TIDMGHT
RNS Number : 9420D
Gresham Technologies PLC
08 March 2022
8 March 2022
Gresham Technologies plc
Annual Financial Report Announcement
Gresham Technologies plc (LSE: "GHT", "Gresham", "Group",
"Company"), the leading software and services company that
specialises in providing solutions for data integrity and control,
banking integration, payments and cash management, is pleased to
announce its audited results for the financial year ended 31
December 2021 ("FY21").
Financial Highlights
-- Forward-looking Clareti Annualised Recurring Revenue ("ARR")
as at 31 December 2021 up 95% to GBP24.0m, including GBP9.2m
acquired with Electra(5) with strong underlying organic growth
of 20%.
-- Group revenues up 49% to GBP37.0m, including a contribution
of GBP5.6m from Electra(5) since acquisition.
-- Clareti revenues up 65% to GBP25.5m, including a contribution
of GBP5.6m from Electra(5) since acquisition.
-- Clareti recurring revenues up 63% to GBP18.8m (2020: GBP11.5m),
including GBP5.3m from Electra(6) since acquisition.
-- Adjusted EBITDA(1) up 60% to GBP7.2m (2020: GBP4.5m).
-- Cash adjusted EBITDA(2) of GBP2.5m, an increase of GBP2.2m
on the prior year (2020: GBP0.3m).
-- Profit before tax as reported at GBP0.4m (2020: GBP0.3m), including
expenses adjusted in EBITDA metrics above of GBP3.5m (2020:
GBP1.5m).
-- Adjusted diluted earnings per share(3) up 26% at 5.0 pence
(2020: 4.0 pence).
-- Cash at 31 December 2021 of GBP9.1m and no debt drawn upon
(2020: GBP8.9m and no debt)(4) .
-- Final dividend proposed at 0.75 pence per share (2020: 0.75
pence).
-- Year closed ahead of market expectations for revenue, profits
and cash generation.
Operational Highlights
-- Transformational acquisition of Electra in June 2021 providing
scale in US market. Integration materially complete.
-- Customer base expanded to 270+ Clareti customers across 30
countries.
-- Strong organic underlying growth of recurring revenues and
related services within the Clareti business.
-- Net ARR retention for the year of 106%, including annualised
and apportioned rate from Electra(5) since acquisition, highlighting
growth within existing customers and new customer wins throughout
COVID-19 pandemic.
-- Continued growth and development of key accounts. Net ARR retention
rate for top 6 key accounts of 121%.
-- Major deployment milestones with global banks, with legacy
software vendors being decommissioned.
-- Digital corporate banking partnership with Australia and New
Zealand Banking Group continuing to deliver to plan.
-- Larger, more resilient Group, with more than GBP37m of FY22
revenues under contract, providing significant visibility and
a robust platform to execute growth strategy.
-- Management confident about the prospects for the Group.
(1) Adjusted EBITDA refers to earnings before interest, tax,
depreciation and amortisation, adjusted for one-off exceptional
charges and share-based payments. (see note 5 of the Group
financial statements).
(2) Adjusted EBITDA less capitalised development spend and any
IFRS16 lease-related cash payments.
(3) Diluted earnings per share, adjusted to add back share-based
payment charges, exceptional items and amortisation from acquired
intangible assets.
(4) Excludes any IFRS16 lease-related payables.
(5) The Electra acquisition completed on 22 June 2021.
(6) Percentage increases stated above are based on rounding to
the nearest GBP'000 as disclosed at detailed level within this
report.
Ian Manocha, CEO, commented:
"This has been a year of significant strategic, operational and
financial progress for Gresham. The Group delivered revenue,
profits and cash ahead of market expectations whilst completing its
largest acquisition to date, cementing its leadership position as a
trusted software partner in financial markets and accelerating its
opportunity in the major North American market.
Digital transformation and automation remain key priorities
within the financial services sectors and our software portfolio is
specially designed to help customers navigate and thrive in today's
increasingly complex landscape. The new financial year has started
with continued trading momentum, a significant and growing base of
recurring subscription revenue with GBP37m of 2022 Group revenues
already under contract, and a strong orderbook providing high
levels of visibility. As a result, we are excited about the future
prospects and the Board remains confident in its ambition to build
a GBP100m ARR SaaS business."
Presentations and Documents
A presentation for analysts will be held at 11am GMT today via
conference call and a separate presentation for existing and
potential shareholders will be held at 2pm GMT today via the
Investor Meet Company ("IMC") platform, details of which are set
out in the Company's announcement dated 25 February 2022.
A copy of the presentation to be tabled at both sessions is
available on Gresham's website: www.greshamtech.com .
A copy of this announcement has been submitted to the National
Storage Mechanism and will shortly be available for inspection at
https://data.fca.org.uk/#/nsm/nationalstoragemechanism and
www.greshamtech.com/investors .
The Annual Financial Report 2021 will be sent to shareholders in
due course.
Enquiries
Gresham Technologies plc +44 (0) 207 653
Ian Manocha / Tom Mullan 0200
investorrelations@greshamtech.com
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 greshamtech@almapr.co.uk
Inside information
The information contained within this announcement is deemed by
the Company to constitute inside information as stipulated under
the Market Abuse Regulation (EU) No. 596/2014 ("MAR"). Upon the
publication of this announcement via a Regulatory Information
Service ("RIS"), this inside information is now considered to be in
the public domain.
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.
ANNUAL FINANCIAL REPORT ANNOUNCEMENT
In accordance with the Disclosure and Transparency Rules, the
extracts below are from the Annual Financial Report 2021 in
un-edited full text. In order to comply with the regulatory
requirement to include un-edited text in this Annual Financial
Report Announcement, page and note references refer to page and
note numbers in the Annual Financial Report 2021.
CHAIRMAN'S STATEMENT
Dear shareholder
I am pleased to present this 2021 Annual Financial Report.
Overview
I am delighted to be able to report on a period of strong
progress for Gresham Technologies. Our core products continue to
gain traction in a vast and growing market and play an integral
role in some of the world's largest financial organisations. We
have built a strong reputation and are now benefitting from the
significant investment made in our software solutions in line with
our strategic roadmap. Our success is due to great leadership,
innovative expanding solutions and our talented and committed team
of employees globally.
Throughout the year, we continued to execute effectively against
our growth strategy, securing 16 new Clareti customers and growing
our relationships with existing customers, reflecting the
investment in our solutions and people. COVID-19 has accelerated
the rate in which businesses are automating their service platforms
and we have taken advantage of these opportunities by investing to
drive organic growth in the business as well as integrating
carefully selected complementary acquisitions. During the year, we
completed our largest acquisition to date, with the purchase of
Electra in June 2021 for up to USD $38.6m. As well as expanding our
product offering and client base, it provides us with a strong
operational foothold in North America, from which we will look to
drive our growth in this key market. As part of the acquisition, we
raised GBP21m (gross) by way of a placing and welcomed a number of
new shareholders to the register and I would like to thank them and
our existing shareholders for their support.
Overall, our revenue for the year was significantly up at
GBP37.0m (2020: GBP24.8m), with adjusted EBITDA also significantly
up at GBP7.2m (2020: GBP4.5m). In a year that was still affected by
COVID-19 related challenges, this is an excellent achievement for
the Group.
We enter the new financial year with positive market tailwinds
and high levels of confidence in our business, our people and our
ability to continue on our profitable growth trajectory.
Based on the overall financial performance and the cash within
the business, the Board will be recommending a final dividend of
0.75 pence per share (2020: 0.75 pence) at the forthcoming AGM.
Delivery against our strategic vision
2021 saw strong progress against the major strategic goals
identified by the Board, including:
-- the Electra acquisition has brought additional sticky ARR
and significantly widens our addressable market;
-- revenues from subscriptions reached 63% of Group revenue
in the period, providing high levels of visibility and
increased certainty for future years' revenue;
-- we continued to invest in our underlying business systems
and processes to increase our scalability.
People and culture
I am delighted to report that, once again, we improved our
result in our annual employee engagement survey, scoring 78%
overall (2020: 76%), and thereby continuing our trend of annually
increasing our engagement score since 2017. This is the clear
result of the investments and efforts that the Company has made to
develop a brilliant culture and create opportunities for our people
to thrive.
On behalf of the Board, I would like to take this opportunity to
thank all members of staff for the dedication and commitment to
making Gresham what it is today. Employees globally have worked
extremely hard to create the right working environment for Gresham
to succeed in the future.
Despite the ongoing disturbances caused by COVID-19, our staff
have adapted well to a hybrid way of working with little
interruption. Although we are a technology driven business, we are
also a people-led company and I am proud of the way in which staff
at Gresham have responded whilst also helping the business to
succeed.
ESG
As Gresham continues to grow, we are committed to ensuring we do
so responsibly, to enhance the long-term value generated by our
business. Following a review of Gresham's Environmental, Social and
Governance priorities in 2021, we have established a three-pillar
ESG strategy as part of our approach to continually improve in
these areas.
Scaling responsibly is built across the following three
pillars:
-- Our customers: leveraging our growth to improve customer
outcomes
-- Our people: fostering positive and productive communities
in our business and our industry
-- Our world: managing our impact on the environment and being
a force for good in our world
The strategy is underpinned by a strong culture and good
governance across the Group and we are confident about executing on
our strategic vision in the coming year and beyond.
Looking ahead
Following a year of transformation, there is now great momentum
in the business and I am pleased to say we have ended the financial
year as a more robust company. We have delivered against the
strategic priorities the Board approved in December 2020 to
strengthen our position in the market:
-- continue to build a global footprint and resilient international
operations;
-- increase investment in sales and marketing;
-- make scalability and repeatability key themes within product
development and professional services to enhance operating
leverage and accelerate speed of implementations;
-- increase investment in AI to support our vision of self-learning
and self-optimising solutions;
-- identify options to monetise the IP arising from the ANZ
strategic partnership in the wider market; and
-- seek further earnings-enhancing acquisitions which add
adjacent technology capabilities, scale, and expand global
reach.
We enter the new financial year with a focus on expanding our
existing client base and securing new customer wins through
investments in our technology, and on completing the integration of
Electra into the business. We have GBP37m of 2022 revenues under
contract, which gives us confidence to continue with our
investments, and we have a strong pipeline of demand for our
products as the digital transformation era continues to accelerate
for many businesses. We are excited about the future opportunities
this will create.
Our management team have built a rare business with a very
exciting future in a substantial, growing market. We have the
benefit of a track record with an innovative, well invested product
set which has been designed for today's complexities. I believe
that the scale of our opportunity is as large as our ambition
allows.
Peter Simmonds
Non-Executive Chairman
7 March 2022
CEO'S STATEMENT
Strategic review
Introduction
2021 was a significant year of strategic, operational and
financial progress for Gresham Technologies. We further
strengthened our position as the leading player in reconciliations
software to the financial sector as a result of the successful
transformational acquisition of Electra in June 2021, and delivered
a strong, high quality, underlying financial performance. We are
pleased to close the year ahead of market expectations.
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 have confidence in their digital operations. In the
year we signed 16 new clients to reach more than 270 across 30
countries by 31 December 2021, adding to our roster of
long-standing relationships including many the world's top 100
investment banks. In addition, we have flagship customers using our
technology in retail and commercial banking, asset management,
insurance, energy and commodities.
We support the boards of some of the largest companies in the
world to improve operational efficiency, manage risk and
regulation, accelerate their digital transformation initiatives,
and provide a key part of the data intelligence platform that
ensures they remain agile, competitive and compliant. We supply
mission-critical technology to our customers and are building a
reputation as a trusted industry partner.
Our success reflects the investment and the efforts of our
talented team in delivering differentiated solutions that are
proven at scale and backed by a high-quality global service
capability. This, together with our product roadmap, provides a
platform for growth by expanding within our existing clients and
winning new ones, and delivering scalable high margin recurring
revenues.
As a result of strong trading in the year together with
acquisitive contribution, the Group delivered a year of significant
growth in revenue and profits as well as cash generation well ahead
of both 2020 and market expectations. Underpinning this is the
Group's growing base of subscription revenue contributing to a 95%
increase in Clareti ARR to GBP24.0m and providing enhanced
visibility into future periods. Notwithstanding strategic
acquisition contributions in the year, the Group saw double-digit
underlying organic growth of 20% in ARR driven by new sales
momentum and ARR net retention levels well in excess of 100%.
The global pandemic over the last two years has accelerated the
need for all businesses to invest their core processing systems and
data platforms to create more intelligent and automated solutions
that reduce the need for manual interventions and the risk of
error. Over the past 18 months, we have successfully capitalised on
this opportunity with two important acquisitions, as well as
investing to drive organic growth.
Our success reflects our research, planning and focus on
delivering value to our clients. Our significant investments in
people and infrastructure have put in place the building blocks of
a scalable fintech platform with a market-leading product
portfolio, highly invested cloud architecture, established
blue-chip global customer base, and an ambitious, proven management
team. The opportunity in front of us is large and we are ideally
placed to pursue our growth ambitions, underpinned by a repeatable,
high margin business model.
Business Review - Bringing digital integrity, agility and
confidence to the world's financial institutions
The shift to digital within the financial services sector over
the past ten years has 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. Our software helps market participants connect,
reconcile and control the many disparate sources of transaction,
finance, risk and regulatory data that exist in modern trading
ecosystems.
Product portfolio: platform and solutions
During the first half of the year, we re-packaged our Clareti
platform capabilities into two product lines, Control and Connect,
and, in the second half of the year, we strengthened the portfolio
with complementary offerings acquired with Electra. Our products
can be combined to quickly deliver real-time digital solutions for
customers into environments where generic solutions are inadequate.
They are available in the customers' data centres 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.
Control
Clareti Control is an enterprise-grade business self-service
platform for the reconciliation and control of "any and all"
transaction data in financial markets. Clareti Control is now well
established in the market for "non-standardised" problems such as
inter-systems reconciliations with dozens of successful
implementations. Our investment into additional cash and securities
processing functionality over the last three years means we are now
the only vendor in the market that can offer "standardised" and
"non-standardised" data reconciliations and controls on a single
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 further 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).
Connect and Data
Our Connect and Data 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,
cost and time to market. Our Connect solutions enable customers to
interact with their bank partners, trading venues, regulatory
reporting venues, and other industry applications and provide
intelligent control over complex data flows. Our Data solution is
focussed on the needs of the buy-side community and is used by fund
managers and service providers alike to collect and aggregate data
from third parties such as custodians. These mission-critical
services are delivered in the cloud from our secure data centres
and operated with exceptionally high levels of service and support.
In 2021, 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, ultimately, we plan to
bring together the Electra Data and Clareti Connect services onto a
common cloud Connect platform.
I am pleased to say the development work on these two offerings
has progressed successfully throughout the financial year and our
new messaging and simplified Clareti product story and collateral
have been well received in the market.
We also have a third development team working on Digital Banking
products driven by our innovation partnership with ANZ which
progressed extremely well during the year. In December, our
software was formally accepted into testing ahead of deployment
with ANZ's first customers during 2022. As a result of achieving
this important milestone, ANZ increased their investment into
Clareti software, and a further increase is expected upon customer
go-live in FY22.
Markets - Digital transformation of financial services continues
at pace
Four key drivers continue to support growth in our market and
the need for our clients to invest in their systems and
reporting
Managing risk and regulation
Every day, we help 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.
This is compounded by ever greater regulatory pressures which
increases their need for oversight and accurate reporting. The
global market for regulatory reporting solutions is expected to
reach USD $1.16bn by the end of 2026, with a CAGR of 19.5%. Over
the last five years, we have secured a significant number of sales
in the regulatory area and our recent acquisitions have further
strengthened our position.
Digital automation
Aligned with the above, we are part of our clients' investment
to digitise their processes, reduce their operating costs through
automation, and serve their customers better. We are part of
programmes globally aimed at improving the quality, connectivity
and exploitation of data to deliver more intelligent business
outcomes.
Underpinning business success
Our software not only enables businesses to survive in the
modern era, but importantly to become more competitive through
access to information and agile decision-making, all underpinning
the launch of new products and innovative customer
propositions.
Expanding market
The overall size of the addressable market for Clareti software,
and the competitiveness of our offerings is continually expanding
and we are well placed to participate in a growing market
opportunity.
Growth Strategy - Building blocks to GBP100m ARR
The overall size of the addressable market for Clareti software,
and the competitiveness of our offerings, provides an opportunity
for us to build a GBP100m ARR SaaS business with a best-in-class
sales, cost and delivery model with high quality, high growth
recurring revenues.
Grow customer footprint in core markets
We remain focused on winning a meaningful share of the global
market for reconciliations, data integrity and control software in
financial services before turning our attention to other industries
and use cases. We are focussed on winning new names through direct
sales teams in the key geographies of UK, Europe, North America,
Asia and Australia. Our newly appointed sales hires in Luxembourg
and Asia Pacific both secured new name customers during the course
of the year giving us further confidence in our ability to
scale.
Highlights during the year include:
-- a new Clareti contract win with a fast-growing global financial
group which is expected to generate total software subscription
fees of EUR 1.4m over a committed five-year term, with
additional services revenues to deploy the solution;
-- a contract win with one of the world's largest professional
services firms to provide advanced technology to its financial
services audit practice in the US. This new contract is
expected to generate total software subscription fees of
USD $2.8m over a committed five-year term, with the annual
subscription fee starting at USD $0.25m and committed to
rise to USD $0.7m from the third year of the term, in addition
to services revenue to deploy the solution;
-- a contract with a leading provider of retirement investment
services in the US to replace a legacy reconciliation platform
with USD $0.6m software subscriptions over three years.
Expand engagement across existing substantial customer base
We are already regarded as an innovative partner to many of the
world's largest financial institutions and we aim to deepen those
key account relationships. Winning and growing large "key account"
customers is an important aspect of our strategy, the success of
which is demonstrated by the Group's consistently strong customer
retention levels, with ARR net retention increasing to 106% on an
annualised basis across all customers, and even higher for our Key
Accounts. Notable successes in the period include:
-- Australia and New Zealand Banking Group, our largest customer,
signed contracts totalling over AUD $21m, which combined
with existing agreements provide contractual certainty
over the renewal of all existing Clareti and non-Clareti
licences, as well as securing new incremental revenues
from recurring software, recurring managed services, consulting
services and contracting services;
-- we successfully executed a five-year subscription with
a global Tier 1 bank customer to extend and upgrade its
investment in the Clareti software;
-- a five-year subscription with a global Tier 1 bank customer
to extend its current investment in Clareti software. The
contract value totals GBP2.8m for the ongoing use of the
technology and follows the successful migration of the
bank's global legacy "core reconciliations" to Clareti
Control;
-- securing a multi-year renewal with the largest customer
acquired through Electra, providing greater certainty over
future years.
Provide incremental growth opportunities through focused
innovation programme
The Board and management team are focused on fostering a culture
of innovation, supported by investment in our products, people and
client relationships to ensure we continue to deliver
market-leading solutions to some of the largest companies in the
world. This commitment is demonstrated by the improved matching
results and economic performance being seen by the Tier 1 bank
development partner for our cash and stock reconciliation offering.
Economic benefits are substantially ahead of the displaced legacy
transaction lifecycle management product and provides an indicative
business case for other institutions.
Our Control software is now a clear leader in the market in
terms of functionality and scalability, and the priority for our
R&D team has shifted towards ease of adoption and provision of
greater business self-service capability. During 2022, we will
introduce new web-based interfaces for our Control solutions and
progressively upgrade the underlying architectural components such
that the Electra and Clareti offerings ultimately operate on a
common "micro-service" based cloud-native Control 2.0 platform.
Our Connect 2.0 platform, which brings together our data access
and transformation technology assets across the domains of trading
STP, regulatory, payments and messaging, has also reached a market
level of functional maturity. We will continue to enhance this
service for newer industry requirements such as ISO20022, add
connectivity to additional industry platforms, and make the
technology more accessible through adoption of natural language
processing (NLP) and enhanced reporting. Our Connect offering is a
powerful capability and extremely relevant to today's global
financial markets and we intend to ramp up our marketing during the
year.
In addition to the continued enhancement of our product
portfolio, a proportion of the R&D team is dedicated to
developing and incubating new corporate banking and payments
software in partnership with ANZ. After three years of work, the
new technologies are being deployed into production use cases and
offer a potentially significant break-out opportunity for the Group
in the coming years.
M&A
Alongside our strategic pillars, we look to supplement our
organic growth opportunities through strategic M&A. We are
proud of our successful M&A strategy which has expanded our
portfolio of products, deepened our relationships with key clients,
and broadened our footprint internationally. Whilst we continue to
explore investment opportunities to further scale the business, our
priority is to leverage the combined assets and enlarged global
business to sustain high levels of profitable organic growth. With
that in mind, I am pleased to report that Inforalgo has delivered a
very strong performance in its first full year with the Group. The
acquisition has brought additional sticky ARR and widened Gresham's
customer footprint in North America.
Electra
The standout event of the year was the USD $38.6m acquisition of
Electra in June 2021, which not only reinforced our leadership
position for reconciliation software in financial markets but also
strengthened our market share and portfolio of products for the
investment management market. The deal also accelerates our
opportunity in the major North American market and creates a truly
global platform for the Group from which to deliver strong,
long-term growth.
This transformational acquisition opens the door to the next
stage of development at Gresham. We are now 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.
The acquisition of Electra has been a catalyst for change within
the business. We have reviewed our processes for scalability, and
made rapid progress with integration work, enabling us to operate
as a single global company internally as well as externally in the
marketplace.
Current Trading and Outlook
As a result of our acquisitions and the successful transition to
subscription revenues in the Clareti business, Gresham now benefits
from high levels of recurring revenues. We ended the financial year
as a larger, more resilient company, with more than GBP37m of 2022
Group revenues already under contract (which represents 100% of
2021 Group revenue) in the current year, providing significant
visibility and a robust platform to execute our growth
strategy.
Today's Gresham has the financial strength and trusted partner
client relationships to drive further expansion in the medium-term.
We are already regarded as an innovative partner to many of the
world's largest financial institutions and our aim is to deepen
those key account relationships as well as win new names.
There are now strong indications that financial firms are
planning for greater investment in FY22, with digital
transformation and automation remaining a priority. During 2021, we
saw increasing levels of management ambition and associated budget
allocations for change projects in our target markets and our
pipeline is much improved over the same period last year. Several
large opportunities are moving through competitive tender processes
and Gresham is in 'proof of concept' with a number of new 'key
accounts'.
Given the continuing market demand for data and process
automation, connectivity and control, we also have a significant
opportunity to grow with our existing installed base of 270+
customers by expanding across their operational infrastructures,
resulting in a regular beat rate of upgrade contracts. We believe
there is the opportunity to double revenues with our existing
clients as they expand across business lines and geographies.
In addition to securing new key accounts and growing with
existing customers, we are investing in the productisation and
repeatability of our software to accelerate our scale-up in the
mid-market in order to attack a total addressable market comprising
over 500 banks globally and more than 1000 investment managers.
At the time of writing, the devastating situation in Ukraine is
worsening and, as a Group, we condemn the abhorrent actions of the
Russian and Belarusian leadership in the strongest possible terms.
Whilst Gresham has limited direct exposure to Russian or Belarusian
firms, and we have no operations in the region, we are committed to
playing our part by adhering to the governmental sanctions,
assessing our operations and relationships to ensure they are
legally and morally correct, and supporting the relief effort to
the extent possible.
With your support, and the hard work of our talented global
team, we have created the foundations for success and benefit from
a focussed strategy, strong balance sheet and growing market
opportunity. The Board remains confident in its ambition to build a
GBP100m ARR SaaS business with best-in-class performance metrics
expected of a valuable global financial technology company of
substantial scale.
Ian Manocha
Chief Executive
7 March 2022
FINANCIAL REVIEW
Transformative acquisition of Electra
We were delighted to complete the transformative acquisition of
Electra on 22 June 2021 and are grateful for the support provided
by our new and existing shareholders for the transaction. We are
also pleased to confirm that since the acquisition Electra has been
integrated to become part of the Clareti business segment, thus
will be reported as such.
Electra was acquired on a debt free, cash free basis with an
upfront consideration of USD $28.95m. Subject to the achievement of
performance criteria based on the retention of acquired customer
recurring revenues, a maximum of USD $9.65m (GBP7.2m) in contingent
consideration will be due, payable in two instalments after the
first and second anniversaries of completion.
Upon acquisition, Electra had GBP9.2m of forward-looking ARR and
the following significant balance sheet items: intangible fixed
assets consisting of customer relationships with a fair value of
GBP11.8m and software of GBP5.0m; right of use assets of GBP0.3m;
trade and other receivables of GBP1.6m; cash and cash equivalents
of GBP0.1m; trade, lease and other liabilities of GBP2.3m and a
deferred tax liability (generated on acquisition) of GBP4.1m.
Subsequent to the acquisition, we are also pleased to report
that Electra as a standalone business has performed slightly ahead
of management's plans.
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.
2021 2020 Variance %
Clareti ARR at
Clareti ARR start of year GBPm 12.3 9.5 N/a
Acquired with
Electra/Inforalgo GBPm 9.2 1.2 N/a
Organic increase
in ARR GBPm 2.5 1.6 0.9 56%
----- ------ --------- ----
Clareti ARR at
end of year KPI GBPm 24.0 12.3 11.7 95%
----- ------ --------- ----
Other ARR Other ARR GBPm 4.1 3.5 0.6 17%
----- ------ --------- ----
Group ARR Group ARR GBPm 28.1 15.8 12.3 78%
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. Whilst
the Electra acquisition, completed in June 2021, was transformative
to our Clareti ARR, it is pleasing to also have seen strong organic
growth of GBP2.5m or 20% on the ARR brought forward at the start of
the year. Our retention and upsell measures remain strong, with the
trailing twelve month net Clareti ARR retention rate being 106%,
including the annualised Electra rate since acquisition. We
calculate our net ARR retention rate as ARR from 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.
ARR from our Other businesses has also grown by GBP0.6m to
GBP4.1m in 2021, although it should be noted that the growth has
come from increased end customer usage in the lower margin software
reselling business as ARR from our own high-margin legacy solutions
continues to decline as planned. It remains encouraging to see the
ongoing longevity of these business lines continuing to provide
predictability and further ability to invest with confidence in the
Clareti business.
In addition to Group ARR of GBP28.1m, expected revenues from
non-recurring contracts in place as at 31 December 2021 total
GBP9.1m, thus giving near contractual certainty over GBP37.2m of
revenue for 2022 before any new or incremental contracts are
won.
Income Statement
Revenues
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 - which are 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 - include 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.
2021 2020 Variance %
Clareti solutions Recurring GBPm 13.5 11.5 2.0 18%
Recurring - Electra GBPm 5.3 - N/a N/a
----- ----- --------- ----
Recurring - Clareti
total KPI GBPm 18.8 11.5 7.3 63%
Non-recurring 6.4 4.0 2.4 60%
Non-recurring 0.3 - N/a N/a
- Electra
----- ----- --------- ----
Non-recurring
- Clareti total GBPm 6.7 4.0 2.7 68%
----- ----- --------- ----
Total Clareti
revenues KPI GBPm 25.5 15.5 10.0 65%
Other solutions
& services Recurring GBPm 4.6 3.7 0.9 24%
Non-recurring GBPm 6.9 5.6 1.3 23%
---------------------------- --------------------------- ----- ----- --------- ----
Total GBPm 11.5 9.3 2.2 23%
---------------------------- -------------------------- ----- ----- --------- ----
Group Total KPI GBPm 37.0 24.8 12.2 49%
--------------------- ----- ------- ----- ----- --------- ----
Clareti Solutions
Clareti recurring revenues increased by 63%, up GBP7.3m on 2020,
this included a contribution of GBP5.3m from Electra since the
acquisition late in June 2021. Excluding the impact of Electra,
Clareti recurring revenues increased by 18%, or GBP2.0m since the
prior year. These increases were as a result of new recurring
revenue sales, increased consumption of Clareti solutions from our
existing customers and a full year's contribution from our 2020
acquisition, Inforalgo.
Clareti non-recurring revenues increased by 68%, up GBP2.7m on
the prior year, with a relatively small services contribution from
Electra. Excluding the impact of Electra the increase was 60%. This
increase is being driven by new implementations associated with the
increase in Clareti recurring revenues, step ups in ongoing 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 ongoing support and
managed service capability, part of which will begin being
recognised as a recurring revenue.
Other Solutions & Services
Total revenues from Other solutions and services increased by
23% to GBP11.5m, 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 fixed margin services at a margin of 13% under
twelve-month contractual terms.
Recurring revenues within the Other solutions and services
portfolio increased by 24% to GBP4.6m as a result of increased
end-user consumption fees from existing customers of our reseller
arrangement. As expected we saw lower revenues from our own-IP
software, however, these revenue reductions were more than offset
by increases in reselling and contracting revenues, albeit at lower
margins. 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
2021 2020 Variance %
Clareti Solutions Gross margin GBPm 16.6 14.3 2.3 16%
Gross margin - GBPm 4.9 - N/a N/a
Electra
------ --------- -------- ---------
Gross margin -
Clareti total GBPm 21.5 14.3 7.2 50%
Gross margin % 83% 92% (9%) N/a
Gross margin - % 88% - N/a N/a
Electra
------ --------- -------- ---------
Gross margin -
Clareti total % 84% 92% (8%) N/a
Other solutions
& services Gross margin (*) GBPm 3.7 3.4 0.3 9%
Gross margin (*) % 32% 37% (5%) N/a
Group Gross margin (*) GBPm 25.2 17.7 7.5 42%
Gross margin (*) % 68% 71% (3%) N/a
Adjusted EBITDA KPI GBPm 7.2 4.5 2.7 60%
Adjusted EBITDA KPI % 19% 18% 1% N/a
------------------------------- ------ -------- ------ --------- -------- ---------
Cash Adjusted
EBITDA KPI GBPm 2.5 0.3 2.2 733%
Cash Adjusted
EBITDA KPI % 7% 1% 6% N/a
------------------------------- ------ -------- ------ --------- -------- ---------
Statutory profit/(loss)
after tax GBPm (1.0) 1.3 (2.3) (177%)
------------------------------- -------- ------ --------- -------- ---------
Adjusted diluted
EPS KPI pence 5.02 3.96 1.06 27 %
Gross margin and reporting reclassification (*)
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 this report we have 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 2020
comparative has also been restated, the value of this
reclassification in the current year is GBP2.6m (2020:
GBP3.1m).
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 reduced slightly from 71%
to 68%, this is as a result of an increased usage of contractors
throughout all areas of the business.
The gross margin within the existing Clareti business has
reduced from 92% to 83%, this is due to an increased use of
contractors to assist with project delivery and an increasing
proportion of business being hosted in one of our cloud
infrastructures. The acquired Electra business is carrying another
very high gross margin of 88%. The combination of these is driving
a gross margin of 84% for 2021.
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 remains in structural decline.
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. We
also consider this to be consistent with the manner in which
similar small-cap LSE (or AIM) listed companies present their
results and how we understand the global investment community
assesses performance, with this particularly being the case for
growth shares in which the recurring cash performance is considered
important. However, whilst we consider them consistent and
appropriate, this EBITDA measure and the cash adjusted EBITDA
measure below are not necessarily directly comparable to other
companies as they are not strictly governed IFRS accounting
measures, nor should they be considered as a substitute for, or
superior to, any IFRS measures.
Group adjusted EBITDA has improved by GBP2.7m or 60% since the
prior year with the margin improving by 1% to 19% in 2021. 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 GBP2.2m of the GBP2.7m improvement in adjusted EBITDA
(mentioned above) dropping through to improvement cash EBITDA. The
GBP0.5m 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. This has resulted in a cash adjusted EBITDA margin of 7%,
an improvement of 6% from a margin of 1% in the prior year. Like
adjusted EBITDA, we expect to see continued improvements in these
margins in future years.
Statutory profit/(loss) after tax and Adjusted diluted EPS
There has been a reduction in statutory profit after tax to a
loss of GBP1.0m from a prior year profit of GBP1.3m. This reduction
of GBP2.3m is due to the combination of: improved adjusted
operating profit of GBP2.2m as a result of the growth and improved
profitability of the Group; offset by; increased exceptional
expenses of GBP1.1m (see below); increased share-based payment
charges of GBP0.2m; increased amortisation on acquired intangibles
largely due to the Electra acquisition of GBP0.8m; and an increased
tax charge of GBP2.4m (see below).
Adjusted diluted EPS has improved by 27% to 5.02 pence per
share. Adjusted earnings used in this calculation adjust the
statutory result after tax for: exceptional items; amortisation of
acquired intangibles, share-based payments and the deferred tax
charge in relation to the sale of the IP acquired with Electra from
the US to the UK business (see taxation below).
Exceptional items
During the year, the Group recognised exceptional costs of
GBP1.8m, of which: (i) GBP1.3m were acquisition costs in relation
to the acquisition of Electra Information Systems, Inc on 22 June
2021; and (ii) GBP0.5m related to various integration expenses in
relation to the same acquisition. The prior year exceptional costs
of GBP0.4m were in relation to the July 2020 acquisition of
Inforalgo and various restructuring costs upon the July 2020 expiry
of the earn-out period relating to the acquisition of the B2 Group
in July 2018. Offsetting the exceptional costs in the year was
exceptional income of GBP0.3m, which occurred from currency hedging
activities taking place to fund the USD denominated Electra
acquisition. There was no such exceptional income in the prior
year.
Taxation
For the year ended 31 December 2021, the Group has recorded a
net tax charge of GBP1.4m (2020: credit of GBP1.0m). The material
drivers for the variance from the prior year being: an increase in
overseas current tax charges of GBP0.5m as a result of the
increased profits from our US and Australian operations as those
businesses continue to grow, with US taxes also increasing as a
result of the Electra acquisition; a one-off deferred US tax charge
of GBP1.4m has also been incurred in the year as a result of the
Group's long-term global tax planning, part of which included the
sale of the IP acquired in the Electra acquisition from our US
business to our UK business to ensure the UK remains the
centralised IP generating entrepreneur within the Group; and the
surrender of tax losses in relation to UK R&D activities being
GBP0.3m lower than the prior year which included the surrender of
two years' worth of qualifying R&D.
Cash flow
The Group's financial position remained very strong throughout
2021, at a headline level the cash balance at the year end of
GBP9.1m remained fairly consistent with that of the prior year end
of GBP8.9m, however there were a number of significant movements
beneath the headline balances which are described below. There
continues to be no debt in the business, the USD $15m revolving
credit facility, put in place at the time of the Electra
acquisition as an insurance policy to fund the contingent
consideration payments which coincide with the annual low point in
cash, has not been drawn upon.
Operating cash flow excluding working capital and exceptional
items has increased by GBP3.0m to GBP7.5m in the year as a result
of the improved cash EBITDA of the Group in existence prior to the
Electra acquisition and the cash generative impact of the
operations of Electra post acquisition.
Operating cash outflow from exceptional items has increased by
GBP1.4m since the prior year to GBP1.8m. This increase is one-off
in nature with the significant majority being advisory and
integration fees in respect of the Electra acquisition.
The movement in working capital has increased by GBP0.7m to
GBP1.3m at the end of the year. The increase in the movement in
working capital is as a result of the inclusion of Electra working
capital in the Group balance sheet since acquisition which was
offset by a reduction relating to the unwinding of an initial
three-year prepayment of GBP3.0m from a GBP1.0m per annum
subscription licence that became non-contingent in March 2019.
Net tax payments of GBP1.1m were made during the year (2020: net
tax receipts of GBP0.8m). Gross tax payments were made in the year
of GBP1.1m (2020: GBP0.5m), the increase on the prior year largely
as a result of increased profitability in the US and Australia. In
the prior year the Group also received gross tax receipts of
GBP1.3m in the year as a result of research and development
activities performed during 2018 and 2019 where enhanced relief was
available, an equivalent gross tax reclaim was made during 2021
totalling GBP1.1m, however, this was not received from HMRC until
January 2022.
The capitalised development expenditure of GBP4.2m has increased
by GBP0.7m from the prior year, the vast majority of the increase
being in relation to such expenditure within the acquired Electra
business.
During the year the Group paid GBP0.9m of contingent
consideration in relation to the July 2020 Inforalgo acquisition,
in the prior year the initial consideration of GBP1.9m was paid.
The Group is delighted to report that the contingent consideration
payment of GBP0.9m was paid in full shortly after the first
anniversary of the acquisition as the target metrics agreed with
the sellers were met in full. Subsequent to the year end, the final
contingent consideration payment of GBP0.4m was also paid in full
during February 2022.
The Group paid GBP19.6m (net of cash acquired) of initial
consideration during the year to acquire Electra in June 2021. This
was funded through the capital raised of GBP20.2m (net of costs) in
June 2021.
The Group received GBP0.1m upon the exercise of share options
during the year (2020: GBP0.5m).
As was the case in the prior year, with increasing Clareti sales
(now including Electra) from the growing annuity base and new
customer wins, coupled with carefully selected and controlled
investments, we expect the cash-generation capacity of the business
to continue and are looking at opportunities to best utilise the
excess cash generated. In order to maximise our returns, we plan to
increase levels of investment in distribution and customer success,
whilst continuing to invest excess cash efficiently in bank
deposits and giving appropriate consideration to M&A
opportunities.
2021 2020 Variance %
Opening cash & cash equivalents
at 1 January GBPm 8.9 9.6 (0.7) (7%)
Operating cash flow excluding
exceptional items GBPm 7.2 4.5 2.7 60%
Operating cash flow from
exceptional items GBPm (1.5) (0.4) (1.1) (275%)
Total operating cash flow
excluding working capital GBPm 5.7 4.1 1.6 39%
Movement in working capital GBPm 1.3 0.6 0.7 117%
------------------------------------------ ------ ------- ------ --------- -------
Cash inflow from operations GBPm 7.0 4.7 2.3 49%
Net tax (payments)/receipts GBPm (1.1) 0.8 (1.9) (239%)
Capital expenditure - development
costs GBPm (4.2) (3.5) (0.7) 19%
Capital expenditure - other GBPm (0.1) (0.1) - -
Principal paid on lease
liabilities GBPm (0.6) (0.6) - -
Inforalgo acquisition (net
of cash acquired) GBPm (0.9) (1.9) 1.0 51%
Electra acquisition (net
of cash acquired) GBPm (19.6) - (19.6) -
Shares issued - Electra
acquisition (net of costs) GBPm 20.2 - 20.2 -
Shares issued - upon option
exercises GBPm 0.1 0.5 (0.4) (80%)
Dividend GBPm (0.5) (0.5) - -
Other GBPm (0.1) (0.1) - -
------------------------------------------ ------ ------- ------ --------- -------
Net increase/(decrease)
in cash and cash equivalents GBPm 0.2 (0.7) 0.9 129%
------------------------------------------ ------ ------- ------ --------- -------
Closing cash & cash equivalents
at 31 December KPI GBPm 9.1 8.9 0.2 2%
Consolidated statement of financial position
Intangible fixed assets have increased from GBP31.1m to
GBP62.3m, largely as a result of the Electra acquisition in June
2021.
Trade receivables increased from GBP2.5m to GBP3.8m and accrued
income (a contract asset) have increased from GBP0.4m to GBP1.2m
both of these increases are aligned with the proportioned increase
in revenues from the Electra acquisition and associated billing
cycles.
Income tax receivable has increased from nil to GBP1.1m due to a
timing difference in the receipt of funds from HMRC in relation to
R&D credits, in which the cash from the 2021 claim in relation
to 2020 activity was received in January 2022, whereas the cash
from the equivalent claim made in 2020, in relation to 2018 and
2019 was received in December 2020.
Called up equity share capital increased by GBP0.7m to GBP4.2m
and the share premium account increased by GBP19.6m to GBP23.9m.
These are both as a result of the capital raise in June 2021 that
funded the Electra acquisition.
Deferred tax liabilities have increased by GBP5.5m to GBP6.8m as
a result of GBP1.4m deferred tax charge in the year on the IP sale
from the US to the UK (see tax section), GBP3.8m deferred tax
generated upon the acquisition of intangibles upon the Electra
acquisition (net of subsequent amortisation) and GBP0.4m in
relation to the expected increase in future UK tax rates from 19%
to 25%.
Non-current contingent consideration has increased by GBP3.3m to
GBP3.6m and current contingent consideration has increased by
GBP3.0m to GBP3.9m. Within non-current contingent consideration
during the year, GBP3.6m was generated on the acquisition of
Electra, with the second contingent consideration payment of
GBP0.4m in relation to the Inforalgo acquisition moving from
non-current to current contingent consideration since the prior
year. Within current contingent consideration during the year
GBP3.6m was generated on the acquisition of Electra, the first
contingent consideration payment of GBP0.9m was paid upon targets
being met on the first anniversary of the Inforalgo acquisition and
the aforementioned GBP0.4m in relation to the Inforalgo acquisition
moved from non-current to current contingent consideration since
the prior year.
Trade payables increased from GBP0.9m to GBP1.1m, which is
largely aligned with the increased size of the combined business
subsequent to the Electra acquisition. Other payables have
increased from GBP3.3m to GBP6.5m as a result of various other
payables related to the Electra acquisition, other payables in
relation to regular Electra business activity (e.g. sales tax) and
an increase in the bonus provision to all employees and executives
reflecting the performance against annual targets. Contract
liabilities have increased from GBP11.0m to GBP12.0m, the increase
is as a result of the proportioned increase in revenues from the
Electra acquisition and associated billing cycles; offset by to the
unwinding of an initial three-year prepayment of GBP3.0m from a
GBP1.0m per annum subscription licence that became non-contingent
in March 2019.
Financial outlook
Management is very pleased with the financial performance for
the year, particularly given that the Group entered 2021 with a
weaker pipeline than desired as a result of the COVID-10 challenges
of 2020. It is a testament to the Group that we achieved a 20%
organic growth rate in Clareti ARR, bolstered to 95% including the
Electra acquisition. The Group plans to at least maintain this
level of organic Clareti ARR growth going forward.
The other (non-Clareti) software portfolio continues to surpass
expectations. Parts of the portfolio are in long-term decline and
since the general trend is towards the lower margin products and
services, we continue to plan for a declining contribution to Group
earnings. We expect our contracting services business to remain
relatively stable in 2022.
Overall, through continued organic growth and the Electra
acquisition we have further increased levels of revenue
predictability throughout the Group. In addition to the
significantly increased Clareti recurring revenue base, high levels
of contracted backlog of Clareti services for ongoing
implementations and innovation services and a high portion of the
non-Clareti portfolio already is already under contract for 2022.
This was the case as we entered 2020 and 2021 and is the case to an
even greater degree as we enter 2022. With this in mind, we
continue to invest for growth, including the re-investment of cost
synergies generated through the scale that the combined Clareti and
Electra provides the Group. This net investment will be focussed on
distribution, product and customer success, to drive revenue
synergies to ensure that we are best placed to take advantage of
the significant market opportunities.
Tom Mullan
Chief Financial Officer
7 March 2022
CONSOLIDATED INCOME STATEMENT
notes year ended restated
31 December year ended
2021 31 December
2020
GBP'000 GBP'000
------------------------------------------- ------------------ ------------------------- ------------------------
revenue 4,5 37,026 24,752
cost of sales (11,799) (7,003)
------------------------------------------- ------------------ ------------------------- ------------------------
gross profit 25,227 17,749
adjusted administrative
expenses (21,146) (15,911)
------------------------------------------- ------------------ ------------------------- ------------------------
adjusted operating profit 4,081 1,838
------------------------------------------- ------------------ ------------------------- ------------------------
adjusting administrative items:
exceptional costs 5 (1,821) (400)
exceptional income 5 330 -
amortisation on acquired
intangibles 14 (1,673) (893)
share-based payments 23 (369) (220)
------------------------------------------- ------------------ ------------------------- ------------------------
(3,533) (1,513)
------------------------------------------- ------------------ ------------------------- ------------------------
total administrative expenses (24,679) (17,424)
------------------------------------------- ------------------ ------------------------- ------------------------
operating profit 5,6 548 325
finance revenue 4,9 4 37
finance costs 9 (121) (54)
------------------------------------------- ------------------ ------------------------- ------------------------
profit before taxation 431 308
taxation 10 (1,443) 953
------------------------------------------- ------------------ ------------------------- ------------------------
(loss)/profit after taxation
attributable
to the equity holders of the
parent (1,012) 1,261
------------------------------------------- ------------------ ------------------------- ------------------------
earnings per share
statutory pence pence
basic earnings per share 11 (1.31) 1.84
diluted earnings per share 11 (1.31) 1.80
------------------------------------------- ------------------ ------------------------- ------------------------
adjusted
basic earnings per share 11 5.08 4.04
diluted earnings per share 11 5.02 3.96
------------------------------------------- ------------------ ------------------------- ------------------------
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
year ended year ended
31 December 31 December
2021 2020
GBP'000 GBP'000
------------------------------------------------------------------ ------------------------ ------------------------
(loss)/profit after taxation attributable to the
equity holders of the parent (1,012) 1,261
------------------------------------------------------------------ ------------------------ ------------------------
other comprehensive expenses
items that will or may be re-classified into profit
or loss:
exchange differences on translating foreign
operations (184) (113)
------------------------------------------------------------------ ------------------------ ------------------------
total other comprehensive expenses (184) (113)
------------------------------------------------------------------ ------------------------ ------------------------
total comprehensive (expense)/income for the year (1,196) 1,148
------------------------------------------------------------------ ------------------------ ------------------------
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Notes
At 31 December At 31 December
2021 2020
GBP'000 GBP'000
-------------------------------- ------ ----------------- ---------------
Assets
Non-current assets
Property, plant and equipment 13 218 243
Right-of-use assets 16 1,466 1,646
Intangible assets 14 62,267 31,108
Deferred tax assets 10 232 552
-------------------------------- ------ ----------------- ---------------
64,183 33,549
-------------------------------- ------ ----------------- ---------------
Current assets
Trade and other receivables 18 5,403 3,497
Contract assets 18 1,665 923
Income tax receivable 18 1,204 -
Cash and cash equivalents 19 9,139 8,876
-------------------------------- ------ ----------------- ---------------
17,411 13,296
Total assets 81,594 46,845
-------------------------------- ------ ----------------- ---------------
Equity and liabilities
Equity attributable to owners
of the Parent
Called up equity share capital 22 4,168 3,508
Share premium account 25 23,876 4,341
Own share reserve 22 (609) (778)
Other reserves 25 536 536
Foreign currency translation
reserve 25 (378) (194)
Retained earnings 25 18,288 19,453
Total equity attributable to
owners of the Parent 45,881 26,866
-------------------------------- ------ ----------------- ---------------
Non-current liabilities
Contract liabilities 20 60 66
Lease liabilities 16 770 1,004
Deferred tax liability 10 6,831 1,289
Provisions 20 144 146
Contingent consideration 20 3,575 349
11,380 2,854
-------------------------------- ------ ----------------- ---------------
Current liabilities
Trade and other payables 20 19,616 15,303
Lease liabilities 16 642 535
Income tax payable 20 131 378
Contingent consideration 20 3,944 909
24,333 17,125
-------------------------------- ------ ----------------- ---------------
Total liabilities 35,713 19,979
-------------------------------- ------ ----------------- ---------------
Total equity and liabilities 81,594 46,845
-------------------------------- ------ ----------------- ---------------
The financial statements were approved by the Board of Directors
and authorised for issue on 7 March 2022.
On behalf of the Board
Ian Manocha Tom Mullan
Chief Executive Chief Financial Officer
7 March 2022 7 March 2022
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Notes Share Share Own share Other Foreign Retained Total
capital premium reserve reserves currency earnings
account translation
reserve
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 - - - - - 1,261 1,261
Other comprehensive
expenses - - - - (113) - (113)
--------------------------- ------ --------- --------- ---------- ---------- ------------- ---------- --------
Total comprehensive
(expenses)/income - - - - (113) 1,261 1,148
Exercise of share options 22 95 438 - - - - 533
Transfer of own shares
held by Employee Share
Ownership Trust to
employees 22 - - 167 - - - 167
Share-based payments 23 - - - - - 220 220
Dividend paid - - - - - (506) (506)
At 31 December 2020 3,508 4,341 (778) 536 (194) 19,453 26,866
--------------------------- ------ --------- --------- ---------- ---------- ------------- ---------- --------
Attributable loss for
the period - - - - - (1,012) (1,012)
Other comprehensive
expenses - - - - (184) - (184)
--------------------------- ------ --------- --------- ---------- ---------- ------------- ---------- --------
Total comprehensive
expenses - - - - (184) (1,012) (1,196)
Issue of equity shares 22 656 20,344 - - - - 21,000
Share issue costs 22 - (870) - - - - (870)
Exercise of share options 22 4 61 - - - - 65
Transfer of own shares
held by Employee Share
Ownership Trust to
employees 22 - - 169 - - - 169
Share-based payments 23 - - - - - 369 369
Dividend paid 12 - - - - - (522) (522)
At 31 December 2021 4,168 23,876 (609) 536 (378) 18,288 45,881
--------------------------- ------ --------- --------- ---------- ---------- ------------- ---------- --------
CONSOLIDATED STATEMENT OF CASH FLOW
Notes Year ended Year ended
31 December 31 December
2021 2020
GBP'000 GBP'000
---------------------------------------------- ------ ------------- -------------
Cash flows from operating activities
(Loss)/profit after taxation (1,012) 1,261
Depreciation of property, plant and
equipment 13 175 245
Amortisation of intangible assets 14 4,042 2,810
Amortisation of right-of-use assets 16 581 496
Share-based payments 23 369 220
(Increase)/decrease in trade and other
receivables (776) 1,060
Increase in contract assets (220) (312)
Increase in trade and other payables 1,996 1,111
Increase/(decrease) in contract liabilities 256 (1,263)
Taxation 10 1,443 (953)
Exchange gain on financial instrument 5 (330) -
Net finance costs 9 117 17
---------------------------------------------- ------ ------------- -------------
Cash inflow from operations 6,641 4,692
Income taxes received - 1,307
Income taxes paid (1,114) (510)
---------------------------------------------- ------ ------------- -------------
Net cash inflow from operating activities 5,527 5,489
Cash flows from investing activities
Interest received 9 4 37
Exchange gain on financial instrument 5 330 -
Purchase of property, plant and equipment 13 (145) (87)
Payments to acquire subsidiary undertaking
(net of cash) 24 (19,639) (1,900)
Payment of contingent consideration
on acquisition of Inforalgo 20 (923) -
Payments to acquire intangible fixed
assets 14 (4,150) (3,565)
---------------------------------------------- ------ ------------- -------------
Net cash used in investing activities (24,523) (5,515)
Cash flows from financing activities
Interest paid 9 (39) (16)
Principal paid on lease liabilities 16 (590) (576)
Dividends paid 12 (522) (506)
Share issue proceeds (net of costs) 22 20,195 533
---------------------------------------------- ------ ------------- -------------
Net cash from/(used in) financing activities 19,044 (565)
Net increase/(decrease) in cash and
cash equivalents 48 (591)
Cash and cash equivalents at beginning
of year 8,876 9,605
Effect of foreign exchange rate changes 215 (138)
Cash and cash equivalents at end of
year 19 9,139 8,876
---------------------------------------------- ------ ------------- -------------
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
1. Basis of preparation
The Group's financial statements have been prepared in
accordance with international accounting standards in conformity
with the requirements of the Companies Act 2006 and in accordance
with international financial reporting standards and international
accounting standards as issued by the International Accounting
Standards Board (IASB) and Interpretations (collectively IFRSs).
The accounting policies which follow set out those policies which
apply in preparing the financial statements for the year ended 31
December 2021.
The Group's financial statements have been prepared on a
historical cost basis, except for the following items:
-- Contingent consideration
-- Cash settled share-based payment liabilities
The Group financial statements are presented in Sterling, which
is also the Group's functional currency. All values are rounded to
the nearest thousand pounds (GBP'000) except when otherwise
indicated
2. Responsibility statements under the disclosure and transparency rules
The Annual Financial Report for the year ended 31 December 2021
contains the following statements:
The directors confirm that to the best of their knowledge:
-- The Group financial statements have been prepared
in accordance with International Financial Reporting
Standards ("IFRSs") as adopted by the European
Union and Article 4 of the IAS Regulation and
give a true and fair view of the assets, liabilities,
financial position and profit and loss of the
Group; and
-- The Annual Financial Report 2021 includes a fair
review of the development and performance of
the business and the financial position of the
Group and the Parent Company, together with a
description of the principal risks and uncertainties
that they face.
The name and function of each of the directors for the year
ended 31 December 2021 are set out in the Annual Financial Report
2021.
3. Segment information
The segmental disclosures reflect the analysis presented on a
monthly basis to the chief operating decision maker of the
business, the Chief Executive Officer and the Board of
Directors.
In addition, the split of revenues and non-current assets by the
UK and overseas have been included as they are specifically
required by IFRS 8 "Operating Segments".
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-premises or deployed into hybrid
environments. These primary offerings within
this segment include:
o Clareti Control products (which now includes
the acquired Electra 'Reconciliation' products)
o Clareti Connect products (which now includes
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.
Other
Notes Clareti Solutions Contracting Adjustments, Consolidated
Solutions Services central
overheads
and elimination
2021 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Revenue 4 25,470 5,222 6,334 - 37,026
Cost of sales (3,978) (2,338) (5,483) - (11,799)
Gross profit 21,492 2,884 851 - 25,227
Gross profit % 84% 55% 13% 68%
Adjusted administrative
expenses (20,996) (150) - - (21,146)
Adjusted operating profit 496 2,734 851 - 4,081
Adjusting items:
Exceptional costs 5 (1,491) (1,491)
Amortisation of acquired
intangibles 14 (1,673) (1,673)
Share-based payments 23 (369) (369)
Adjusting administrative
expenses (3,533) (3,533)
Operating profit 548
Finance revenue 9 4
Finance costs 9 (121)
Profit before taxation 431
Taxation 10 (1,443)
Loss after taxation (1,012)
Adjusted operating profit 4,081
Amortisation of intangibles 14 2,369
Depreciation of property,
plant and equipment 13 175
Amortisation of right-of-use
assets 16 581
Adjusted EBITDA 7,206
Development costs capitalised 14 (4,105)
Principal paid on lease
liabilities 16 (590)
Adjusted cash EBITDA 2,511
Segment assets 81,126594
Segment liabilities (35,245713)
Other
Notes Clareti Solutions Contracting Adjustments, Consolidated
Solutions Services central
overheads
and elimination
2020 (restated) GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------- ------ ----------- ----------- ------------ ----------------- -------------
Revenue 4 15,453 4,395 4,904 - 24,752
Cost of sales (1,126) (1,605) (4,272) - (7,003)
Gross profit after contracting
fully costed 14,327 2,790 632 - 17,749
93% 63% 13% 72%
Adjusted administrative
expenses (15,752) (159) - - (15,911)
---------------------------------- ------ ----------- ----------- ------------ ----------------- -------------
Adjusted operating (loss)/profit (1,425) 2,631 632 - 1,838
Adjusting items:
Exceptional costs 5 (400) (400)
Amortisation of acquired
intangibles 14 (893) (893)
Share-based payments 23 (220) (220)
---------------------------------- ------ ----------- ----------- ------------ ----------------- -------------
Adjusting administrative
expenses (1,513) (1,513)
Operating profit from
continuing operations 325
Finance revenue 9 37
Finance costs 9 (54)
Profit before taxation 308
Taxation 10 953
---------------------------------- ------ ----------- ----------- ------------ ----------------- -------------
Profit after taxation 1,261
---------------------------------- ------ ----------- ----------- ------------ -----------------
Adjusted operating profit 1,838
Amortisation of intangibles 14 1,917
Depreciation of property,
plant and equipment 13 213
Amortisation of right-of-use
assets 16 496
Bank charges 9 (13)
---------------------------------- ------ ----------- ----------- ------------ ----------------- -------------
Adjusted EBITDA - continuing
operations 4,451
Development costs capitalised 14 (3,561)
Principal paid on lease
liabilities 16 (576)
---------------------------------- ------ ----------- ----------- ------------ ----------------- -------------
Adjusted cash EBITDA 314
---------------------------------- ------ ----------- ----------- ------------ ----------------- -------------
Segment assets 46,845
Segment liabilities (19,979)
---------------------------------- ------ ----------- ----------- ------------ ----------------- -------------
The Group has a customer relationship with one banking customer
which is considered by the Directors to be individually
significant; revenue from this relationship exceeded 10% of the
Group's revenue, totalling GBP17,618,000 (2020: GBP11,388,000)
which includes low margin contracting revenue of GBP8,442,000
(2020: GBP5,115,000).
Adjusting administrative items
Operating performance is analysed excluding exceptional items,
share-based payment charges and amortisation from acquired
intangibles which is consistent in with the way in which the Board
and most stakeholders review the financial performance of the
Group. These adjusting items are all either non-cash or
non-recurring IFRS expenses (or income) that do not reflect the
underlying performance of the business. In the case of share-based
payment charges, management acknowledge that these awards are
potentially paid "in-lieu' of cash salary or bonuses and therefore
there is a value to these. However, the IFRS valuation methodology
applied to these charges does not represent a cash cost to the
business or a value that is representative of any the actual cost
to the Company, its shareholders or any other Group stakeholder,
nor is it representative of the ultimate value to the award
beneficiary. Adjusting for these items is also consistent with the
manner in which similar small and mid-cap LSE (or AIM) listed
present their results and how we understand the investment
community to assess performance, where, for growth shares the
recurring cash performance of the business is considered most
important. In addition, these adjustments are also aligned with the
performance methodology used by the panel of debt providers that
tendered for the revolving credit facility established during the
year in order to assess and continually monitor credit worthiness,
risk and upon which covenants are set.
The adjusting administrative items are:
2021 2020
GBP'000 GBP'000
---------------------------------------------- -------- --------
Acquisition and associated integration costs 1,814 423
Advisory fees for new share option scheme 7 33
---------------------------------------------- -------- --------
Exceptional costs 1,821 456
Exceptional income (330) (56)
Total Exceptional items 1,491 400
---------------------------------------------- -------- --------
Amortisation on acquired intangibles 1,673 893
Share-based payments 369 220
---------------------------------------------- -------- --------
Total adjusting administrative items 3,533 1,513
---------------------------------------------- -------- --------
During the year the Group incurred GBP1,814,000 (2020:
GBP423,000) exceptional costs relating to legal, due diligence and
professional fees for the acquisition of Electra Information
Systems and associated integration costs.
Exceptional legal and tax advisory costs were incurred in the
year of GBP7,000 (2020: GBP33,000) associated with implementation
of a new ten-year share option incentive scheme. These costs are
not expected to occur for a further ten years.
Exceptional income of GBP330,000 was recognised in the year on
realising a gain on the completion of a contract to forward
purchase US dollars. The contract was entered into to minimise the
currency risk on the acquisition of Electra Information Systems.
GBP56,000 was received during 2020 following an initiative by the
Australian Government to support businesses during the COVID-19
pandemic. This income has been treated as exceptional as it is
non-recurring.
Due to the amount and nature of amortisation of acquired
intangibles and share-based payments both costs were treated as an
adjusting administrative item.
Adjusted EBITDA
Adjusted EBITDA is disclosed within the financial statements to
show the underlying performance of the group on a consistent basis
and to aid understanding of the financial performance during the
year.
Notes 2021 2020
GBP'000 GBP'000
--------------------------------------------------- -------------- ------------------- -------------------
Profit before taxation 431 308
Adjusting items:
Amortisation of intangibles 14 4,042 2,810
Depreciation of property, plant and
equipment 13 175 213
Amortisation of right-to-use assets 16 581 496
Notional interest on lease liabilities 9 43 38
Finance revenue 9 (4) (37)
Interest payable 9 78 3
EBITDA 5,346 3,831
Exceptional items 5 1,491 400
Share-based payments 23 369 220
Adjusted EBITDA 7,206 4,451
-------------- ------------------- -------------------
Adjusted EBITDA is not an IFRS measure or not considered to be a
substitute for or superior to any IFRS measures. It is not directly
comparable to other companies.
Geographic information 2021 2020
GBP'000 GBP'000
----------------------------------------------------- -------- --------
Revenues from external customers (by destination)
UK 5,998 6,719
EMEA 3,151 2,593
United States 9,096 3,038
Americas 517 494
Australia 17,738 11,413
Asia Pacific 526 495
----------------------------------------------------- -------- --------
37,026 24,752
----------------------------------------------------- -------- --------
EMEA includes revenue from external customers located primarily
in the Netherlands, Luxembourg, Germany, Belgium and South Africa.
Asia Pacific includes revenue from external customers located
primarily in Malaysia and Singapore.
2021 2020
GBP'000 GBP'000
----------------------------------------------------- -------- --------
Non-current assets
UK 62,777 32,269
EMEA 448 588
North America 396 9
Asia Pacific 562 683
----------------------------------------------------- -------- --------
64,183 33,549
----------------------------------------------------- -------- --------
Non-current assets consist of property, plant and equipment,
right-of-use assets, intangible assets and deferred tax assets.
4. Taxation
Tax on profit on ordinary activities
Tax charge in the income statement
2021 2020
GBP"000 GBP"000
---------------------------------------------------- --------- ---------
Current income tax
Overseas tax credit - adjustment to previous years (93) (124)
Overseas tax charge - current year 1,118 599
UK corporation tax credit - adjustment to previous
years (1,045) (1,307)
Total current income tax (20) (832)
Deferred income tax
Movement in net deferred tax asset 1,231 (202)
Tax rate change adjustments 232 81
---------------------------------------------------- --------- ---------
Total deferred income tax 1,463 (121)
Total charge/(credit) in the income statement 1,443 (953)
---------------------------------------------------- --------- ---------
Reconciliation of the total tax charge
The tax charge in the income statement for the year is higher
(2020: lower) than the standard rate of corporation tax in the UK
of 19.0% (2020: 19.0%). The differences are reconciled below:
2021 2020
GBP'000 GBP'000
---------------------------------------------------------- -------- --------
Profit before taxation 431 308
Profit before taxation multiplied by the UK standard
rate of corporation tax of 19.0% (2020: 19.0%) 82 59
Expenses not deductible for tax purposes 288 137
Differences in tax rates 785 168
Overseas tax credit - adjustment to previous years (93) (124)
Research and development credit - adjustment to
previous year (1,045) (1,307)
Research and development enhanced relief (1,703) (1,424)
Movement in unrecognised losses carried forward 1,371 1,359
Recognition of deferred tax liability on the inter-group 1,398 -
sale of intellectual property
Movement in unrecognised temporary differences 254 211
Movement in unrecognised fixed asset temporary
differences 253 (16)
Temporary difference on share-based payments (61) 73
Temporary movement on acquired intangibles (318) (170)
Tax rate change adjustments 232 81
---------------------------------------------------------- -------- --------
Total tax charge/(credit) reported in the income
statement 1,443 (953)
---------------------------------------------------------- -------- --------
Unrecognised tax losses
The Group has tax losses that are available indefinitely for
offset against future taxable profits of the companies in which the
losses arose as analysed below. Deferred tax assets have not been
recognised in respect of these losses as they may not be used to
offset taxable profits elsewhere in the Group and they have arisen
in subsidiaries that have been loss making for some time.
The tax effect of exchange differences recorded within the
consolidated statement of comprehensive income is a credit of
GBP35,000 (2020: GBP21,000).
Temporary differences associated with Group investments
At 31 December 2021, there was no recognised deferred tax
liability (2020: GBPnil) for taxes that would be payable on the
unremitted earnings of certain of the Group's subsidiaries as the
Group has determined that undistributed profits of its subsidiaries
will not be distributed in the foreseeable future.
Deferred tax
Deferred tax assets/(liabilities)
2021 Asset Liability Net
GBP'000 GBP'000 GBP'000
---------------------------------------------- -------- ------------ -----------
1 January 552 (1,289) (737)
Movement in the period:
- Tax losses (24) - (24)
- Employee share award schemes 119 - 119
- Qualifying research and development
expenditure (494) - (494)
- Fixed asset timing differences (96) - (96)
- Acquired intangibles - 318 318
- I nter-group sale of intellectual property
IP transfer - (1,398) (1,398)
Acquisition of intangibles in subsidiaries - (4,055) (4,055)
Impact of change in tax rate 175 (407) (232)
---------------------------------------------- -------- ------------ -----------
31 December 232 (6,831) (6,599)
---------------------------------------------- -------- ------------ -----------
2020
---------------------------------------------- -------- ------------ -----------
1 January 489 (952) (463)
Movement in the period:
- Tax losses 411 - 154
- Employee share award schemes (219) - (262)
- Qualifying research and development
expenditure (513) - (211)
- Fixed asset timing differences 353 - 351
- Acquired intangibles - 170 170
Acquisition of intangibles in subsidiaries - (395) (395)
Impact of change in tax rate 31 (112) (81)
31 December 552 (1,289) (737)
---------------------------------------------- -------- ------------ -----------
Comprising: 2021 2020
Asset GBP'000 GBP'000
------------------------------------------------------------- ------------ ----------
Tax losses 3,639 2,784
Employee share award schemes 310 145
Qualifying research and development expenditure (4,545) (3,079)
Fixed asset timing differences 828 702
31 December 232 552
------------------------------------------------------------- ------------ ----------
2021 2020
Liability GBP'000 GBP'000
------------------------------------------------------------- ------------ ----------
Inter-group sale of intellectual property IP Transfer (1,398) -
Acquired intangibles (5,433) (1,289)
31 December (6,831) (1,289)
------------------------------------------------------------- ------------ ----------
Unrecognised potential deferred tax assets
The deferred tax not recognised in the consolidated 2021 2020
statement of financial position is as follows:
GBP'000 GBP'000
----------------------------------------------------- -------- --------
Gresham Technologies (Luxembourg) S.A. 816 429
Gresham Technologies (Holdings) SARL 103 604
Inforalgo Information Technology Limited 243 205
Gresham Technologies (Singapore) Limited 125 129
Gresham Technologies (TDI) Limited 116 91
----------------------------------------------------- -------- --------
Tax losses 1,403 1,458
----------------------------------------------------- -------- --------
Gross tax losses unrecognised 5,857 6,459
----------------------------------------------------- -------- --------
Future tax rates
The main UK corporation tax rate is due to increase to 25% from
1 April 2023 as substantively enacted by the Finance Act 2021.
Therefore, the rate used to calculate deferred tax balances at 31
December 2021 has increased from 19% to 25%.
The Group's recognised and unrecognised deferred tax assets in
the UK, Luxembourg, Australian and US subsidiaries have been shown
at the rates in the following table, being the substantively
enacted rates in these countries.
2021 2020
% %
------------ ----- -----
UK 25 19
Luxembourg 25 25
Australia 30 30
US 27 27
------------ ----- -----
5. Earnings
Earnings per share
Basic earnings per share amounts are calculated by dividing
profit or loss for the year attributable to owners of the Parent by
the weighted average number of ordinary shares outstanding during
the year.
Diluted earnings per share amounts are calculated by dividing
profit or loss attributable to owners of the Parent by the weighted
average number of ordinary shares outstanding during the year 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 except when such dilutive instruments would
reduce the loss per share.
The following reflects the earnings and share data used in the
basic and diluted earnings per share computations:
2021 2020
----------------------------------- ----------- -----------
Basic weighted average number of
shares 77,132,796 68,697,828
Employee share options - weighted
(note 23) 890,100 1,414,549
Diluted weighted average number
of shares 78,022,896 70,112,377
------------------------------------ ----------- -----------
Notes 2021 2020
GBP'000 GBP'000
-------------------------------------------- ------ -------- --------
Adjusted earnings attributable to owners
of the Parent 3,919 2,774
Adjusting items:
Exceptional items 5 (1,491) (400)
Amortisation of acquired intangibles 14 (1,673) (893)
Deferred tax charge on inter-group sale
of intellectual property 10 (1,398) -
Share-based payments 23 (369) (220)
Statutory earnings attributable to owners
of the Parent (1,012) 1,261
-------------------------------------------- ------ -------- --------
Earnings per share
Statutory pence pence
Basic earnings per share (1.31) 1.84
Diluted earnings per share (1.31) 1.80
-------------------------------------------- ------ -------- --------
Adjusted
Basic earnings per share 5.08 4.04
Diluted earnings per share 5.02 3.96
-------------------------------------------- ------ -------- --------
During the year ended 31 December 2021, share options granted
under share option schemes were exercised and the Group issued
83,000 (2020: 1,900,000) ordinary shares accordingly (ranking pari
passu with existing shares in issue). See note 22 for further
details.
In June 2021 the Company issued 13,125,000 ordinary shares at a
price of 160 pence (ranking pari passu with existing shares in
issue). See note 22 for further details.
There have been no other transactions involving ordinary shares
or potential ordinary shares between the reporting date and the
date of completion of this Annual Financial Report 2021.
6. Dividends paid and proposed
The final dividend for the year ended 31 December 2020 was
approved at the Company Annual General Meeting on 10 May 2021 and
paid on 20 May 2021 of 0.75 pence per share, equating to a total of
GBP522,000. The Company will be proposing a final dividend for
approval at the AGM for the year ended 31 December 2021 of 0.75
pence per share.
7. Intangible assets
Separately identified
intangibles on
acquisition
Development Patents Software Customer Goodwill Total
costs and licences relationships
2021 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------- ------------ -------------- --------- --------------- ---------- ---------
Cost
At 1 January 26,996 832 7,161 2,410 5,625 43,024
Additions 4,105 45 4,959 11,800 14,279 35,188
Disposals - (6) - - - (6)
Exchange adjustment (29) (13) - - (56) (98)
--------------------- ------------ -------------- --------- --------------- ---------- ---------
At 31 December 31,072 858 12,120 14,210 19,848 78,108
--------------------- ------------ -------------- --------- --------------- ---------- ---------
At 1 January (8,117) (739) (2,141) (669) (250) (11,916)
Charge for year (2,326) (43) (964) (709) - (4,042)
Eliminated on
disposal - 6 - - - 6
Exchange adjustment 65 13 - - 33 111
At 31 December (10,378) (763) (3,105) (1,378) (217) (15,841)
--------------------- ------------ --------- ---------- ---------
Net carrying amount
At 31 December 20,694 95 9,015 12,832 19,631 62,267
At 1 January 18,879 93 5,020 1,741 5,375 31,108
--------------------- ------------ -------------- --------- --------------- ---------- ---------
Separately identified
intangibles on
acquisition
Development Patents Software Customer Goodwill Total
costs and licences relationships
2020 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------- ------------ -------------- --------- --------------- ---------- ---------
Cost
At 1 January 23,345 872 6,275 1,218 2,943 34,653
Additions 3,561 4 886 1,192 2,656 8,299
Disposals - (44) - - - (44)
Exchange adjustment 90 - - - 26 116
--------------------- ------------ -------------- --------- --------------- ---------- ---------
At 31 December 26,996 832 7,161 2,410 5,625 43,024
--------------------- ------------ -------------- --------- --------------- ---------- ---------
Amortisation and impairment
At 1 January (6,182) (729) (1,477) (440) (250) (9,078)
Charge for year (1,863) (54) (664) (229) - (2,810)
Eliminated on
disposal - 44 - - - 44
Exchange adjustment (72) - - - - (72)
At 31 December (8,117) (739) (2,141) (669) (250) (11,916)
--------------------- ------------ --------- ---------- ---------
Net carrying amount
At 31 December 18,879 93 5,020 1,741 5,375 31,108
At 1 January 17,163 143 4,798 778 2,693 25,575
--------------------- ------------ -------------- --------- --------------- ---------- ---------
Development costs
Development costs are internally generated and are capitalised
at cost. These intangible assets have been assessed as having a
finite life and are amortised on a straight-line basis over their
useful lives of two to eleven years. These assets are tested for
impairment where an indicator of impairment arises and annually
prior to them being made available for use.
For the years ended 31 December 2021 and 31 December 2020 the
Group has capitalised development costs in respect of individual
Clareti applications which have been individually assessed against
the required capitalisation criteria and been individually assigned
useful economic lives reflecting the maturity and availability of
comparable applications in our markets. These useful economic lives
are assessed to be between two and eleven years.
No changes have been made to development costs capitalised in
prior years in respect of the Clareti platform, which continue to
be amortised on a systematic basis over the existing useful
economic life of eleven years.
Patents and licences
Patents and licences are the third party costs incurred in
seeking and obtaining protection for certain of the Group's
products and services. These intangible assets have been assessed
as having a finite life and are being amortised evenly over their
useful economic life, to a maximum of ten years. Patents have a
remaining life of three years and licences have a remaining life of
one to ten years.
Separately identified acquired intangibles
Separately identified intangibles acquired through business
combinations represent software and customer relationships which
arose through the acquisitions of C24 Technologies Limited, B2
Group, Inforalgo and Electra Information Systems.
Software is amortised over its useful economic life, which is
deemed to be ten years.
Customer relationships acquired in the year are amortised over
their useful economic life, which is deemed to be twelve years for
the Electra acquisition, eight years for the Inforalgo and C24
Technologies Limited acquisitions and six years for B2 Group.
Goodwill
Goodwill arose on the acquisition of our Asia Pacific real-time
financial solutions business, C24 Technologies Limited, B2 Group,
Inforalgo and Electra Information Systems. It is assessed as having
an indefinite life and is assessed for impairment at least
annually.
8. Business Combinations during the period
On 22 June 2021 Gresham Technologies plc acquired the entire
ordinary share capital in Electra Information Systems, Inc., a
specialist in connectivity and intelligent automation solutions for
financial services institutions enabling straight through
processing and real-time regulatory reporting.
The initial consideration was GBP17,778,000 with an additional
GBP1,991,000 consideration paid to settle outstanding liabilities.
Contingent consideration dependent on performance of up to
GBP6,936,000 is payable over a 24-month period post acquisition.
The maximum potential consideration is GBP26,701,000.
The 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 10 - 10
Right-of-use assets 285 - 285
Trade and other receivables 1,645 - 1,645
Cash and cash equivalents 130 - 130
Trade and other liabilities (2,051) - (2,051)
Lease liabilities (297) - (297)
Deferred tax liability - (4,055) (4,055)
Total net (liabilities)/assets (278) 12,704 12,426
------------------------------------------ ----------- ------------ -----------
Satisfied as follows:
Cash 19,769
Contingent consideration 6,936
Total consideration 26,705
------------------------------------------ ----------- ------------ -----------
Goodwill (note 14) 14,279
------------------------------------------ ----------- ------------ -----------
Analysis of cash flows on acquisition:
Net cash acquired (130)
Cash paid 19,769
------------------------------------------ ----------- ------------ -----------
Net cash flow 19,639
------------------------------------------ ----------- ------------ -----------
Fair value of consideration
paid:
Cash 19,769
Contingent consideration due
less than one year 3,468
Contingent consideration due
more than one year 3,468
------------------------------------------ ----------- ------------ -----------
Total consideration 26,705
------------------------------------------ ----------- ------------ -----------
The goodwill recognised above is attributable to intangible
assets that cannot be individually separately and reliably measured
due to their nature. These items include the expected value of
synergies and assembled workforce.
Acquisition costs of GBP1,579,000 were incurred during the year
ended 31 December 2021 as a result of the acquisition of Electra.
These costs have been recognised as exceptional costs within the
Income Statement.
From the date of acquisition, Electra has contributed revenue of
GBP5,647,000 to the Group and operating profit of GBP1,352,000. If
the acquisition had occurred on 1 January 2021, Group revenue would
have been GBP41,747,000 and Group operating profit
GBP1,345,000.
Contingent consideration
As part of the sale and purchase agreement, contingent
consideration is payable up to GBP6,936,000 with the maximum amount
payable if the Annual Recurring Revenues are GBP9,185,000 24 months
after acquisition. The consideration is payable on a straight-line
basis with no lower threshold with 50% payable in June 2022 and the
balance payable in June 2023. Due to the nature of these payments
Management has performed a review and estimates that the full
amount of contingent consideration is expected to be paid. As
result, contingent consideration has been recognised in full in the
statement of financial position, with GBP3,468,000 due in less than
one year and GBP3,468,000 due in more than one year.
9. Related party transactions
Key management compensation (including Directors)
2021 2020
GBP'000 GBP'000
----------------------- -------- --------
Directors' emoluments
Remuneration 648 618
Social security costs 145 100
Bonuses 401 180
Pension 22 22
Share-based payments 116 68
------------------------ -------- --------
1,332 988
----------------------- -------- --------
Details of Directors' compensation are included in the
Directors' Remuneration Report.
There is no single party known that the Directors consider to be
a controlling shareholder or ultimate parent undertaking. Refer to
page 66 for details of all significant shareholders that the
Company has been notified of.
10. Events after the reporting date
A dividend of 0.75 pence per share has been approved by the
Board to propose to shareholders at the Annual General Meeting.
11. Additional information
Principal risks and uncertainties
The principal risks and uncertainties facing the Group together
with actions being taken to mitigate them and future potential
items for consideration are set out in the Strategic Report section
of the Annual Financial Report 2021.
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END
FR LDLLBLXLXBBK
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March 08, 2022 02:01 ET (07:01 GMT)
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