29 April 2024
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 2023
("FY23").
Financial Highlights(1)
·
|
Forward-looking Clareti Annualised
Recurring Revenue ("ARR") up 5% to £29.5m (2022: £28.1m) as at 31
December 2023.
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·
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Group revenues up 2% to £49.0m
(2022: £48.2m).
|
·
|
Clareti revenues up 10% to £36.3m
(2022: £32.9m).
|
·
|
Clareti recurring revenues up 10%
to £29.6m (2022: £26.9m).
|
·
|
Adjusted EBITDA(2) up
9% to £10.7m (2022: £9.8m).
|
·
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Cash adjusted EBITDA(3)
of £4.7m, an increase of 21% on the prior year (2022:
£3.9m).
|
·
|
Profit before tax as reported up
£1.6m to £3.1m (2022: £1.9m), including expenses adjusted in EBITDA
metrics above of £2.4m (2022: £4.4m).
|
·
|
Adjusted diluted earnings per
share(4) at 6.3 pence (2022: 7.0
pence).
|
·
|
Cash at 31 December 2023 of £4.8m
and no debt after payment of £4.0m in contingent consideration for
previous acquisitions (2022: £6.3m and no
debt)(5).
|
·
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Interim dividend declared at 0.75
pence per share (2022: £nil).
|
Operational Highlights
·
|
Standalone Clareti business
continuing to grow after becoming cash profitable for the first
time in 2022, generating cash EBITDA(3) of £1.6m (2022:
£0.6m), as growth, scale and operating leverage begin to take
effect.
|
·
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Twelve new-name wins, including
several global Tier 1 financial institutions, bringing total direct
customers to 270 across 30 countries.
|
·
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Electra business integration
completed and delivering initial cross-sells and operating
synergies.
|
·
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Strong growth in Cloud and other
recurring revenues.
|
·
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Net ARR retention for the year of
105% (2022: 102%), highlighting growth within existing customer
base.
|
·
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Continued growth and development
of key accounts.
|
·
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Excellent economic returns being
realised by Tier 1 firms replacing legacy reconciliation software
with Control.
|
·
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Digital corporate banking product
developed with Australia and New Zealand Banking Group deployed
into production use.
|
Outlook
·
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Larger, more resilient Group, with
more than £38m of FY24 revenues under contract upon entering the
year, providing significant visibility and a robust platform to
execute growth strategy.
|
·
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Management confident about the
ongoing execution of its strategy for the Group and the potential
for further value creation over the longer term.
|
Recommended Offer
·
|
On 9 April 2024, the Boards of
Gresham and Alliance Bidco Ltd ("Bidco") announced the recommended
acquisition of Gresham by Bidco at a price of 163 pence per Gresham
share, plus the interim dividend of 0.75 pence per Gresham share
declared today. The transaction is conditional on, amongst other
things, the approval of Gresham shareholders by the requisite
majorities of resolutions to be proposed at a Court Meeting and a
General Meeting, both convened for 16 May 2024. The scheme document
(Scheme Document) and other documentation in this regard were
published on 18 April 2024 and are available on the Investor Hub on
the Gresham website.
|
(1) 2022 financials have been restated. Refer to Financial Review
and to note 3 of the Group financial statements for full
details.
(2) Adjusted EBITDA refers to earnings before interest, tax,
depreciation and amortisation, adjusted for one-off exceptional
charges, share-based payments and foreign exchange differences on
intercompany balances. (see note 5 of the Group financial
statements).
(3) Adjusted EBITDA less capitalised development spend and any
IFRS16 lease-related cash payments.
(4) Diluted earnings per share, adjusted to add back share-based
payment charges, exceptional items, amortisation from acquired
intangible assets and foreign exchange differences on intercompany
balances.
(5) Excludes any IFRS16 lease-related payables.
(6) Percentage increases stated above are based on rounding to
the nearest £'000 as disclosed at detailed level within this
report.
Ian Manocha, CEO, commented:
"We are pleased to report another year of profitable growth
and progress towards our goal of creating a leading global
financial technology company. In a challenging market, most
especially in the first half of 2023, our talented team delivered
strategic new wins, improved on customer ARR net retention, and
further lifted margins in the Clareti business and across the Group
as a whole. The improved resilience enabled the Group to further
reduce its dependency on legacy revenues, stepping away from its
low margin sub-contracting business at the end of the
year.
The Group has now completed its transformation into a modern
subscription software and cloud services business. Whilst markets
remain difficult, with elongated sales cycles, we have made a
positive start to 2024."
Documents
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 at https://www.greshamtech.com/invest-in-us.
The Annual Financial Report 2023
will be made available on the Company's website at
https://www.greshamtech.com/invest-in-us
and sent to shareholders in due
course.
Enquiries
Gresham Technologies plc
Ian Manocha / Tom
Mullan
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+44 (0) 207 653 0200
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Singer Capital Markets (Financial Adviser and
Broker)
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+44 (0) 207 496 3000
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Shaun Dobson / Tom Salvesen / Jen
Boorer
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Alma Strategic Communications
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+44 (0) 203 405 0205
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Josh Royston / Hilary Buchanan /
Will Ellis Hancock
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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.
Rule 26.1 Disclosure
In accordance with Rule 26.1 of
the City Code on Takeovers and Mergers, a copy of this announcement
will be available on the investor section of the Company's website
at https://www.greshamtech.com/invest-in-us
by no later than 12 noon (London time) on the
business day immediately following the date of this
announcement. The content of the website referred to in this
announcement is not incorporated into and does not form part of
this announcement.
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 2023 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
2023.
The financial information
contained herein for the year ended 31 December 2023 and the year
ended 31 December 2022 does not constitute the Company's statutory
accounts for those years. The statutory accounts for the year ended
31 December 2023 will be delivered to the Registrar of Companies
following the Company's Annual General Meeting in due
course.
The auditor's reports on the
accounts for the years ending 31 December 2023 and 31 December 2022
were unqualified, did not draw attention to any matters by way of
emphasis, and did not contain a statement under 498(2) or 498(3) of
the Companies Act 2006.
CHAIR'S STATEMENT
Dear shareholder
Overview
I am pleased to present my first
annual results as Chair of Gresham, having joined the Group in
October. At the time of my appointment, the Group was making good
progress against its strategic objectives, and I am delighted to
report that this has continued with the Group closing the year on a
high. Alongside eight new customer wins and meaningful strategic
progress, whilst navigating through a challenging market
environment, the Group delivered a robust financial performance
with increased recurring revenues, enhanced profitability and cash
ahead of expectations.
A major development in the year
was the accelerated transition of the Group to a pure-play SaaS
business, a transformation the Board has led over the last decade,
utilising the Group's cashflows to invest in its next generation
Clareti platform. This journey culminated with a decision in the
latter part of FY23 to discontinue the Group's legacy, non-core IT
sub-contracting business, enabling the Group to intensify focus on
the high-margin Clareti opportunity.
Over those ten years we have
invested to evolve towards an own-IP pure-play software business
model, characterised by higher margins, sustained growth,
multi-year recurring revenue contracts and significantly reduced
customer concentration, enhancing our position and resilience in
the market.
Against the backdrop of a
turbulent financial services and banking environment in the first
half of 2023, this has been a busy and productive year for Gresham
and is testament to the quality of our team. We remain focused on
building a supportive and rewarding environment, ensuring we
maintain our excellent culture as we scale. As such, we were
pleased to see our Employee Engagement Survey producing an overall
engagement score of 76% (2022: 82%), with our employee turnover
rate of 15.3% (2022: 16.3%).
First impressions
In taking up the position as
Chair, there were a number of qualities that attracted me to the
Group.
The first thing was the scale of
the opportunity. The highly complex data landscape in financial
markets means that generic, legacy IT systems that dominate the
sector are not fit for purpose. This is exacerbated by accelerating
growth in data volumes, predicted to increase 40% by
2025[1] in the
financial services sector, along with changing regulation. The
scope to drive efficiencies, improved resilience, adherence to
compliance and improved decision-making through the application of
automation and modern technology is substantial, and I believe we
are only seeing the start of this journey in our target
markets.
Furthermore, I have been impressed
by the professionalism and dedication of our team. Our people
exhibit a depth of expertise and a commitment to serving our
clients and developing software that can genuinely make a
difference to our clients' operations. The quality and reliability
of our solutions and services has consistently been reflected in
the year-on-year growth in our client numbers and ARR.
Finally, the evolution of the
Group's financial profile and business model, following prior years
of investment and M&A, mean we have the potential to realise
the benefits of operational leverage.
Operating the business in a sustainable way
The Board remains focused on
advancing the Group's Environmental, Social and Governance ("ESG")
agenda. This includes managing our impact on the environment;
our social responsibilities to our people and our communities;
improving outcomes for our customers; having consideration for our
suppliers; and operating as an ethical business.
To further our support of the Task
Force on Climate-related Financial Disclosures ("TCFD"), we created
a Sustainability Committee, and conducted our first climate-related
scenario analysis.
Dividend
Having considered the Group's
financial performance for the year, together with the cash within
the business and capital allocation priorities, and in light of the
current offer for Gresham mentioned below, the Board is declaring
an interim dividend of 0.75 pence per share (FY22: £nil) instead of
a final dividend (FY22: 0.75 pence). It is intended to pay the
interim dividend on 10 June 2024 to all shareholders on the
register at close of business on 10 May 2024. The ex-dividend date
will be 9 May 2024.
Outlook
We closed the financial year with
good momentum, new customer wins adding to the Group's base of
recurring revenues, and an improved pipeline. Despite a challenging
macro environment, trading is in line with the Board's
expectations.
We have a substantial opportunity
to expand within our 270 clients, the market drivers for new
companies to engage with us have never been more acute and the
recent launch of Floe, the Group's smart bank account platform,
highlights the new ideas and IP that sits within Gresham
today.
On 9 April 2024, the Boards of
Gresham and Alliance Bidco Ltd ("Bidco") announced the recommended
acquisition of Gresham by Bidco at a price of 163 pence per Gresham
share, plus the interim dividend of 0.75 pence per Gresham share
declared today.
The transaction is conditional on,
amongst other things, the approval of Gresham shareholders by the
requisite majorities of resolutions to be proposed at a Court
Meeting and a General Meeting, both convened for 16 May 2024.
The scheme document (Scheme Document) and other documentation in
this regard were published on 18 April 2024 and are available on
the Investor Hub on the Gresham website.
Richard Last
Non-Executive Chair
29 April 2024
CEO'S STATEMENT
Dear shareholder
Overview: significant milestone in our strategic
journey
In 2023, Gresham achieved key
milestones in its journey towards becoming a global leader in
mission-critical data control and automation solutions for
financial services. As a result of our strategic acquisition
of Electra in the US in 2021 and subsequent efforts in defining our
integrated technology roadmap, and executing on our sales plan and
global marketing strategies, we have extended our position in the
market.
This year marked an acceleration
in this journey, with nearly 300 organisations globally trusting
our solutions to drive their operations forward and our commitment
to innovation evidenced by the successful launch of Floe, our new
innovative banking platform. With our extended international
reach and a firm foothold across banking, capital markets,
insurance, and energy trading sectors, we are well positioned for
continued growth and success.
As we reflect on our achievements,
a number of contract wins helped validate our market
standing. This included a Clareti contract win with a major
US investment manager where our cloud solution is helping to
automate and reduce costs in its operations. We also welcomed
two new Tier 1 banking customers later in the year who are using
our Control solutions across their business
operations.
Our robust financial performance
during a year of dramatic events in capital markets underscores our
resilience, with Clareti Annualised Recurring Revenue reaching
£29.5 million (up 5% on FY22) or £30.4 million on a constant
currency basis (up 8% on FY22) by year-end. With EBITDA
reaching £10.7 million and healthy cash reserves exceeding our
expectations at £4.8 million, we started the new year with
confidence and determination to drive further innovation and value
for our clients and stakeholders.
Market: trends of digital transformation, regulation and AI
are accelerating
2023 has been another challenging
year for financial markets and the wider finance sector. With
continued concerns over banking liquidity at the start of the year,
the broader economic and geo-political challenges as well as the
mixed benefits throughout the year of higher interest rates on
Banks and Asset Managers, it has been a difficult market for
organisations to navigate. More broadly, however, several asset
classes performed much better than expected in the year which
together with an expectation that monetary policy will normalise
through 2024 should support increasing confidence for consumers,
corporates and therefore our target clients. Importantly, all
the drivers that create a need for banks, fund managers and other
financial institutions to engage with us are key boardroom agenda
items in both better and tougher years.
Continuing pace of regulatory changes
The regulatory landscape does not
stand still, and the last year has only reinforced the need for
intra-day monitoring and rule-based reporting. Governments
have the challenge of regulating traditional banks and engaging
with emerging technologies, particularly in areas like fintech,
digital payments, and cryptocurrencies. In Europe the new
EMIR Refit reporting rules which go live during 2024 have focused
attention on more accurate data for regulatory reporting. In
the US, there is an ambitious agenda of change planned in the
coming year, including significant proposed changes to capital,
resolution planning, consumer compliance, and supervision, among
many others. The move to T+1 settlement comes into effect in
2024 in the US, representing a substantial shift in the industry,
with Europe and the UK currently debating the switch to a T+1
environment. For banks, these changes will further
necessitate building and maintaining effective governance, risk
management, and control frameworks, intra-day processing and
particularly how they interact with consumers.
Innovation in financial services
Technology-led product and service
innovation continues to have a transformative impact on financial
services with generative AI, open data, APIs and embedded finance,
the digitisation of money, digital identity and concerns over
cyber-security all likely to grow further in 2024.
The interest and adoption of
blockchain technology, cryptocurrencies and other digital assets
have been growing. Several US asset managers are planning to
launch exchange traded funds ("ETFs") with leveraged bitcoin
exposure and expand into bitcoin-based options and other
cryptocurrencies after SEC approval. More broadly, financial
institutions continue to explore how to integrate blockchain for
secure and transparent transactions within their systems and
specifically how they can reconcile and report transactions for
digital asset classes. This is a good example of where it
becomes harder for banks to stretch existing legacy IT systems and
we are seeing some banking clients that have implemented our
systems over the last five years are returning in a second wave of
investment to remain competitive and compliant.
Controlling Artificial Intelligence and Machine Learning in
the financial services sector
The use of artificial intelligence
(AI) and machine learning (ML) in the financial sector is
increasing. These technologies have been deployed for a while
for fraud detection, marketing and customer service and are
becoming increasingly prevalent as applications are found across
the entirety of a bank's internal and external operations.
The priority for boards is to ensure automation tools, especially
those which are AI driven, are used appropriately and the outputs
and decisions taken are compliant, transparent, optimal and
explainable. AI has always been a key component of our
technology and roadmap but the rapid advances in the potential of
the technology are providing us with a range of options to both
improve our products, streamline our development cycles, and
operate more efficiently as a business.
Digital transformation
Fintech companies continue to
challenge traditional banking models, and established financial
institutions continually need to adapt, compete and adopt digital
technologies to improve efficiency and enhance customer
experiences. This includes investing in cloud computing,
APIs, mobile applications, and other digital technologies that
enable banks to deliver products and services to their customers in
a fast, efficient, and seamless manner. This remains the
over-arching main driver of our new business
discussions.
Clareti a leading solution in the sector
Our conversations with banks,
asset managers and a range of institutions encompass all these
challenges. Our Data and Connect solutions provide a
comprehensive suite for seamless integration into global financial
systems, supporting third party data access and lowering
integration risks, costs, and saving time. The Data service
offers a cloud-based aggregation platform collecting data from
2,500 sources, processing 14.5 billion records annually, and
serving close to 300 clients. The goal is to become a leading
independent provider of bank and custodian account data.
Meanwhile, Connect solutions enable interaction with bank partners
for payments and statements, streamline trading processes, ensuring
regulatory compliance, and enhancing real-time data flows through a
cloud platform.
Clareti is therefore a clear
choice in supporting many companies in delivering optimised
business processes, enhanced data accuracy, all while ensuring
compliance with regulatory frameworks. Most importantly, our
software and managed services enables customers to prioritise and
focus on improving their own client service levels and
propositions. This is why we grow our client numbers
year-on-year and why many of our existing clients return each year
to expand and upgrade their systems.
Client wins with major banks and buy-side
firms
A good example of Clareti in
action was our major win during the year with a major player in the
US investment management industry. This contract was
particularly pleasing because of the size and importance of the
client but it also highlighted the end-to-end service and
transformation we can deliver.
The firm, which offers active
equity and fixed-income solutions to institutional and private
clients, selected us to help automate and reduce costs in its
investment operations with a cloud solution covering data
collection from custodians and brokers, data aggregation,
reconciliation against internal books and records, and exception
management processes. Following an extensive evaluation of
market options, the firm selected Control for Investment Management
delivered as a service in the Clareti Cloud.
The contract includes minimum
subscription fees of $240k per annum over an initial five-year
committed term, with potential for incremental subscription fees
through optimal managed services and usage expansion and additional
service income.
The Group also secured a number of
wins to close the year. In December, contracts for initial
deployments with two new Control customers were signed including a
Tier 1 global investment bank and one of the world's largest
sovereign wealth funds. In addition, an agreement was reached with
two recently merged tier one bank customers for the adoption of
Control as standard across the combined business operations,
providing a high level of certainty over existing recurring
revenues.
Innovation: Floe - our next generation bank account
platform
It is that focus on the end
banking customer that has driven one of our most exciting
innovation programmes over the last few years. In Q3 2023
after nearly four years of development funded by our partner, ANZ
Bank, we launched our next generation banking platform,
Floe.
The partnership, first announced
in September 2019, has focused on developing next generation
solutions for digital corporate banking and particularly targeting
corporate cash management workflows and embedded bank account
solutions. We have made remarkable progress over the past
three and a half years and our collaboration with ANZ has been
transformative in terms of the product and go-to-market plans we
have today. From 2020 to 2021 we engaged in intensive design,
development and deployment phases, culminating in early releases of
our product. Through 2022 rigorous testing procedures led to
the realisation of a product-grade solution, now actively deployed
with ANZ Bank. As we enter the next phase, our focus now
shifts towards monetisation.
At the core of Floe's mission lies
our commitment to facilitating faster, more flexible, and
frictionless corporate banking experiences. Floe is a cloud
native, modular and configurable application that can build on
existing legacy systems to provide a modern, real-time, digital
banking platform. Future solutions included embedded bank
accounts, in-house banking, and banking-as-a-service offerings, all
enabled with a modern API centric and cloud-native
architecture.
The cloud design makes it flexible
for different banking environments, it is highly scalable and
secure and is based on industry standards for communication, making
it easy to connect to other systems, and therefore offer new
services quickly.
We believe our target market
encompasses approximately 250 to 300 middle-sized transaction banks
globally, with a focus on those seeking innovative solutions
without the need for extensive in-house development or core system
replacements.
Financially, we expect scaling
Floe to be broadly self-funding in the near term. Beyond that
we believe Floe has the potential to extend our strategic
importance in our target markets and become a material contributor
to ARR.
ANZ services relationship
As the Floe programme has
progressed, we have taken the opportunity to review our ongoing
relationship. In consultation with ANZ, the Company agreed to
exit the lower margin legacy sub-contracting business under which
locally based freelance IT contractors are provided to the Bank on
short-term agreements. We recognised £8.1m in revenue from
these arrangement in FY23 with fixed margins of 13%, and the
business was being abandoned from December 2023. In line with
the Group's strategy, these changes will continue the Group's
transformation to a pure-play SaaS company and lead to an immediate
improvement in gross and adjusted EBITDA margins.
People
In 2023, as we largely completed
our transition to a pure fintech-focused software business, we have
taken the opportunity to re-evaluate our marketing strategy.
A key part of this new approach is the investment in our brand and
our commitment to maintaining a challenger culture in product
development and client interaction. In July we were therefore
pleased to welcome Geneva Loader to our team, to lead the
Group-wide marketing strategy.
Looking forward as we think about
our technology roadmap over the next five years, post year-end we
announced the appointment of Andrew Elmore as Chief Technology
Officer. With his industry experience, he will not only add
valued insight and knowledge into our R&D roadmap but also
provides a fresh opportunity to look at our processes and how we
best allocate product development capital.
Importantly, Neil Vernon, CTO from
the start of our Clareti journey, has transitioned to the newly
created role of Chief Product and Innovation Officer, with a focus
on identifying and driving next generational product strategy;
including artificial intelligence and machine learning to serve the
evolving needs of the financial services data landscape.
Current trading and outlook: encouraging client interactions
in Q1
We have had a positive start to
2024 and while sales cycles remain elongated and end markets are
consolidating, there are some signs of improving trends across our
clients which gives us confidence for the year ahead. The
successful transformation of the Group presents us with
opportunities to enhance efficiencies across the organisation while
remaining steadfast in our roadmap and go-to-market strategy.
This dual emphasis on growth and operational refinement positions
us for sustained success and innovation in the marketplace, driven
by our commitment to client success and our own operational
excellence.
Ian Manocha
Chief Executive
29 April 2024
FINANCIAL REVIEW
Forward-looking annualised recurring revenue
("ARR")
Our ARR is an aggregated value of
all recurring revenues that are either fully or partially
contracted for the next twelve months and/or are highly expected to
renew in the next twelve months. Future uplifts in variable usage
or contingent recurring fees are not included in ARR, unless they
are contractually certain with all deliverables having already been
met.
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2023
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2022
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Variance
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%
|
|
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Clareti ARR
|
Clareti ARR at start of
year
|
|
£m
|
28.1
|
24.0
|
N/a
|
|
|
Organic increase in ARR
|
|
£m
|
2.2
|
2.3
|
(0.1)
|
(4%)
|
|
Foreign exchange
movement
|
|
£m
|
(0.8)
|
1.8
|
(2.6)
|
(144%)
|
|
Clareti ARR at end of year
|
KPI
|
£m
|
29.5
|
28.1
|
1.4
|
5%
|
Other ARR
|
Other ARR
|
|
£m
|
3.2
|
3.5
|
(0.3)
|
(9%)
|
Group ARR
|
Group ARR
|
|
£m
|
32.7
|
31.6
|
1.1
|
4%
|
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. The organic Clareti ARR growth in 2023 was
£2.2m, an increase of 8% on the opening Clareti ARR position, and
broadly aligned with the £2.3m organic growth achieved in the
previous year, we were disappointed with the Clareti ARR growth
performance in 2023 and confident in improving this in 2024.
Foreign exchange movements in the opening ARR position, largely the
strengthening of the GBP against the USD and AUD, were negative
£0.8m, compared to the positive £1.8m experienced in 2022. Our
retention and upsell measures improved on the previous year, with
the trailing twelve-month net Clareti ARR retention rate being
105%, increasing from the 102% rate achieved in the prior year
(both on a constant currency basis). We calculate our net ARR
retention rate as ARR from the end of the 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 are strategically investing in capturing. Going
forward, we expect to our net ARR retention rate to further improve
in 2024.
ARR from our Other businesses have
fallen by £0.3m to £3.2m in 2023. The significant majority of this
ARR is denominated in AUD. Therefore the movement is largely due to
the strengthening of the GBP against the AUD since the prior year.
It remains encouraging to see the ongoing longevity of the
remaining non-Clareti business line continuing to provide
predictability and further ability to invest with confidence in the
Clareti business.
In addition to Group ARR of
£32.7m, expected revenues from non-recurring contracts in place as
at 31 December 2023 provide visibility for over £38.0m of revenue
for 2024 before any new or incremental contracts are
won.
Prior year restatement
The Group identified two items
requiring restatement in relation to a change in revenue
recognition policy and an error in the accounting for foreign
exchange differences on the retranslation of intercompany trading
and loan balances. Full details of these restatements are disclosed
in full within note 3 to the financial statements. The financial
statements and all commentary and references to the year's
performance or year-end position of the Group for 2022 and 2023 are
presented post the application of these changes, as has the opening
balance sheet position at 1 January 2022. Where commentary and
references are made to performance and positions prior to 1 January
2022, these are based upon the previously published results. A
summary of these restatements for the year ended 31 December 2022
is as follows:
|
|
|
|
2022 - as previously
reported
|
Restatements
|
2022 - as
restated
|
Group revenues
|
|
|
£m
|
48.7
|
(0.5)
|
48.2
|
Group gross profit
|
|
£m
|
33.9
|
(0.5)
|
33.5
|
Group adjusted EBITDA
|
|
|
£m
|
10.3
|
(0.5)
|
9.8
|
Group cash adjusted
EBITDA
|
|
|
£m
|
4.4
|
(0.5)
|
3.9
|
Statutory profit after
tax
|
|
|
£m
|
2.9
|
(1.3)
|
1.6
|
Income Statement
Abandoned
operations
During November we announced that
in line with the Group's strategy to continue our transformation to
a pure-play SaaS company, we were abandoning our Contracting
Services business with ANZ bank; with all material operations
ceasing before 31 December 2024. This business was
the lower-margin legacy sub-contracting business
under which locally based IT contractors were provided to the Bank
on short-term agreements.
The majority of the
sub-contracting business has been reported as its own contracting
services business segment, with a smaller proportion being reported
within Clareti non-recurring revenue where a small number of
contractors have been provided specifically as part of the Floe
project (now presented separately in note 5 to the financial
statements). Revenues and profits from this operation have been
disclosed below and are described separately to the ongoing
operations of the Group. Revenues from this contract were £8.1m for
the year, 22% lower than 2022, with the reduction being due to
lower demand from ANZ for these non-strategic services. In addition
to the transition away from these services, these revenues have
also been impacted by foreign exchange differences due to the AUD
weakness experienced throughout the year against the
GBP.
|
|
|
|
2023
|
2022
|
Variance
|
%
|
Abandoned operations
|
|
|
|
|
|
|
|
Clareti revenues (1)
|
Non-recurring
|
|
£m
|
1.5
|
2.2
|
(0.7)
|
(32%)
|
Other services revenues
(1)
|
Non-recurring
|
£m
|
6.6
|
8.2
|
(1.6)
|
(20%)
|
Group revenues
|
|
|
£m
|
8.1
|
10.4
|
(2.3)
|
(22%)
|
Group gross margin
|
|
|
£m
|
1.1
|
1.4
|
(0.3)
|
(22%)
|
|
|
|
%
|
13%
|
13%
|
-
|
N/a
|
Group adjusted EBITDA
|
|
|
£m
|
1.1
|
1.4
|
(0.3)
|
(22%)
|
|
|
|
%
|
13%
|
13%
|
-
|
N/a
|
Group cash adjusted
EBITDA
|
|
£m
|
1.1
|
1.4
|
(0.3)
|
(22%)
|
|
|
|
%
|
13%
|
13%
|
-
|
N/a
|
(1) Abandoned operations under both the Clareti and
Non-Clareti business segments were performed under the same master
contract and carried the same fixed margin
Constant currency Income
Statement headlines
Due to the levels of transactions
occurring in currencies other than the Company's functional
reporting currency of GBP, largely USD and AUD, the Group suffered
to a material degree from the strengthening of the GBP throughout
the year. The table below shows 2023 performance if transactions
had been reported on the same average exchange rates for the year
as 2022.
|
|
|
2023
|
2022
|
Variance on constant
currency basis
|
%
|
|
|
|
Actual
basis
|
Constant currency
basis
|
|
|
|
|
|
|
|
|
|
|
Group revenue
|
|
£m
|
49.0
|
50.2
|
48.2
|
2.0
|
4%
|
Group gross margin
|
£m
|
36.2
|
36.9
|
33.5
|
3.4
|
10%
|
Group gross margin %
|
%
|
74%
|
74%
|
70%
|
4%
|
|
Group adjusted EBITDA
|
|
£m
|
10.7
|
11.0
|
9.8
|
1.2
|
12%
|
Group adjusted EBITDA %
|
|
%
|
22%
|
22%
|
21%
|
1%
|
|
Cash adjusted EBITDA
|
|
£m
|
4.7
|
5.0
|
3.9
|
1.1
|
28%
|
Cash adjusted EBITDA %
|
|
%
|
10%
|
10%
|
8%
|
1%
|
|
|
|
|
|
|
|
|
|
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.
|
|
|
|
2023
|
2022
|
Variance
|
%
|
|
|
|
|
|
|
|
|
Clareti solutions
|
Recurring
|
KPI
|
£m
|
29.6
|
26.9
|
2.7
|
10%
|
|
Non-recurring
|
|
|
6.6
|
6.0
|
0.6
|
10%
|
|
Total Clareti revenues
|
KPI
|
£m
|
36.2
|
32.9
|
3.3
|
9%
|
Other solutions &
services
|
Recurring
|
£m
|
4.2
|
4.6
|
(0.4)
|
(9%)
|
|
Non-recurring
|
£m
|
0.5
|
0.3
|
0.2
|
67%
|
|
Total
|
|
£m
|
4.7
|
4.9
|
(0.2)
|
(4%)
|
Abandoned operations
|
Non-recurring
|
|
£m
|
8.1
|
10.4
|
(2.3)
|
(22%)
|
Group
|
Total
|
KPI
|
£m
|
49.0
|
48.2
|
0.8
|
2%
|
Clareti Solutions
Clareti recurring revenues
increased by 10%, up £2.7m on 2022 or 12% and £3.2m on a constant
currency basis. These increases were as a result of both new
recurring revenue sales and increased consumption of Clareti
solutions from our existing customers.
Clareti non-recurring revenues
increased by 10%, up £0.6m on the prior year. The increase driven
by new implementations associated with the increase in Clareti
recurring revenues and improved discipline in ensuring services
work from the Electra business, acquired in 2021, is fully
chargeable.
Other Solutions & Services
The vast majority of the remaining
and ongoing 'Other Solutions & Services' relate to a legacy
partner relationship where we act as a reseller of third party
software to a single customer. We continue to benefit from very
good visibility of customer intentions in relation to this
remaining product line.
Recurring revenues within the
'Other Solutions & Services' portfolio decreased by 9% to £4.2m
as a result of the discontinuation of our own-IP software product
(EDT) from 31 December 2022, and the weakening of the AUD, which
the vast majority of the remaining recurring business is contracted
in. Non-recurring Other revenues increased from £0.3m to £0.5m due
to a one-off purchase of extended rights for unsupported source
code usage of one of our legacy products.
Earnings
|
|
|
|
2023
|
2022
|
Variance
|
%
|
Clareti Solutions
|
Gross margin
|
|
£m
|
32.9
|
29.7
|
3.2
|
11%
|
|
Gross margin
|
|
%
|
91%
|
90%
|
1%
|
N/a
|
Other solutions &
services
|
Gross margin
|
£m
|
2.3
|
2.5
|
(0.2)
|
(8%)
|
|
Gross margin
|
%
|
50%
|
49%
|
1%
|
N/a
|
Abandoned operations
|
Gross margin
|
£m
|
1.0
|
1.3
|
(0.3)
|
(20%)
|
|
Gross margin
|
%
|
13%
|
13%
|
-
|
N/a
|
Group
|
Gross margin
|
|
£m
|
36.2
|
33.5
|
2.7
|
8%
|
|
Gross margin
|
|
%
|
74%
|
69%
|
5%
|
N/a
|
|
Adjusted EBITDA
|
KPI
|
£m
|
10.7
|
9.8
|
0.9
|
9%
|
|
Adjusted EBITDA
|
KPI
|
%
|
22%
|
20%
|
2%
|
N/a
|
|
Cash Adjusted EBITDA
|
KPI
|
£m
|
4.7
|
3.9
|
0.8
|
21%
|
|
Cash Adjusted EBITDA
|
KPI
|
%
|
10%
|
8%
|
2%
|
N/a
|
|
Statutory profit after
tax
|
|
£m
|
3.1
|
1.6
|
1.5
|
94%
|
|
Adjusted diluted EPS
|
KPI
|
Pence
|
6.32
|
7.03
|
(0.71)
|
(10%)
|
|
|
|
|
|
|
|
|
|
| |
Gross margin
The majority of our cost of sales
within the Clareti business is made up of: (i) customer-specific
third party costs incurred in providing our hosted cloud solutions;
and (ii) third party contractor costs providing non-recurring
services to customers. Gross margins achieved within the Clareti
business segment have increased from 90% in 2022 to 91% in 2023 as
high margin recurring revenues have increased as a proportion of
total Clareti revenues.
Within the 'Other Solutions &
Services' business segment, cost of sales are incurred in relation
to the fees paid to the software IP owner at fixed margins under
reselling contracts. Gross margins generated in this business
segment for the year are 50%, relatively consistent with those in
2022 of 49%.
Group gross margins have improved
from 69% to 74% as the mix of the Group's business has continued to
move, in line with Group strategy, to the high-margin Clareti
business.
Adjusted EBITDA
Adjusted EBITDA (earnings before
interest, tax, depreciation and amortisation) is analysed excluding
exceptional items, share-based payment charges and foreign exchange
differences on intercompany balances; 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 recurring cash performance is considered
important. However, whilst we consider them consistent and
appropriate, this EBITDA measure and 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 £0.9m, or 9%, since the prior year with margins improving by 2%
to 22% in 2023. 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. 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 IFRS 16 lease-related cash expenses classified as
depreciation and interest. We consider this a good measure of cash
profitability for a modern SaaS business who continue to invest in
product development to ensure they remain market
leading.
Cash adjusted EBITDA has also
improved on the prior year, with £0.8m of the £0.9m improvement in
adjusted EBITDA (mentioned above) dropping through to improvement
cash EBITDA. This has resulted in a cash adjusted EBITDA margin of
10%, an improvement of 2% on the prior year. Like adjusted EBITDA,
we expect to see continued improvements in these margins in future
years.
The Clareti standalone business
reached an important milestone in 2022, becoming cash adjusted
EBITDA positive for the first time, generating a margin of 2%. As
was anticipated, this margin further improved to 4% in 2023. As the
Clareti business continues to scale this will continue to drive
Group cash adjusted EBITDA improvements.
Statutory profit after tax and Adjusted diluted
EPS
There has been an increase in
statutory profit after tax of £1.5m to £3.1m due to the combination
of improved adjusted operating profit of £0.4m as a result of the
growth and improved profitability of the Group; offset by an
increase in tax charge of £0.7m (see below).
Adjusted diluted EPS has reduced by
10% to 6.3 pence per share, the reduction is largely due to the
increased taxation charge for the year (refer to taxation section
below). Adjusted earnings used in this calculation adjust the
statutory result after tax for exceptional items; amortisation of
acquired intangibles, share-based payments and foreign exchange
differences on intercompany balances.
Exceptional
items
During the year, the Group
recognised exceptional costs of £0.1m in relation to the
termination of supplier contracts following the closure of the EDT
business in December 2022. In the prior year, £0.2m of exceptional
costs were incurred in relation to the Electra acquisition and
associated integration. The Group also received £0.1m of
exceptional income in the year from a one-off tax credit in
relation to the Covid-19 pandemic relief scheme; there was no such
exceptional income in 2022.
Taxation
For the year ended 31 December
2023, the Group has recorded a net tax charge of £1.0m (2022:
£0.3m). This is made up of a current tax charge of £0.6m (2022:
£0.3m) and deferred tax charge of £0.4m (2022: £nil).
The current tax charge increased by
£0.3m, largely due to the credit generated upon the surrender of
tax losses for a cash rebate related to the enhanced relief
available from qualifying R&D activity being lower than the
prior year as a result of their being fewer losses
available.
The deferred tax charge increased
by £0.4m as a result of: the recognition of tax asset due to losses
generated being £0.4m lower than the prior year upon the reduction
in rate of enhanced tax relief on qualifying R&D activity from
130% to 86%; and a £0.3m reduction in deferred tax asset due
unexercised employee share awards, which are valued at the current
share price for tax purposes which has reduced since the prior
year.
Cashflow
The Group's financial position
remained very strong throughout 2023. At a headline level, the cash
balance at the year-end of £4.8m was behind that of the prior
year-end of £6.3m. Whilst the final deferred consideration payments
from 2021's Electra acquisition during the year of £4.0m explains
much of this, there are also a number of other movements beneath
the headline balances which are described below.
Operating cashflow, excluding
working capital, abandoned and exceptional items, has increased by
£0.8m to £9.7m in the year as a result of the improved cash EBITDA
of the Group, particularly the strategic Clareti
business.
Operating cash outflow from
exceptional items has reduced from £0.2m to £nil, and operating
cashflows from abandoned operations have reduced by £0.4m to
£1.0m.
The movement in working capital,
excluding the impact of the abandoned operations, has improved from
negative £0.8m to a positive £1.3m; a trend which is expected to
continue due to the 'paid annually in advance' commercial model in
the Clareti business (this was after a number of one-off items
caused the negative movement in the prior year). The movement in
working capital from abandoned operations was a negative £1.9m,
reflecting the quarterly advance payments model of the Contracting
Services business.
The Group paid net tax of £0.6m in
2023, whereas £0.6m was received in 2022. Gross tax payments
were made in the year of £1.9m (2022: £1.9m). During 2023 the Group
received gross tax receipts of £1.3m as a result of research and
development activities performed. During 2022, two years' worth of
equivalent receipts were received relating to 2020 and 2021,
totalling £2.5m.
The capitalised development
expenditure of £5.2m is £0.2m higher than with 2022 largely due to
inflationary related salary increases.
During 2023 the Group spent £0.2m
on other capital spend, a return to normal levels, after 2022 saw a
one-off increase in relation to the complete refurbishment of our
New York office.
During the prior year the Group
paid the final contingent consideration payment of £0.4m in
relation to the July 2020 Inforalgo acquisition. As such, there was
no equivalent payment in the current year.
Upon meeting the success criteria
measured on the second anniversary of the 2021 Electra acquisition,
the second and final contingent consideration payment was made in
full of £4.0m (2022: £4.0m).
The Group received £0.2m upon the
exercise of share options during the year (2022: £0.1m).
Included within 'Other' is the
recording of negative effect of foreign exchange rate changes of
£0.1m, arising upon the revaluation of the Group's non-GBP entity
opening balance sheets upon consolidation; the equivalent in the
prior year was £1.1m.
As has been the strategy of the
Group for a number of years, with increasing Clareti sales
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 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.
|
|
|
2023
|
2022
|
Variance
|
%
|
|
|
|
|
|
|
|
Opening cash and cash equivalents at 1
January
|
|
£m
|
6.3
|
9.1
|
(2.8)
|
(31%)
|
Operating cashflow excluding
abandoned and exceptional items
|
£m
|
9.7
|
8.9
|
0.8
|
9%
|
Operating cashflow from abandoned
operations
|
|
£m
|
1.0
|
1.4
|
(0.4)
|
(29%)
|
Operating cashflow from
exceptional items
|
|
£m
|
-
|
(0.2)
|
0.2
|
(100%)
|
Total operating cashflow excluding working
capital
|
|
£m
|
10.7
|
10.1
|
0.6
|
6%
|
Movement in working
capital
|
|
£m
|
1.0
|
(0.8)
|
1.8
|
(225%)
|
Movement in working capital -
abandoned operations
|
£m
|
(1.6)
|
-
|
(1.6)
|
N/a
|
Cash inflow from operations
|
|
£m
|
10.1
|
9.3
|
0.8
|
9%
|
Net tax
(payments)/receipts
|
|
£m
|
(0.6)
|
0.6
|
(1.2)
|
(200%)
|
Capital expenditure - development
costs
|
|
£m
|
(5.4)
|
(5.2)
|
(0.2)
|
4%
|
Capital expenditure -
other
|
|
£m
|
(0.2)
|
(0.8)
|
0.6
|
(75%)
|
Principal paid on lease
liabilities
|
|
£m
|
(0.7)
|
(0.6)
|
(0.1)
|
17%
|
Inforalgo acquisition (net of cash
acquired)
|
|
£m
|
-
|
(0.4)
|
0.4
|
100%
|
Electra acquisition
|
|
£m
|
(4.0)
|
(4.0)
|
-
|
-
|
Shares issued - upon option
exercises
|
|
£m
|
0.2
|
0.1
|
0.1
|
100%
|
Dividend
|
|
£m
|
(0.6)
|
(0.6)
|
-
|
-
|
Other
|
|
£m
|
(0.3)
|
(1.2)
|
0.9
|
(75%)
|
Net increase/(decrease) in cash and cash
equivalents
|
£m
|
(1.5)
|
(2.8)
|
1.3
|
(46%)
|
Closing cash and cash
equivalents at 31 December
|
KPI
|
£m
|
4.8
|
6.3
|
(1.5)
|
(24%)
|
Consolidated statement of financial
position
Intangible fixed assets remain the
largest item on the balance sheet at £62.9m (2022: £62.8m),
consisting of software development assets of £25.9m (2022: £23.6m),
separately identified assets acquired with previous acquisitions of
£17.2m (2022: £19.5m), and goodwill of £19.6m (2022:
£19.7m).
Trade receivables increased from
£4.8m to £5.7m and accrued income (a contract asset) has reduced
from £1.8m to £1.0m. The combined balance of trade receivables and
accrued income remains fairly consistent year on year, however the
balance between the two has shifted due to the timing of a single
large customer invoice being raised.
Contract liabilities are split
between non-current, £0.8m (2022: £0.4m) and current liabilities,
£13.0m (2022: £13.5m). Non-current contract liabilities have
increased by £0.4m due to two customers negotiating non-standard
renewal terms under which they paid the full three-year renewal
term upfront. Current contract liabilities have reduced by
£0.5m due to the abandoning of the non-Clareti Contracting Services
business, which is partially offset by the increase in Clareti ARR
which is typically paid annually in advance.
Deferred tax liabilities, which are
presented net of deferred tax assets, have increased from £5.7m to
£6.5m as a result of research and development spend qualifying for
enhanced tax relief being £0.4m lower than the prior year as a
result of the rate reducing from 130% to 86% ; offset by a
reduction of £0.6m from the unwinding of timing difference arising
on acquired intangibles, a £1.0m decrease in tax losses available
and a £0.3m decrease in deferred tax on employee share
awards.
Contingent consideration has
reduced from £4.0m to £nil as a result of the final amount of $4.8m
due on the Electra acquisition being paid during the third quarter
of 2023.
Trade payables decreased from £1.5m
to £1.0m, largely due to the Contracting Services business being
abandoned. Accruals decreased to £3.6m (2022: £4.3m), largely in
relation to a reduced bonus provision as 2023 performance was not
as strong against set targets as it was in 2022.
Financial outlook
Management were pleased to deliver
continued growth in 2023 in Clareti revenues, Group adjusted EBITDA
and Group cash adjusted EBITDA against the continued turbulent
economic environment in which our customers operate, and the
foreign exchange headwinds experienced. Management are confident of
the building blocks in place to drive expected improvements in
Clareti growth rates; which will be achieved through new customer
wins, expanding the existing ARR base from existing customers, and
reducing losses and down-sells.
The decision with ANZ to abandon
the non-core low-margin Contracting Services business simplifies
the Group towards a pure-play SaaS company, generating Group
margins expected of such a business.
We are also focussed on improving
our profit margins through targeted cost optimisations across the
Group whilst prioritising investments that maximise growth
generation.
Tom Mullan
Chief Financial Officer
29 April 2024
CONSOLIDATED INCOME STATEMENT
|
Notes
|
Year ended 31 December
2023
|
As
restated
Year
ended 31 December 2022
|
|
|
£'000
|
£'000
|
|
|
|
|
Revenue
|
4,5
|
49,012
|
48,238
|
Cost of sales
|
|
(12,790)
|
(14,774)
|
Gross profit
|
|
36,222
|
33,464
|
|
|
|
|
Adjusted administrative
expenses
|
|
(29,431)
|
(27,027)
|
|
|
|
|
Adjusted operating
profit
|
|
6,791
|
6,437
|
|
|
|
|
Adjusting administrative
items:
|
|
|
|
Exceptional costs
|
5
|
(79)
|
(153)
|
Exceptional income
|
5
|
119
|
-
|
Foreign exchange differences on
retranslation of intercompany balances
|
5
|
636
|
(860)
|
Amortisation of acquired
intangibles
|
14
|
(2,315)
|
(2,315)
|
Share-based payments
|
23
|
(757)
|
(1,027)
|
|
|
(2,396)
|
(4,355)
|
Total administrative
expenses
|
|
(31,827)
|
(31,382)
|
|
|
|
|
Operating profit
|
5,6
|
4,395
|
2,082
|
|
|
|
|
Finance revenue
|
9
|
1
|
6
|
Finance costs
|
9
|
(307)
|
(219)
|
Profit before taxation
|
|
4,089
|
1,869
|
Taxation
|
10
|
(1,013)
|
(279)
|
Profit after taxation attributable
to the equity holders of the Parent
|
|
3,076
|
1,590
|
|
|
|
|
|
|
|
|
Earnings per share
|
|
|
|
Statutory
|
|
pence
|
pence
|
Basic earnings per share
|
11
|
3.68
|
1.91
|
Diluted earnings per
share
|
11
|
3.55
|
1.88
|
|
|
|
|
|
|
|
|
|
|
|
| |
CONSOLIDATED STATEMENT OF COMPREHENSIVE
INCOME
|
Notes
|
Year ended 31 December
2023
|
As
restated
Year
ended 31 December 2022
|
|
|
£'000
|
£'000
|
Profit after taxation attributable
to the equity holders of the Parent
|
|
3,076
|
1,590
|
|
|
|
|
Other comprehensive expenses
|
|
|
|
Items that will or may be
re-classified into profit or loss:
Exchange differences on translating
foreign operations
|
24
|
(421)
|
(77)
|
Total other comprehensive
expenses
|
|
(421)
|
(77)
|
|
|
|
|
Total comprehensive income for the
year
|
|
2,655
|
1,513
|
CONSOLIDATED STATEMENT OF FINANCIAL
POSITION
|
Notes
|
At 31 December
2023
|
As
restated
At 31
December 2022
|
As
restated
At 1
January 2022
|
|
|
£'000
|
£'000
|
£'000
|
Assets
|
|
|
|
|
Non-current assets
|
|
|
|
|
Property, plant and
equipment
|
13
|
731
|
899
|
218
|
Right-of-use assets
|
16
|
1,574
|
1,592
|
1,466
|
Intangible assets
|
14
|
62,861
|
62,788
|
62,267
|
Deferred tax assets
|
10
|
137
|
-
|
232
|
|
|
65,303
|
65,279
|
64,183
|
Current assets
|
|
|
|
|
Trade and other
receivables
|
18
|
7,175
|
6,515
|
5,403
|
Contract assets
|
18
|
1,871
|
2,605
|
1,740
|
Income tax receivable
|
|
-
|
-
|
1,268
|
Cash and cash
equivalents
|
19
|
4,774
|
6,280
|
9,139
|
|
|
13,820
|
15,400
|
17,550
|
Total assets
|
|
79,123
|
80,679
|
81,733
|
Equity and liabilities
|
|
|
|
|
Equity attributable to owners of the Parent
|
|
|
|
|
Called up equity share
capital
|
22
|
4,194
|
4,172
|
4,168
|
Share premium account
|
24
|
24,232
|
23,941
|
23,876
|
Own share reserve
|
22
|
(44)
|
(296)
|
(609)
|
Other reserves
|
24
|
536
|
536
|
536
|
Retained earnings
|
24
|
21,550
|
18,770
|
16,459
|
Total equity attributable to owners of the
Parent
|
|
50,468
|
47,123
|
44,430
|
Non-current liabilities
|
|
|
|
|
Contract liabilities
|
20
|
796
|
354
|
60
|
Lease liabilities
|
16
|
867
|
953
|
770
|
Deferred tax liability
|
10
|
6,489
|
5,712
|
6,566
|
Provisions
|
20
|
183
|
146
|
144
|
Contingent consideration
|
20
|
-
|
-
|
3,575
|
|
|
8,335
|
7,165
|
11,115
|
Current liabilities
|
|
|
|
|
Trade and other payables
|
20
|
19,659
|
21,633
|
21,602
|
Lease liabilities
|
16
|
661
|
709
|
642
|
Income tax payable
|
20
|
-
|
62
|
-
|
Contingent consideration
|
20
|
-
|
3,987
|
3,944
|
|
|
20,320
|
26,391
|
26,188
|
Total liabilities
|
|
28,655
|
33,556
|
37,303
|
Total equity and liabilities
|
|
79,123
|
80,679
|
81,733
|
The financial statements were
approved by the Board of Directors and authorised for issue on 29
April 2024.
On behalf of the Board
Ian
Manocha
Tom
Mullan
Chief
Executive
Chief Financial Officer
29 April
2024
29 April 2024
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
|
Notes
|
Share
capital
|
Share
premium account
|
Own share
reserve
|
Other
reserves
|
Retained
earnings
|
Total
|
|
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
At 1 January 2022 - as previously
reported
|
|
4,168
|
23,876
|
(609)
|
536
|
17,910
|
45,881
|
|
|
|
|
|
|
|
|
Prior year adjustment
|
3
|
-
|
-
|
-
|
-
|
(1,451)
|
(1,451)
|
At 1 January 2022 - As
restated
|
|
4,168
|
23,876
|
(609)
|
536
|
16,459
|
44,430
|
|
|
|
|
|
|
|
|
Attributable profit for the period
- As restated
|
|
-
|
-
|
-
|
-
|
1,590
|
1,590
|
Other comprehensive expenses - As
restated
|
|
-
|
-
|
-
|
-
|
(77)
|
(77)
|
Total comprehensive income - As
restated
|
|
-
|
-
|
-
|
-
|
1,513
|
1,513
|
|
|
|
|
|
|
|
|
Exercise of share
options
|
22
|
4
|
65
|
-
|
-
|
-
|
69
|
Transfer of own shares held by
Employee Share Ownership Trust to employees
|
22
|
-
|
-
|
313
|
-
|
92
|
405
|
Deferred tax movement in respect of
share options
|
10
|
-
|
-
|
-
|
-
|
301
|
301
|
Share-based payments
|
23
|
-
|
-
|
-
|
-
|
1,027
|
1,027
|
Dividend paid
|
12
|
-
|
-
|
-
|
-
|
(622)
|
(622)
|
At 31 December 2022 - As
restated
|
|
4,172
|
23,941
|
(296)
|
536
|
18,770
|
47,123
|
|
|
|
|
|
|
|
|
Attributable profit for the
period
|
|
-
|
-
|
-
|
-
|
3,076
|
3,076
|
Other comprehensive
expenses
|
|
-
|
-
|
-
|
-
|
(421)
|
(421)
|
Total comprehensive
income
|
|
-
|
-
|
-
|
-
|
2,655
|
2,655
|
|
|
|
|
|
|
|
|
Exercise of share
options
|
22
|
15
|
291
|
-
|
-
|
-
|
306
|
Issue of shares to Employee Share
Ownership Trust
|
22
|
7
|
-
|
(7)
|
-
|
-
|
-
|
Transfer of own shares held by
Employee Share Ownership Trust to employees
|
22
|
-
|
-
|
259
|
-
|
223
|
482
|
Deferred tax movement in respect of
share options
|
10
|
-
|
-
|
-
|
-
|
(229)
|
(229)
|
Share-based payments
|
23
|
-
|
-
|
-
|
-
|
757
|
757
|
Dividend paid
|
12
|
-
|
-
|
-
|
-
|
(626)
|
(626)
|
At
31 December 2023
|
|
4,194
|
24,232
|
(44)
|
536
|
21,550
|
50,468
|
CONSOLIDATED STATEMENT OF CASHFLOW
|
Notes
|
Year ended 31 December
2023
|
As
restated
Year
ended 31 December 2022
|
|
|
£'000
|
£'000
|
Cashflows from operating activities
|
|
|
|
Profit after taxation
|
|
3,076
|
1,590
|
Depreciation of property, plant and
equipment
|
13
|
333
|
191
|
Amortisation of intangible
assets
|
14
|
5,294
|
4,723
|
Amortisation of right-of-use
assets
|
16
|
556
|
714
|
Profit on disposal of fixed
assets
|
|
(11)
|
-
|
Share-based payments
|
23
|
757
|
1,027
|
Increase in trade and other
receivables
|
|
(790)
|
(886)
|
Decrease/(increase) in contract
assets
|
|
664
|
(743)
|
(Decrease)/increase in trade and
other payables
|
|
(680)
|
1,560
|
Increase in contract
liabilities
|
|
215
|
278
|
Decrease in sales tax provision
arising on acquisition
|
|
-
|
(496)
|
Taxation
|
10
|
1,013
|
279
|
Net finance costs
|
9
|
306
|
213
|
Cash inflow from
operations
|
|
10,733
|
8,450
|
Income taxes received
|
10
|
1,179
|
2,473
|
Income taxes paid
|
|
(1,833)
|
(1,893)
|
Net cash inflow from operating
activities
|
|
10,079
|
9,030
|
Cashflows from investing activities
|
|
|
|
Interest received
|
9
|
1
|
6
|
Purchase of property, plant and
equipment
|
13
|
(191)
|
(806)
|
Payment of contingent consideration
on acquisition of Inforalgo
|
20
|
-
|
(369)
|
Payment of contingent consideration
on acquisition of Electra
|
20
|
(3,987)
|
(3,987)
|
Payments to acquire intangible
fixed assets
|
14
|
(5,398)
|
(5,195)
|
Net cash used in investing
activities
|
|
(9,575)
|
(10,351)
|
Cashflows from financing activities
|
|
|
|
Interest paid
|
9
|
(209)
|
(138)
|
Principal paid on lease
liabilities
|
16
|
(676)
|
(645)
|
Dividends paid
|
12
|
(626)
|
(622)
|
Drawdown on RCF loan
facility
|
21
|
3,278
|
-
|
Repayment of RCF loan
facility
|
21
|
(3,278)
|
-
|
Share issue proceeds (net of
costs)
|
22
|
242
|
69
|
Net cash used in financing
activities
|
|
(1,269)
|
(1,336)
|
|
|
|
|
Net decrease in cash and cash
equivalents
|
|
(765)
|
(2,657)
|
Cash and cash equivalents at
beginning of year
|
|
6,280
|
9,139
|
Effect of foreign exchange rate
changes
|
|
(741)
|
(202)
|
Cash and cash equivalents at end of year
|
19
|
4,774
|
6,280
|
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
1. Basis of preparation
The Group's financial statements
have been prepared in accordance with UK adopted 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
2023.
The Group's financial statements
have been prepared on a historical cost basis except contingent
consideration.
The Group financial statements are
presented in Sterling, which is also the Company's functional
currency. All values are rounded to the nearest thousand pounds
(£'000) except when otherwise indicated.
2. Responsibility statements under the
disclosure and transparency rules
The Annual Financial Report for
the year ended 31 December 2023 contains the following
statements:
The directors confirm that to the
best of their knowledge:
· the Group
financial statements have been prepared in accordance with UK
adopted international accounting standards 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 2023 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 2023 are set out in
the Annual Financial Report 2023.
3. Prior Year restatement
Revenue
recognition policy
Management changed their assessment as to
whether software licensing, support and maintenance for
non-Gresham-hosted deployments were distinct performance
obligations and could therefore be unbundled. Management now
consider that unbundling is not possible, largely due to changes in
customer expectations, the maturity of subscription software
selling, the pace of innovation in the fin-tech industry and
precedents set over the decade plus life of the Clareti business to
date. This change in assessment has resulted in a change in the
accounting treatment for the recognition of revenue for on-premise
license fees during the year. Previously this revenue was
recognised at the point in time the license was delivered to the
customer, following a review of customer contracts the revenue
previously recognised was corrected to reflect the fact that
performance obligations for the license fee were on-going through
the contracted period and therefore these licenses should be
treated as a right to access licence under IFRS 15 and not a right
of use licence. Therefore, revenue should be recognised rateably
over the contracted period. Administrative expenses have been
adjusted for the amortisation of contracted sales commissions which
has been recognised in line with revenue recognition in accordance
with IFRS 15.
As result of this change revenue for the year
ended 31 December 2022 has been restated, reducing revenue by
£481,000 and increasing administrative expenses by £28,000. This
adjustment has resulted in the restatement of the Group's opening
reserves at 1 January 2022, its financial position as at 31
December 2022 and the results of the cashflows of the Group then
ended. The impact of this change as at 1 January 2022 was to reduce
the net assets by £1,911,000, increasing contract liabilities
(current liabilities) by £1,986,000 and reducing contract assets by
£75,000.
The impact of this adjustment has also reduced
the taxation charge for the year ended 31 December 2022 by £77,000,
with the deferred tax liability reducing by £90,000 and a £13,000
increase in corporation tax creditor. The impact of this change as
at 1 January 2022 is to reduce the deferred tax liability by
£265,000, the corporation creditor by £131,000 and increases income
tax receivable by £64,000, with a corresponding increase of
£460,000 to retained earnings.
Foreign
exchange differences on retranslation of intercompany
balances
Foreign exchange differences arising on
intercompany trading balances have historically been recognised
within Other Comprehensive Income within the consolidated financial
statements and cumulatively recognised in the foreign currency
translation reserve. In accordance with IAS21, exchange differences
on intragroup balances should be recognised in the Income statement
as they do not form part of Company's net investment in foreign
operations.
As a result of the identification of this
error, the Income statement has been restated to reflect the
foreign exchange differences, with the impact increasing
administrative expenses by £860,000 in the year ended 31 December
2022, with the corresponding correction recognised as a reduction
within other comprehensive income. In addition, the previously
separately recognised foreign currency translation reserve has been
merged with the retained earnings reserve. This change has been
applied retrospectively, restating the Group's opening reserves at
1 January 2022 and its financial position as at 31 December 2022.
The impact of this change as at 1 January 2022 was to reduce
retained earnings by £378,000 and to increase Foreign currency
translation reserve by £378,000.
The combined impact of these changes are
detailed below:
Consolidated
Income Statement
Year ended 31 December 2022
|
As
previously reported
|
Change in
revenue recognition
|
Foreign
exchange differences
|
As
restated
|
|
£'000
|
£'000
|
£'000
|
£'000
|
Revenue
|
48,719
|
(481)
|
-
|
48,238
|
Gross profit
|
33,945
|
(481)
|
-
|
33,464
|
Administrative expenses
|
(30,494)
|
(28)
|
(860)
|
(31,382)
|
Profit before taxation
|
3,238
|
(509)
|
(860)
|
1,869
|
Taxation
|
(356)
|
77
|
-
|
(279)
|
Profit after taxation
|
2,882
|
(432)
|
(860)
|
1,590
|
Consolidated
Statement of Financial Position
At 1 January 2022
|
As
previously reported
|
Change in
revenue recognition
|
Foreign
exchange differences
|
As
restated
|
|
£'000
|
£'000
|
£'000
|
£'000
|
Current assets
|
|
|
|
|
Contract assets
|
1,665
|
75
|
-
|
1,740
|
Income tax receivable
|
1,204
|
64
|
-
|
1,268
|
Total current assets
|
17,411
|
139
|
-
|
17,550
|
Current liabilities
|
|
|
|
|
Contract liabilities
|
(12,048)
|
(1,986)
|
-
|
(14,034)
|
Income tax payable
|
(131)
|
131
|
-
|
-
|
Total current
liabilities
|
(24,333)
|
(1,855)
|
-
|
(26,188)
|
Non-current liabilities
|
|
|
|
|
Deferred tax liability
|
(6,831)
|
265
|
-
|
(6,566)
|
Total liabilities
|
(35,713)
|
(1,590)
|
-
|
(37,303)
|
Equity
|
|
|
|
|
Retained earnings
|
18,288
|
(1,451)
|
(378)
|
16,459
|
Foreign currency translation
reserve
|
(378)
|
-
|
378
|
-
|
Total equity
|
45,881
|
(1,451)
|
-
|
44,430
|
|
|
|
|
|
At 31 December 2022
|
As
previously reported
|
Change in
revenue recognition
|
Foreign
exchange differences
|
As
restated
|
|
£'000
|
£'000
|
£'000
|
£'000
|
Current assets
|
|
|
|
|
Contract assets
|
2,558
|
47
|
-
|
2,605
|
Current liabilities
|
|
|
|
|
Contract liabilities
|
(11,070)
|
(2,467)
|
-
|
(13,537)
|
Income tax payable
|
(244)
|
182
|
-
|
(62)
|
Total current
liabilities
|
(24,106)
|
(2,285)
|
-
|
(26,391)
|
Non-current liabilities
|
|
|
|
|
Deferred tax liability
|
(6,067)
|
355
|
-
|
(5,712)
|
Total liabilities
|
(31,626)
|
(1,930)
|
-
|
(33,556)
|
Equity
|
|
|
|
|
Retained earnings
|
21,968
|
(1,883)
|
(1,315)
|
18,770
|
Foreign currency translation
reserve
|
(1,315)
|
-
|
1,315
|
-
|
Total equity
|
49,006
|
(1,883)
|
-
|
47,123
|
|
|
|
|
|
Earnings per
share
For the year ended 31 December 2022 the impact
has reduced basic and diluted earnings per share from 3.46 pence
per share to 1.91 pence per share and from 3.41 pence per share to
1.88 pence respectively.
4. 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-premise or deployed into hybrid
environments. These primary offerings within this
segment include:
o Clareti Control
products
o Clareti Connect
products
· Other Solutions -
supply of a range of well-established solutions to enterprise-level
customers in a variety of end markets
· Clareti
Contracting Services - supply of IT contracting services to one
banking customer. Services provided relate to Clareti
products
· Contracting
Services - supply of IT contracting services to one banking
customer, excluding Clareti Contracting Services.
The Clareti Solutions reportable segment has
been analysed separated between Solutions and Contracting Services
in the tables below. The separate analysis is provided following
the announcement in November 2023 that the agreement for
contracting services business was being terminated in 2024. This
reflects how the business is reported to Management and the Board
of Directors and how the business will be monitored going
forward.
The prior year segmental analysis has been
updated to reflect this change.
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.
|
|
|
|
|
|
|
|
Notes
|
Clareti
Solutions
|
Clareti
Contracting
Services
|
Other
Solutions
|
Contracting
Services
|
Adjustments, central
overheads and elimination
|
Consolidated
|
2023
|
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
Revenue
|
4
|
36,281
|
1,501
|
4,653
|
6,577
|
|
49,012
|
Cost of sales
|
|
(3,415)
|
(1,301)
|
(2,320)
|
(5,754)
|
|
(12,790)
|
Gross profit
|
|
32,866
|
200
|
2,333
|
823
|
|
36,222
|
Gross profit %
|
|
91%
|
13%
|
50%
|
13%
|
|
74%
|
Adjusted administrative
expenses
|
|
(29,363)
|
-
|
(68)
|
-
|
|
(29,431)
|
Adjusted operating
profit
|
|
3,503
|
200
|
2,265
|
823
|
|
6,791
|
|
|
|
|
|
|
|
|
Adjusting administrative
items:
|
|
|
|
|
|
|
|
Exceptional items
|
5
|
|
|
|
|
40
|
40
|
Foreign exchange differences on
retranslation of intercompany balances
|
6
|
|
|
|
|
636
|
636
|
Amortisation of acquired
intangibles
|
14
|
|
|
|
|
(2,315)
|
(2,315)
|
Share-based payments
|
23
|
|
|
|
|
(757)
|
(757)
|
Adjusting administrative
expenses
|
|
|
|
|
|
(2,396)
|
(2,396)
|
Operating profit
|
|
|
|
|
|
|
4,395
|
|
|
|
|
|
|
|
|
Finance revenue
|
9
|
|
|
|
|
|
1
|
Finance costs
|
9
|
|
|
|
|
|
(307)
|
Profit before taxation
|
|
|
|
|
|
|
4,089
|
Taxation
|
10
|
|
|
|
|
|
(1,013)
|
Profit after taxation
|
|
|
|
|
|
|
3,076
|
|
|
|
|
|
|
|
|
Adjusted operating
profit
|
|
|
|
|
|
|
6,791
|
Amortisation of
intangibles
|
14
|
|
|
|
|
|
2,979
|
Depreciation of property, plant and
equipment
|
13
|
|
|
|
|
|
333
|
Amortisation of right-of-use
assets
|
16
|
|
|
|
|
|
556
|
Adjusted EBITDA
|
|
|
|
|
|
|
10,659
|
Development costs
capitalised
|
14
|
|
|
|
|
|
(5,297)
|
Principal paid on lease
liabilities
|
16
|
|
|
|
|
|
(676)
|
Cash adjusted EBITDA
|
|
|
|
|
|
|
4,686
|
|
|
|
|
|
|
|
|
Segment assets
|
|
|
|
|
|
|
79,123
|
Segment liabilities
|
|
|
|
|
|
|
(28,655)
|
|
|
|
|
|
|
|
|
Notes
|
Clareti
Solutions
|
Clareti Contracting
Services
|
Other
Solutions
|
Contracting
Services
|
Adjustments, central overheads and elimination
|
Consolidated
|
2022 (as restated)
|
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
Revenue
|
4
|
32,888
|
2,150
|
4,976
|
8,224
|
|
48,238
|
Cost of sales
|
|
(3,164)
|
(1,868)
|
(2,546)
|
(7,196)
|
|
(14,774)
|
Gross profit
|
|
29,724
|
282
|
2,430
|
1,028
|
|
33,464
|
Gross profit %
|
|
90%
|
13%
|
49%
|
13%
|
|
69%
|
Adjusted administrative
expenses
|
|
(26,926)
|
-
|
(101)
|
-
|
|
(27,027)
|
Adjusted operating
profit
|
|
2,798
|
282
|
2,329
|
1,028
|
|
6,437
|
|
|
|
|
|
|
|
|
Adjusting administrative
items:
|
|
|
|
|
|
|
|
Exceptional costs
|
5
|
|
|
|
|
(153)
|
(153)
|
Foreign exchange differences on
retranslation of intercompany balances
|
6
|
|
|
|
|
(860)
|
(860)
|
Amortisation of acquired
intangibles
|
14
|
|
|
|
|
(2,315)
|
(2,315)
|
Share-based payments
|
23
|
|
|
|
|
(1,027)
|
(1,027)
|
Adjusting administrative
expenses
|
|
|
|
|
|
(4,355)
|
(4,355)
|
Operating profit
|
|
|
|
|
|
|
2,082
|
|
|
|
|
|
|
|
|
Finance revenue
|
9
|
|
|
|
|
|
6
|
Finance costs
|
9
|
|
|
|
|
|
(219)
|
Profit before taxation
|
|
|
|
|
|
|
1,869
|
Taxation
|
10
|
|
|
|
|
|
(279)
|
Profit after taxation
|
|
|
|
|
|
|
1,590
|
|
|
|
|
|
|
|
|
Adjusted operating
profit
|
|
|
|
|
|
|
6,437
|
Amortisation of
intangibles
|
14
|
|
|
|
|
|
2,408
|
Depreciation of property, plant and
equipment
|
13
|
|
|
|
|
|
191
|
Amortisation of right-of-use
assets
|
16
|
|
|
|
|
|
714
|
Adjusted EBITDA
|
|
|
|
|
|
|
9,750
|
Development costs
capitalised
|
14
|
|
|
|
|
|
(5,195)
|
Principal paid on lease
liabilities
|
16
|
|
|
|
|
|
(645)
|
Cash adjusted EBITDA
|
|
|
|
|
|
|
3,910
|
|
|
|
|
|
|
|
|
Segment assets
|
|
|
|
|
|
|
80,679
|
Segment liabilities
|
|
|
|
|
|
|
(33,556)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
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 £17,589,000 (2022:
£20,604,000) which includes contracting revenue of £8,078,000
(2022: £10,374,000).
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,
however the actual charge represents a non-cash expense. Adjusting
for these items is also consistent with the manner in which a
number of 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:
|
2023
|
As
restated
2022
|
|
£'000
|
£'000
|
Acquisition and associated
integration costs
|
-
|
153
|
Professional fees
|
79
|
-
|
Exceptional costs
|
79
|
153
|
Exceptional income
|
(119)
|
-
|
Total exceptional items
|
(40)
|
153
|
|
|
|
Foreign exchange differences on
retranslation of intercompany balances
|
(636)
|
860
|
Amortisation on acquired
intangibles
|
2,315
|
2,315
|
Share-based payments
|
757
|
1,027
|
Total adjusting administrative
items
|
2,396
|
4,355
|
During the year the Group incurred £79,000
exceptional costs relating to termination costs of supplier
contracts following the closure of the EDT business and one-off
corporate costs including legal and professional fees.
The exceptional income related to payroll tax
relief received from the Australian tax authorities as a result of
a post-Covid pandemic scheme.
In 2022 exceptional costs related to legal and
professional fees for the integration of prior year
acquisitions.
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
|
2023
|
As
restated
2022
|
|
|
£'000
|
£'000
|
Profit before taxation
|
|
4,089
|
1,869
|
Adjusting
items:
|
|
|
|
Amortisation of
intangibles
|
14
|
5,294
|
4,723
|
Depreciation of
property, plant and equipment
|
13
|
333
|
191
|
Amortisation of
right-to-use assets
|
16
|
556
|
714
|
Notional interest on
lease liabilities
|
9
|
58
|
45
|
Finance
revenue
|
9
|
(1)
|
(6)
|
Interest
payable
|
9
|
249
|
174
|
EBITDA
|
|
10,578
|
7,710
|
|
|
|
|
Net exceptional
items
|
5
|
(40)
|
153
|
Foreign exchange
differences on retranslation of intercompany balances
|
5
|
(636)
|
860
|
Share-based
payments
|
23
|
757
|
1,027
|
Adjusted EBITDA
|
|
10,659
|
9,750
|
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
|
2023
|
As
restated
2022
|
|
£'000
|
£'000
|
Revenues from external customers (by
destination)
|
|
|
UK
|
8,114
|
6,832
|
EMEA
|
4,635
|
4,128
|
United States
|
16,686
|
14,568
|
Americas
|
1,146
|
1,307
|
Australia
|
17,726
|
20,851
|
Asia Pacific
|
705
|
552
|
|
49,012
|
48,238
|
|
EMEA includes revenue from external
customers located primarily in the Netherlands, Luxembourg,
Switzerland, Sweden, and South Africa. Americas includes revenue
primarily from Canada. Asia Pacific includes revenue from external
customers located primarily in Malaysia and Singapore.
|
|
|
|
2023
|
2022
|
|
£'000
|
£'000
|
Non-current assets
|
|
|
UK
|
62,854
|
63,077
|
EMEA
|
454
|
425
|
North America
|
1,269
|
740
|
Asia Pacific
|
726
|
1,037
|
|
65,303
|
65,279
|
|
|
| |
Non-current assets consist of
property, plant and equipment, right-of-use assets, intangible
assets and deferred tax assets.
5. Taxation
Tax on profit on ordinary
activities
Tax charge in the Income
Statement
|
2023
|
As
restated
2022
|
|
£'000
|
£'000
|
Current income tax
|
|
|
Overseas tax charge - adjustment to
prior years
|
41
|
45
|
Overseas tax charge - current
year
|
1,503
|
1,583
|
UK corporation tax credit -
adjustment to prior years
|
(949)
|
(1,293)
|
Total current income tax
|
595
|
335
|
|
|
|
Deferred income tax
|
|
|
Movement in net deferred tax
liability
|
418
|
(56)
|
Total deferred income
tax
|
418
|
(56)
|
Total charge in the Income
Statement
|
1,013
|
279
|
The UK corporation tax credit
included £1,162,000 (2022: £1,273,000) relating to the surrender of
prior year tax losses under the HMRC R&D tax credit
scheme.
Reconciliation of the total
tax charge
The tax charge in the Income
Statement for the year is higher (2022: lower) than the standard
rate of UK corporation tax for the period of 23.5% (2022: 19.0%).
The differences are reconciled below:
|
2023
|
As
restated
2022
|
|
£'000
|
£'000
|
Profit before taxation
|
4,089
|
1,869
|
Profit before taxation multiplied
by the UK standard rate of corporation tax for the period of 23.5%
(2022: 19.0%)
|
961
|
355
|
Effects of:
|
|
|
Expenses not deductible for tax
purposes
|
460
|
573
|
Impact of tax rate change on timing
differences
|
-
|
139
|
Difference in overseas tax
rates
|
194
|
375
|
Movement in unprovided deferred tax
losses
|
545
|
97
|
Adjustments to prior years in
respect of current tax
|
(908)
|
(1,248)
|
Adjustments to prior years in
respect of deferred tax
|
2,150
|
2,165
|
Research and development enhanced
relief claim
|
(2,389)
|
(2,177)
|
Total tax charge reported in the
Income Statement
|
1,013
|
279
|
Tax credit recognised in
equity:
|
2023
|
2022
|
|
£'000
|
£'000
|
Deferred tax (charge)/credit
recognised directly in equity
|
(229)
|
301
|
Total tax (charge)/credit
recognised directly in equity
|
(229)
|
301
|
Deferred
tax
Deferred tax liabilities
The movement on the net deferred
tax liability is shown below:
|
2023
|
As
restated
2022
|
|
£'000
|
£'000
|
At 1 January
|
(5,712)
|
(6,334)
|
Recognised in income
|
(418)
|
56
|
Recognised in equity
|
(229)
|
301
|
Foreign exchange
|
7
|
265
|
At 31 December
|
(6,352)
|
(5,712)
|
Deferred tax recognised relates to
the following:
|
2023
|
As
restated
2022
|
|
£'000
|
£'000
|
Tax losses available for offset
against future taxable income
|
3,550
|
4,334
|
Employee share award
schemes
|
503
|
766
|
Capitalised development
costs
|
(5,843)
|
(5,577)
|
Accelerated depreciation for tax
purposes on fixed assets
|
333
|
540
|
Other timing
differences
|
403
|
379
|
Inter-group sale of intellectual
property
|
(988)
|
(1,300)
|
Acquired intangibles - software
and customer relationships
|
(4,310)
|
(4,854)
|
31 December
|
(6,352)
|
(5,712)
|
|
|
|
Comprising:
|
2023
|
As
restated
2022
|
|
£'000
|
£'000
|
Asset
|
137
|
-
|
Liability
|
(6,489)
|
(5,712)
|
31 December
|
(6,352)
|
(5,712)
|
|
|
|
|
|
|
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 £99,000 (2022: credit
£15,000).
Temporary differences
associated with Group investments
At 31 December 2023, there was no
recognised deferred tax liability (2022: £nil) 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.
Unrecognised potential deferred tax
assets
The deferred tax not recognised in
the Consolidated Statement of Financial Position is as
follows:
|
2023
|
2022
|
|
£'000
|
£'000
|
Gresham Technologies (Luxembourg)
S.A.
|
665
|
793
|
Gresham Technologies (Holdings)
SARL
|
128
|
109
|
Gresham Technologies (Singapore)
Limited
|
235
|
137
|
Gresham Technologies (TDI)
Limited
|
73
|
119
|
Tax losses
|
1,101
|
1,158
|
|
|
|
Gross tax losses
unrecognised
|
4,859
|
5,155
|
Future tax rates
The main UK corporation tax rate
increased from 19% 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 2023 is
25%.
The Group's recognised and
unrecognised deferred tax assets in the UK, Luxembourg, Australian,
Singapore and US subsidiaries have been shown at the rates in the
following table, being the substantively enacted rates in these
countries.
|
2023
|
2022
|
|
%
|
%
|
UK
|
25
|
25
|
Luxembourg
|
25
|
25
|
Australia
|
30
|
30
|
Singapore
|
17
|
17
|
US
|
27
|
27
|
6. 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:
|
|
2023
|
As
restated
2022
|
Basic weighted average number of
shares
|
|
83,669,390
|
83,393,061
|
Employee share options - weighted
(note 23)
|
|
2,917,224
|
1,133,957
|
Diluted weighted average number of
shares
|
|
86,586,614
|
84,527,018
|
|
Notes
|
2023
|
2022
|
|
£'000
|
£'000
|
Adjusted earnings attributable to
owners of the Parent
|
|
5,472
|
5,945
|
Adjusting items:
|
|
|
|
Exceptional items
|
5
|
40
|
(153)
|
Foreign exchange differences on
retranslation of intercompany balances
|
5
|
636
|
(860)
|
Amortisation of acquired
intangibles
|
14
|
(2,315)
|
(2,315)
|
Share-based payments
|
23
|
(757)
|
(1,027)
|
Statutory earnings attributable to
owners of the Parent
|
|
3,076
|
1,590
|
Earnings per share
|
|
|
|
Statutory
|
|
|
pence
|
pence
|
Basic earnings per share
|
|
3.68
|
1.91
|
Diluted earnings per
share
|
|
3.55
|
1.88
|
|
|
|
|
|
Adjusted
|
|
|
|
|
Basic earnings per share
|
|
6.54
|
7.13
|
Diluted earnings per
share
|
|
6.32
|
7.03
|
During the year ended 31 December
2023, share options granted under share option schemes were
exercised and the Group issued 285,000 (2022: 85,000) ordinary
shares accordingly (ranking pari passu with existing shares in
issue). Shares totalling 140,000 were issued and transferred to the
Employee Share Ownership Trust during the year. 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 2023.
7. Dividends paid and
proposed
The final dividend for the year
ended 31 December 2022 was approved at the Company Annual General
Meeting on 23 May 2023 and paid on 26 May 2023 of 0.75 pence per
share, equating to a total of £626,000. The Board has declared an
interim dividend of 0.75 pence per share (2022: £nil) instead of a
final dividend (2022: 0.75p).
8. Intangible assets
|
|
|
Separately identified
intangibles on acquisition
|
|
|
|
Development
costs
|
Patents and
licences
|
Software
|
Customer
relationships
|
Goodwill
|
Total
|
2023
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
Cost
|
|
|
|
|
|
|
At 1 January
|
36,301
|
777
|
12,120
|
14,210
|
19,903
|
83,311
|
Additions
|
5,297
|
101
|
-
|
-
|
-
|
5,398
|
Disposals
|
-
|
(85)
|
-
|
-
|
-
|
(85)
|
Exchange adjustment
|
(41)
|
(4)
|
-
|
-
|
(60)
|
(105)
|
At 31 December
|
41,557
|
789
|
12,120
|
14,210
|
19,843
|
88,519
|
|
|
|
|
|
|
At 1 January
|
(12,745)
|
(730)
|
(4,317)
|
(2,481)
|
(250)
|
(20,523)
|
Charge for year
|
(2,934)
|
(45)
|
(1,212)
|
(1,103)
|
-
|
(5,294)
|
Eliminated on disposal
|
-
|
85
|
-
|
-
|
-
|
85
|
Exchange adjustment
|
34
|
4
|
-
|
-
|
36
|
74
|
At 31 December
|
(15,645)
|
(686)
|
(5,529)
|
(3,584)
|
(214)
|
(25,658)
|
|
|
|
|
|
|
|
Net carrying amount
|
|
|
|
|
|
|
At 31 December
|
25,912
|
103
|
6,591
|
10,626
|
19,629
|
62,861
|
At 1 January
|
23,556
|
47
|
7,803
|
11,729
|
19,653
|
62,788
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Separately identified
intangibles on acquisition
|
|
|
|
Development
costs
|
Patents and
licences
|
Software
|
Customer
relationships
|
Goodwill
|
Total
|
2022
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
Cost
|
|
|
|
|
|
|
At 1 January
|
31,072
|
858
|
12,120
|
14,210
|
19,848
|
78,108
|
Additions
|
5,195
|
-
|
-
|
-
|
-
|
5,195
|
Disposals
|
-
|
(91)
|
-
|
-
|
-
|
(91)
|
Exchange adjustment
|
34
|
10
|
-
|
-
|
55
|
99
|
At 31 December
|
36,301
|
777
|
12,120
|
14,210
|
19,903
|
83,311
|
|
|
|
|
|
|
At 1 January
|
(10,378)
|
(763)
|
(3,105)
|
(1,378)
|
(217)
|
(15,841)
|
Charge for year
|
(2,360)
|
(48)
|
(1,212)
|
(1,103)
|
-
|
(4,723)
|
Eliminated on disposal
|
-
|
91
|
-
|
-
|
-
|
91
|
Exchange adjustment
|
(7)
|
(10)
|
-
|
-
|
(33)
|
(50)
|
At 31 December
|
(12,745)
|
(730)
|
(4,317)
|
(2,481)
|
(250)
|
(20,523)
|
|
|
|
|
|
|
|
Net carrying amount
|
|
|
|
|
|
|
At 31 December
|
23,556
|
47
|
7,803
|
11,729
|
19,653
|
62,788
|
At 1 January
|
20,694
|
95
|
9,015
|
12,832
|
19,631
|
62,267
|
|
|
|
|
|
|
|
|
|
|
|
|
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 ten years.
These assets are tested for impairment where an indicator of
impairment arises and on an annual basis.
For the years ended 31 December
2023 and 31 December 2022 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 ten 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 ten
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, B2 Group, Inforalgo and Electra Information
Systems.
Software is amortised over its
useful economic life, which is deemed to be ten years.
Customer relationships 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 acquisitions and six years for B2
Group.
Goodwill
Goodwill arose on the acquisition
of our Asia Pacific real-time financial solutions business, C24
Technologies, B2 Group, Inforalgo and Electra Information Systems.
It is assessed as having an indefinite life and is assessed for
impairment at least annually.
9. Related party
transactions
Key management compensation
(including Directors)
|
|
2023
|
2022
|
|
|
£'000
|
£'000
|
Directors' emoluments
|
|
|
|
Remuneration
|
|
662
|
652
|
Social security costs
|
|
102
|
137
|
Bonuses
|
|
136
|
298
|
Pension
|
|
23
|
22
|
Share-based payments
|
|
175
|
406
|
|
|
1,098
|
1,515
|
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 78 for details of all
significant shareholders that the Company has been notified
of.
10. Events after the reporting
date
An interim dividend of 0.75 pence
per share has been declared by the Board (2022: £nil) instead of a
final dividend (2022: 0.75p).
On 9 April 2024, the Boards of
Gresham and Bidco announced the recommended acquisition of Gresham
by Bidco at a price of 163 pence per Gresham share, plus the
interim dividend of 0.75 pence per Gresham share declared today.
The transaction is conditional on, amongst other things, the
approval of Gresham shareholders by the requisite majorities of
resolutions to be proposed at a Court Meeting and a General
Meeting, both convened for 16 May 2024. The Scheme Document
and other documentation in relation to the acquisition were
published on 18 April 2024 and are available on the Investor Hub on
the Gresham website.
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
2023.