TIDMGHT
RNS Number : 8979F
Gresham Technologies PLC
21 July 2021
RNS
21 July 2021
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
2021.
The Group is pleased to be able to report 30% growth in Clareti
revenues, driving 19% growth in total Group revenues and 167%
growth in Group cash EBITDA against the first half of 2020.
Financial highlights - excluding the impact of the Electra
acquisition
HY 2021 HY 2020 Growth Like for
GBPm GBPm % like growth(i)
%
------------------------------ -------- -------- ------- ----------------
Clareti annualised recurring
revenues 12.9 10.7 21% 9%
Group annualised recurring
revenues 16.5 13.8 20% 11%
============================== ======== ======== ======= ================
Group revenues 14.5 12.2 19% 14%
Clareti revenues 9.6 7.4 30% 22%
Clareti recurring software
revenues 6.6 5.4 22% 11%
Group Adjusted EBITDA 2.8 2.4 17% 13%
Group cash EBITDA 0.8 0.3 167% 167%
============================== ======== ======== ======= ================
Cash 8.1 7.4 9% N/a
Financial highlights - the impact of the Electra acquisition
-- Nine days trading post acquisition generated H1 revenues of
GBP0.3m, with a cash EBITDA margin of approximately 14%
-- Combined Clareti and Electra "Strategic" annualised recurring
revenues increased by GBP9.2m to GBP22.1m as at 30 June 2021
-- Group annualised recurring revenues increased by GBP9.2m to GBP25.7m as at 30 June 2021
Operational highlights
-- Transformative acquisition of Electra creates global platform
for growth funded out of existing cash resources and a GBP21m
equity fundraise
-- Thirteen new Clareti contracts secured including three new bank customers in Europe
-- Significant contract win in new industry segment of audit
-- Deepening key account relationships driving incremental opportunities
-- Strong performance from Inforalgo business at first anniversary of acquisition
-- Non-Clareti portfolio continuing to prove resilient
Outlook
-- 96 % of planned (pre-Electra acquisition) full year Clareti
revenues already contracted or highly visible entering the second
half of 2021
-- On track to achieve full year market expectations
-- Management confident in the strategy and outlook for the Group
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 for H1 2021 from the Inforalgo
business acquired in July 2020.
Ian Manocha, Gresham CEO, commented:
"This has been another strong performance from our global team
with thirteen new subscriptions in the first half including several
key competitor wins.
As a result of the successful acquisition of Electra, Gresham is
now the leading independent provider of reconciliations software to
the global financial services community, with a significant
presence in the US, our largest market. Our forward looking ARR is
now more than double what it was just a year ago. We are a stronger
and more resilient business with good momentum as we confidently
head into the second half the year."
As announced on 14 July 2021, a presentation for analysts will
be held today at 8.30 a.m. (BST) via conference call, with a
separate presentation for private and retail investors to be held
today at 4.30 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 contact Gresham at investorrelations@greshamtech.com.
Information on how to register attendance for the private and
retail investor presentation is set out in the Company's
announcement of 14 July 2021. 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 / Iqra
Amin
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
Strategic overview
Gresham provides mission-critical software and cloud services
that are highly differentiated, contain rich intellectual property,
are proven at scale, and generate sticky high margin recurring
revenues. Our Clareti technology solutions provide our customers
complete control over their digital operations and give accountable
executives in financial markets confidence in their critical data
and business processes.
We aim to have Clareti embedded across the global financial
community as the industry standard control platform for digital
business, and in turn to create a valuable, modern, global,
enterprise financial technology company.
We now have flagship customers using our technology in retail,
commercial and investment banking, asset management, insurance and
energy and commodities. We have also deployed our solutions into
large corporates and the audit industry. The COVID-19 pandemic has
highlighted the pressing need for financial institutions to further
invest in intelligent automation solutions to reduce the need for
manual interventions in their core processing activities and to
transition to fully digital operations. Gresham is moving at a pace
to capitalise on these opportunities, investing to drive organic
growth as well as successfully integrating several carefully
selected complementary acquisitions.
Our recent strategic acquisition of Electra Information Systems,
a US-based competitor, which completed in June 2021, has
significantly strengthened the Company's market share in the
buy-side customer base and in the US, and has created a global
platform for long term growth in revenues and earnings.
This acquisition gives us critical scale in our global delivery
and customer success network - we now support over 270 customers in
20 countries around the world. The Electra customers have responded
positively to the new ownership, and our previously competing teams
are enthused about joining forces to create a global leader. We now
have stronger direct sales teams in the major global financial
markets in North America, Asia Pacific and in Europe, which will
enable us to continue securing new name accounts as well as
upselling and cross-selling our portfolio of software and cloud
services to existing customers.
The Electra investment opens the door to the next stage of the
development of our Group. We will now be able to leverage the
combined investments in product development, distribution and
customer support infrastructure to compete more effectively and
ultimately to realise the high margins, strong cash generation, and
attractive valuation multiples typical of large mature enterprise
software firms.
Whilst we will continue to explore investment opportunities to
gain further scale and distribution in each of our go-to-market
initiatives, our focus for the immediate term is the successful
integration of Electra and the globalisation of our combined
businesses in order to efficiently sustain high levels of organic
growth. With that in mind, it is pleasing to report that Gresham
had a strong first half in 2021 with growth across all revenue
lines including the acquired Inforalgo business and the non-Clareti
business. Electra, operating as an independent business until 22
June 2021, also had a successful first half. Moving forward, we
will refer to these combined recurring revenues as our 'Strategic
ARR', as distinct from the 'non-Clareti ARR' coming from legacy
products or third-party software and which is expected to decline
over time in line with our strategy.
Trading update
Revenue
The Group earns revenues from the sale of software, cloud
services, and provision of ancillary consultancy services. The
following table summarises the Group's revenue performance in the
six months to 30 June 2021:
H1 2021 H1 2020 Variance
GBP'm GBP'm GBP'm %
------------------------- ----- ------- -------- -------- --------------- ------------------
Revenues
Clareti Solutions
Recurring 6.6 5.4 1.2 22%
Non-recurring 0.1 - 0.1 100%
------------------------- ------------- -------- -------- --------------- ------------------
Software 6.7 5.4 1.3 24%
Services 2.9 2.0 0.9 45%
Electra (9 days
contribution) 0.3 - 0.3 100%
------------------------- ------------- -------- -------- --------------- ------------------
Total KPI 9.9 7.4 2.5 34%
Other Solutions
Software - Partners 1.9 1.4 0.5 36%
Software - Own
solutions 0.3 0.3 - -
Services 0.3 0.4 (0.1) (25%)
Contracting services 2.4 2.7 (0.3) (11%)
------------------------- ------------- -------- -------- --------------- ------------------
Total 4.9 4.8 0.1 2%
Total Revenue KPI 14.8 12.2 2.6 21%
------------------ --------------------- -------- -------- --------------- ------------------
Annualised recurring revenue as at 30 June
2021
Clareti ARR KPI 12.9 10.7 2.2 21%
Electra ARR 9.2 - 9.2 N/a
----------------------------------- ------- ------ ----- -----
Strategic ARR New KPI 22.1 10.7 11.4 107%
Group ARR 25.7 13.8 11.9 86%
In the first half of the year, we were pleased to secure several
new Clareti software contracts as well a number of new licences and
upgrades with existing customers.
Our Clareti Control business performed well, signing three new
bank customers in Europe, and a significant contract with the US
audit practice of KPMG who will use the technology to improve
automation in their testing and assurance work. All these new
customers conducted rigorous evaluations and selected Clareti
Control for its ability to handle multiple use cases and data
types.
Our Clareti Connect product line, which brings together our
messaging, banking, payments, regulatory and STP integration
capabilities, performed strongly in the first half. We secured
three new Connect customers, two of which are using the technology
alongside our Control offering, and we saw multiple upgrades as
existing customers added further connections for regulatory
reporting, trading STP or payments requirements. Inforalgo,
acquired in July 2020, is now integrated into the Clareti Connect
business and has performed strongly in the first eleven months of
ownership, generating GBP0.6m of revenue and positive cash EBITDA
in the first half of 2021. On a like for like, constant currency,
basis, Inforalgo forward-looking ARR grew 17% thanks to good
customer retention and incremental sales. As a result, the Group
expects to pay the first instalment of the deferred consideration
in full (totalling GBP0.9m) during the third quarter of 2021.
Total Clareti renewals were also strong with a gross retention
rate for the previous 12 months of 95% (excluding the impact of any
ARR increases from existing contracts). As a result of new and
incremental business, our forward-looking Clareti annualised
recurring revenues (ARR) are 21% higher than a year ago.
Year-on-year ARR growth at the end of June 2021 was impacted by
slower new sales during and after the 2020 COVID-19 lockdown. Given
the importance to the Group of building Strategic ARR, we look
forward to providing further disclosures related to the maintenance
of existing ARR as well as growth rates of incremental ARR at the
full year.
Our Clareti professional services revenues stepped up
significantly in H1. This is being driven by new sales
implementations, on-going client support that was delayed during
the 2020 lock-down, and a significant pull through of additional
services with key customer ANZ. ANZ are transitioning towards
go-live with our new digital banking products and we are building
out the on-going support and managed service capability. We expect
to develop further 'managed service' propositions for our Connect
and Control customers. The Electra team have also been successfully
introducing this software-related managed service model as a means
to improve revenue visibility and customer value.
Other Solutions, the Group's portfolio of legacy revenues,
performed in-line with our planning assumptions with additional
recurring revenues from increased usage of third-party partner
software by ANZ and growth in our lower margin Australian
contracting business.
Earnings
Group: H1 2021 H1 2020 Variance
GBPm %
------------------- ----- ------- -------- -------- --------------- ----------------
Gross margin GBPm 11.1 10.5 0.6 6%
Gross margin % 75% 86% (9%)
-------------------------- ------ -------- -------- --------------- ----------------
Adjusted EBITDA KPI GBPm 2.8 2.4 0.4 17%
Adjusted EBITDA % 25% 20% 5%
-------------------------- ------ -------- -------- --------------- ----------------
Cash EBITDA KPI GBPm 0.8 0.3 0.5 167%
Cash EBITDA % 6% 3% 3%
-------------------------- ------ -------- -------- --------------- ----------------
Profit before tax GBPm (0.8) 0.5 (1.3) (260%)
-------------------------- ------ -------- -------- --------------- ----------------
Adjusted diluted
EPS pence 2.2 1.4 0.8 57%
-------------------------- ------ -------- -------- --------------- ----------------
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; and (ii) third party
contractor costs incurred by our contracting services business
(individuals we bring on our payroll as fixed-term employees to
provide this service are recorded in administration costs).
On a Group basis, gross margin percentage has reduced as both
our Clareti and contracting services lines of business have seen an
increased amount of work being delivered via third party
contractors which are recorded as a cost of sale. Both adjusted
EBITDA and cash EBITDA have seen margin improvements due to growth
in the Clareti business.
Included below are tables and commentary for each of our key
business segments which describe the underlying trends in gross
margin, adjusted EBITDA and cash adjusted EBITDA. Cash adjusted
EBITDA adjusts EBITDA for capitalised development spend and any
IFRS16 lease-related cash expenses classified as depreciation and
interest.
Clareti Solutions: H1 2021 H1 2020 Variance
GBPm %
-------------------- ----- ------ -------- -------- ---------------- ---------------
Gross margin GBPm 8.4 6.9 1.5 22%
Gross margin % 88% 93% (5%)
--------------------------- ----- -------- -------- ---------------- ---------------
Adjusted EBITDA GBPm 1.3 0.7 0.6 86%
Adjusted EBITDA % 14% 9% 6%
--------------------------- ----- -------- -------- ---------------- ---------------
Cash EBITDA KPI GBPm (0.7) (1.3) 0.6 46%
Cash EBITDA % (7)% (18)% 11%
--------------------------- ----- -------- -------- ---------------- ---------------
Our key growth business, Clareti, continues to move towards a
cash EBITDA breakeven position. As previously announced, we expect
a combined Clareti and Electra cash EBITDA breakeven position for
the first 12 months of trading post acquisition, with further
operational leverage to be gained in subsequent periods. Gross
margin from Clareti software remains consistent with the prior
year, however this is offset by gross margin reductions in Clareti
services which have reduced since H1 2020 as an increased amount of
services work has been delivered via third party contractors which
are recorded as a cost of sale as opposed to operating expense. It
is important to also note that both EBITDA measures for the
increased Clareti services revenue have improved since the prior
year.
Other Solutions H1 2021 H1 2020 Variance
(software):
GBPm %
----------------- ------ -------- -------- ---------------- ---------------
Gross margin GBPm 1.3 1.4 (0.1) (7)%
Gross margin % 52% 66% (14%)
------------------ ----- -------- -------- ---------------- ---------------
Adjusted EBITDA GBPm 1.2 1.3 (0.1) (8)%
Adjusted EBITDA % 49% 63% (14)%
------------------ ----- -------- -------- ---------------- ---------------
Cash EBITDA GBPm 1.2 1.3 (0.1) (8)%
Cash EBITDA % 49% 63% (14)%
------------------ ----- -------- -------- ---------------- ---------------
Our Other Solutions (software) business saw the expected
reduction in revenues from one higher margin software arrangement
which were more than offset by increases in usage fees from another
legacy partner arrangement. The net of this resulted in an expected
reduction in all margins across this business line. This business
segment is not core to Gresham's strategy and our primary objective
is to operate it as profitably as possible and at minimal risk.
Other Solutions (contracting H1 2021 H1 2020 Variance
services):
GBPm %
------------------------ ------- -------- -------- ---------------- ---------------
Gross margin GBPm 1.1 2.1 (1.0) (48)%
Gross margin % 46% 78% (32%)
------------------------- ------ -------- -------- ---------------- ---------------
Adjusted EBITDA GBPm 0.3 0.4 (0.1) (25)%
Adjusted EBITDA % 13% 13% -
------------------------- ------ -------- -------- ---------------- ---------------
Cash EBITDA GBPm 0.3 0.4 (0.1) (25)%
Cash EBITDA % 13% 13% -
------------------------- ------ -------- -------- ---------------- ---------------
We provide contracting services to ANZ at a fixed net margin of
13%. Fees are paid quarterly in advance, providing a helpful
contribution to working capital, but otherwise this business
segment is not strategically important and will continue to be
managed with negligible administrative overheads. Whilst the cash
EBITDA margin remains a consistent 13%, the gross margin for this
business line fluctuates depending upon the level of work being
contracted via third party contractors which are recorded as a cost
of sale (fixed term employees are recorded as operational
expenses).
Cashflow
H1 2021 H1 2020 Variance
GBP'm GBP'm GBP'm %
--------------------------------- -------- -------- --------------- ---------------
Opening cash & cash equivalents 8.9 9.6 (0.7) (7)%
Operating cashflow excluding
working capital 1.9 2.1 (0.2) (10)%
Movement in working capital (1.6) (2.3) 0.7 30%
Capital expenditure -
development costs (1.8) (1.8) - -
Principal paid on lease
liabilities (0.3) (0.3) - -
Net tax (payment)/refund (0.7) 0.5 (1.2) (240)%
Other (0.3) 0.1 (0.4) (400)%
Financing activities -
dividend paid (0.5) (0.5) - -
Share issue proceeds (net
of costs) 20.2 - 20.2 N/a
Payments to acquire subsidiary
(net of cash) (17.7) - (17.7) N/a
Closing cash & cash equivalents
- KPI 8.1 7.4 0.7 9%
----------------------------------- -------- -------- --------------- ---------------
The Group continues to be funded from operating cash and has no
debt, although we now have the benefit of a revolving debt facility
that was entered into alongside the acquisition of Electra. The USD
$15m multicurrency revolving credit and USD $10m accordion loan
facility may be drawn down upon to satisfy any future deferred
consideration payments due to be made as a result of the Electra
acquisition but there are no plans to draw on this at present.
Operating cashflow remains strong and is materially consistent with
the equivalent period in the prior year. 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. At a high level, free cash
flow, excluding the impact of taxation, has remained reasonably
flat. This is a result of the improving margins in our high growth
Clareti business being offset by an expected decline in margins in
the non-Clareti business. The Clareti business is now very close to
a cash break even position and Group cash generation and operating
leverage is expected to significantly improve as Clareti moves past
the breakeven milestone. Further improvements in the mid-term are
expected when synergies from the Electra combination are
realised.
Tax has moved from a net receipt position in the first half of
the prior year to a net payment position in the first half of 2021.
This change is due to: our foreign entities continuing to grow,
resulting in increases in foreign tax payments compared to the
equivalent prior year period of GBP0.4m; and the first half of 2020
including tax receipts of GBP0.8m occurring from the surrender of
prior year tax losses. An equivalent prior year surrender of tax
losses has not yet been made during 2021, although this may yet
occur in the second half of 2021.
Currency movements are recorded in 'other', with the losses in
the first half of 2021 being made on foreign currency holdings,
largely AUD and USD, against which GBP strengthened in the
period.
The net cash generated from share issue of GBP20.2m was raised
to fund the Electra acquisition for which the payment of the
majority of the initial consideration of GBP17.7m is also shown in
the table above.
Electra
We were delighted to complete the acquisition of Electra during
H1 and are grateful for the support provided by our new and
existing shareholders for the transaction. The opportunity to
combine the previously competing businesses to create a market
leader is compelling and will accelerate the achievement of
Gresham's ambitions in the global market.
Electra was acquired on a debt free, cash free basis on 22 June
2021 with an upfront consideration of USD $28.95m, of which USD
$24.7m was paid in June 2021, with the balance remaining payable
pending the finalisation of the completion accounting process.
Subject to the achievement of performance criteria based on the
retention of acquired customer recurring revenues, a maximum of USD
$9.65m in deferred consideration will be due, payable in two
instalments after the first and second anniversaries of
completion.
Electra has over 150 customers, the majority of which are
U.S.-based buy-side financial services firms, and provides
solutions to improve efficiency and mitigate risk in post-trade
processing, including reconciliation, data aggregation and
transformation, trade settlement and client fee billing. The
acquisition secures Gresham a leading position in the buy-side
market and strengthens our U.S. market presence. Longer term
synergies are expected to be achieved as investments are made on a
combined basis using pooled global resources. Our plans have been
well received by staff, customers and partners and, whilst
integration work is now underway, the management teams are ensuring
the first priority is to ongoing customer-facing sales and service
activity.
From a financial perspective, the combination provides an
opportunity to drive meaningful earnings accretion and accelerate
earnings growth and quality of revenues. Electra, as an independent
standalone business, performed well during the first six months of
2021, adding four new customers, and growing forward-looking ARR to
approximately USD $12.7m, from USD $12.2m at 31 December 2020. As
at 30 June 2021, our Strategic ARR, the combined Clareti and
Electra forward-looking annualised recurring revenue, is GBP22.1m,
more than double what it was a year ago.
Sales and Marketing
Direct sales remain our primary route to market, and during 2020
we took the opportunity to re-structure our direct sales
organisation. In H1 2021, we added a new inside sales team to
support lead generation work, as well as creating business
development roles for our key product lines. We are now seeing the
benefits in terms of new wins, an improving pipeline and higher
quality customer engagements. Enterprise software sales cycles into
the financial community are high touch and complex, with
competitive tendering processes, presentations, demonstrations,
client references and proofs of concept. We continue to refine our
sales approach and continue to pursue partnerships including
selling alongside global system integrators as well as
white-labelling and OEM arrangements. In H1, we launched our new
messaging, website and a simplified Clareti product story and
collateral, all of which has been well received in the market.
Products
During H1, we re-packaged our offerings and re-aligned our
development groups into two product lines: Clareti Control and
Clareti Connect. Development work on these offerings has progressed
throughout H1 at full capacity as we enhance our platform to extend
our undoubted technology lead in the market. We also have a third
development team working on Digital Banking products driven by our
innovation partnership with ANZ.
Clareti Control products
Clareti Control is an enterprise-grade business self-service
platform for the reconciliation and control of "any and all"
transaction data in financial markets. Our flagship Clareti
Transaction Control is now well established in the market for
'non-standardised' problems such as inter-systems reconciliations
with dozens of successful implementations. We have long recognised
that, to achieve market leadership, we would need to enhance the
platform to tackle the 'standardised' cash and securities markets
and ultimately displace deeply embedded legacy solutions such as
Smartstream TLM and FIS Intellimatch. In H1, we made available
production releases of Clareti Cash Control and Clareti Securities
Control based on functionality developed in partnership with two of
the world's largest investment banks for nostro, depot and
confirmations reconciliations.
We are now the only vendor in the market that can offer
'standardised' and 'non-standardised' data reconciliations and
controls on a modern self-service platform that has been proven at
scale. This is a 'holy grail' for the operations functions within
large capital markets institutions and we expect to capitalise on
this opportunity in the market over the next few years. Over time,
we will bring Electra's reconciliation offering onto the same
platform to offer 'out of the box' capabilities for handling
buy-side nostro/depot as well as leveraging their patented
capabilities for combining cash/stock/transaction into a single
view (the NAV).
Clareti Connect products
Clareti Connect solutions allow customers to participate in the
complex inter-connected global financial system without needing to
be concerned with integration risk, cost and time to market.
Connect solutions are sold primarily as cloud services delivered
with tools built or acquired by Gresham and a rich library of
industry connectivity and data transformations IP. These solutions
enable institutions to seamlessly join their banking, payments,
trading, accounting and regulatory systems and their external
partners with intelligent straight-through-processing in a way that
is reliable and cost effective. The current generation of solutions
are based on technology acquired from C24, B2 and Inforalgo, and
includes a library of over 350 standard services or connections.
During H1, we went live with the first customer on our next
generation cloud-native architecture Connect 2.0 and we are
continuing the migration of customers and build out of the
platform. The new technology enables extremely complex data
integrations and straight through processes to be configured,
deployed, monitored and maintained in a 'low-code' environment. We
continue to enhance Connect to support for new industry
requirements such as SWIFT MX / ISO20022 messaging.
Ultimately, we plan to bring together the Electra Data and
Clareti Connect services onto common tooling.
Digital Banking products
Our strategic partnership with ANZ to develop a next generation
of cash management offerings has progressed well in H1. The product
development work via a chargeable Innovation Service and the first
production release of a cloud-native bank account platform is on
track to be handed over to ANZ before the end of this year. This
important milestone will trigger incremental recurring software
revenues, and an exciting roadmap for future releases has been
jointly mapped out. In H2, we will also turn our attention to the
opportunity to further monetise this innovative software in the
global market.
Outlook
Following the successful completion of the move to subscription
revenues in the Clareti business, and the acquisition of Electra,
itself a subscription-based business, Gresham now benefits from
high levels of recurring revenues. Our Strategic ARR, the combined
Clareti and Electra forward-looking ARR, totalled GBP22.1m as at 30
June 2021. The non-Clareti portfolio provides a further GBP3.6m of
forward-looking ARR, bringing Group ARR to GBP25.7m. Whilst the
remainder of the non-Clareti portfolio, including our Australian
sub-contracting operations, is not formally contracted on a
recurring basis, it does have a track record of performing very
predictably. In addition, existing signed statements of works for
professional services projects provide a good level of visibility
into second half services billings.
As a result, we enter the second half of 2021 with 96% of our
planned (pre-Electra acquisition) full year Clareti revenues
already contracted or highly visible and also have comparable
levels of visibility over Electra planned revenues. Remaining
planned revenues are expected to come from new subscriptions or
upgrades currently in our combined pipeline.
There is good momentum in both businesses with pipelines
continuing to improve from the low point about a year ago. The
Clareti team are focused on developing key accounts in banking,
sustaining the run rate of wins in Europe and opening up the Asia
Pacific market following our appointment of a new sales team into
Singapore in early 2021. The key account of ANZ is expected provide
further incremental revenues in the fourth quarter as current
innovation work achieves important milestones. The Electra business
is expected to close several new names wins in the US and in Europe
for both the reconciliations offering and the data aggregation
service. There is also an encouraging level of on-going
subscription growth in the customer base.
The pandemic and uncertain economy impacted the ability of our
customers to initiate and drive new projects in FY20, however,
during FY21 we have seen increasing levels of management ambition
and associated budget allocations for change projects in our target
markets. There are now strong indications that financial firms are
planning for greater investment in FY22, with digital
transformation and automation remaining a priority. A key challenge
to address for Gresham, and our customers, is the availability of
IT and software skills in a rapidly changing, high demand, global
market. With the acquisition of Electra, we now have greater scale
to explore new models for bringing talent in the business. For
example, we will be expanding our graduate intake this year to be
global and cross-functional. We are also reviewing our operating
model for software development and other technical functions as
part of merging the businesses.
The Group is now a larger and more resilient business following
the acquisition of Electra. We have a clear and focused strategy, a
strong balance sheet and cash position, and remain debt free. Given
the continuing market demand for our offerings, and the encouraging
sales pipeline underpinned by our current levels of contracted and
highly visible revenues, we remain confident in our ability to
achieve our FY21 plans for revenues and earnings.
Thank you for your support,
Ian Manocha
Chief Executive Officer
20 July 2021
Consolidated income statement
Notes 6 months 6 months 12 months
ended ended ended
30 June 30 June 31 December
2021 2020 2020
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
-------------------------------------- ------ ----------- ----------- -------------------
Revenue 2 14,791 12,197 24,752
Cost of sales (3,692) (1,702) (3,860)
-------------------------------------- ------ ----------- --------------- ---------------
Gross profit 11,099 10,495 20,892
Adjusted administrative expenses (9,739) (9,309) (19,054)
-------------------------------------- ------ ----------- --------------- ---------------
Adjusted operating profit 1,360 1,186 1,838
-------------------------------------- ------ ----------- --------------- ---------------
Adjusting administrative items:
Exceptional items 2 (1,482) (195) (400)
Amortisation on acquired intangibles (516) (397) (893)
Share-based payments (174) (94) (220)
-------------------------------------- ------ ----------- --------------- ---------------
(2,172) (686) (1,513)
-------------------------------------- ------ ----------- --------------- ---------------
Total administrative expenses (11,911) (9,995) (20,567)
-------------------------------------- ------ ----------- --------------- ---------------
Operating (loss)/profit (812) 500 325
Finance revenue 3 30 37
Finance costs (28) (27) (54)
-------------------------------------- ------ ----------- --------------- ---------------
(Loss)/profit before taxation (837) 503 308
Taxation 3 256 (194) 953
-------------------------------------- ------ ----------- --------------- ---------------
(Loss)/profit after taxation -
Attributable to owners of the
Parent (581) 309 1,261
-------------------------------------- ------ ----------- --------------- ---------------
Earnings per share
Statutory
Basic earnings per share - pence 4 (0.82) 0.45 1.84
Diluted earnings per share - pence 4 (0.82) 0.44 1.80
-------------------------------------- ------ ----------- --------------- ------------------
Adjusted
Basic earnings per share - pence 4 2.25 1.45 4.04
Diluted earnings per share - pence 4 2.21 1.42 3.96
-------------------------------------- ------ ----------- --------------- ------------------
Consolidated statement of comprehensive income
6 months 6 months 12 months
ended ended ended
30 June 30 June 31 December
2021 2020 2020
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
-------------------------------------------- ----------- ----------- -------------
(Loss)/profit attributable to the Parent (581) 309 1,261
-------------------------------------------- ----------- ----------- -------------
Other comprehensive income/(expense)
Items that will or may be re-classified
into profit or loss:
Exchange differences on translating
foreign operations 11 (77) (113)
-------------------------------------------- ----------- ----------- -------------
Total other comprehensive income/(expense) 11 (77) (113)
-------------------------------------------- ----------- ----------- -------------
Total comprehensive (expense)/income
for the period (570) 232 1,148
-------------------------------------------- ----------- ----------- -------------
Consolidated statement of financial position
30 June 30 June 31 December
2021 2020 2020
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
-------------------------------- ----------- ----------- ------------
Assets
Non-current assets
Property, plant and equipment 191 294 243
Right-of-use assets 1,657 1,087 1,646
Intangible assets 61,568 26,091 31,108
Deferred tax assets 1,010 - 552
--------------------------------- ----------- ----------- ------------
64,426 27,472 33,549
Current assets
Trade and other receivables 5,364 4,484 3,497
Contract assets 2,617 790 923
Cash and cash equivalents 8,084 7,398 8,876
--------------------------------- ----------- ----------- ------------
16,065 12,672 13,296
Total assets 80,491 40,144 46,845
--------------------------------- ----------- ----------- ------------
Equity and liabilities
Equity attributable to owners
of the Parent
Called up equity share capital 4,166 3,413 3,508
Share premium account 23,856 3,903 4,341
Own share reserve (510) (778) (778)
Other reserves 536 536 536
Foreign currency translation
reserve (183) (158) (194)
Retained earnings 18,524 18,375 19,453
Total equity attributable to
owners of the Parent 46,389 25,291 26,866
--------------------------------- ----------- ----------- ------------
Non-current liabilities
Contract liabilities - 470 66
Lease liabilities 923 525 1,004
Deferred tax liability 5,214 1,216 1,289
Provisions 146 144 146
Contingent consideration 2,581 - 349
8,864 2,355 2,854
-------------------------------- ----------- ----------- ------------
Current liabilities
Trade and other payables 19,706 11,773 15,303
Lease liabilities 662 436 535
Income tax payable 117 289 378
Contingent consideration 4,753 - 909
25,238 12,498 17,125
-------------------------------- ----------- ----------- ------------
Total liabilities 34,102 14,853 19,979
--------------------------------- ----------- ----------- ------------
Total equity and liabilities 80,491 40,144 46,845
--------------------------------- ----------- ----------- ------------
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 2020 3,413 3,903 (945) 536 (81) 18,478 25,304
Attributable profit
for the period - - - - - 309 309
Other comprehensive
expense - - - - (77) - (77)
------------------------- ----------- ----------- ---------- ------------ --------------- ------------ --------
Total comprehensive
income - - - - (77) 309 232
Share-based payment
expense - - - - - 94 94
Issue of shares held
by Employee Share
Ownership Trust - - 167 - - - 167
Dividend - - - - - (506) (506)
At 30 June 2020 3,413 3,903 (778) 536 (158) 18,375 25,291
------------------------- ----------- ----------- ---------- ------------ --------------- ------------ --------
Attributable profit
for the period - - - - - 952 952
Other comprehensive
expense - - - - (36) - (36)
------------------------- ----------- ----------- ---------- ------------ --------------- ------------ --------
Total comprehensive
income - - - - (36) 952 916
Exercise of share
options 95 438 - - - - 533
Share-based payment
expense - - - - - 126 126
At 31 December 2020 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
income - - - - 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
------------------------- ----------- ----------- ---------- ------------ --------------- ------------ --------
Consolidated statement of cashflows
6 months 6 months 12 months
ended ended ended
30 June 30 June 31 December
2021 2020 2020
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
----------------------------------------------- ----------- ----------- -------------
Cashflows from operating activities
(Loss)/profit after taxation (581) 309 1,261
Depreciation of property, plant and equipment 84 109 245
Amortisation of intangible assets 1,633 1,284 2,810
Amortisation of right-to-use assets 261 229 496
Share-based payments 174 94 220
(Increase)/decrease in trade and other
receivables (756) (118) 1,060
Increase in contract assets (1,172) (178) (312)
Increase/(decrease) in trade and other
payables 525 (740) 1,111
Decrease in contract liabilities (340) (1,155) (1,263)
Taxation 256 35 (953)
Net finance costs 25 3 17
----------------------------------------------- ----------- ----------- -------------
Cash inflow/(outflow) from operations 109 (128) 4,692
Income taxes received - 769 1,307
Income taxes paid (663) (285) (510)
----------------------------------------------- ----------- ----------- -------------
Net cash (outflow)/inflow from operating
activities (554) 356 5,489
Cash flows from investing activities
Interest received 3 30 37
Purchase of property, plant and equipment (22) (35) (87)
Payments to acquire subsidiary undertakings
(net of cash) (17,676) - (1,900)
Payments to acquire intangible fixed assets (1,745) (1,834) (3,565)
----------------------------------------------- ----------- ----------- -------------
Net cash used in investing activities (19,440) (1,839) (5,515)
Cash flows from financing activities
Interest paid - (8) (16)
Principal paid on lease liabilities (270) (303) (576)
Dividends paid (522) (506) (506)
Share issue proceeds (net of costs) 20,173 - 533
Net cash from/(used in) financing activities 19,381 (817) (565)
Net decrease in cash and cash equivalents (613) (2,300) (591)
Cash and cash equivalents at beginning
of period 8,876 9,605 9,605
Exchange adjustments (179) 93 (138)
Cash and cash equivalents at end of period 8,084 7,398 8,876
----------------------------------------------- ----------- ----------- -------------
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 20 July 2021.
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 2020.
The financial statements for the year ended 31 December 2020,
which were prepared in accordance with international accounting
standards in conformity with the requirements with the Companies
Act 2006 and in accordance with international financial reporting
standards adopted pursuant to Regulation (EC) No 1606/2002 as it
applies to the European Union. 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
-- The only modern enterprise-grade business self-service
platform for the reconciliation and control of "any and all"
transaction data in financial markets.
-- Disrupting markets dominated by legacy vendors whose
inflexible technology fails to achieve more granular and real-time
data control, or replacing in-house systems and manual
processes.
-- Sold as applications for specific use cases including Clareti
Transaction Control, Clareti Cash Control, Clareti Securities
Control and Clareti Regulatory Control.
-- In future reporting periods, it is expected that Electra
Control products will be reported along with this product line.
o Clareti Connect products
-- A unique service that enables customers to participate in the
complex inter-connected global financial system without having to
worry about integration risk, cost and time to market.
-- Enables institutions to seamlessly connect their banking,
payments, trading, accounting and regulatory systems and external
partners with intelligent straight-through-processing in a way that
is reliable and cost effective.
-- Sold primarily as a cloud service bringing together tools and
software libraries built or acquired by Gresham into a rich menu of
industry connectivity and data transformation services.
-- In future reporting periods, it is expected that Electra Data
Connect products will be reported along with this product line.
-- 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 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 (1,147) (1,181) (1,364) (3,692)
Gross profit 8,709 1,287 1,103 11,099
------------------------------------- ----- ----------- --------- ------------ -------------
Gross profit % 88% 52% 45% 75%
Contracted administrative
expenses (267) - (787) (1,054)
------------------------------------- ----- ----------- --------- ------------ -------------
Gross profit after contracting
fully costed 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 (2,171)
Operating loss (812)
Finance revenue 3
Finance costs (28)
------------------------------------- ----- -----------
Loss before taxation (837)
Taxation 256
------------------------------------- ----- ----------- --------- ------------ -------------
Loss after taxation (581)
------------------------------------- ----- ----------- --------- ------------ -------------
Adjusted operating (loss)/profit (172) 1,216 316 1,360
Amortisation of intangibles 1,117 - - 1,117
Depreciation of property,
plant and equipment 84 - - 84
Amortisation of right-of-use
assets 261 - - 261
Bank charges (9) - - (9)
------------------------------------- ----- ----------- --------- ------------ -------------
Adjusted EBITDA 1,281 1,216 316 2,813
Development costs capitalised (1,745) - - (1,745)
Principal paid on lease
liabilities (270) - - (270)
------------------------------------- ----- ----------- --------- ------------ -------------
Cash EBITDA (734) 1,216 316 798
------------------------------------- ----- ----------- --------- ------------ -------------
Segment assets 80,491
Segment liabilities (34,102)
------------------------------------- ----- ----------- --------- ------------ -------------
6 months ended 30 June 2020 (unaudited) - Segmental
Information
Other Solutions
-----------------------
Clareti Contracting
Solutions Software Services Consolidated
GBP'000 GBP'000 GBP'000 GBP'000
------------------------- ---------------- ----------- --------- ------------ -------------
Revenue 7,426 2,094 2,677 12,197
Cost of sales (433) (700) (571) (1,704)
Cost of sales capitalised
as intangible asset 2 - - 2
------------------------------------- ---- ----------- --------- ------------ -------------
Gross profit 6,995 1,394 2,106 10,495
------------------------------------- ---- ----------- --------- ------------ -------------
Gross profit % 94% 67% 79% 86%
Contracted administrative
expenses - - (1,748) (1,748)
------------------------------------- ---- ----------- --------- ------------ -------------
Gross profit after contracting
fully costed 6,995 1,394 358 8,747
------------------------------------- ---- ----------- --------- ------------ -------------
Gross profit % 94% 67% 13% 72%
------------------------------------- ---- ----------- --------- ------------ -------------
Adjusted administrative
expenses (7,486) (75) - (7,561)
------------------------------------- ---- ----------- --------- ------------ -------------
Adjusted operating (loss)/profit (491) 1,319 358 1,186
Adjusted operating margin
% (7%) 63% 13% 10%
Adjusting items:
Exceptional costs (195)
Amortisation of acquired
intangibles (397)
Share-based payments (94)
------------------------------------- ---- ----------- --------- ------------ -------------
Adjusting administrative
expenses (686)
Operating profit 500
Finance revenue 30
Finance costs (27)
------------------------------------- ---- ----------- --------- ------------ -------------
Profit before taxation 503
Taxation (194)
------------------------------------- ---- ----------- --------- ------------ -------------
Profit after taxation 309
------------------------------------- ---- ----------- --------- ------------ -------------
Adjusted operating (loss)/profit (491) 1,319 358 1,186
Amortisation of intangibles 887 - - 887
Depreciation of property,
plant and equipment 109 - - 109
Amortisation of right-of-use
assets 229 - - 229
Bank charges (6) - - (6)
------------------------------------- ---- ----------- --------- ------------ -------------
Adjusted EBITDA 728 1,319 358 2,405
Development costs capitalised (1,834) - - (1,834)
Principal paid on lease
liabilities (303) - - (303)
------------------------------------- ---- ----------- --------- ------------ -------------
Cash EBITDA (1,409) 1,319 358 268
Segment assets 40,144
------------------------------------- ---- ----------- --------- ------------ -------------
Segment liabilities (14,853)
------------------------------------- ---- ----------- --------- ------------ -------------
Adjusted EBITDA
Adjusted EBITDA is calculated as EBITDA excluding exceptional
charges and share-based payments, reconciled as follows:
6 months 6 months 12 months
ended ended ended
30 June 30 June 31 December
2021 2020 2020
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
---------------------------------------- ------------- ----------- -------------
(Loss)/profit before taxation (837) 503 308
---------------------------------------- ------------- ----------- -------------
Adjusting items:
Amortisation of intangibles 1,633 1,284 2,810
Depreciation of property, plant and
equipment 84 109 213
Amortisation of right-to-use assets 261 229 496
Notional interest on lease liabilities 19 19 38
Finance revenue (3) (30) (37)
Interest payable - 2 3
---------------------------------------- ------------- ----------- -------------
EBITDA 1,157 2,116 3,831
---------------------------------------- ------------- ----------- -------------
Exceptional items 1,482 195 400
Share-based payments 174 94 220
---------------------------------------- ------------- ----------- -------------
Adjusted EBITDA 2,813 2,405 4,451
---------------------------------------- ------------- ----------- -------------
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
2021 2020 2020
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
--------------------------------------------- ----------- ----------- -------------
Acquisition and associated integration
costs 1,805 195 423
Gain on forward foreign exchange contract (330) - -
Implementation of new ten-year share option
scheme 7 - 33
Australian government Covid-19 contribution - - (56)
1,482 195 400
--------------------------------------------- ----------- ----------- -------------
3. Taxation
6 months 6 months 12 months
ended ended ended
30 June 30 June 31 December
2021 2020 2020
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
----------------------------------------------- ----------- ----------- -------------
Current income tax
Overseas tax credit - adjustment to previous
periods (99) (111) (124)
Overseas tax charge - current period 433 217 599
UK corporation tax credit - adjustment
to previous periods - (659) (1,307)
Total current income tax 334 (553) (832)
Deferred income tax
(Recognition)/derecognition of deferred
tax (467) 676 (202)
Tax rate change adjustments (123) 71 81
Total deferred income tax (590) 747 (121)
Total (credit)/charge in the income statement (256) 194 (953)
----------------------------------------------- ----------- ----------- -------------
The prior year UK corporation tax prior period adjustment
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
2021 2020 2020
Unaudited Unaudited Audited
Basic weighted average number of
shares 70,763,791 68,256,458 68,697,828
Dilutive potential ordinary shares
Employee share options - weighted 1,361,641 1,881,255 1,414,549
Diluted weighted average number
of shares 72,125,432 70,137,713 70,112,377
---------------------------------------------- ----------- ----------- --------------
6 months 6 months 12 months
ended ended ended
30 June 30 June 31 December
2021 2020 2020
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
------------------------------------------- ----------- ----------- -------------
Adjusted earnings attributable to owners
of the Parent 1,591 995 2,774
Adjusting items:
Exceptional items (1,482) (195) (400)
Amortisation of acquired intangibles (516) (397) (893)
Share-based payments (174) (94) (220)
Statutory earnings attributable to owners
of the Parent (581) 309 1,261
-------------------------------------------- ----------- ----------- -------------
Earnings per share:
Statutory
Basic earnings per share - pence (0.82) 0.45 1.84
Diluted earnings per share - pence (0.82) 0.44 1.80
-------------------------------------------- ----------- ----------- -------------
Adjusted
Basic earnings per share - pence 2.25 1.45 4.04
Diluted earnings per share - pence 2.21 1.42 3.96
-------------------------------------------- ----------- ----------- -------------
There have been no other 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
2021 2020 2020
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
------------------------------------- ----------- ----------- --------------
Final dividend
Final dividend for the year ended 522 - -
31 December 2020 of 0.75 pence per
share
Final dividend for the year ended
31 December 2019 of 0.75 pence per
share - 506 506
522 506 506
------------------------------------- ----------- ----------- --------------
6. Acquisition of Electra Information Systems Inc
On 22 June 2021 Gresham Technologies plc acquired the entire
ordinary share capital in Electra Information Systems Inc, a US
based provider of post-trade processing software solutions and
services.
The initial consideration was GBP17.8m with GBP3.0m additional
consideration to be paid to settle outstanding liabilities.
Contingent consideration dependent upon performance of up to
GBP6.9m is payable over a 24 month period post acquisition. The
maximum potential consideration is GBP27.7m.
The provisional amounts recognised in respect of identifiable
assets and liabilities assumed are set out in the table below:
Book value Adjustments Fair value
GBP'000 GBP'000 GBP'000
---------------------------------------- ----------- ------------ -----------
Intangible assets
Customer relationships - 11,800 11,800
Software - 4,959 4,959
Property, plant and equipment 25 - 25
Right-of-use assets 285 - 285
Trade and other receivables 1,633 - 1,633
Cash and cash equivalents 98 - 98
Trade and other liabilities (4,152) - (4,152)
Lease liabilities (297) - (297)
Deferred tax liability - (4,055) (4,055)
Total net (liabilities)/assets (2,408) 12,704 10,296
---------------------------------------- ----------- ------------ -----------
Satisfied as follows:
Cash 17,774
Contingent consideration 6,048
Total consideration 23,822
---------------------------------------- ----------- ------------ -----------
Goodwill 13,526
---------------------------------------- ----------- ------------ -----------
Analysis of cash flows on acquisition:
Net cash acquired (98)
Cash paid 17,774
---------------------------------------- ----------- ------------ -----------
Net cash flow 17,676
---------------------------------------- ----------- ------------ -----------
Fair value of consideration
paid:
Cash 17,774
Contingent consideration due
less than one year 3,467
Contingent consideration due
more than one year 2,581
---------------------------------------- ----------- ------------ -----------
Total consideration 23,822
---------------------------------------- ----------- ------------ -----------
The goodwill recognised above is attributable to intangible
assets that cannot be individually separately and reliably measured
from Electra due to their nature. These items include the expected
value of synergies and assembled workforce.
Intangible assets were identified on acquisition relating to
customer contracts and relationships and software. To determine the
fair value of the intangible assets a valuation was performed by an
independent external expert.
The customer related assets were valued using an Excess earnings
method to assess the present value of expected cash received over
the life of customer relationships adjusted by an annual attrition
rate calculated based on historical revenue data. The software
assets relating to internally developed technology were valued
using an implied royalty rate method to estimate the fair value of
developed technology.
Acquisition costs of GBP1.8m were incurred during the period
ended 30 June 2021 as a result of the acquisition and integration
of Electra. These costs have been recognised as exceptional costs
within the Income Statement. In addition to the costs recorded as
exceptional costs, a further GBP0.8m of costs directly attributable
to the equity raise have been recognised within the net equity
raise of GBP20.2m.
Contingent consideration
As part of the sale and purchase agreement, contingent
consideration is payable up to GBP6,935,000 with the maximum amount
payable if the Annual Recurring Revenues are GBP8,900,000 24 months
after acquisition. The consideration is payable on a straight-line
basis with no lower threshold with 50% payable in June 2021 and the
balance payable in June 2023. Due to the nature of these payments a
fair value calculation has been performed by Management to estimate
the expected amount of consideration to be paid. As result,
contingent consideration of GBP6,049,000 has been recognised in the
statement of financial position, with GBP3,467,000 due in less than
one year and GBP2,581,000 due in more than one year.
7. 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 as adopted by the European Union; 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 2021 and anticipated for the remainder of the
year ended 31 December 2021 remain consistent with those disclosed
in the Group's financial statements for the year ended 31 December
2020, which are available from www.greshamtech.com .
Specific consideration has been given to the risks due to the
Covid crisis, for further details see Chief Executive Review.
8. 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.
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END
IR RMMLTMTITBJB
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