TIDMGHT
RNS Number : 5095V
Gresham Technologies PLC
24 July 2018
RNS
24 July 2018
Gresham Technologies plc
Clareti revenues up 13%, six new Clareti customers
Gresham Technologies plc (LSE: "GHT", "Gresham" or the "Group"),
the leading software and services company that specialises in
providing real-time data integrity and control solutions, announces
its unaudited half year results for the six months ended 30 June
2018.
Financial highlights
-- Group revenues down 5% to GBP9.36m (H1 17: GBP9.87m)
-- Clareti revenues up 13% to GBP5.46m (H1 17: GBP4.83m)
-- Clareti software revenues consistent at GBP3.66m (H1 17: GBP3.72m)
-- Clareti annualised recurring revenues up 15% to GBP6.20m (H1 17: GBP5.41m)
-- Adjusted EBITDA down 80% to GBP0.44m (H1 17: GBP2.15m)
Operational highlights
-- Six new Clareti customers signed in H1 2018
-- Strategic win with Tier 1 global investment bank
-- Six Clareti customer licence upgrades
-- Acquisition of B2 Group completed 4 July 2018
-- Management confident in the full year outlook
All revenue figures include joint venture revenue share.
Adjusted EBITDA refers to earnings before interest, tax,
depreciation and amortisation, adjusted for one-off exceptional
charges and share-based payments.
Ian Manocha, Gresham CEO, commented:
"We won six new Clareti customers in the first half of 2018 and
have just completed the acquisition of the B2 Group, bringing a
further fifteen customers into the Group. Our recent investments in
direct sales, marketing and alliances have contributed to a
strengthening Clareti pipeline. We are expecting a strong second
half of the year, and we have made a positive start with three new
Clareti wins so far in July."
A copy of the results presentation provided to analysts will be
available on Gresham's website at approximately 11.00 a.m.
today.
Enquiries
+44 (0) 207 653
Gresham Technologies plc 0200
Ian Manocha
Tom Mullan
+44 (0) 207 496
N+1 Singer (Joint Broker) 3000
Shaun Dobson
Lauren Kettle
+44 (0) 207 894
Cantor Fitzgerald Europe (Joint Broker) 7000
Marc Milmo
Catherine Leftley
Note to editors
Gresham Technologies plc is a leading software and services
company that specialises in providing real-time data integrity and
control solutions. 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, all of whom are served locally from offices located
in Europe, North America and Asia Pacific.
Gresham's award-winning Clareti software platform has been
designed to provide financial institutions with complete certainty
in their data processing. Clareti is a highly flexible and fully
scalable platform for ensuring the integrity of data across an
enterprise. It is designed to address today's most challenging
financial control, risk management, data governance and regulatory
compliance problems.
Chief Executive review
Strategic overview
The Group's strategic plan is to create a valuable, modern,
enterprise financial technology company that enables organizations
to be in control of their data in today's fast-paced digital world.
Value is being created through high-margin Clareti software sales,
recurring revenue subscriptions and cloud services as part of a
managed, multi-year transition from dependence on the Group's
declining legacy business, which includes third party software
reselling, sub-contractor services, and mainframe and tape storage
software. In the last five years this Clareti led strategy has led
to the acquisition of approximately 80 new high-quality customers
into the Group.
Based on the Clareti platform, our modern portfolio of
applications addresses complex financial, risk, regulatory and
compliance challenges. Our flagship offering, Clareti Transaction
Control (CTC), is specifically built to disrupt a market dominated
by a small number of legacy vendors whose inflexible technology
architectures fail to address the need for more granular and
real-time data control across the entirety of a firm's operations.
Market demand for agile solutions is particularly high among
financial market participants driven by a global regulatory agenda
increasingly focused on data quality, as well as by the need to
simplify operations and drive down transaction costs. Gresham is
ideally placed to address these needs with its modern technology
and deep industry domain expertise.
Our goal is to establish Clareti as the platform of choice for
financial markets participants who need to "be data confident".
Additional applications and services are being developed to expand
the portfolio of Clareti offering in three key market segments:
capital markets data integrity and control solutions; cash
management solutions for banks and corporates; commercial lending
solutions.
Our go-to-market strategy predominantly involves deploying
direct sales teams into the major financial markets in the UK,
Europe and North America. We are investing to open more alliances
and indirect channels to extend our reach and grow market share.
Our Asia Pacific business primarily focuses on major account
management and supports the Group with global customer support and
delivery capabilities.
In October 2016, we acquired C24 Technologies Limited to
strengthen the capability of our technology platform to process a
wider variety of financial message formats. In July 2018, we added
the B2 Group to enable us to provide secure high-availability cloud
services, innovative cash management technology that enables
institutions to connect with multiple banks, and to further extend
our reach into continental Europe. We will continue to pursue
carefully selected acquisition opportunities that can add long-term
value to the Group in line with our strategy.
Trading update
The Group earns revenues from the sale of software and provision
of ancillary consultancy services. The following summarises the
Group's financial performance in the six months to 30 June
2018:
H1 2018 H1 2017 Variance
GBP'm GBP'm GBP'm %
---------------------------- ----- ------- ------- ------------------ --------------
Revenues
Clareti Solutions
Recurring (including joint
venture revenue share) 2.90 2.50 0.40 16%
Non-recurring 0.76 1.22 (0.46) (38%)
------------------------------------ ------- ------- ------------------ --------------
Software 3.66 3.72 (0.06) (2%)
Services 1.80 1.11 0.69 62%
------------------------------------ ------- ------- ------------------ --------------
Total KPI 5.46 4.83 0.63 13%
Other Solutions
Recurring 1.75 2.34 (0.59) (25%)
Non-recurring 2.15 2.70 (0.55) (20%)
------------------------------------ ------- ------- ------------------ --------------
Total 3.90 5.04 (1.14) (23%)
Total KPI 9.36 9.87 (0.51) (5%)
---------------------------- ------ ------- ------- ------------------ --------------
Total excluding joint venture
revenue share 9.33 9.77 (0.44) (5%)
Annualised recurring revenue (including joint
venture) as at 30 June
Clareti ARR KPI 6.20 5.41 0.79 15%
Group ARR KPI 9.92 9.98 (0.03) -%
In the first half of the year, we won six new Clareti customers,
including a first project in one of the world's largest global
investment banks. New customers came from our targeted industries
of banking, investment management and insurance broking in Europe,
the US and Singapore. New licence contracts were a mix of term and
subscription, with one new client choosing to deploy into the cloud
with a Clareti-as-Service subscription. In addition, six existing
Clareti customers increased their subscriptions to support expanded
usage of the software. Clareti new licence sales in Q2 were lower
than expected due primarily to the delay of certain new contracts
into the second half of the year.
As regards the Group's Other Solutions business, comprising our
legacy products and Australian sub-contracting services, revenues
were 23% lower than the same period in 2017. This performance was
in line with our planning assumptions given the run off of a major
legacy software client that completed during 2017 and expected
short term movements in phasing of sub-contracting revenues.
Our professional services revenues were strongly up compared to
H1 2017 reflecting the high level of implementation work generated
from the large number of new Clareti client wins in the prior
twelve months.
In the first six months, Clareti revenues represented 58% of
total Group revenues (H1 17: 49%, H1 16: 40%) and, as at 30 June
2018, Clareti annualised recurring revenues (ARR) were up by 15% to
GBP6.20m (30 June 2017: GBP5.41m).
Earnings
H1 2018 H1 2017 Variance
%
------------------------ ---- ----- ------- ------- ------------ -----------
Gross margin GBPm 7.91 8.36 (0.45) (5%)
Gross margin % 85 86 (1) (1%)
Adjusted EBITDA KPI GBPm 0.44 2.15 (1.71) (80%)
Adjusted EBITDA % 5 22 (17) (77%)
Statutory (loss)/profit
before tax KPI GBPm (0.79) 1.11 (1.90) (171%)
-------
Adjusted diluted
EPS pence 0.17 2.76 (2.59) (94%)
------------------------------ ----- ------- ------- ------------ -----------
The reduction in adjusted EBITDA against the same period in the
prior year can be attributed to a combination of factors; Group
revenues being lower; a lower proportion of development spend
qualifying for capitalization (GBP0.52m); and ongoing investment
into the business (GBP0.68m). These general investments include new
systems for talent management and professional services automation,
as well as new senior appointments in sales, marketing and finance
to support planned global growth.
Consequently, first half earnings against the comparative period
in 2017 are significantly down, with gross margin of 85% (H1 17:
86%), adjusted EBITDA down 80% to GBP0.44m (H1 17: GBP2.15m) and
adjusted diluted earnings per share down 94% to 0.17 pence per
share (H1 17: 2.76 pence per share).
Cashflow
H1 2018 H1 2017 Variance
GBP'm GBP'm GBP'm %
------------------------------ ------- ------- --------------- -----------
Operating cashflow excluding
working capital 0.20 1.68 (1.48) (88%)
Movement in working capital 0.28 0.54 (0.26) (48%)
Capital expenditure -
development costs (1.22) (1.75) 0.53 30%
Capital expenditure -
other (0.07) (0.10) 0.03 30%
Investing activities - C24
acquisition deferred payment (0.36) - (0.36) n/a
Financing activities -
dividend paid (0.34) - (0.34) n/a
Other 0.22 0.24 (0.02) (8%)
Closing cash 6.99 7.81 (0.82) (11%)
-------------------------------- ------- ------- --------------- -----------
Cash & cash equivalents 6.99 7.21 (0.22) (3%)
Cash deposits - 0.60 (0.60) n/a
The Group continues to be funded from operating cash and has no
debt. During the six months ended 30 June 2018, cashflow arising
from operating activities decreased by 88% to GBP0.20m (H1 17:
GBP1.68m) as a direct result of the reduced profitability of the
Group and in particular the lower value of new Clareti initial
licence fees in the period. Capitalised development costs reduced
by 30% to GBP1.22m (H1 2017: GBP1.75m) due to a lower proportion of
development activities qualifying to be capitalized as the base
Clareti platform continues to mature.
The Group's closing cash position as at 30 June 2018 was
GBP6.99m (30 June 17: GBP7.81m), including the effect of deferred
consideration totalling GBP1.2m for the acquisition of C24
Technologies Ltd paid in October 2017 and April 2018 and a maiden
dividend of GBP0.3m paid in May 2018. The initial consideration for
the acquisition of the B2 Group included a cash element paid in
July 2018 of GBP2.9m.
Sales, marketing and distribution
The Group's planned investments in sales, marketing and
alliances have proceeded well in the first six months of the year.
We have strengthened our central marketing team with an experienced
chief marketing officer who is tasked with building the visibility
of the brand in North America and Europe through a more engaging
digital presence and a compelling thought leadership agenda. We are
working to improve the awareness of our unique technology and our
agile delivery and innovation model with senior executives in our
target financial markets in the expectation that this will enhance
our ability to win new and larger contracts. We have also invested
in local field marketing to specifically target the North America
market opportunity with positive results in terms of pipeline in
this region. Our investment into alliances in 2017 has helped build
a pipeline of larger deals for the remainder of the year, and our
partnership with a global systems integrator was an important
factor in our recent new Tier 1 global bank win against established
suppliers.
We have experienced sales teams in place led by strong local
sales managers in the UK and the US and continue to see a high
win-rate in competitive bids. We were particularly pleased to be
selected by one of world's leading providers of cash management
solutions for Clareti-as-a-Service (CaaS) in a competitive tender
process. The initial project is with one of the customer's European
subsidiaries with the intention that other subsidiaries will adopt
the technology over time. The investment into the B2 Group will
further strengthen our presence in continental Europe which has
seen strong growth in the last 18 months.
Our export sales growth in the three years FY2015 to FY2017 were
an important factor in the Group winning the Queen's Award for
Enterprise in June of this year. This award is a strong recognition
and endorsement of the Group's advanced technology and the work of
its global team.
Customer satisfaction
In the last five years, the Clareti business has brought
approximately 80 new customers into the Group, excluding B2. This
substantial Clareti client base is contributing towards the growing
awareness of Gresham in the market and the Group is focused on
sustaining an excellent reputation for successful projects and
top-class customer support. Our twelve months rolling customer
satisfaction measured after some 6,500 interactions via our support
channels scored at 98%. Our CaaS cloud platform has been operating
with continuous 100% availability for all customers since the very
first cloud customer went live two years ago. The Group continues
to invest in core infrastructure to enable the Clareti business to
scale globally.
In the first six months of the year our services team delivered
successful Clareti 'go-lives' for clients in the US, Canada,
Europe, Asia and Australia. We are now working to enable our
partner community to take on additional implementation work for
clients as the business scales.
Products and innovation
At our Innovation Labs in Bristol, we continue to invest in new
product development as well as enhance our existing offerings to
remain competitive. Our plan is to continuously extend and enhance
capabilities in our core platform so that our portfolio of
applications can take direct advantage of these features. This
keeps our development cost low, time to market is reduced and
applications are more robust. Our use of modern development tools,
microservices and open interfaces (API's), as well as our agile
development processes, which involve close customer collaboration,
fast cycle releases, and integrated testing, are regarded as market
leading practices.
Clareti Transaction Control, our flagship offering, is now seen
as the only modern enterprise-grade platform for the control of
non-standard transaction data in financial markets. In the first
six months of 2018 we have released new functionality which will
enable us to compete more directly with the legacy vendors in their
core cash and securities markets. This will continue to be an
important focus for enhancements in the coming months. In
partnership with an early adopter bank, we have also been
developing capabilities in the regulatory control area, and we are
building on early prototypes of our Clareti Data Accelerator
offering which will lead to a differentiated offering in the "big
data" data quality space.
The B2 Group and cash management solutions
Gresham has a long history of providing solutions to the
corporate and transaction banking space. Our experience as prime
contractor of treasury management and related solutions, and our
own Clareti account receivables management projects, as well as
third party market research, collectively indicate that corporates
are investing to improve the way they manage their cash across
their global business. In July 2018, we completed the acquisition
of the Luxembourg-based B2 Group to take advantage of the
opportunity in this area. B2 Group's bank connectivity technology
and high availability cloud service, along with Gresham's existing
products and customer roadmap, will give us a substantial set of
capabilities and a larger addressable market.
An initial consideration of EUR 3.65 million was paid in July
2018 and there is potential for two further consideration payments
of up to EUR 4.85 million in aggregate, based on the acquired
business growing incremental, profitable, annually recurring
revenues over the next two years. The acquisition adds
approximately EUR 1.4 million of annualised recurring revenues and
is expected to be earnings enhancing in FY 2019.
All B2 Group staff and executives have transitioned into Gresham
and will continue to work together as team, to be known as Gresham
Cash Management Solutions. The response from B2 Group staff,
customers and partners has been overwhelmingly positive. The
business integration plan and the joint sales plan, which were
agreed in parallel with due diligence, are now being executed. We
will take B2 Group's Multi-Bank Integrator product through the
Gresham sales organization in Europe and the US, re-named as
Clareti Multi Bank, and will be seeking cross-sell and up-sell
opportunities. Over time, we expect to have a broader portfolio of
cash management solutions and a common cloud infrastructure across
all Clareti offerings.
Outlook
We have a pipeline of significant opportunities and remain
confident in the full year outlook. July has started positively
with three new Clareti wins, including: a new Clareti Adaptors
annuity subscription sale to a large US community bank via a
channel partner; also in the US, a new CaaS cloud subscription for
CTC with one of the world's largest independent investment
management firms; and, in Europe, a first project with one of the
world's largest energy companies, representing our third CTC
customer in this sector and our first "key customer" in the
industry.
For the remainder of 2018, our focus for new business will
continue to be in Europe and North America, with our Asia Pacific
team focusing on major account management. In Europe we are
aggressively targeting the legacy reconciliation vendor installed
base as well as seeking regulatory driven opportunities with banks
and with their financial markets service providers. B2 has seen
consistently strong annuity growth in Europe since launching their
Multi Bank Integrator product in 2016. We expect B2, now Gresham
Cash Management Solutions, to contribute GBP1.1m of Clareti
revenues to the Group in the second half of the year and will be
leveraging the scale of the wider group to build a robust pipeline
for Clareti Multi Bank in 2019. We will continue to scale up our US
business which represents the single largest global market for our
CTC technology.
We will continue to closely manage our non-Clareti installed
base, and whilst we expect to see a continued decline in our legacy
software fees, we expect this to be broadly offset by an increase
in lower margin sub-contracting revenues on a full year basis. The
Group will continue to manage its cost base carefully with modest
investment in the second half of 2018 focused on revenue generating
functions.
The Gresham team is strongly motivated and aligned around our
plan for the remainder of the year and I am confident we are on a
positive track leveraging the solid foundations we have already
established of an exciting, modern, enterprise financial technology
business.
Ian Manocha
Chief Executive Officer
23 July 2018
Consolidated income statement
Notes 6 months 6 months 12 months
ended ended ended
30 June 30 June 31 December
2018 2017 2017
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
------------------------------------- ----- ---------- ---------- ------------
Revenue 3 9,327 9,774 21,668
Cost of sales (1,417) (1,416) (3,283)
------------------------------------- ----- ---------- ---------- ------------
Gross profit 7,910 8,358 18,385
Adjusted administrative expenses (8,275) (6,916) (14,602)
------------------------------------- ----- ---------- ---------- ------------
Adjusted operating (loss)/profit (365) 1,442 3,783
------------------------------------- ----- ---------- ---------- ------------
Adjusting administrative items:
Exceptional items 5 (195) (108) (90)
Amortisation on acquired intangibles (207) (203) (410)
Share-based payments (76) (119) (239)
------------------------------------- ----- ---------- ---------- ------------
(478) (430) (739)
------------------------------------- ----- ---------- ---------- ------------
Total administrative expenses (8,753) (7,436) (15,341)
------------------------------------- ----- ---------- ---------- ------------
Statutory operating (loss)/profit (843) 1,012 3,044
Share of post-tax profit of
joint venture 38 85 (18)
Finance revenue 14 15 33
Finance costs - - (2)
------------------------------------- ----- ---------- ---------- ------------
(Loss)/profit before taxation (791) 1,112 3,057
Taxation 4 434 378 744
------------------------------------- ----- ---------- ---------- ------------
Attributable to owners of
the Parent (357) 1,490 3,801
------------------------------------- ----- ---------- ---------- ------------
Earnings per share
Statutory
Basic earnings per share -
pence 5 (0.53) 2.22 5.65
Diluted earnings per share
- pence 5 (0.51) 2.15 5.45
--------------------------- -------------------- ---------------- ----------------
Adjusted
Basic earnings per share -
pence 5 0.18 2.86 6.75
Diluted earnings per share
- pence 5 0.17 2.76 6.51
--------------------------- -------------------- ---------------- ----------------
All activities were continuing during the period.
Consolidated statement of comprehensive income
6 months 6 months 12 months
ended ended ended
30 June 30 June 31 December
2018 2017 2017
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
-------------------------------------------- ---------- ---------- ------------
Attributable to the owners of the Parent (357) 1,490 3,801
-------------------------------------------- ---------- ---------- ------------
Other comprehensive (expense)/income
Items that will or may be re-classified
into profit or loss - exchange differences (45) (12) (31)
-------------------------------------------- ---------- ---------- ------------
Total other comprehensive (expense)/income (45) (12) (31)
-------------------------------------------- ---------- ---------- ------------
Total comprehensive (loss)/income for
the period (402) 1,478 3,770
-------------------------------------------- ---------- ---------- ------------
Consolidated statement of financial position
30 June 30 June 31 December
2018 2017 2017
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
------------------------------- ---------- ---------- -----------
Assets
Non-current assets
Property, plant and equipment 493 585 590
Intangible assets 20,834 19,844 20,479
Interest in joint venture 21 85 (18)
Deferred tax assets 2,314 1,508 1,894
-------------------------------- ---------- ---------- -----------
23,662 22,022 22,945
Current assets
Trade and other receivables 3,735 3,789 5,477
Income tax receivable 82 95 109
Other financial assets - bank
deposits - 600 200
Cash and cash equivalents 6,993 7,214 8,280
-------------------------------- ---------- ---------- -----------
10,810 11,698 14,066
Total assets 34,472 33,720 37,011
-------------------------------- ---------- ---------- -----------
Equity and liabilities
Equity attributable to owners
of the Parent
Called up equity share capital 3,380 3,375 3,375
Share premium account 3,632 3,560 3,562
Other reserves 313 313 313
Foreign currency translation
reserve (55) 9 (10)
Retained earnings 17,514 15,844 18,275
Total equity attributable
to owners of the Parent 24,784 23,101 25,515
-------------------------------- ---------- ---------- -----------
Non-current liabilities
Deferred income 471 287 592
Provisions 49 13 18
Deferred tax liability 545 628 596
Contingent consideration - - -
1,065 928 1,206
------------------------------- ---------- ---------- -----------
Current liabilities
Trade and other payables 8,576 8,493 9,820
Income tax payable 2 - 47
Provisions 45 62 67
Contingent consideration - 1,136 356
8,623 9,691 10,290
------------------------------- ---------- ---------- -----------
Total liabilities 9,688 10,619 11,496
-------------------------------- ---------- ---------- -----------
Total equity and liabilities 34,472 33,720 37,011
-------------------------------- ---------- ---------- -----------
Consolidated statement of changes in equity
Share Share Other Currency Retained Total
capital premium reserves translation earnings
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------------- -------- -------- --------- ------------ --------- -------
At 1 January 2017 3,340 3,242 313 21 14,235 21,151
Attributable profit
for the period - - - - 1,490 1,490
Other comprehensive
expense - - - (12) - (12)
---------------------------- -------- -------- --------- ------------ --------- -------
Total comprehensive
income - - - (12) 1,490 1,478
Exercise of share
options 35 318 - - - 353
Share-based payment
expense - - - - 119 119
At 30 June 2017 3,375 3,560 313 9 15,844 23,101
---------------------------- -------- -------- --------- ------------ --------- -------
Attributable profit
for the period - - - - 2,311 2,311
Other comprehensive
income - - - (19) - (19)
---------------------------- -------- -------- --------- ------------ --------- -------
Total comprehensive
income - - - (19) 2,311 2,292
Exercise of share
options - 2 - - - 2
Share-based payment
expense - - - - 120 120
At 31 December 2017
(as reported) 3,375 3,562 313 (10) 18,275 25,515
---------------------------- -------- -------- --------- ------------ --------- -------
Adjustment arising
from change in accounting
standard IFRS 15 - - - - (142) (142)
At 31 December 2017
(as restated) 3,375 3,562 313 (10) 18,133 25,373
---------------------------- -------- -------- --------- ------------ --------- -------
Attributable (loss)/profit
for the period - - - - (357) (357)
Other comprehensive
(loss)/income - - - (45) - (45)
---------------------------- -------- -------- --------- ------------ --------- -------
Total comprehensive
(loss)/income - - - (45) (357) (402)
Exercise of share
options 5 70 - - - 75
Share-based payment
expense - - - - 76 76
Dividend - - - - (338) (338)
At 30 June 2018 3,380 3,632 313 (55) 17,514 24,784
---------------------------- -------- -------- --------- ------------ --------- -------
Consolidated statement of cashflows
6 months 6 months 12 months
ended ended ended
30 June 30 June 31 December
2018 2017 2017
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
--------------------------------------- ---------- ---------- ------------
Cashflows from operating activities
(Loss)/profit after taxation (357) 1,490 3,801
Depreciation, amortisation and
impairment 1,010 879 1,855
Share-based payment expense 76 119 239
Share of post-tax profit from joint
venture (38) (85) 18
Decrease/(increase) in trade and
other receivables 1,558 946 (781)
(Decrease)/increase in trade and
other payables (1,278) (404) 495
Movement in deferred tax provisions (424) (448) -
Fair value adjustment on deferred
contingent consideration - - (69)
Movement in provisions (1) 11 20
Loss on disposal of property, plant - - -
and equipment
Net finance income (14) (15) (31)
--------------------------------------- ---------- ---------- ------------
Cash inflow from operations 532 2,493 5,547
Net income taxes (paid)/received (56) (273) (219)
--------------------------------------- ---------- ---------- ------------
Net cash inflow from operating
activities 476 2,220 5,256
Cash flows from investing activities
Interest received 14 15 31
Decrease/(increase) in financial
assets-bank deposits 200 (600) (200)
Purchase of property, plant and
equipment (67) (99) (280)
Disposal of property, plant and - - -
equipment
Net payments to acquire subsidiary
undertaking (356) - (711)
Payments to acquire intangible
fixed assets (1,219) (1,752) (3,199)
--------------------------------------- ---------- ---------- ------------
Net cash used in investing activities (1,428) (2,436) (4,359)
Cash flows from financing activities
Interest paid - - -
Dividend paid (338) - -
Share issue proceeds 76 238 239
Share issue transaction costs - - (7)
--------------------------------------- ---------- ---------- ------------
Net cash generated from financing
activities (262) 238 232
Net increase/(decrease) in cash
and cash equivalents (1,214) 22 1,129
Cash and cash equivalents at beginning
of period 8,280 7,206 7,206
Exchange adjustments (73) (14) (55)
Cash and cash equivalents at end
of period 6,993 7,214 8,280
--------------------------------------- ---------- ---------- ------------
Notes to the interim report
1. Basis of preparation
Gresham Technologies plc (LSE: "GHT", "Gresham" or the "Company"
or the "Group" or the "Parent") is a limited liability company and
is listed on the London Stock Exchange. The Company's registered
address is Aldermary House, 10 - 15 Queen Street, London, EC4N 1TX
and the Company's registration number is 1072032.
These condensed interim financial statements are unaudited, have
not been reviewed by the Group's auditors, and do not constitute
statutory accounts within the meaning of the Companies Act
2006.
These condensed interim financial statements have been prepared
on a going concern basis and in accordance with IAS 34 'Interim
Financial Reporting', the Disclosure and Transparency Rules and the
Listing Rules of the Financial Conduct Authority, and were approved
on behalf of the Board by the Chief Executive Officer Ian Manocha
and Chief Financial Officer Tom Mullan on 23 July 2018.
The accounting policies and methods of computation applied in
these condensed interim financial statements are consistent with
those applied in the Group's most recent annual financial
statements for the year ended 31 December 2017.
The financial statements for the year ended 31 December 2017,
which were prepared in accordance with International Financial
Reporting Standards, as endorsed by the European Union ('IFRS'),
and with those parts of the Companies Act 2006 applicable to
companies reporting under IFRS, have been delivered to the
Registrar of Companies. The auditors' opinion on those financial
statements was unqualified and did not contain a statement made
under s498(2) or (3) of the Companies Act 2006.
Copies of these condensed interim financial statements and the
Group's most recent annual financial statements are available from
the Group's website www.greshamtech.com or by writing to the
Company Secretary at the Company's registered office.
2. Changes in accounting policy
IFRS 15 Revenue from Contracts with Customers (effective for the
Group's first IFRS financial statements for the period beginning on
1 January 2018) replaces IAS 18 'Revenue', IAS 11 'Construction
Contracts' and related interpretations. The standard introduces a
single, five-step revenue recognition model that is based upon the
principle that revenue is recognised at the point that control of
goods or services is transferred to the customer. The standard also
updates revenue disclosure requirements.
The Directors have specifically considered the adoption of IFRS
15 on the revenue recognition of the Group's on-premise software
subscription contracts, which combine the delivery of software, and
support & maintenance services. Under our current policies, we
recognise the entire fee rateably over the subscription term.
As part of our review of our future IFRS15 accounting policies,
we have considered whether such contracts represent a right to use
the software at the point of initial delivery (with license revenue
recognisable at that point), or access the software over the
contracts applicable term (with license revenue recognised pro-rata
over the term), irrespective of associated cashflows.
We have concluded these subscription contracts do represent
access to the software over the contract term as the fee for the
delivery of software and support & maintenance services is
fully combined and prepaid without distinction. We have therefore
concluded the fee for the combined delivery of software and support
& maintenance services should continue to be recognised
rateably over the subscription term under IFRS 15.
The adoption of IFRS 9 and IFRS 15 resulted in no material
impact on the Group's financial statements in the period as the
Group historically applied similar accounting treatment for a
number of the standards, with respect to IFRS 9 the Group have
minimal financial instruments that would be impacted, and as such
there is no restatement of 2017 results.
The effective dates stated here are those given in the original
IASB/IFRIC standards and interpretations. As the Group prepares its
financial statements in accordance with IFRSs as adopted by the
European Union, the application of new standards and
interpretations will be subject to their having been endorsed for
use in the EU via the EU endorsement mechanism. In the majority of
cases this will result in an effective date consistent with that
given in the original standard or interpretation, but the need for
endorsement restricts the Group's discretion to early adopt
standards.
3. Segmental information
The segmental disclosures reflect the analysis presented on a
monthly basis to the chief operating decision maker of the
business, the Chief Executive and the Board of Directors.
In addition, 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. These solutions include: Clareti Transaction Control;
Clareti Accounts Receivable Management; Clareti Adaptors and
Clareti Loan Control.
-- Other Solutions - supply of a range of well-established
solutions to enterprise-level customers in a variety of end
markets, which include third party software reselling,
sub-contractor services, and mainframe and tape storage
software.
Transfer prices between segments are set on an arm's length
basis in a manner similar to transactions with third parties.
Segment revenue, segment expense and segment result include
transfers between business segments. Those transfers are eliminated
on consolidation.
6 months ended 30 June 2018 (unaudited) - Segmental
Information
Other
------------
Adjustments,
Clareti Contracting central
Solutions Solutions Services and eliminations Consolidated
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------------------- ----------- ------------ ------------ ------------------ -------------
Revenue
External customer 5,423 2,015 1,889 - 9,327
Inter-segment - - - - -
----------------------------- ----------- ------------ ------------ ------------------ ---------------
Total revenue 5,423 2,015 1,889 - 9,327
----------------------------- ----------- ------------ ------------ ------------------ ---------------
- -
Cost of sales (183) (384) (850) - (1,417)
----------------------------- -----------
Gross profit 5,240 1,631 1,039 - 7,910
----------------------------- ----------- ------------ ------------ ------------------ ---------------
97% 81% 55% - 85%
Contracting administrative
expenses - - (791) - (791)
Gross profit after
contracting fully
costed 5,240 1,631 248 - 7,119
97% 81% 13% - 76%
Adjusted administrative
expenses - - - (7,484) (7,484)
----------------------------- ----------- ------------ ------------ ------------------ ---------------
Adjusted operating
(loss)/profit 5,240 1,631 248 (7,484) (365)
Adjusting items:
Exceptional costs (195) (195)
Amortisation of acquired
intangibles (207) (207)
Share-based payments (76) (76)
----------------------------- ----------- ------------ ------------ ------------------ ---------------
Adjusting administrative
expenses (478) (478)
Statutory operating
(loss)/profit (7,962) (843)
Share of post-tax
profit from joint
venture 38
Interest revenue 14
Interest expense -
----------------------------- -----------
(Loss)/profit before
taxation (791)
Taxation 434
----------------------------- ----------- ------------ ------------ ------------------ ---------------
(Loss)/profit after
taxation (357)
----------------------------- ----------- ------------ ------------ ------------------ ---------------
Segment assets 34,472
----------------------------- ----------- ------------ ------------ ------------------ ---------------
Segment liabilities (9,688)
----------------------------- ----------- ------------ ------------ ------------------ ---------------
6 months ended 30 June 2017 (unaudited) - Segmental
Information
Other
----------------------
Adjustments,
Clareti Contracting central
Solutions Solutions Services and eliminations Consolidated
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------- ---------- --------- ----------- ----------------- ------------
Revenue
External customer 4,742 2,769 2,263 - 9,774
Inter-segment - - - - -
---------------------------- ---------- --------- ----------- ----------------- ------------
Total revenue 4,742 2,769 2,263 - 9,774
---------------------------- ---------- --------- ----------- ----------------- ------------
- -
Cost of sales (104) (316) (996) - (1,416)
---------------------------- ----------
Gross profit 4,638 2,453 1,267 - 8,358
---------------------------- ---------- --------- ----------- ----------------- ------------
98% 89% 56% - 86%
Contracting administrative
expenses - - (921) - (921)
Gross profit after
contracting fully costed 4,638 2,453 346 - 7,437
98% 89% 15% - 76%
Adjusted administrative
expenses - - - (5,995) (5,995)
---------------------------- ---------- --------- ----------- ----------------- ------------
Adjusted operating
profit 4,638 2,453 346 (5,995) 1,442
Adjusting items:
Exceptional costs (108) (108)
Amortisation of acquired
intangibles (203) (203)
Share-based payments (119) (119)
---------------------------- ---------- --------- ----------- ----------------- ------------
Adjusting administrative
expenses (430) (430)
Statutory operating
profit (6,425) 1,012
Share of post-tax profit
from joint venture 85
Interest revenue 15
Interest expense -
---------------------------- ----------
Profit before taxation 1,112
Taxation 378
---------------------------- ---------- --------- ----------- ----------------- ------------
Profit after taxation 1,490
---------------------------- ---------- --------- ----------- ----------------- ------------
Segment assets 33,720
---------------------------- ---------- --------- ----------- ----------------- ------------
Segment liabilities (10,619)
---------------------------- ---------- --------- ----------- ----------------- ------------
4. Taxation
6 months 6 months 12 months
ended ended ended
30 June 30 June 31 December
2018 2017 2017
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
------------------------------------------ ---------- ---------- ------------
Current income tax
Overseas tax charge/(credit) - adjustment
to previous periods 29 36 53
Overseas tax charge - current period 8 6 50
UK corporation tax charge - adjustment
to previous periods - - (20)
Total current income tax 37 42 83
Deferred income tax
(Recognition)/reversal of deferred
tax asset (480) (454) (827)
Tax rate change adjustments 9 34 -
------------------------------------------ ---------- ---------- ------------
Total deferred income tax (471) (420) (827)
Total credit in the income statement (434) (378) (744)
------------------------------------------ ---------- ---------- ------------
5. Earnings per ordinary share
Basic earnings per share amounts are calculated by dividing net
profit for the period attributable to ordinary equity holders of
the Parent by the weighted average number of ordinary shares
outstanding during the period.
Diluted earnings per share amounts are calculated by dividing
the net profit attributable to ordinary equity holders of the
Parent by the weighted average number of ordinary shares
outstanding during the period plus the weighted average number of
ordinary shares that would be issued on the conversion of all the
dilutive potential ordinary shares into ordinary shares.
The following reflects the earnings and share data used in the
basic and diluted earnings per share computations:
6 months 6 months 12 months
ended ended ended
30 June 30 June 31 December
2018 2017 2017
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
----------------------------------- ---------- ---------- -------------
Basic weighted average number
of shares 67,541,108 67,061,216 67,276,136
Dilutive potential ordinary
shares
Employee share options -
weighted 2,927,206 2,379,073 2,488,515
Diluted weighted average
number of shares 70,468,314 69,440,289 69,764,651
------------------------------------ ---------- ---------- -------------
6 months 6 months 12 months
ended ended ended
30 June 30 June 31 December
2018 2017 2017
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
------------------------------------- ---------- ---------- ------------
Adjusted earnings attributable to
owners of the Parent 121 1,920 4,540
Adjusting items:
Exceptional items (195) (108) (90)
Amortisation of acquired intangibles (207) (203) (410)
Share-based payments (76) (119) (239)
Statutory earnings attributable
to owners of the Parent (357) 1,490 3,801
-------------------------------------- ---------- ---------- ------------
Earnings per share
Statutory
Basic earnings per share - pence (0.53) 2.22 5.65
Diluted earnings per share - pence (0.51) 2.15 5.45
-------------------------------------- ---------- ---------- ------------
Adjusted
Basic earnings per share - pence 0.18 2.86 6.75
Diluted earnings per share - pence 0.17 2.76 6.51
-------------------------------------- ---------- ---------- ------------
There have been no other transactions involving ordinary shares
or potential ordinary shares between the reporting date and the
date of completion of this interim statement.
Exceptional items in the period largely relate to advisory costs
for the acquisition of B2 Group S.a.R.L which was completed 4 July
2018. Exceptional items in the prior year included integration
costs from the acquisition of C24 Technologies Limited and
associated fair value adjustment in respect of the final
consideration paid, recruitment costs for the new CFO and joint
venture and all staff incentive establishment fees.
6. Dividends paid and proposed
Amounts recognised as distributions to equity holders during the
period:
6 months 6 months 12 months
ended ended ended
30 June 30 June 31 December
2018 2017 2017
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
------------------------------------ ---------- ---------- -------------
Final dividend
Final dividend for the year ended
31 December 2017 of 0.50 pence per
share 338 - -
338 - -
------------------------------------ ---------- ---------- -------------
The final dividend for the year ended 31 December 2017 was
approved at the Company Annual General Meeting on 10 May 2018 and
paid on 21 May 2018.
7. Principal risks and uncertainties
The principal risks and uncertainties facing the Group are
disclosed in the Group's financial statements for the year ended 31
December 2017, available from www.greshamtech.com and remain
unchanged.
8. Adjusted EBITDA reconciliation
Adjusted EBITDA for the Group's operations is calculated as
EBITDA excluding exceptional charges and share-based payments,
reconciled as follows:
6 months 6 months 12 months
ended ended ended
30 June 30 June 31 December
2018 2017 2017
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
------------------------------ ----------------- ---------- ------------
(Loss)/profit before tax (791) 1,112 3,057
------------------------------ ----------------- ---------- ------------
Adjusting items:
Exceptional items 195 108 90
Amortisation and depreciation 975 828 1,754
Loss on disposal - - -
Share-based payments 76 119 239
Interest received (14) (15) (31)
------------------------------ ----------------- ---------- ------------
Adjusted EBITDA 441 2,152 5,109
------------------------------ ----------------- ---------- ------------
9. Statement of directors' responsibilities
The Directors are responsible for preparing the half-yearly
financial report, in accordance with applicable law and
regulations.
The Directors confirm, to the best of their knowledge, that this
condensed set of financial statements:
-- has been prepared in accordance with IAS 34 as adopted by the European Union; and
-- includes a fair review of the information required by Rules
4.2.7 and 4.2.8 of the Disclosure and Transparency Rules of the
United Kingdom Financial Conduct Authority (as detailed in the
Chief Executive review).
The principal risks and uncertainties facing the Group for the
period ending 30 June 2018 and anticipated for the remainder of the
year ended 31 December 2018 remain consistent with those disclosed
in the Group's financial statements for the year ended 31 December
2017, which are available from www.greshamtech.com.
10. Related party transactions
No related party transactions have taken place during the first
six months of the year that have materially affected the financial
position or performance of the Company.
There have been no changes in the related party transactions
described in the last annual report that could have a material
effect on the financial position or performance of the Company in
the first six months of the current financial year.
11. Post balance sheet events
On 4 July 2018 Gresham Technologies Plc acquired all of the
issued shares in B2 Group S.a.R.L, specialists in bank-to-corporate
integration and cash management software with a focus on the
growing multi-bank solutions market. B2 Group's core product is an
innovative, proprietary, cloud-based software platform that
connects corporates and asset managers with their bank partners. It
provides organisations with real-time visibility of their cash
position, improved control of outgoing payments and automated
processing of incoming statements. The acquisition was made for
initial consideration of EUR 3.65m, comprising cash of EUR 3.35m
and newly issued shares in Gresham Technologies Plc to the value of
EUR 0.3m. Deferred consideration dependent upon performance of up
to EUR 4.85m may be payable over the two year period subsequent to
the acquisition, therefore the total potential consideration is up
to EUR 8.50m. The financial effects of the above transaction have
not been brought to account at 30 June 2018. The operating results
and assets and liabilities of the company will be brought to
account from 4 July 2018.
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.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR PGUAUMUPRGBW
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