Gresham Regulatory News (GHT)

RNS

17 November 2023

Gresham Technologies plc

Trading Update

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 provide an update on trading and the discontinuation of its legacy IT contracting services business.

FY23 performance and outlook

The Company expects FY23 Group revenues and earnings to be in-line with market expectations. At the end of October, the Company had 98% of expected revenues already recognised or under contract and expected to be recognised prior to year-end. The Company continues to have a solid pipeline of opportunities from both new and existing customers and expects to close additional Clareti subscription business before the end of the year which will contribute to the Group's Annualised Recurring Revenue ("ARR") and FY24 planned revenues.

Discontinuation of legacy IT contracting services business

The Company benefits from a long-standing relationship with Australia and New Zealand Banking Group Limited (the "Bank"), the Group's largest customer by revenue. The Bank was an early adopter of Clareti and continues to expand the use of this software. In recent years the Bank has also been a development partner of the Company's Floe product and is also expected to expand the use of this innovative banking solution.

As previously disclosed, the Bank's contractual arrangements with Gresham also include lower margin legacy non-Clareti agreements covering: the provision of IT contractors; the re-selling of third-party software; and the provision of consulting and managed services. These legacy businesses pre-date the Clareti business, operate at a lower margin to Clareti, and as previously stated are not considered strategic to the future development of the Group or the creation of long-term value for our shareholders. Over recent years the Company has taken strategic decisions to substantially reduce exposure to these non-core offerings in order to focus on the high-margin Clareti opportunity.

The Company has substantially completed negotiations with ANZ regarding the renewal of existing business through 2024 and expects ANZ to renew all Clareti Control, Floe and re-sold third party VBT software licences for the period.

In consultation with ANZ, the Company has agreed to completely exit the lower margin legacy sub-contracting business under which locally based freelance IT contractors are provided to the Bank on short-term agreements. The Company expects to recognise £8.5m in revenue from these agreements in FY23 with fixed margins of 13% and will discontinue the business from January 2024.

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.

In line with the Group's strategy, these changes will accelerate the Group's transformation to a pure-play SaaS company and lead to an immediate improvement in gross and adjusted EBITDA margins.

FY24 Outlook

Except for the reduction to revenues directly attributable to the discontinuation of the IT contracting line of business, the Company is making no other material changes to its guidance for FY24 revenues.

Since the move to a Clareti subscription model in 2019, and the acquisition of Electra in 2021, the Company benefits from a strong base of recurring revenues. Clareti recurring revenues now account for 75% of FY24 planned Group revenues on a like for like basis excluding the discontinued contracting services business. Whilst the macro-environment is expected to remain challenging, the above factors support management's confidence in the Clareti business and prospects for on-going growth.

Ian Manocha, CEO commented:

"We are pleased to have supported ANZ for more than a decade to meet their need for skilled IT resources and will now focus on Clareti solutions where ANZ continues to be an important partner.

Discontinuing our IT contracting business will further accelerate our plan to become a pure-play subscription software company and enable us to focus on creating long-term value through our high-margin Clareti solutions. Whilst it has been a difficult year for financial markets, and customer budgets are expected to remain fairly tight, we have a solid pipeline of Clareti opportunities and a strategic plan aligned to customer priorities."

Enquiries

Inside information

The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulation (EU) No. 596/2014 ("MAR"). Upon the publication of this announcement via a Regulatory Information Service ("RIS"), this inside information is now considered to be in the public domain.

Note to editors

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

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