with applicable law and regulations.

The Directors confirm, to the best of their knowledge, that this condensed set of financial statements:

   --      has been prepared in accordance with IAS 34; and 

-- includes a fair review of the information required by Rules 4.2.7 and 4.2.8 of the Disclosure and Transparency Rules of the United Kingdom Financial Conduct Authority (as detailed in the Chief Executive review).

The principal risks and uncertainties facing the Group for the period ending 30 June 2022 and anticipated for the remainder of the year ended 31 December 2022 ; remain consistent with those disclosed in the Group's financial statements for the year ended 31 December 2021, which are available from www.greshamtech.com .

   7.      Related party transactions 

No related party transactions have taken place during the first six months of the year that have materially affected the financial position or performance of the Company.

Key management compensation

 
                                   6 months     6 months       12 months 
                                      ended        ended           ended 
                                    30 June      30 June     31 December 
                                       2022         2021            2021 
                                  Unaudited    Unaudited         Audited 
                                    GBP'000      GBP'000         GBP'000 
-----------------------------   -----------  -----------  -------------- 
 Directors' emoluments 
 Remuneration                           326          323             648 
 Bonuses                                129          109             401 
 Pension                                 11           11              22 
 Share-based payment charges            151           43             116 
                                        617          486           1,187 
 -----------------------------  -----------  -----------  -------------- 
 

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.

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END

IR EAFXSAELAEAA

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July 26, 2022 02:00 ET (06:00 GMT)

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