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GHT has reached agreement with ANZ to cease its sub-contracting services effective Jan-24, a decision we believe was driven by ANZbut in truth the motivation (or end result) matters little, as quite simply generating £8.5m of legacy non-IP related revs (~£1m/GP) this doesn’t move the needle on valuation. Indeed arguably, GHT could be viewed more positively, as recurring revs will move from 60% to 75% FY23/24, while EBITDA margins are now expected to rise from 22% to 25% FY23/24. Revised forecasts also include a further £2.0m reduction to Clareti non-recurring revenue, whereby ANZ is rationalising (GHT) Services spend relating to Clareti and Floe. Our expectation is that these Services will now be provided by another (lower cost) third party. I.e. this reflects a switching of service providers, rather than lower investment in Clareti/Floe products or a breakdown in relationship in our view. This is important to highlight. Reinforcing this message, GHT has substantially renewed its software licence contracts with ANZ for FY24and echoing this, we have kept our FY24 Clareti recurring revenue estimate unchanged looking for +10% y/y growth FY23/24.
Gresham Technologies plc
At last week’s investor briefing, GHT lifted the lid on Floe – a new product which materially extends Gresham’s value proposition beyond Clareti (regulatory and operational FS software) to front-end banking software as well, specifically corporate banking account management – a large (but poorly served) market. This attitude is seemingly shared by ANZ - which has been key to Floe’s development and will be first to commercialise the software. And - subject to a successful rollout – its deal value (ARR) could surpass all existing Clareti contracts, over time. Additionally, GHT has also set its sights on >100 other banks. Floe’s opportunity is evidently very large. As such (and while it will take time for these larger deals to convert and ramp – so leave forecasts unch.) we think GHT’s long-term growth runway now looks better than ever.
Gresham has delivered H1 organic revenue growth of 5% y/y (cc.), driven by continued positive momentum in Clareti revenues (+11% y/y). 5 new Clareti contract wins alongside 16 upgrades, have all contributed to strong top-line growth, with performance also underpinned by a NRR of 103% (+1pp h/h). Cash adj EBITDA was £1.7m (H1’22: £1.8m), with net cash of £3.8m (H1’22: £6.3m). The key highlight is contracted forward-looking revenue visibility of 95%/FY’23e (at Jun’23), leaving an undemanding c£2m revenue to find in H2. Even given macro turbulence and rapid base rate rises which drove major disruption in HTM bond book values and subsequently across global financial services institutions (GHT’s core market), GHT’s market-leading proposition continues to capture healthy demand and “a strong pipeline of opportunities”; rapid and accurate reconciliation software becomes even more critical in our view. Looking forward, we model cash EBITDA margins of 15% by FY’25e (FY’22: 9%) driven by GHT guidance for 40%/new ARR dropping through. Couple this with projected 14% sales CAGR to FY’25e and FCF yield moves sharply higher to 5%/7% by FY’24e/FY’25e. That’s compelling.
With FY22 in line and no changes to our existing FY23 forecasts, our focus is on the introduction of new forecasts for FY24 and FY25. We model Clareti recurring revenue growth of 17% and 18% resp. With Clareti having broken through to positive cash EBITDA for the first time in its history in FY22, we expect operating leverage to drive significant margin expansion over the next three years and beyond (Gresham guides to 40% of ARR dropping through to cash EBITDA). We model cash EBITDA margins of 15% in FY25 vs. 9% in FY22, generating amongst the fastest earnings and FCF growth in the sector (the latter a CAGR of c. 40%). Our new forecasts put the stock on FY24/5 FCF yields of 4.5%/6.0%. Thats a Buy.
Gresham complements several large deal announcements during 2022 with a further $1.3m (minimum over 5 years) Clareti Connect deal with an existing Tier 1 banking customer, providing further evidence of the success of its land and expand strategy. Additional fees will come from recurring usage-based fees and professional services. This is a solid end to a successful year, where Clareti ARR is likely to have seen mid-to-upper teens organic growth. Such progress is likely to exert upwards pressure on our 12m PT of 220p.
Gresham announces a 3-year $1.9m win, ramping to $0.5m recurring ARR, with a new customer that is a leading global asset manager. The deal is significant not only in terms of its size and quality but also as it includes core functionality from both Clareti and Electra, providing further validation of this acquisition and instrumental in yet another replacement of legacy vendors. Momentum remains strong at Gresham, which remains a core tech holding.
After upgrading FY22 revenues and adj. EBITDA by 10% and 4% in early October we upgrade both by 5% today, bringing the total upgrade to 15% and 10% resp. We also upgrade FY23 revenues by 4% (9% since Oct), adj. EBITDA by 3%, cash EBITDA by 15% to £4.5m and FCF by 18% to £4.3m. Gresham is one of the fastest growing companies in our universe with operating leverage further magnifying earnings growth. The potential to push towards £10m FCF in a meaningful time frame is likely to exert upwards pressure on our 12m PT of 220p.
Gresham announces contract wins today that cause it to expect FY22 revenues and earnings to be ahead of expectations. The first is a £1m over 5 years Clareti deal to replace a legacy incumbent solution for one of Europe’s largest privately owned banking and financial services groups (new logo). The second comprises renewals and extensions across a broad array of products and services with Gresham's largest customer, ANZ. Furthermore, management expects to close further subscription business in Q4 from a “solid pipeline”. We upgrade FY22 revenues by 10% to £46m and EBITDA by 4% to £9.6m. In the light of current macro uncertainties, we make more prudent upgrades to FY23 revenues, up by 4% to £48.2m, and maintain EBITDA at £10.6m, c. 1% margin progression yoy, a key part of the investment case. It is encouraging to see Gresham continue to replace incumbents and generate upsell from existing clients in what remains a challenging macro environment.
Gresham has delivered H1 19% organic revenue growth with cash EBITDA margins rising to 8% from 6% and adj. FD EPS up 74% yoy as organic leverage and accretion from Electra kicks in. Clareti ARR has risen 18% organic with $ denominated revenues helping protect against £ weakness. H1 revenues of £23m leave a comfortable £19m to do in H2 and H1 adj. EBITDA of £4.5m is tracking at least in line with our FY22 forecast of £9.2m. Bigger picture, Gresham estimates that the marginal cash EBITDA margin on £1 of incremental ARR is some 40%, vs. the average 8% just reported in H1. We believe this presages a period of rapidly expanding FCF as the SaaS model evolves.
Gresham reports that positive trading has continued in H1 with group revenues up 19% organic to £23.1m. Clareti ARR grew an impressive 17% organic to £25.9 and continues to be the engine of growth. There was also strong trading from non-Clareti revenues which has the potential to continue in H2 depending on some material Contracting revenues renewals. As such Gresham expects FY22 results to be at least in line with expectations. We make no changes to forecasts at this time, though further positive updates are possible in H2 given the highly visible pipeline. Implied Clareti end FY23 EV/ARR is an undemanding 2.7x and as the operational gearing of the SAAS model kicks in, we expect to see FCF rising faster than revenues over the coming years.
Gresham has announced a landmark win with a key Tier 1 existing banking customer worth up to £6.3m over a minimum of c. 5 years. Building on an initial 3 year contract signed in June 2020 worth £1.7m over 3 years, the scope of work has materially expanded with Clareti being chosen as the customer’s single enterprise platform across its whole UK business, covering retail accounts, cards, payments and as well commercial banking. Clareti will replace manual processes and, of particular note, legacy vendor systems. It continues to displace incumbents, whether greenfield or land and expand. The contract adds an immediate £0.5m of incremental ARR which is expected to grow to £0.8m over time as well as £1.3m of services over the next 12 months. It thereby provides increased confidence regarding FY22 expectations for 16% organic ARR growth and extends visibility beyond. We introduce FY23 forecasts with recurring revenues anticipated to grow c. 18% to £33.4m and EBITDA margins advancing 100ps to 23%. We calculate the market is valuing this fast growing and FCF generative FY23e revenue stream at 3.3x when stripping out Services and Legacy revenues and cash. We reiterate our 220p price target and Buy recommendation.
Highlights from FY21 results are 20% organic growth for Clareti, a significant improvement in cash EBITDA, comments from the company that it could generate double the revenues from the installed base, general optimism and specific optimism on further margin improvement. We really urge investors to look at this company as we suspect it has prospects beyond our immediate 220p price target.
Highlights of FY21 are 28% organic revenue growth at Clareti, group EBITDA 8% ahead of our forecasts and net cash nearly £4m ahead of our expectations on “very strong” cash collections and lower than expected acquisition costs. Our unchanged FY22 forecasts are well underpinned by 88% contracted revenues. We forecast ARR will grow a further 17% organic in FY22, which is one of the fastest growth rates in our universe. We introduce a Buy recommendation and 220p price target.
Gresham has won an extension and expansion deal with a long-standing Tier 1 investment bank customer as it continues to standardise on the Clareti platform. Including this and other deals, current ARR rises to £23.3m, a 5% organic uplift from end June. Clareti/Electra are trading in line, though Gresham flags potential for further new business in FY21 and an “encouraging pipeline” for FY22. Non-Clareti revenues are performing ahead of expectations leading us to upgrade FY21 revenues and adj. EBITDA by 5%, leading to a cash EBITDA upgrade of 25% to £1.5m. Today’s deal underpins our FY22 estimates, which we leave unchanged, though suspect the risk is to the upside. The stock remains firmly in the “best ideas” stable.
A renewal and extension worth c. A$30m over the coming year at ANZ takes FY21 revenue visibility to c.100% with a quarter to go. Q4 wins would mean upside. ANZ will grow its Clareti revenues 35% yoy to A$14m. It is this type of growth in excess of opex growth that is pushing Clareti into positive FCF generation. We think the market is missing the substantial operational gearing that a SaaS company experiences as it goes through b/e and can see Clareti generating FCF of up to £6m in short order and nearly £9m+ not long after. Needless to say, such a performance would imply a valuation far in excess of the current market capitalisation.
Gresham has delivered a strong H1 with Clareti revenues up 22% lfl to £9.6m and Electra off to a good start. We note group cash EBITDA margins of 6% vs. PY 3% and expect continued margin improvements to drive earnings growth faster than revenue growth over the coming years. Electra cash EBITDA margins of 14% are also tracking ahead of our forecast 9%. With Clareti/Electra expected to break-even on this basis over the next 12 months, the operational gearing of the SaaS model continues to kick in. We have written elsewhere of the possibility of generating £5-10m FCF by FY24/5 and believe that could lead to material upside in the stock.
Gresham has issued a half year trading update and provided further commentary on recently acquired Electra. First half trading is comfortably in-line with our expectations with Group revenues of £14.5m (H1’20: £12.2m) +14% on a like-for-like basis (or +19% reported). Clareti revenues jumped 22% like-for-like, driven by 13 new or incremental licence agreements, including three new banks in Europe and one of the world’s largest professional services firms. This strong growth is reflecting in Clareti ARR up 21% to £12.9m at June 2021 (+9% on a likefor-like, despite currency headwinds) or alternatively, £22.1m when including Electra, which provides a step-change for the business. Other non-Clareti revenues of £4.9m (H1’20: £4.8m) and non-Clareti businesses are performing in-line with management expectations. Inforalgo, acquired in July 2020, performed strongly in the first eleven months of ownership, with ARR growth of +17%, at constant currency. Gresham expects to pay the first instalment of the deferred consideration in full in Q3’21. Inforalgo is now fully integrated and operating under the Clareti Connect brand. Closing net cash healthy at £8.1m (H1’20: £7.4m). This strong H1 and high levels of contractually committed revenue provide confidence in our FY21 forecasts.
We upgrade FY22 EPS by 18% today on completion of the Electra acquisition. This is a strategic acquisition that marks a decisive step on the path to creating a global fintech champion of substantial scale, and yet we see no strategic premium in the price paid (11x EV/EBITDA). It more than triples Clareti’s North America ARR to some £12m, significantly enhancing its presence in the largest market for its products and accelerates FCF b/e. Stripping out legacy businesses and cash and valuing Clareti/Electra services on 2x sales, the implied EV/ARR for Clareti/Electra is 3.9x FY22. Looking at growth scenarios beyond our forecast horizon and resulting FCF scenarios, we see Clareti capable of generating FCF of £5- 10m by FY24/5 and suspect that could lead to material upside in the stock.
Gresham is proposing to acquire US post-trade processing solutions provider, Electra, for up to $38m in cash. It expects the acquisition to be “immediately significantly accretive” to adj. earnings and to accelerate cash EBITDA breakeven for the combined Clareti/Electra business to within 12 months post-acquisition. Gresham believes that it represents a transformative opportunity to combine two complementary and high-quality businesses to drive meaningful earnings accretion and accelerate its earnings growth and quality of revenues. Gresham proposes to fund the deal by an institutional placing and retail offering. Both the acquisition and placing are subject to shareholder approval at a general meeting on 21st June. We are now restricted on the stock and suspend our forecasts with immediate effect.
After producing impressive 17% organic growth in Clareti ARR in FY20, despite COVID headwinds, we expect ARR growth to accelerate to >25% in FY21, with 85% plus of this revenue already visible given the recurring revenue model. We introduce forecasts today of a further 20% ARR growth in FY22. Stripping out cash of £9m, valuing legacy revenues at 1x (£9m) and Clareti Services at 2x (£11m), the residual £78m is 4.9x FY21 Clareti ARR, falling to 4.1x FY22 ARR. This looks too low to us: a key reason GHT is one of our top picks for 2021.
Gresham has rounded off what could have been a difficult year with 17% organic growth in Clareti ARR to £12.3m. Several large new deals have helped achieve this growth showing that Clareti sits firmly in the digital transformation camp. EBITDA forecasts were actually revised up 7% over the year. All this bodes well for FY21, where we believe our forecast of just under 30% revenue growth for Clareti is over 80% underpinned. A strengthening pipeline over H220 should make our forecasts achievable/beatable. It’s rare in this market to be able to buy into a business set to grow like this for an implied EV/ARR of just over 5x our forward Clareti ARR forecasts.
GHT is acquiring Inforalgo for £2.3m cash and £1.3m deferred, an attractive <2x ARR. We adjust our FY20 forecasts for modest accretion. This strengthens GHT’s nascent Regulatory business, allowing it to offer end-to-end solutions and significantly extends its real-time cloud connectivity services such that it can provide a potentially transformative STP capability. Adjusting for the acquisition, for cash, valuing Clareti Services at 2x sales and Legacy at 1x, leaves Clareti valued at just 4.1x ARR.
Interims are in line with our expectations. We maintain strongly underpinned FY20 EBITDA forecasts, while trimming revenues in line with GHT’s excellent c. 90% visibility. This report delves deeper into why Clareti is taking market share (H1 ARR +18% yoy). We touch on the flexible data model and faster speeds as well as the origins of the company within larger competitor Smartstream. It’s a truly disruptive story with significant runway ahead and can be had for c. 5.8x current Clareti ARR.
Gresham continues to show strong progress in difficult times. 18% yoy organic growth in Clareti ARR is amongst the fastest growth of any UK software company. It is being achieved because Gresham has built a disruptive product that is now replacing incumbents at Tier 1 financial institutions around the world. These results underpin our FY20 EBITDA expectations. The implied valuation of Clareti’s ARR is <6x revs, which we think offers value for an emerging leader.
Gresham maintains its “worst-case scenario” guidance of FY20 adj. EBITDA in line with FY19 based on achieving just 84% “highly visible” revenues vs. pre-CV19 planned revenues. On this basis we expect it to remain cash generative in FY20, with estimated current net cash of over £7m providing a buffer that is unlikely to be needed. Most interesting today, GHT notes it is “encouraged by ongoing [new] business activity”. Companies riding the digital transformation wave (and GHT is definitely that) are actually signing new business, even in these circumstances. Should this be the case for GHT, it might even provide upside to the current worst-case scenario EBITDA forecasts.
Gresham is one of the few companies to maintain FY20 EBITDA guidance, and this at an early stage in the year. This is predicated solely on a worst-case scenario of highly visible revenues equivalent to 84% of planned revenues. This is a strong statement and is testimony to the strengthed business model resulting from the shift to a recurring revenue model. And so our focus can return to the fact that GHT is one of the UK’s fastest growing software companies that is demonstrably executing on its goal of being the global leader in its core business areas. Stripping out net cash, valuing Clareti services at 2x sales and legacy solutions at 1x sales leaves a residual value of c. £53m, compared to Clareti ARR currently in the region of £10m.
FY19 was an excellent year, characterised by accelerating sales growth (+30% y/y) to £25m and a swing to positive cash EBITDA (both in line with upgraded FY19 estimates). Highlights include the two land-mark contracts wins with Global Tier 1 banks. They represent a significant step-up in deal value for GHT, reflecting the global nature of both implementations and further, the broadening into ‘core’ (i.e. cash and securities processing) reconciliations management. Importantly, GHT displaced two large incumbents - providing further evidence the company is winning share in a >$300m market opportunity. GHT is amongst the fastest growing UK software companies and has every possibility of achieving its aim of becoming the number one global player in its core business areas.
GRESHAM TECHNOLOGIES^ (GHT, NR, CNP) – Trading update. Significant progress made with revenues up by 30% to £25.0m and stronger underlying recurring revenues and good momentum heading into the forthcoming year. | CYANCONNODE^ (CYAN, NR, CNP) - New Order for Smart Metering Project in South India worth £3.3m.
Gresham Technologies plc CyanConnode Holdings plc
Following last month’s trading update and upgrade, today GHT has provided a further release, communicating £4.0m of EBITDA is now expected – higher than our upgraded estimate of £3.7m. All other estimates meanwhile stay essentially unchanged, as sales of £25.0m and ARR of £9.6m (both +30% y/y) are reiterated. Additionally – and very encouragingly – GHT also flag the company is in advanced stages with a Tier 1 global bank for an enterprise scale deployment of CTC. This in-turn provides support for existing growth and profit forecasts, where for reference, we expect Clareti sales growth of 25% in FY20. Consequently, we continue to reiterate our positive stance on this stock and further – while trading on just 4x FY20E Clareti sales - also continue to believe upside considerable remains.
GHT has today announced a strong H2 trading update, driven by multiple new Clareti deals – the largest (also announced today) is with a leading global alternative investment manager and worth $1m/three years. As a result, we upgrade EBITDA from £3.4m to £3.7m this year and from £4.0m to £4.1m in FY20E. For Clareti alone, this now means we forecast sales of £15.4m in FY19E – up 30% y/y and of which, c.2/3rd should now be recurring (c.f. 56%) - reflecting the continuing transition towards recurring sales and therefore improving visibility. On updated numbers, GHT therefore trades on just a 4x Clareti sales multiple – undemanding in our view, considering the business’ growth rate, in turn due to continued momentum against legacy competitors.
Gresham has issued interim results that highlight an excellent start to the year with group revenues up 36% to £12.4m (29% like-for-like), delivering adjusted EBITDA (post IFRS 16) up 525% to £2.5m. Clareti software recurring revenues were up 63% and Clareti ARR up 31% on a like-for-like basis. This growth was driven by four strategic Clareti wins, each exceeding £1m and with an aggregate minimum value of £7.8m; six new Clareti customers signed in the period (including one of the strategic wins); and a number of chargeable customer upgrades. We make only two changes to our headline forecasts: incorporating the impact of IFRS 16 adoption on our EBITDA estimates and increasing our yearend net cash estimates to reflect early payment from a significant customer. The former increases EBITDA in both our forecast years by £0.5m, while the latter increases our net cash estimates by c£2.0m. We continue to view Clareti as a unique technology that is rapidly becoming the new financial industry standard for enterprise data integrity. We expect this to result in rapid growth in annuity revenues, strong earnings growth and a significant re-rating.
Gresham has issued a trading update that confirms an excellent first half, with strong Clareti subscription growth driven by four strategic Clareti wins, a number of smaller new deals and customer upgrades. Excluding the impact of the B2 Group acquisition, group revenues are expected to grow 29%, with Clareti software recurring revenues up 63%. As a consequence, management is confident that trading performance remains in line with full year expectations. This latest update confirms that Gresham continues to make strong progress against its strategy of building high quality, recurring subscription revenues. We make no changes to our forecasts pending the release of interim results on 23 July and continue to view Clareti as a unique technology that is rapidly gaining industry standard status.
Gresham has announced a strategically significant contract win with a global central counterparty and clearing house worth c£1.2m over the initial 5-year term. This latest success highlights the attractions of the Clareti platform to capital market participants with complex data reconciliation requirements. It also provides further evidence that trading is robust, reinforces management’s commitment to building recurring revenues and supports the view that Clareti is rapidly becoming the new standard for enterprise data integrity. We make no changes to our forecasts.
Gresham has released an AGM statement indicating an “excellent” start to the year, with the two significant Clareti contracts that slipped from FY 2018 closing in Q1 and a further three new Clareti customers signed this year. Professional services contracts related to the former have also now been signed and are expected to generate initial revenues in excess of £500k. While this is a brief update, it confirms that underlying trading momentum remains robust and that the company is on track to meet our existing expectations. We make no changes to our forecasts and will provide a more detailed update when interim results are released in July.
Gresham has announced a significant new Clareti contract win with a global tier 1 bank. The contract, which is one of the two high value deals that slipped from FY 2018, is worth £5m in software fees over its five year term, with £0.9m to be recognised in FY 2019. This is positive news as it confirms that both the large deals that slipped from 2018 have now been signed, and that their contribution to FY 2019 revenues will be broadly as expected. Investors should now be reassured that recent deal slippage was purely timing driven. We make no changes to existing forecasts.
FY 2018 results were largely as indicated in the January trading update, although adjusted EBITDA was slightly ahead. Investors should focus on the positive strides made so far in 2019, reflected in the successful disposal of the legacy VME business and the signing of one of the landmark deals that slipped from December. Strong growth (30%) in the Clareti recurring revenue base offers a potent reminder that this unique technology continues to gain traction across a broadening array of use cases.
Gresham has announced a significant new Clareti contract win with a global tier 1 bank that is an existing customer. The contract, which is one of the two high value deals that slipped from FY 2018, is worth in excess of CHF 3.0m (£2.3m) over its five year term and is expected to contribute CHF 1.1m (£0.8m) to 2019 revenues. We are highly encouraged by this news, in particular the fact that the contract has been secured early enough that its contribution to FY 2019 revenues will be broadly as expected. Hence we make no changes to our existing forecasts. We have consistently viewed recent changes in expectations as timing-driven rather than the result of any fundamental shift in underlying demand. Clareti remains a unique technology with exciting commercial potential.
Gresham has announced that is has agreed to sell its non-core VME mainframe software business to Fujitsu for £2.0m, with all VME customer contracts and IP rights in the relevant software products to be transferred to Fujitsu as of 31 January. We have reduced our FY 2019 revenue and adjusted EBITDA estimates by £0.7m and £0.6m, respectively. As the VME business is a legacy asset with steadily declining revenues in recent years, we believe this disposal - for c3x estimated VME revenue in FY 2019 - represents a positive outcome. It will allow the group to focus its efforts and resources on its Clareti-led growth strategy and continue with its transformation into a global financial technology provider with a unique offering and large addressable market.
Gresham has issued a trading update indicating that two high-value replacement software deals have not fully closed in time to meet full year expectations. As a result, the company now expects to report FY 2018 revenue of £20.0m (vs N1Se £23.3m) and adjusted EBITDA of £0.8m (vs N1Se £3.5m). Both these deals are expected to conclude in early 2019 and still represent wins in two major competitive bids. We have revised our FY 2018 revenue, adjusted EBITDA and cash estimates in line with the indications given in the update. We have also reduced our FY 2019 revenue estimate by 2% to £25.7m and the corresponding EBITDA estimate by 30% to £3.5m. While these downgrades are disappointing and will further dent investor sentiment, the issue here remains one of timing. We are encouraged by the fact that the company enters FY 2019 with a strong recurring revenue base (£7.4m and expected to be £8.8m when the two deals close) and a focused plan to build visible subscription revenue. We continue to view Clareti as a unique technology with exciting potential, underpinned by broadening use cases and a large addressable market.
Gresham Technologies (GHT LN) Improving win-rate in H2 and pipeline underpins confidence in full year | Hargreaves Services (HSP LN)Wolf Minerals Update | Hollywood Bowl Group (BOWL LN) Robust YE update | Marston’s (MARS LN) Slightly soft end to the year | Miton Group (MGR LN) Flow momentum continues into Q3 | Sanderson Group (SND LN) Significant progress in FY18, full year revenue and profit slightly ahead | Scapa Group (SCPA LN) In line H1 trading update | Springfield Properties (SPR LN) Site visit highlights quality offering | The PRS REIT (PRSR LN) Strong deployment continues into Q1 | Walker Greenbank (WGB LN) On track to deliver revised forecasts. Search for new CEO started
GHT HSP BOWL MARS SCPA SPR SDG PMI SND
While H1 results were impacted by contract slippages and lower contracting bookings, a positive outlook statement is underpinned by confirmation that 3 new Clareti wins have been secured in July and that there is a significant pipeline of opportunities. These wins add to the 6 client wins in the first half, including a first project in one of the world’s largest investment banks. We have made no changes to our underlying revenue and profit expectations, but updated our forecasts to reflect the acquisition of the B2 Group (+5% to N1Se FY19 EPS, slightly offset by an increase in diluted share capital). We think the current valuation (FY18 EV/EBITDA of 17.6x, falling to 13.6x for FY19) offers considerable upside given the broadening use cases for Clareti, the size of the addressable market and the positive start to H2.
Gresham Technologies (GHT LN) Capital Markets Day highlights the potential of the Clareti platform | T. Clarke (CTO LN) Positive order book momentum provides a share price catalyst
Gresham Technologies plc TClarke plc
The 2017 performance built strongly on 2016, with Clareti y-o-y revenue growth of 48% driving 40% growth in adjusted PBT even as the group continued to invest in the business. The balance sheet is strong providing flexibility and options and the Board also recommended initiating a dividend (0.5pps), signifying confidence. We upgraded our revenue growth expectations for Clareti (expect +38% in 2018 and +27% in 2019). We believe Gresham’s continued momentum reflects a positive demand environment, a highly competitive and differentiated product set and a strong management team that will continue to drive shareholder value.
Gresham announced the appointment of Tom Mullan as CFO for the group from 1 March 2018. This appointment looks to be a strong fit given Tom’s background in financial technology enterprises and managing strong international growth. FY results will be released on 18 March 2018. The year end trading update released in early January confirmed another successful year with revenues up 24% (Clareti revenues up 48% y-o-y) and EBITDA up 32% to c. £5.0m.
Gresham Technologies year end trading update confirmed another strong year driven by Clareti and its flagship product, CTC. FY revenues are expected to be up 24%, with Clareti revenues accounting for 52% of total and up 48% y-o-y. This strong Clareti performance drove good profitable, cash generative growth, with adjusted EBITDA up 32% to c. £5.0m and cash up to £8.5m (2016: £7.1m). North America performance was particularly strong in 2017 following direct sales investment in 2016 and 2017. We believe the global opportunities for the group remain plentiful and we expect another good year of progress in 2018. FY results will be out on 13 March 2018.
Gresham Technologies won a significant contract win with one of the largest financial services groups in the Nordic region. The bank will use Clareti Transaction Control (CTC) as part of a modernisation programme in its wholesale banking operations The contract has an initial value of approximately €2 million, around half of which is immediately recognisable (contributing in 2017), with the remainder to be recognised over the initial five-year term of the contract. This is another good win for CTC, following on from a number of significant wins in 2017, leaving us confident of its prospects.
Future (FUTR LN) Trading ahead of expectations | Gooch & Housego (GHH LN) FY17 trading in line with expectations | Gresham Technologies (GHT LN) Trading in-line, new CTC win | Walker Greenbank (WGB LN) Encouraging autumn order intake trends underpin EPS forecasts
GHT GHH SDG FUTR
Gresham announced its third North America bank win in CTC in the last nine months, with the client using CTC to support its global regulatory control framework. Whilst we make no changes to our forecasts, this positive momentum in the highly strategic North American market is very encouraging and highlights the group’s ability to compete and win opportunities in this market.
Gresham’s H1 results showed 50% growth in adjusted EBITDA and 62% growth in adjusted EPS driven by another strong period for its portfolio of Clareti products and its flagship product, CTC. The group won 8 CTC clients in the period (vs. 11 for the whole of 2016), including 3 in the strategically important North American market. In addition, CTC is increasingly displacing legacy vendors in the customers rather than being used just for new projects, confirming a much more significant market the group can address. Our forecasts are unchanged; we expect to see continued strong growth driven by CTC.
Gresham issued a half year trading update indicating trading is in line with expectations and that it remains confident in the full year outlook. Revenues and adjusted EBITDA are expected to be strongly up, with Clareti driving the performance. Clareti revenues are expected to be up 52% y-o-y (35% excluding C24). We are not making any changes to forecasts. Eight CTC wins in H1’17 compares against 11 won in the whole of 2016, 11 in 2015 and 8 in 2014. A couple of the wins are also in the strategically important North American market and the group is also starting to replace legacy vendors. As such, we believe the group is in a good place and seeing positive momentum which we expect to carry on for the rest of the year.
Gresham Technologies announced a significant contract win with one of North America’s largest financial services group. This is the third new CTC customer win in North America this year and follows on from its first US Tier 1 bank win in late 2016. This is a strategically important region for the group and the accelerating development of opportunities bodes well for growth prospects. Clareti continues to prove to be a disruptive offering in the financial services market – opening doors to long-term relationships with a whole raft of financial services companies including Tier 1 institutions. We believe the medium and long-term outlook for the group remains exciting.
At the time of its FY results in March, Gresham indicated that 2016 has started well with a significant professional services extension with a Tier 1 UK bank and a US asset manager. Today, the group announced a further 3 CTC wins (2 UK-based hedge fund investment firms and a US third party fund administrator). We remain positive of the growth prospects for the group given its expanding applications portfolio for financial control, risk management and regulatory compliance see this contract momentum as supportive of that.
Gresham delivered strong FY’15 results driven by the significant progress of CTC. New wins across key geographies, growth of existing accounts and increasing use cases combined with a growing sales and marketing team and an increasingly sophisticated platform, leave us confident of prospects. With an expanding applications portfolio for financial control, risk management and regulatory compliance, the global opportunities for the group remain exciting with potential to develop a leadership position in enterprise data integrity.
Gresham year end trading update showed revenues, adjusted EBITDA and cash performed in line with expectations. CTC continues to be the growth engine with software sales up 212% y-o-y. CTC new customer wins (11) are from all over the globe with use cases ranging from financial control to data integrity assurance during business transition. The group also launched its cloud service and made investments in sales and marketing to support continued momentum. With CTC at its core, the group is building a leadership position in a new category of enterprise data integrity where we believe there is significant opportunity. Prospects remain bright.
Gresham issued an update that showed progress across a number of fronts and confirmed it has strong visibility of forecast revenues for 2015 and is trading in line with expectations. The group signed a further four new name customers for its flagship CTC product (3-year contract value of c. £2m), launched new technology including an upgrade to the core CTC platform that enhances on-boarding significantly, launched Clareti-as-a-Service, giving customers access to CTC in the cloud and expanded its sales capability in the US. We are encouraged by all these developments and believe it is indicative of positive momentum and should help drive further growth going forward.
Gresham has announced a new CTC customer win in the insurance sector. The addition of this Singapore-based global provider of insurance and asset management services is further validation of Gresham’s best-in-class transaction control and data integrity platform and continues the positive momentum being shown under new CEO Ian Manocha.
Gresham delivered an interim performance in line with expectations driven by good growth in its core CTC product. The performance puts them on track to deliver our full year expectations of revenue of £14.9m and adjusted PBT of £2.1m. CTC progress has been strong with both new and existing customers and the outlook remains positive. We believe new CEO Ian Manocha’s experience in growing businesses will help advance the group’s sales strategy with multiple opportunities for CTC growth (product extensions, international growth, new industries). The group has done well to rebuild confidence in 2015 thus far but we believe there is more to go for with strong execution. The market demand for modern transaction control and data integrity platforms remain high and CTC is proving to be best-in-class.
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