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Annual Financial Report 2022
Gresham Technologies plc
Registered Number 01072032
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Table of contents
Gresham Technologies plc
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Annual Financial Report 2022
SECTION
PAGE
STRATEGIC REPORT
3
Corporate statement, purpose and values
3
Investment case
4
Highlights
5
At a glance
7
Chair’s statement
9
Business model
11
CEO’s statement
13
Innovation
18
Strategy
20
Strategy in action
21
Key performance indicators
23
Stakeholder engagement
25
Environmental, social and governance
27
Financial review
36
Principal risks and uncertainties
43
CORPORATE GOVERNANCE
47
Chair’s introduction to governance
47
Board of Directors
48
Corporate Governance Report
50
Audit Committee Report
55
Nomination Committee Report
59
Introduction to Remuneration Report
61
Remuneration Report
62
Directors’ Report
79
Statement of Directors’ responsibilities
83
FINANCIAL STATEMENTS
84
Independent auditor’s report
84
Consolidated income statement
92
Consolidated statement of comprehensive income
93
Consolidated statement of financial position
94
Consolidated statement of changes in equity
95
Consolidated statement of cash flow
96
Notes to the financial statements
97
Company balance sheet
139
Company statement of changes in equity
140
Notes to Company financial statements
141
CORPORATE INFORMATION
150
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Corporate statement, purpose and values
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Corporate statement
Gresham Technologies plc is a global leader in mission critical software and automation solutions for financial services. Listed
on the main market of the London Stock Exchange (“LSE:GHT.L”) and headquartered in the City of London, our 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.
Our purpose
Our purpose is to enable financial institutions to digitise their operations, giving them complete confidence in their data to
improve competitiveness and manage risk and reputation. We have built an award-winning software platform which helps
firms operate efficiently, manage risk, stay compliant and focus on their customers, knowing that their data and digital
processes are under control.
Our values
We Embrace Difference
We value different backgrounds, experience, expertise and ways of thinking. We encourage curiosity and respect every
individual, recognising that everyone has the capability to bring something extraordinary to the table. We each apply our
unique talents with passion and integrity and we are all committed to making Gresham an exceptional place to work.
We Create Together
Working together with our colleagues, customers and partners, we create energy and a dynamic approach to challenge the
norm and find innovative ways to solve problems. Through open discussion and feedback, healthy debate and continuous
learning, we combine the virtues of experience and fresh thinking. We operate at pace, taking the lead where appropriate,
ensuring that we work together to seamlessly deliver outstanding products and services.
We Champion Success
We are passionate about delivering successful outcomes for our customers, employees, partners and shareholders, as well
as our industry and our community. Our nimble approach means that we can adapt to our customers’ individual ways of
working, taking ownership for delivering the wow factor, delighting customers and enabling our business and our people to
grow and flourish.
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Investment case
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Reasons to invest in Gresham
We are a global leader in mission critical software and automation solutions for financial services. We have an enviable blue-
chip customer list and an absolute commitment to market leadership through innovation. Supported by our global operating
platform, our proven, scalable business model is consistently generating high levels of recurring revenues and delivering
profitable growth.
Global fintech leader
We have deep domain expertise and support 275 customers across 30 countries, including several of the world’s largest
banks.
A culture of innovation
Our 215+ staff across 10 offices are amongst the most talented in the world, with strong values and a commitment to
innovation. This keeps us at the heart of customer workflows.
Long-term market drivers
Our addressable market is expanding as systemic data challenges persist and firms increasingly turn to modern automation
solutions to secure operational efficiencies, meet regulatory obligations and customer demands.
Scalable SaaS business model
Our best-in-class software subscriptions are delivering high quality, high growth recurring revenues and strong margins, with
24% organic ARR growth in the last five years.
Ambitious
We are aiming to build a £100m+ ARR SaaS business through a five-pillar growth strategy. We have a highly experienced
management team fully committed to delivering shareholder value.
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Highlights
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Annual Financial Report 2022
Financial
•
Forward-looking Clareti Annualised Recurring Revenue (“ARR”) up 17% to £28.1m as at 31 December 2022.
•
Group revenues up 32% to £48.7m.
•
Clareti revenues up 39% to £35.5m.
•
Clareti recurring revenues up 46% to £27.4m
(5)
(6)
.
•
Adjusted EBITDA
(1)
up 43% to £10.3m (2021: £7.2m).
•
Cash adjusted EBITDA
(2)
of £4.4m, an increase of 76% on the prior year (2021: £2.5m).
•
Profit before tax as reported up £2.8m to £3.2m (2021: £0.4m), including expenses adjusted in EBITDA metrics above of
£3.5m (2021: £3.5m).
•
Adjusted diluted earnings per share
(3)
up 50% at 7.5 pence (2021: 5.0 pence).
•
Cash at 31 December 2022 of £6.3m and no debt after payment of £4.4m in contingent consideration for previous
acquisitions (2021: £9.1m and no debt)
(4)
.
•
Final dividend proposed at 0.75 pence per share (2021: 0.75 pence).
Operational
•
Standalone Clareti business cash profitable for the first time, generating cash EBITDA
(2)
of £1.1m, as growth, scale and
operating leverage begin to take effect.
•
12 new-name wins, including several global Tier 1 financial institutions, bringing total customers to more than 275 across
30 countries.
•
Electra business integration completed and delivering initial cross-sells and operating synergies.
•
Strong growth in cloud and other recurring revenues.
•
Net ARR retention for the year of 102%, highlighting growth within existing customer base.
•
Continued growth and development of key accounts.
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Highlights
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•
Excellent economic returns being realised by Tier 1 firms replacing legacy reconciliation software with Control.
•
Digital corporate banking product developed with Australia and New Zealand Banking Group now deployed into
production use.
Outlook
•
Larger, more resilient Group, with more than £42m of FY23 revenues under contract, providing significant visibility and a
robust platform to execute growth strategy.
•
Management confident about the prospects for the Group.
(1)
Adjusted EBITDA refers to earnings before interest, tax, depreciation and amortisation, adjusted for one-off exceptional charges and share-based payments. (see note 5 of the Group
financial statements).
(2)
Adjusted EBITDA less capitalised development spend and any IFRS16 lease-related cash payments.
(3)
Diluted earnings per share, adjusted to add back share-based payment charges, deferred tax charge on the inter-group sale of IP, exceptional items and amortisation from acquired
intangible assets.
(4)
Excludes any IFRS16 lease-related payables.
(5)
The Electra acquisition completed on 22 June 2021.
(6)
Percentage increases stated above are based on rounding to the nearest £’000 as disclosed at detailed level within this report.
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At a glance
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A global platform for growth
We are building a global fintech champion.
We have:
•
10 offices
o
UK: London, Bristol, Solihull, Southampton
o
EMEA: Luxembourg
o
Americas: New York, Florida
o
Asia Pacific: Australia, Singapore, Malaysia
•
215+ employees
•
275+ customers in 30 countries
•
102% ARR net retention
•
38% five-year ARR CAGR
Technology solutions for control and automation in financial services
Our vision for our customers is that their every action and decision is based on data and processes they can trust.
Our platform
Clareti is our enterprise-grade SaaS platform to connect, reconcile and control “any and all” data and processes.
Our solutions
Reconciliation
Simplify the complexity of buy-side and sell-side reconciliations and scale to growth with end-to-end automation, intelligent
matching, and accelerated onboarding.
Regulatory reporting
Deliver accurate, on-time reports through connectivity with multiple trading and reporting venues, real-time matching, and
consolidation across multiple regulatory regimes.
Connectivity
Dynamically connect to trading and regulatory venues, clients and partners across the financial services ecosystem through
350+ industry connections and data transformation services in the cloud.
Data aggregation
Access normalised, validated data on securities, cash positions, transactions, and trade fail investigations from 1,500+ global
sources to feed reconciliations and other post-trade workflows.
Our industries
•
Capital markets
•
Banking and payments
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At a glance
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•
Investment management
•
Energy and commodities
•
Insurance
•
Corporates
Growth strategy
Our growth strategy is based on five pillars:
•
Cross-industry – we have an immediate addressable market of 500 banks globally and over 1,000 buy-side firms.
We are already regarded as an innovative partner to many of the world's largest financial institutions, coupled with
incremental opportunity from new industry verticals.
•
Land and expand – by delivering ROI every day we believe we can increase revenues with our existing clients as
they roll out our solutions across business lines and geographies.
•
International – we have grown organically and entered new international markets over the last decade. Through the
acquisition of Electra in June 2021, we have a large footprint in North America which gives us an important platform
for growth.
•
Cross-sell and solutions – we have a continuous programme of re-investment into product innovation, providing
incremental growth opportunities and ensuring our market leadership position is maintained.
•
M&A – in addition to strong organic growth, we have made a number of successful acquisitions and have the financial
strength and trusted partner client relationships to lead further consolidation.
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Chair’s statement
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Annual Financial Report 2022
Dear shareholder
Overview
I am pleased to report on another period of sustained progress for Gresham Technologies. This year has seen the full benefits
of our M&A and integration programme being realised through the transformational acquisition of Electra, while the
optimisation of our sales team has meant that core product lines have performed consistently across a mixture of industries
and geographies as more global financial institutions invest in Gresham’s expanded suite of solutions. The Group’s
progression against its strategic vision has been a result of strong leadership, market-leading solutions and a highly committed
and talented global team.
Throughout the period under review, we have built upon the momentum delivered in FY21 and continued to execute effectively
against our growth strategy. We secured 12 new Clareti customers, including substantial long-term agreements with three
global Tier 1 financial institutions, and successfully executed on our land and expand strategy by winning new projects with
existing clients, resulting in ARR net retention levels in excess of 100%.
Overall, the Group’s performance has been strong with two upgrades to forecasts during the year. Revenue for the period
was significantly up 32% to £48.7m (2021: £37.0m), adjusted EBITDA increasing 43% to £10.3m (2021: £7.2m), and operating
profit increasing by £3m to £3.5m (2021: £0.5m). In a year that has seen a number of challenging macroeconomic headwinds
impacting the wider sector, this is an outstanding achievement for the Group.
Based on the overall financial performance and the cash within the business, the Board will be recommending a final dividend
of 0.75 pence per share (2021: 0.75 pence) at the forthcoming AGM.
Delivery against our strategic vision
2022 saw strong progress against the major strategic goals identified by the Board, including:
•
The full integration of Electra, and the realisation of its impact on improving customer stickiness and incrementally
increasing ARR;
•
Very good revenue visibility across both Clareti and non-Clareti, with over £42m of 2023 Group revenues already
under contract; and
•
Increased investment in global sales and marketing teams to capitalise on the market opportunity.
People and culture
I am delighted to report that we have had another “best ever” result from our annual Employee Engagement Survey. This
continues a six-year trend of improvement in overall engagement, with a response rate increase to 72% and an overall
engagement score of 82% (2021: 78%).
Gresham’s excellent culture is exemplified by our high staff retention rate, something of an anomaly for the sector. As a
people-oriented business, Gresham goes to great lengths to remain competitive as an employer and ensure that it is a
welcoming and rewarding environment for all of its staff.
I would like to take this opportunity to thank our team across the globe for their hard work and dedication throughout the year,
without whom the successes during the year would not have been possible.
ESG
The Board is committed to operating the business in a sustainable way, which includes managing our impact on the
environment, our social responsibilities to our people and those within our communities, improving outcomes for our
customers, and operating as an ethical business through direct and indirect practices. Further details of the Group’s ESG
strategy can be found starting on page 27.
During the period, Gresham released a comprehensive statement regarding the Task Force on Climate-Related Financial
Disclosures (“TCFD”) for financial year 2021. Disclosure for 2022 can be found starting on page 30.
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Chair’s statement
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Outlook
Following another successful year, which has seen the Group build on the momentum of previous periods, I am pleased to
say that Gresham has finished 2022 as a stronger company. Despite the challenges that macro headwinds have brought to
most industries and businesses, we have continued to deliver against our strategic priorities and established a strong
foundation upon which to achieve scalable growth and fully capitalise on the opportunities available in the market.
As we continue to progress, the Group will focus on:
•
Optimising our global sales and marketing capabilities via strategic investments;
•
Continuing to grow and diversify ARR by leveraging the platform we have built; and
•
Remaining cognisant of further M&A opportunities that meet Gresham’s financial criteria and enhance existing
operational capabilities.
The Board remains confident in the year ahead and the medium-term opportunity for Gresham to address the expanded
market opportunity in front of us.
Peter Simmonds
Non-Executive Chair
13 March 2023
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Business model
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Our business model is to earn high-margin, recurring revenues by providing innovative software solutions for reconciliations,
regulatory reporting, connectivity and data aggregation services.
Our strengths
Compelling market opportunity
The financial services industry is being re-imagined through digital transformation and regulatory pressures, but firms are
constrained by their legacy systems. This creates a compelling market opportunity for smarter automation and technology
controls over data and processes.
Disruptive technology
Our Clareti platform is best-in-class, versatile, highly scalable and sits at the heart of customer workflows. We have an
exceptional innovation engine and a proven track record of bringing disruptive solutions to market, offering fast time to value
and low cost of ownership.
People and culture
We have an exceptional pool of talent that incorporates a vital blend of skills and experience. Our deep domain expertise and
dynamic culture ensure we continuously develop and deliver effective solutions for our customers, establishing us as trusted
advisors.
Our business
Sales and marketing
Our direct sales team are based in major financial centres and focus on our key sectors. Targeted lead generation and other
marketing initiatives are used to originate new clients, be they big global accounts or regular mid-sized firms. Account
expansion is delivered through increased usage, up-sells and cross-sells. We also generate indirect sales through our partner
channels.
Customer success
Our customer success team are focused on delivering the best possible service and outcomes for our customers throughout
the entire lifecycle, which promotes loyalty, advocacy and account growth. We have professional services consultants in all
our key locations. Our global support and managed services teams are available 24/7.
Charging model
We operate a subscription model for software and cloud solutions. Subscriptions are typically limited by geography, business
line, modules and/or volume to allow for future account expansion. Fees are generally charged annually in advance, although
some contracts are usage-based with monthly or annual true-ups. Managed services are charged on an annually recurring
basis. One-off professional services are charged on a time spent basis.
Operations
We have a mature and highly effective global business platform, which supports our rapid growth and entrepreneurial decision-
making within an appropriate governance framework. Our regional go-to-market teams are supported by centralised systems
and processes for all key operational areas such as finance, people & culture, IT, information security, and legal.
Creating value
For investors
Our model builds capital value based on high levels of recurring revenues and sustained growth. A progressive dividend policy
has been in place since 2018, providing further shareholder returns.
For customers
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Business model
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Our solutions give customers confidence in their data in an increasingly complex and regulated environment. Our model
enables us to continually invest in innovation and maintain the value proposition of our solutions.
For employees
Our employees have the opportunity to be part of a fast-paced, entrepreneurial business, where individuals are valued and
career aspirations can be fulfilled. Corporate success is shared through an all-staff share scheme.
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CEO’s statement
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Dear shareholder
Overview: step-change in strategic opportunity
2022 has been a very pleasing year, with operational progress right across the Group and a step-change in strategic
opportunity, reflecting all the building blocks we have put in place over the last three years. In particular, the successful
integration of the 2021 Electra acquisition has not only delivered initial contract successes but, combined with our established
Clareti team and roadmap, is opening up far more extensive client conversations. The proof points of that progress includes
the high retention rate of Electra clients, a number of cross-sell wins and upgrades in our trading performance through the
year; resulting in positive Clareti cash EBITDA as operating synergies have materialised.
Our Clareti technology solutions now provide major banking and investment management clients with the tools to connect,
reconcile and control their data, enabling them to automate their post-trade business processes and have confidence in their
digital operations. In the year, we signed 12 new clients to reach more than 275 across 30 countries and successfully added
some of the world’s largest financial companies. This included one of world’s largest asset managers that signed a contract
for Control and Data Services in the cloud to replace a legacy reconciliation product and to streamline its data aggregation
processes. The US-based firm, consistently ranked in the top five global asset managers by AUM, will partner with Gresham
to consolidate all market-facing reconciliations and data controls for their corporate business onto a modern cloud platform
with an initial order value of $1.9 million.
We have also won key contracts in Europe and Asia Pacific, highlighting the global challenges facing the financial sector, the
repeatability of our solutions and the increasing maturity of our sales efforts. During the period, we also saw wins in the
payments, energy and digital asset sectors, as well as our core capital markets segments.
Clareti ARR grew £4.1m, or 17%, to £28.1m and recurring revenues increased by 46%, up £8.6m, to £27.4m, highlighting the
significant scale-up of the business over the last year. Higher gross margins, as well as the growth in revenues, contributed
to Clareti Cash EBITDA of £1.1m
and, at Group level, cash EBITDA up 76% to £4.4m. We finished the year with a strong
balance sheet, including cash balances of £6.3m after making the first deferred consideration payment for Electra.
Market: continuous waves of regulation and digital optimisation
A number of key drivers continue to support our growth outlook:
Managing risk and regulation
All businesses need to invest in their core processing systems and data platforms to create more intelligent and automated
solutions that reduce the need for manual interventions and the risk of error. Within the financial services sector, this has been
compounded over the last 15 years by growing regulatory pressures and scrutiny. This increases the need for financial
institutions and banks to have timely and accurate processing, coupled with greater transparency and accountability. Our
software helps companies connect, reconcile and control the many disparate sources of transaction, finance, and risk data to
ensure accurate day to day processing, and to satisfy and report on new and existing regulations.
Given the size of our client base, this underpins a steady flow of up-sell contracts and services opportunities for Gresham.
New regulation drivers in 2022 included The European Market Infrastructure Regulation (“EMIR”) Refit which is designed to
amend and simplify European markets infrastructure and brings with it major changes, including an uplift in the number of
reportable data items.
In the US, the Securities and Exchange Commission have proposed shortening the standard settlement cycle for most broker-
dealer securities transactions from two business days following the trade date (T+2) to one business day (T+1), with
implications for how broker-dealers, investment advisers and clearing agencies process institutional trades.
The pressure on public finances globally has also meant there is now an even greater focus by government departments and
regulators on maximising their collection of taxes, with implications right across the eco-systems of many financial companies.
Further regulation and heightened scrutiny increase the need for banks and fund managers to review, simplify and potentially
upgrade their systems. The global market for regulatory reporting solutions is expected to reach USD $1.16bn by the end of
2026, with a CAGR of 19.5%.
Digital automation and platform modernisation
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CEO’s statement
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Aligned with the above, we are part of our clients’ investment to digitise their processes, reduce their operating costs through
automation, and serve their customers better. We are part of programmes globally aimed at improving the quality, connectivity
and exploitation of data to deliver more intelligent business outcomes. Of particular note are the ageing legacy reconciliation
systems implemented on-premise throughout the industry during the 1990s and early 2000s, which are expected to be
replaced by modern, more flexible, often cloud-based alternatives, over the coming years.
Underpinning business success
Our software not only enables businesses to survive in the modern era, but importantly, to become more competitive through
access to information and agile decision-making, which underpins the launch of new products and innovative customer
propositions. Given the tightening economy and ever competitive nature of financial markets, the operating efficiencies we
deliver are greatly valued by our clients.
Expanding market
The factors above underpin growth from our existing base and traditional markets. However, the overall size of the addressable
market for Clareti solutions and the competitiveness of our offerings are continually expanding, and we are increasingly looking
for opportunities to diversify further into new markets such as retail banking and payments, energy and the control of digital
asset data processing. At a high level, the risk management software market is valued at around $35bn and is expected to
grow at a CAGR of 10%+ in the medium-term.
Helping our clients manage macro headwinds
The macro and market backdrop will mean that banks and fund management companies are mindful of ensuring value for
money as they review their IT budgets. Consequently, decision-making cycles are likely to increase. However, these large
enterprises have often patched together legacy solutions or relied on in-house teams to build and maintain software, with the
obvious challenges of retaining know-how. The result is often inaccurate, incomplete and poor-quality data, frequent
breakages, a black-box of manual workarounds and quick fixes, and platforms that struggle in terms of volume and speed as
new regulations layer on further demand and complexity.
In addition, as companies, CIOs and COOs pause for breath, they are under pressure to focus on remaining agile and
competitive, as well as compliant, and are faced with dealing with unexpected challenges such as remote working. In many
cases we will respond to RFPs to replace legacy systems, and in 2022 we won a number of contracts where we replaced
older competing technology, processes and platforms built in-house over time. This all provides opportunity for Gresham and
adds to our own operational protection even as economies struggle. Within banking, there are business and product lines
where a higher interest rate environment is in fact favourable to financial success, and here there will be a desire to reinvest
in technology along the way.
Operational progress: executing on our strategy
Post the transformative acquisition of Electra, we have been focused on integrating the business, processes and people, and
building a go-to-market platform and optimising our product roadmap. This will propel us towards our ambition of creating a
leading £100m ARR fintech with high margins, strong cash generation, and attractive valuation multiples typical of large
mature enterprise software firms.
Products and solutions: optimising our roadmap and branding
During the year we have seen the benefits of re-packaging our platform capabilities, including Electra assets, into three Clareti
product lines: Control, Data, and Connect; each with its own roadmap to encourage agility and innovation. Our products can
be combined to quickly deliver complete digital solutions for customers into environments where generic solutions are
inadequate. They are available on a subscription basis in the customers' data centres, or on a software-as-a-service basis in
a Gresham-hosted cloud. Optional subscriptions for the collection and aggregation of external data and/or the provision of
managed services are also available as routes to ARR up-sell.
Control
Clareti Control, our flagship offering, is an “out-of-the-box” enterprise-grade business self-service platform for the
reconciliation, exception management and control of “any and all” transaction data in financial markets. Clareti Control is now
well established in the market for “non-core” data problems such as inter-systems reconciliations, with dozens of successful
implementations. Over the last few years we have invested heavily into developing functionality for the “core” cash and
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securities reconciliations market, which legacy vendors have dominated for nearly three decades. We have now completed
large-scale legacy vendor product migrations in the US, Asia and Europe; delivering exceptional improvements in match rates,
operating efficiencies, and total cost of ownership. A high-performance upgrade loading and matching technology went live at
several customers, providing a path to solving the next generation of problems as financial markets move to ever tighter
processing cycles.
Whilst many of our earlier customers chose to deploy Control on-premise, our Clareti-as-a-Service cloud offering is gaining
traction in the market, and during the year we processed over 4.4 billion records in the cloud on behalf of our customers. We
continue to invest in cloud-native architecture, thin-client user interfaces, and self-service functionality.
Data and Connect
Our Data and Connect solutions allow customers to participate in the complex inter-connected global financial system without
needing to be concerned with third party data access, integration risk, cost, and time to market.
Our Data solution provides a cloud data collection and aggregation service for investment managers and fund administrators.
On average, a US medium-sized buy-side firm uses 59 data feeds, and we collect over 2,500 sources of data across our
cloud, highlighting the complexity for the client and the breadth of our solution. Last year, our Data service processed over
14.5 billion records from our secure data centres and operated with exceptionally high levels of service and support. We now
retrieve, process and deliver data to over 275 investment managers. Our goal is to become the leading independent provider
of bank and custodian account data to the investment management industry. We are investing to streamline the tooling that
underpins the Data service which will enable us to further improve margins as we scale.
Our Connect solutions enable customers to interact with their bank partners for payments and statements, support straight
through processing to trading venues, connectivity to regulatory reporting venues, and interoperability with other industry
applications. Connect provides not only connectivity but intelligent control over highly complex real-time data flows. During
2022 we went live with several customers on our latest cloud native platform and will progressively migrate our installed base
across to the new technology.
Digital Banking
Over the last few years, we have reported regularly on the progress of our strategic innovation partnership with ANZ. I am
pleased to confirm that the first product deliverable from the partnership, a cloud-native bank account platform, successfully
progressed into first production use at the end of the year. ANZ continues to fund the product development work via a
chargeable Innovation Service, and an exciting roadmap for future funded releases has been jointly mapped out. We intend
to promote this solution in the global market in 2023 under a new product brand. Launch plans are prepared and we look
forward to sharing further details in due course.
New contract wins
In addition to our Control and Data contract win with the top five global asset manager and the Connect win with Tier 1 bank
announced in December 2022, we have had other notable new customer wins in the year. This included one of Europe's
largest privately held banking and financial services firms that signed a contract for Clareti Control to replace legacy vendor
products across its global asset management business, consolidating all reconciliations and data controls onto a single
modern cloud platform. The initial contract has a minimum five-year term with total committed subscription fees in excess of
£1m. In Asia, we signed one of Singapore’s newest digital banks, and there were multiple new names in Europe, several of
which are public references available on our website.
Customer success - expanding within current clients
In May we were pleased to announce one of our largest ever contracts, a significant subscription agreement for Clareti
software with an existing customer, one of the world's largest commercial and retail banks, for £6.3m (over five years). This
followed an initial contract for the first deployment of Clareti Control within its UK operations in June 2020. As a result of the
success of the initial project, the bank has chosen to adopt our technology as its single enterprise control platform across the
entire UK business including retail accounts, cards, payments, and commercial banking. The platform will be used to deploy
a range of new controls, as well as replace existing manual processes and legacy vendor solutions.
In December, we announced an initial $1.3m enterprise agreement with one of world's largest banks, to extend the use of
Connect across their entire post-trade prime brokerage business. The solution will replace legacy FIX processing infrastructure
to streamline market connectivity and client onboarding. The contract has a five-year committed term, with minimum
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incremental subscription fees and additional recurring usage-based fees. This award was particularly pleasing as we have
been working directly with this client since our acquisition of Inforalgo in July 2020.
The two Tier 1 bank early adopters of our Control for Cash and Securities product are now live at scale and realising the
benefits of replacing legacy systems. One of these implementations has delivered a 35% improvement in automated match
rates, giving the client a substantial economic benefit in terms of headcount.
We continue to maintain and grow our relationship with long-standing client, ANZ Bank. In September, we signed contracts
totalling over AUD $19m to cover the period until September 2023. This contributed to account growth of approximately 15%,
with uplifts in both the Clareti and non-Clareti businesses from recurring software, recurring managed services, consulting
and contracting services.
During the year, our professional service teams supported 64 new go-lives with customers and were engaged in over 150
active projects. We now have reference clients in all of our targeted industry segments and key geographies across the
breadth of our solution portfolio.
People
Gresham’s commitment to its people is at the centre of what we do. We continue to invest in both our team and our community
to ensure we remain both an attractive and enjoyable work environment for current and future employees. These investments
have focused on optimising operational efficiencies post-Electra through upskilling and consolidating, while providing all of
the resources required to support our people in their work through collaboration tooling, on-line training, internal events,
leadership, and mental health accreditations.
A stand-out in the year has been our success in hiring and building out our sales and marketing team. We now have a strong
team in place across Europe, US and Asia; and, given the global breadth of our client wins over the last year, we believe this
leaves us very well placed to expand within our current client base as well as win new ones.
These investments in our people have been a success and I am pleased to report a sixth consecutive record result from our
annual employee engagement survey. It was hugely pleasing to see the total response rate increase to 72%, while our overall
engagement score increased to 82%. We are particularly pleased to report that our newly added questions on diversity and
inclusion scored very well and validate our efforts in that area.
Brand and vision
In the decade since commencing the Clareti business, Gresham has transformed into a respected provider of data and process
control solutions to global financial markets. Our programme of acquisitions has further strengthened our market presence
and extended our product portfolio and customer base. Our vision is for Gresham to become a world-leading provider of cloud-
based post-trade solutions aligned with our mission of making business flow and reducing friction in financial markets.
Acquisitions
Over the last few years we have successfully made three small bolt-on acquisitions, C24, B2, and Inforalgo; each with c.£1m
ARR when acquired. We have now fully integrated the transformational acquisition of Electra, which we made in 2021,
contributing over £9m of ARR. All four acquisitions have been financially and strategically accretive and the average 3x ARR
we have paid for these businesses highlights our discipline, track record and return for shareholders. We continue to look at
acquisitions that are in-line with our strategic vision. However, we will remain focused on how we allocate capital and be
selective in making further acquisitions.
Current trading and outlook: robust foundations and positioned to grow
Our success reflects our research, planning and focus on delivering value to our clients. The team’s years of hard-work,
together with significant investments in people and infrastructure, have put in place the building blocks of a diversified and
scalable fintech platform with a market-leading product portfolio, highly invested cloud architecture, established blue-chip
global customer base, and an ambitious, proven management team.
We have started 2023 well, and, while macro challenges persist, we have highlighted that the pressure for efficiency and
competitiveness means our clients and target clients have a need to engage with us in tougher times as well as good ones.
We have a business today which has a good balance between Europe and the US, and a growing presence in Asia, with a
core addressable market greater than c.$500m and opportunity to expand further across the wider financial services sector.
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We entered 2023 with very good visibility across both Clareti and non-Clareti, with over £42m of Group revenues already
under contract and confidence in our growth outlook. We have a good pipeline of new clients in our core markets, and we also
have demand in the insurance, energy, government and other sectors which we continuously look at how best to service. With
the difficult economic backdrop, we continue to carefully manage product and people investments and ensure that, as the
operating leverage of our model becomes increasingly evident, we can deliver sustained growth over the next few years.
With the support of shareholders in building our platform, and the hard work of our talented global team, we have created the
foundations for success and remain confident in our ambition to build a £100m ARR SaaS business with best-in-class
performance metrics expected of a valuable global financial technology company of substantial scale.
Ian Manocha
Chief Executive
13 March 2023
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Innovation
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Innovation
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Strategy
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Our strategic plan is designed to drive profitable growth and create long-term shareholder value.
Strategy
Key achievements in 2022
Key priorities for 2023
Build a high-margin, recurring
revenue stream based on
Clareti software and cloud
services.
We increased Clareti ARR by 17% (see KPIs,
page 23). Clareti ARR now represents 89% of
Group ARR (2021: 85%), and 57% of our Clareti
ARR is generated from our cloud solutions (2021:
57%).
We will continue to invest in sales and marketing
capacity generally. We will look for opportunities
to move into new geographies and to strengthen
our team. We will increase our focus on managed
services, account expansion and renewals.
Create a valuable financial
technology business through
Clareti-led growth and
complementary acquisitions.
We have integrated Electra into the Group and
secured strong customer and talent retention
rates. We have delivered Clareti revenue and
profitability growth, with Clareti becoming cash
positive for the first time, thereby increasing the
value of the Group.
We will aim to achieve additional revenue, cost
and operational synergies from our acquisitions to
enhance Clareti revenue and profit. We will
continue
to
explore
appropriate
acquisition
opportunities.
Establish Clareti as the
enterprise data integrity platform
“category leader”.
We
delivered
global,
industry-specific
and
geography-specific marketing programmes to
promote our brand and support revenue growth.
Key components of our plans included the voice
of the customer, adding customer-attributed
quotes, as well as digital enablement and thought
leadership initiatives.
Our marketing priorities in 2023 are geared
towards brand amplification, market research,
industry analyst, journalist and social media
engagement across a host of digital and online
channels. These priorities will co-exist alongside
a beat-rate of demand generation programmes.
Focus our product investment
on innovative Clareti solutions
for our chosen markets.
We
proved
our
market-facing
product
investments by completing multiple migration
projects from our main competitor's solutions.
We
delivered an extreme volume release of Control
to process billions of transactions on commodity
hardware, and also delivered feature rich API’s for
direct integration with the Clareti platform.
We will release thin client user interfaces and
further API enhancements to increase product
appeal and integration. We will demonstrate new,
intelligent automation capabilities that increase
customer ROI from our products. We will continue
to expand our capabilities across all products.
Retain strategic non-Clareti
revenues to support Clareti-led
growth.
Our non-Clareti business has operated strongly
and
its
contribution
has
supported
Clareti
investments. The contracting services business in
Australia performed strongly once again. We
made the decision to discontinue our legacy EDT
line of business.
We will continue to operate the non-Clareti
business as effectively and profitably as possible,
whilst avoiding risk and minimising operational
complexity. We will keep legacy products under
review and consider changes or discontinuations
where appropriate.
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Strategy in action
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Control
A single source for end-to-end automation, validation and reconciliation of data, controls, workflows and reporting.
“Gresham’s Control solution is already improving our control mechanisms while simultaneously allowing us to innovate and
scale. This particular module was exactly suited to meet the challenges we’re facing today, and Gresham’s best-in-class
technology stack is aligned with several of our future objectives. We’re looking forward to expanding our relationship to
leverage additional solutions and services such as securities reconciliation and other key functions which are essential to our
long-term competitive advantage and business growth targets.”
Morten Juhl Lilleøre, Head of Operations, Banking Circle
Factoids:
•
50% typical reduction in exception handling by firms using Control
•
97% reduction in time to onboard new controls
Connect
Fully managed intelligent connectivity, data migration and integration with trading partners, banks, clients, regulators and other
venues across the financial services ecosystem.
“We were struggling with in-house development resources, with even fewer understanding the differing types of Post Trade
feeds across trading systems that our primary dealer business needed. Our main aim was to be up and running quickly so
time-to-market was important but, as with any business scaling up, controlling operational connectivity and integration costs
was also a factor – Gresham’s Connect allowed us to do just that and we couldn’t be happier!”
Head of Middle Office, Primary Dealer
Factoids:
•
42 countries using Connect and Control at one multi-national corporation
•
350+ adapters and transformations, for out-of-the-box connectivity
Data Services
A fully outsourced service that collects, aggregates, normalises and delivers accurate, reliable data on securities, cash
positions, transactions and investigations.
“Gresham's Data Services saves an immeasurable amount of time each day in collecting data, checking and chasing down
feeds, managing and adding subscriptions, and normalising and delivering the data to our reconciliation workflows, portfolio
accounting systems, and wherever we need to drive back-office efficiencies.”
Head of Operations, Large Investment Management Firm
Factoids:
•
1,600+ global data sources
•
4800 unique data feeds
•
1.2bn the average number of records acquired each month on behalf of our customers
Managed services
Flexible and scalable cloud deployment, operations and technical services supporting crucial parts of firms’ connectivity,
regulatory reporting and reconciliation workflows.
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Strategy in action
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“As our business underwent a period of significant growth, we found that the increased volume and complexity of data and
reconciliations was putting more and more stress on our operations team which would have required adding headcount.
Thanks to Gresham’s Managed Services, we are actually predicting another 50% reduction in reconciliation time, down to 15
hours per week. This is all due to Gresham’s team always finding more ways to improve our process even as we grow and
expand into new markets.”
Julianna Jones, Operations Manager, WCM Investment Management
Factoids:
•
£20tn in assets moved daily by our solutions
•
£3m in yearly savings delivered for a tier one investment bank
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Key performance indicators
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Financial KPIs
The following key performance indicators (“
KPIs
”) have been selected as the most appropriate financial measures of strategy
execution for the Group. Performance of these KPIs has been discussed within the Chair’s Statement, CEO’s Statement and
Financial Review.
KPI
Performance in
2022
(1)
Description
Why is it a KPI?
Group revenue
£48.7m (up 32%)
Total revenue generated and recognised in
the year from all operations, including
Clareti Solutions and Other Solutions.
Measures the Group’s overall performance
at revenue level, which is an indicator of
the Group’s overall size and complexity.
Clareti revenue
£35.5m (up 39%)
Total revenue generated and recognised in
the year from Clareti Solutions.
Measures the Group’s success in winning
and retaining Clareti revenues, which is an
indicator of the Group’s progress in its
Clareti-led strategy.
Clareti ARR
£28.1m (up 17%)
Aggregate value of all recurring revenues
from Clareti Solutions that are either fully or
partially contracted for the next twelve
months and/or are highly expected to
renew in the next twelve months. The value
stated is as at 31 December 2022.
Provides a forward-looking view of the
minimum expected Clareti revenues in the
next
twelve
months,
which
gives
confidence
to
business
planning
and
investment decisions.
Adjusted EBITDA
(2)
£10.3m (up 43%)
Group
earnings
before
interest,
tax,
depreciation and amortisation, adjusted for
share-based
payment
charges
and
exceptional items.
Key measure of the Group’s effectiveness
in
converting
revenue
to
earnings,
excluding the effects of certain non-
operational
and/or
exceptional
transactions.
Cash Adjusted
EBITDA
(2)
£4.4m (up 76%)
Adjusted
EBITDA
less
capitalised
development
spend
and
any
IFRS16
lease-related cash payments.
A reflection of cash generation in the year,
reflecting the Group’s effectiveness in
converting revenue to cash generation.
Adjusted diluted
earnings per share
(2)
7.5 pence (up 50%)
Earnings per individual share, taking into
account changes in capital structure and
issued equity on a fully diluted basis,
adjusted
for
share-based
payment
charges, deferred tax charge on inter-
group sale of IP, exceptional items and
amortisation
from
acquired
intangible
assets.
Measure
of
Group
profitability
that
identifies performance on a per share
metric and enables comparisons against
other companies.
Net cash
£6.3m (down 31%)
Aggregate net cash balance as at 31
December 2022 including bank deposits
after operational, investing and financing
activities during the financial year.
Provides
a
measure
of
the
Group’s
financial strength and self-sufficiency to
support operations, make investments and
withstand unexpected headwinds.
(1)
All KPI data excludes discontinued operations, except for profit before tax which includes discontinued operations and exceptional items.
(2)
The adjustments to earnings per share and EBITDA have been provided in order to present the underlying performance of the business on a comparable basis (see note 5).
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Non-financial KPIs
The following KPIs have been selected as the most appropriate non-financial measures of strategy execution for the Group.
Performance of these KPIs has been discussed within the Chair’s Statement, CEO’s Statement and Financial Review. The
Group tracks a number of other non-financial performance indicators operationally that are not considered to be individually
relevant as measures of overall strategy execution success. This is reviewed annually.
KPI
Performance in 2022
Description
Why is it a KPI?
Number of Clareti
customers
275+ (2021: 270+)
Total number of Clareti customers as at 31
December 2022.
Growing the customer base provides
additional revenue as well as opportunities
for future expansion.
Clareti ARR net
retention rate
102% (2021: 106%)
The rate of Clareti ARR growth in the
previous twelve months based exclusively
on contracts in place at the start of the
twelve-month period. Includes annualised
and apportioned rate from Electra since
acquisition.
This measure provides the Clareti ARR
growth rate of a specific customer cohort
from start to end of the year, which enables
the Group to analyse and address causes
of Clareti ARR attrition and plan more
reliably.
People engagement
score
82% (2021: 78%)
The overall score derived from the Group’s
annual employee engagement survey.
A highly engaged workforce tends to be
more productive, so this measure provides
an assessment of the overall engagement.
The detailed survey results enable the
Group
to
take
targeted
action
as
appropriate.
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Stakeholder engagement
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Section 172(1) statement
Section 172(1) of the Companies Act 2006 provides that a director of a company must act in the way he/she considers, in
good faith, would be most likely to promote the success of the company for the benefit of its members as a whole, and in
doing so have regard (amongst other matters) to:
(a)
the likely consequences of any decision in the long term;
(b)
the interests of the company’s employees;
(c)
the need to foster the company’s business relationships with suppliers, customers and others;
(d)
the impact of the company’s operations on the community and the environment;
(e)
the desirability of the company maintaining a reputation for high standards of business conduct; and
(f)
the need to act fairly as between members of the company.
This section describes how the Directors have had regard to the matters set out in section 172(1)(a)-(f) of the Companies Act
2006 and forms the Directors’ statement required under section 414CZA of that Act. In making this statement, the Directors
have focused on matters of strategic importance to the Group, having regard to the size and complexity of its business.
Stakeholder group
Why engagement is important
How management and/or
Directors engage
Strategic decisions in the year
Investors
For further information, see
Corporate Governance Report,
starting page 50.
To communicate our long-term
strategic objectives effectively
and promote long-term holdings.
To secure investor support for our
strategic objectives and ensure
access to capital to deliver on our
execution plans.
AGM, analyst presentations,
investor presentations, and,
periodically, a capital markets
day.
Individual investor meetings with
the CEO, CFO, Chair and/or
Committee Chairs.
We organised a capital markets
day for existing investors,
prospective investors and
analysts.
We enhanced our investor
communications and messaging
through our website and
corporate materials.
We conducted shareholder
consultations on remuneration
matters.
Workforce
For further information, see ESG
and People and Culture, starting
page 27.
To retain talent and maintain high
productivity rates.
To promote our culture, purpose
and values, foster a healthy
working environment for our
workforce, support their wellbeing
and be a responsible business.
To maintain competitive
advantage and deliver market-
leading solutions to our
customers.
Transparent workforce
engagement surveys,
performance reviews, objective
setting and formal policies and
procedures. Engagement survey
results are presented to the
Board, with agreed action plans
to address any areas of concern.
Regular “all-hands” meetings and
visits to UK and overseas offices.
Supporting initiatives such as
mental health awareness days,
charity fundraisers and social
events.
Following positive feedback from
our workforce on the Group’s
approach to working in the post-
pandemic era, we introduced a
formal hybrid working policy.
Following the lifting of COVID-19
restrictions, we held employee
events in the UK and in the US to
collaborate, connect and
celebrate with each other.
We developed an ESG strategy
and formed an ESG Champions
Network to promote ESG-related
topics; which are heavily
influenced by our people rather
than management.
Customers
For further information, see
CEO’s statement, starting page
13 and ESG, starting page 27.
To ensure we meet or exceed our
customers’ requirements and
maintain competitive advantages.
To build a highly referenceable
customer base with low attrition
rates.
Quarterly customer success
meetings, involving management
representatives.
Executive sponsorship
programme for key accounts.
Chairing industry roundtables and
customer forums to communicate
We made technology decisions
and product investments to
facilitate the integration of Electra
and prior acquisitions and
enhance our value proposition for
customers.
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To identify and assess new
market opportunities and
collaborate with customers on
high-value projects.
To promote brand loyalty and
identify sales opportunities for
other Gresham solutions.
and consult on product
development priorities and new
features to address emerging
market requirements.
Customer satisfaction surveys on
support incidents.
We made significant investments
in cyber security to secure
ISO27001 accreditation.
We developed an ESG strategy
and strengthened our compliance
processes to satisfy customer
due diligence requirements.
Suppliers
To ensure that we operate our
business effectively and without
disruption.
To act fairly and responsibly with
respect to our suppliers.
To adhere to our contractual
obligations to suppliers.
Key supplier relationships are
managed by the relevant
members of the management
team.
We participate in supplier reviews
when requested.
We introduced a supplier
approval process to manage
financial, legal and security risks,
enabling us to engage and
onboard new suppliers in a
consistent, efficient, and
transparent manner.
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Environment, social and governance
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Scaling up responsibly
As we continue to grow and globalise, we remain committed to our ESG strategy of
“Scaling up responsibly”
. Built across the
following three interwoven pillars, our strategy is underpinned by good culture and brilliant governance as the existing
foundations for our success.
•
Our Customers – leveraging our growth to improve sustainable customer outcomes.
•
Our People – fostering positive, inclusive and productive communities in our business and our industry.
•
Our World – managing our impact on the environment and being a force for good in our world.
ESG Champions Network
In 2022, we introduced a Group-wide ESG Champions Network (the “Network”), designed to support the implementation of
the Group’s ESG strategy. The vision for the Network is:
•
to represent all business functions and geographies passionate about ESG;
•
to seek out and activate opportunities for accelerating positive impact for our people, our customers and our world;
and
•
to champion ESG initiatives across the Group.
People and culture
Our aim is to be a highly valued, engaging and responsible employer across the Group, where our people uphold our core
values and are encouraged to excel. We challenge ourselves to be an inclusive and collaborative place to be successful.
We know that our people are key to our collective expertise and growth plans. Our business model is to attract, retain and
develop talented individuals to help us deliver our long-term objective of becoming one of the world’s leading providers of
enterprise financial technology solutions. We seek to foster a culture of innovation and empowerment where talent, enterprise
and collaboration are recognised and rewarded.
Our core values
We Embrace Difference
We value different backgrounds, experience, expertise and ways of thinking. We encourage curiosity and respect every
individual, recognising that everyone has the potential to bring something extraordinary to the table. We each apply our unique
talents with passion and integrity and we are all committed to making Gresham an exceptional place to work.
We Create Together
Working together with our colleagues, customers and partners, we create energy and a dynamic approach to challenge the
norm and find innovative ways to solve problems. Through open discussion and feedback, healthy debate and continuous
learning, we combine the virtues of experience and fresh thinking. We operate at pace, taking the lead where appropriate,
ensuring that we work together to seamlessly deliver outstanding products and services.
We Champion Success
We are passionate about delivering successful outcomes for our customers, employees, partners and shareholders, as well
as our industry and our community. Our nimble approach means that we can adapt to our customers’ individual ways of
working, taking ownership for delivering the wow factor, delighting customers and enabling our business and our people to
grow and flourish.
Attracting, retaining and developing our talent
We implement Group-wide strategies designed to attract, retain and develop our people that reflect the local geographic and
industry economic climate. These strategies include competitive terms and conditions, a defined contribution pension scheme,
consideration of family and personal needs, training and career development coaching, and a wide range of other flexible
benefits designed to reflect the Group’s culture and values. Our performance-related pay structures include an Annual Bonus
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Scheme, which is linked to personal objectives and wider team and Group objectives. The Annual Bonus Scheme is
complemented by our employee share scheme, which is designed to align employee incentives with shareholder interests
through the award of shares.
Our hiring model is based on creating agile, highly motivated and collaborative international teams. Our strength comes from
collaboration between seasoned professionals with deep client industry experience and some of the brightest technology
talent on the market. We also “hire for attitude”, placing great importance on our values, effective team working and customer
success.
We operate our own bespoke leadership development programme which is designed to equip our people leaders with the
fundamental tools, techniques and resources to coach and mentor their teams to deliver a winning performance. Alongside
this we support personal and professional growth, encouraging our people to develop their technical competency as well as
interpersonal skills and those related to our values-based behaviours.
We encourage our people to spend 5% of their work
time on professional development.
Engaging with our people
We have an “always on” approach to employee engagement and communications including regular meetings within individual
teams throughout the Group, regular Group-wide communications and confidential feedback mechanisms and engagement
surveys. Performance appraisals happen formally at the end of each year, but we encourage ongoing dialogue and continuous
performance management coaching conversations throughout the year to ensure that our people are getting support and
feedback in order to be successful in their roles and to continue growing at Gresham.
Trust is vital in order to support and promote the exceptional levels of employee engagement we enjoy and helps to ensure
that the working environment balances wellbeing, provides motivating opportunities for growth and operates with compassion.
Early careers programme
Our early career entry programme is one of the ways that we attract promising new colleagues to the business. Our graduate
and apprenticeship paths within our professional services, development and IT teams have been running successfully for
several years.
Equality, diversity and inclusion
Gresham is an equal opportunity employer. We celebrate diversity and are committed to creating an inclusive environment
for all employees. We are committed to ensuring that our workplaces are free from unlawful or unfair discrimination in
accordance with applicable legislation and our values. We are determined to ensure that no applicant or employee receives
less favourable treatment on the grounds of gender, age, disability, religion, belief, sexual orientation, marital status, or race,
or is disadvantaged by conditions or requirements which cannot be shown to be justifiable. We publish a statement on equality,
diversity and inclusion which can be found at
www.greshamtech.com/edi
.
Gender analysis
Female
Male
Total
2022
2021
2022
2021
2022
2021
Executive Directors
-
-
2
2
2
2
Senior managers
2
2
6
6
8
8
Staff
51
42
155
156
206
198
Total
53
4
4
163
1
64
216
2
08
Non-Executive Directors
2
2
2
2
4
4
Community
As a company that uses the power of technology to improve the way organisations operate, we are committed to supporting,
developing and helping to educate the future workforce about this sector. We are proud to be Business Class members of
and advisers to The Prince’s Responsible Business Network, through our partnership with Business in the Community
(“BITC”). BITC’s vision is to make the UK the world leader at responsible business, through inspiring, engaging and challenging
businesses to tackle some of global society’s biggest issues.
Charity
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We believe we have an important role to play in supporting the work of charities, both corporately and individually. We
encourage our people to support charitable causes and, as a company, we often provide assistance (such as guidance and
insights) or resources (such as surplus IT equipment) to charities.
Ethical business practices
We are committed to corporate sustainability and to a principled approach of doing business. We recognise that we have a
duty to manage our business affairs and operations in a sustainable and responsible manner, and we expect the highest
standards of ethical conduct from our people and the organisations we work with. We have a zero-tolerance approach to
unethical activities such as corruption and bribery, as well as on issues affecting fundamental human rights. Our annual
statement on modern slavery can be found at
www.greshamtech.com/modern-slavery
.
Environment
Policy statement
Gresham is committed to corporate sustainability and to a principled approach of doing business. We recognise that we have
a duty to manage our business affairs and operations in a sustainable and responsible manner. This includes minimising the
impact of our activities on the environment and supporting environmental initiatives relevant to our industry. Our environmental
policy sets out our responsibilities and actions that support our environmental strategy.
We strongly believe that urgent action is needed to combat climate change and we support the Task Force on Climate-related
Financial Disclosures (“TCFD”) and the wider movement on climate change. Our TCFD statement is available in this report,
starting on page 30.
Carbon emissions
Gresham’s mandatory reporting of greenhouse gas emissions is pursuant to the Companies Act 2006 (Strategic Report and
Directors’ Report) Regulations 2013 (the “Regulations”). Gresham’s greenhouse gas reporting year is the year ended 31
December 2022, to align with our fiscal year and financial reporting year.
Gresham reports emissions data using an operational control approach to define organisational boundary, which meets the
definitional requirements of the Regulations in respect of those emissions for which it is responsible. Gresham has reported
on all material emission sources which it deems itself to be responsible for. These sources align with Gresham’s operational
control and financial control boundaries. Gresham does not have responsibility for any emission sources that are beyond the
boundary of Gresham’s operational control.
The methodology used to calculate Gresham’s emissions is based on the “Environmental Reporting Guidelines, including
mandatory greenhouse gas emissions reporting guidance” (June 2013) and “The Companies (Directors’ Report) and Limited
Liability Partnerships (Energy and Carbon Report) Regulations 2018” issued by the Department for Environment, Food and
Rural Affairs (“Defra”). Gresham has also utilised Defra’s 2016 conversion factors within the reporting methodology.
Our UK and Group global greenhouse gas emissions disclosure for the year ended 31 December 2022 is made below.
UK
Group
Metric
Unit
2020
2021
2022
2020
2021
2022
Global % YoY
change
Absolute
Scope 1 & 2
emissions
tCO
2
e
24
19
17
37
40
39
20-21: 8%
21-22: -3%
Absolute
Scope 3
emissions
tCO
2
e
N/A
N/A
N/A
N/A
N/A
N/A
N/A
Emissions
intensity
tCO
2
e per
£1,000,000
revenue
2.3
1.8
1.4
1.5
1.1
0.8
20-21: -27%
21-22: -27%
Energy
consumption
kWh
104,000
88,000
90,000
158,000
186,000
200,000
20-21: 18%
21-22: 7%
Emissions data has been reported for Gresham’s operations in the UK, USA, Luxembourg and Australia. Locations in Malaysia
and Singapore are not considered material to the scope of this reporting.
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In order to express Gresham’s annual emissions in relation to a quantifiable factor associated with the Group’s activities, the
Directors have used revenue as Gresham’s intensity ratio as this is the most relevant indication of its growth and provides for
the best comparative measure over time.
Task Force on Climate-related Financial Disclosures
We recognise that changes to the climate present extensive risks and opportunities and that the TCFD recommendations
represent a valuable and effective method of bringing about the systemic and permanent changes to business processes,
practices and operations that are needed to accelerate the pace of change and protect our world.
During 2021 and 2022, we have worked to integrate the recommendations of the TCFD into our business in order to better
understand and address the potential impacts on our business. Consideration of climate change and the TCFD
recommendations formed part of the wider review of our environmental, social and governance (“ESG”) responsibilities
undertaken in 2021, and in setting the direction of our new three-pillar ESG approach. Climate and climate-related risk are
key considerations under the “Our World” pillar of the strategy.
In reporting our progress last year on integrating the TCFD recommendations into our business, we also outlined our climate
change programme roadmap including further integration of the TCFD recommendations over a 2-3 year timeline. Over the
course of the last six months, we have further identified and assessed the impact of climate-related risks and opportunities on
our business. In this disclosure, we report the findings from this exercise in the Strategy section. We have also progressed
other areas, including the further consideration of climate-related risks and opportunities in our governance structures and
processes, and the implementation of a new risk management framework.
TCFD compliance statement
The Company’s TCFD compliance statement for the year ended 31 December 2022 is set out in the following table.
Recommendation
Disclosure
Compliance
Summary of progress
Governance
The organisation’s
governance around
climate-related risks
and opportunities.
a) Board’s oversight
of climate-related
risks and
opportunities.
b) Management’s
role in assessing
and managing
climate-related risks
and opportunities.
Fully
compliant
Fully
compliant
+
The Board has overall responsibility for risk management and
internal control (including climate-related). The Board formally
reviews climate-related matters on a six-monthly basis; with
climate-related risk updates included within monthly Board packs.
+
Chief Executive, Ian Manocha, has ultimate responsibility for
oversight and monitoring of climate-related risks and opportunities
and integrating these considerations into the Company’s strategic
response and decision-making (see page 43 for further
information).
+
The Chief Corporate & Legal Officer has operational responsibility
for assessing and managing climate-related risks, with the support
of management.
+
The Risk Review Board, made up of departmental management
and a Non-Executive Director, carries out quarterly reviews of
Group-level risks (including climate-related).
+
During 2023, we plan to further integrate climate-related
considerations into Committee work, and continue to educate the
Board and management on climate-related issues.
Strategy
Actual and potential
impacts of climate-
related risks and
opportunities on the
organisation’s
businesses, strategy
and financial
planning where such
information is
material.
a) Climate-related
risks and
opportunities.
b) Impact on the
organisation’s
businesses,
strategy, and
financial planning.
Fully
compliant
Not compliant
Not compliant
+
Climate-related risks and opportunities have the potential to affect
our business over the short (0-3 years), medium (3-10 years) and
long-term (10+ years).
+
We conducted a Group-wide climate risk and opportunity
evaluation in 2022 (see risk heat map and table below).
+
During 2023, we plan to conduct scenario analysis to develop a
more comprehensive understanding and impact of material
climate-related risks and opportunities.
+
We will also conduct a further review of our corporate strategy and
business model against climate-related risks and opportunities.
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c) Resilience of the
organisation’s
strategy.
Risk management
How the organisation
identifies, assesses,
and manages
climate-related risks.
a) Risk identification
and assessment
process.
b) Risk management
process.
c) Integration into
overall risk
management.
Fully
compliant
Fully
compliant
Partially
compliant
+
We have implemented a new risk management framework and
completed a dedicated climate risk and opportunity assessment,
which enabled us to extend time horizons beyond those we would
typically consider. Further information on our new risk
management framework can be found on page 43.
+
We engaged external advisers to help us identify climate-related
risks and opportunities using various inputs and sources.
+
For each risk identified, a qualitative assessment was carried out
to determine how it could potentially impact the business over
different time horizons, including key assets exposed, before
aligning possible impacts with appropriate financial factors.
Likelihood and impact ratings, aligned to our existing risk
management framework, were then assigned to each risk.
+
Where climate-related risks have a risk rating outside of our
tolerance, these risks are further considered as potential principal
risks in the context of our business. Impact is determined based
on potential impact on revenue, share price, reputation, business
continuity, and other relevant factors.
+
During 2023, we plan to conduct scenario analysis to further
understand the potential implications of material climate-related
risks, and build out medium and long-term plans to manage key
climate-related risks and opportunities.
Metrics and targets
The metrics and
targets used to
assess and manage
relevant climate-
related risks and
opportunities where
such information is
material.
a) Metrics used to
assess climate-
related risks and
opportunities in line
with its strategy and
risk management
process.
b) Disclose Scope 1,
Scope 2, and if
appropriate Scope 3
greenhouse gas
(“GHG”) emissions,
and the related
risks.
c) Describe the
targets used by the
organisation to
manage climate-
related risks and
opportunities and
performance against
targets.
Not compliant
Partially
compliant
Not compliant
+
We are in the process of developing our climate-related metrics as
we understand more about our climate-related risks and
opportunities.
+
Our metrics and targets (including Scope 1 and 2) are disclosed in
the table below.
+
During 2023 and 2024, we plan to further develop metrics and
targets, establish baselines, measure material Scope 3 GHG
emissions including purchased goods and services, and set
targets against metrics in our most relevant areas.
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Climate-related risks and impact
Based on our assessment to date, we have identified several potential climate-related risks, the key ones of which are outlined
in the following table.
Risk
Risk description
Potential financial impacts
Time horizon
Our response/mitigating actions
Physical risks
Digital
infrastructure
Floods, storms, and
extreme heat is testing
the resilience of vital
infrastructure including
data centres and cloud
stability which we rely
on to deliver our core
services.
+
Any outages caused by
damage to digital
infrastructure could affect the
delivery of our services,
directly affecting client
relationships with a negative
impact on revenue and trust
in Gresham’s platform and
products.
+
The business could face
increasing operating costs as
data centre providers are
forced to invest more in
adaptation and resilience
measures.
Medium-long
+
We were not impacted by any
data centre outages in the year
that were due to climate-
related incidents, as far as we
are aware.
+
To date, we have not been
notified of any current or future
cost increases linked to
climate-related adaptation and
resilience, although we will
keep this under review.
Facilities &
workforce
Heatwaves, flooding,
storms and drought
have the potential to
damage our facilities,
local infrastructure and
affect the physical
safety, security,
productivity and
availability of
employees.
+
Lost revenue
through impacts
on business continuity.
+
Increased costs through
reduced workforce
productivity and absenteeism.
+
Damage to buildings and
equipment could result in a
financial impact through
uninsured losses and
increased insurance
premiums.
Short-medium
+
Our new hybrid working policy,
and tech offering, enables our
people to operate effectively
from any location.
+
Our BCP provides guidance
and structure in the event that
our facilities and/or workforce
are affected by climate-related
incidents.
+
We occupy leased offices,
meaning that landlords take
buildings risks. Should costs
increase materially, we would
review our real estate footprint.
+
We maintain contents
insurance but should this not
be available we would consider
self-insuring.
Transition risks
Cost
pressures
Climate-related
operational cost
pressures due to
supplier energy price
rises and increased
costs of cloud
computing.
+
If increased operating costs
could not be passed onto
customers this would affect
margins and profitability with
the potential to affect inward
investment through our
perceived attractiveness to
investors.
+
Possible cost implications to
our services could impact
customer relationships and
ultimately revenue if
customers decide to “shop
around”.
Short-medium
+
Regularly review suppliers to
ensure there is positive
tackling of climate-related
issues, as well as the best
value for money.
Reputation
We may face
reputational risks if we
are unable to fully
understand, reduce or
evidence our total
carbon footprint in line
with increasing
stakeholder and
societal expectations,
+
Reductions in revenue as a
result of the impact of
reputational damage on
customer attraction and
retention.
+
Increased expenditure on
climate mitigation and
adaptation including for
example; external support,
Medium
+
Board reviews of ESG and
climate change issues on a six-
monthly basis ensure these
matters are regularly reviewed
and considered in strategic
decision-making.
+
Our company secretariat has
been expanded to provide
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or through our
association with
customers, suppliers
and third parties for
similar.
switching to more sustainable
data service partners.
additional compliance
oversight.
Product &
competition
If the business and its
solutions are not
successful in
supporting our
customers to achieve
their climate change
goals, there is a risk
that they will look
elsewhere, or that new
operators will enter and
disrupt the market.
+
Reduced revenues through
customer churn.
+
Increased expenditure on
sustainability-related R&D.
Medium-long
+
We are not currently seeing
any product requests related to
climate change.
+
We respond to client
procurement/sourcing requests
related to climate change
quickly.
+
Our climate change
programme is designed to
support our customer
requirements.
Regulatory
We face an
increasingly uncertain
regulatory environment
as a result of climate
change that has the
potential to change
rapidly.
+
Increased expenditure on
internal and external
resources to comply with
climate-related regulation.
+
Costs from any fines or
penalties as a result of non-
compliance.
Short-medium
+
We made investments in 2021
and 2022 to ensure
compliance with TCFD and
ESG requirements.
+
Continuing Director CPD on
climate-change and ESG
matters.
+
Climate change features on the
Board agenda every six
months.
Investment
As investors
increasingly integrate
climate-related issues
into their investment
decisions, our
approach could make
our business less
attractive to investors.
+
Reduced external investment
as a result of negative
impacts on our attractiveness
to investors.
Medium-long
+
We made investments in 2021
and 2022 to ramp up our
climate change programme
and broader ESG strategy.
+
We respond to investor
enquiries on climate change
and ESG.
People
Our response to
climate change has the
potential to affect talent
attraction and retention
in an already
competitive labour
market.
+
Increased expenditure on
employees, including for
example; recruitment costs,
productivity losses and higher
salaries to attract talent.
+
Reduced revenues through
impact of resource challenges
and talent gaps on customer
relationships.
Medium-long
+
Ensure that the Group
continues to address climate-
related issues in accordance
with regulation/legislation.
+
Strong engagement with our
people on climate-related
issues, including via the ESG
Champions Network.
+
Publicise our climate-related
initiatives with all stakeholders
and externally.
Liability risks
Litigation
Climate change
litigation is increasing
and could manifest for
our business as a
result of a perceived
failure to consider,
mitigate or adapt to the
risks associated with
climate change.
+
Increased legal costs paid to
cover the costs of litigation.
+
Reduced external investment
if investors lose appetite to
invest in the business.
+
Reduced revenues if brand
equity is damaged, affecting
customer attraction and
retention.
Long
+
Ensuring that climate-related
and ESG matters remain a
focus for the Board of Directors
in strategy setting and
business reviews.
Transboundary risks
Financial
system
instability
Financial stability is
increasingly under
threat from climate
change and increased
volatility in the market
could affect our future
+
Reduction in capital and
financing affecting our ability
to invest in future growth.
+
Reduced revenues if
customers reduce or defer IT
investments or cease to trade.
Long
+
Maintaining the stability of the
financial system under close
and regular review.
+
Ensuring financial system risks
are taking into account in major
or strategic decisions.
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ability to raise capital
and cost-base.
+
Increased expenditure on
data centres due to a higher
level of customer transactions
being processed by our
software.
+
Our customer base is
predominantly made up of
blue-chip financial services
firms with significant financial
resilience.
+
Monitoring our customer and
supplier base for exposures to
financial stability risks.
Climate-related opportunities
Based on our assessment to date, we have identified several potential climate-related opportunities, the key ones of which
are outlined in the following table.
Opportunity
Opportunity description
Potential financial impacts
Time horizon
Reputation
Demonstrating a thorough understanding of
climate-related risks, opportunities and impacts,
and integrating this into our strategy could
strengthen our reputation with increasingly
climate-conscious stakeholders.
+
Increased revenue as result of company
and product differentiation and our ability to
attract and retain customers, and support
their sustainability ambitions.
+
Increased external investment through an
improved ability to attract investment from
sustainability-focused funds.
+
Lower recruitment costs due to increased
ability to attract and retain talent.
Medium
New revenue
channels
Developing new products or services (or
evolving existing ones) that support climate
mitigation or adaptation activities, or help
facilitate the low carbon transition (for example,
the processing of ESG data).
+
Increased revenue through new channels
and product diversification.
Medium-long
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Cost
efficiencies
Assessing our impacts and investing in new and
improved ways of working that are also more
climate-friendly could lead to cost savings and
increased resilience.
+
Reduced operational costs through, for
example, reduced travel, energy efficiency
measures, hybrid working/reduced office
estate costs.
+
Productivity and efficiency gains.
Short-medium
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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.
2022
2021
Variance
%
Clareti ARR
Clareti ARR at start of year
£m
24.0
12.3
N/a
Acquired with Electra
£m
-
9.2
N/a
Organic increase in ARR
£m
4.1
2.5
1.6
64%
Clareti ARR at end of year
KPI
£m
28.1
24.0
4.1
17%
Other ARR
Other ARR
£m
3.5
4.1
(0.6)
(15%)
Group ARR
Group ARR
£m
31.6
28.1
3.5
12%
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 2022 was £4.1m, an increase of 17% on the opening Clareti ARR position.
Included within this organic growth is the impact of the foreign exchange movements in the year, which contributed £1.8m,
the prior year benefitting by £0.3m; therefore the constant currency organic ARR growth grew from £2.2m in the prior year to
£2.3m in 2022. Whilst still strong double digit constant currency organic growth, this is behind our target rate of 20%+. Our
retention and upsell measures remain strong, with the trailing twelve-month net Clareti ARR retention rate being 102%, a
reduction from the 106% rate 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 improve these rates to at least 2021 levels.
ARR from our Other businesses have fallen by £0.6m to £3.5m in 2022, largely as a result of our decision to discontinue
supporting the last remaining line from our own high-margin legacy solutions. It remains encouraging to see the ongoing
longevity of these business lines continuing to provide predictability and further ability to invest with confidence in the Clareti
business.
In addition to Group ARR of £31.6m, expected revenues from non-recurring contracts in place as at 31 December 2022 total
£10.4m, giving visibility over £42.0m of revenue for 2023 before any new or incremental contracts are won.
Income Statement
Constant currency Income Statement headlines
Due to the levels of transactions occurring in currencies other than the Group’s functional reporting currency of GBP, largely
USD and AUD, the Group has benefitted to a material degree from the weakness experienced in the GBP throughout the
year. The table below shows 2022 performance if transactions had been reported on the same average exchange rates for
the year as 2021 had been.
2022
2021
Variance
on
constant
currency
basis
%
Actual
basis
Constant
currency
basis
Group revenue
£m
48.7
46.6
37.0
9.6
26%
Group gross margin
£m
33.9
32.4
25.2
7.2
29%
Group gross margin %
%
70%
70%
68%
2%
Group adjusted EBITDA
£m
10.3
10.2
7.2
3.0
42%
Group adjusted EBITDA %
%
21%
22%
19%
3%
Cash adjusted EBITDA
£m
4.4
4.2
2.5
1.7
68%
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Cash adjusted EBITDA %
%
9%
9%
7%
2%
Revenues
Our income is analysed between revenues from Clareti Solutions and from our ‘Other’ non-strategic solutions and services,
revenues from each business of these business segments are then broken into:
-
Recurring revenues – which are generated for software and software-related services such as support, maintenance,
and other ongoing managed services; all of which are contracted or expected to continue for the foreseeable future.
-
Non-recurring revenues – include professional services, contracting, training and other services that are expected to
be one-off or periodic in nature.
Given the transformational nature of the Electra acquisition, we have also broken out the Clareti business to show Electra
revenues (and gross margin in the Earnings section below) as individual line items within the Clareti business.
2022
2021
Variance
%
Clareti solutions
Recurring
£m
15.8
13.5
2.3
17%
Recurring – Electra
£m
11.6
5.3
6.3
119%
Recurring – Clareti total
KPI
£m
27.4
18.8
8.6
46%
Non-recurring
7.5
6.4
1.1
17%
Non-recurring – Electra
0.6
0.3
0.3
100%
Non-recurring – Clareti total
£m
8.1
6.7
1.4
21%
Total Clareti revenues
KPI
£m
35.5
25.5
10.0
39%
Other solutions &
services
Recurring
£m
4.3
4.6
(0.3)
(7%)
Non-recurring
£m
8.9
6.9
2.0
29%
Total
£m
13.2
11.5
1.7
15%
Group
Total
KPI
£m
48.7
37.0
11.7
32%
Clareti Solutions
Clareti recurring revenues increased by 46%, up £8.6m on 2021, which included a full year contribution of £11.6m from Electra
against a £5.3m contribution in 2021 (since the acquisition late in June 2021). Excluding the impact of Electra, Clareti recurring
revenues increased by 17%, or £2.3m since the prior year. These increases were as a result of new recurring revenue sales,
increased consumption of Clareti solutions from our existing customers, and currency gains of £1.4m; £1.2m of which coming
from predominantly USD-based Electra business.
Clareti non-recurring revenues increased by 21%, up £1.4m on the prior year, with a relatively small services contribution from
Electra in both years. Excluding the impact of Electra, the increase was 17%. This increase is being driven by new
implementations associated with the increase in Clareti recurring revenues and £0.3m of currency gains.
Other Solutions & Services
Total revenues from Other solutions and services increased by 15% to £13.2m, exceeding our original expectations. This
business line includes revenues from a legacy partner relationship where we act as a reseller of third party software; our sole
remaining, own IP, legacy software product (EDT) which we discontinued support for on 31 December 2022; and our
contracting services business where we provide fixed margin services at a margin of 13% under twelve-month contractual
terms.
Recurring revenues within the Other solutions and services portfolio decreased by 7% to £4.3m as a result of own-IP software
customers not renewing contracts and slightly lower end-user consumption fees from existing customers of our reseller
arrangement. Non-recurring Other revenues, the vast majority of which is our contracting services business, increased by
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£2.0m compared to 2021. The mix of revenues within the Other solutions and services portfolio continues to evolve, being
increasingly weighted towards lower margin business lines. We continue to manage the portfolio carefully benefitting from
good visibility of customer intentions.
Earnings
2022
2021
Variance
%
Clareti Solutions
Gross margin
£m
19.9
16.6
3.3
20%
Gross margin – Electra
£m
10.6
4.9
5.7
116%
Gross margin – Clareti total
£m
30.5
21.5
9.0
42%
Gross margin
%
85%
83%
2%
N/a
Gross margin – Electra
%
87%
88%
(1%)
N/a
Gross margin – Clareti total
%
86%
84%
2%
N/a
Other solutions &
services
Gross margin
£m
3.5
3.7
(0.2)
(5%)
Gross margin
%
27%
37%
(5%)
N/a
Group
Gross margin
£m
34.0
25.2
8.8
35%
Gross margin
%
70%
68%
2%
N/a
Adjusted EBITDA
KPI
£m
10.3
7.2
3.1
43%
Adjusted EBITDA
KPI
%
21%
19%
2%
N/a
Cash Adjusted EBITDA
KPI
£m
4.4
2.5
1.9
76%
Cash Adjusted EBITDA
KPI
%
9%
7%
2%
N/a
Statutory profit/(loss) after tax
£m
2.9
(1.0)
3.9
N/a
Adjusted diluted EPS
KPI
Pence
7.54
5.02
2.52
50%
Gross margin
Across all business segments, the majority of our cost of sales is made up of: (i) customer-specific third party costs incurred
in providing our hosted cloud solutions; (ii) third party contractor costs incurred by our contracting services business; and (iii)
fixed-term payrolled employees that provide fixed margin contracting/recruitment services to ANZ.
In line with long-standing Group strategy, the growth in the high margin Clareti business has offset the continued and expected
decline in gross margin being generated from the legacy Other solutions and services businesses. At a Group level, gross
margins have increased from 68% to 70%. These percentage margins are not changed to any material degree when
considered on a constant currency basis.
The gross margin within Clareti business (including Electra) has increased from 84% to 86%, due to the continued growth of
the high margin recurring revenues.
As planned and described in the revenue section above, the Other solutions and services business mix has continued to move
in balance towards the lower margin software reselling and contracting services business lines from our higher margin legacy
owned IP (EDT), which we discontinued support of on 31 December 2022.
Adjusted EBITDA
Adjusted EBITDA (earnings before interest, tax, depreciation and amortisation) is analysed excluding exceptional items and
share-based payment charges; which is consistent with the way in which the Board reviews the financial results of the Group.
We also consider this to be consistent with the manner in which similar small-cap LSE (or AIM) listed companies present their
results and how we understand the global investment community assesses performance, with this particularly being the case
for growth shares in which the recurring cash performance is considered important. However, whilst we consider them
consistent and appropriate, this EBITDA measure and the cash adjusted EBITDA measure below are not necessarily directly
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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 £3.1m, or 43%, since the prior year with margin improving by 2% to 21% in 2022.
This is as a result of the existing higher margin Clareti business continuing to grow and beginning to drive improved operational
leverage as it scales along with the impact of the Electra acquisition, which offset the continued reducing margin of the Other
solutions and services business lines. Whilst we will ensure that we maximise the current market opportunity through
appropriate strategic investments, we do expect to continue to see improvements to these margins in future years.
Cash Adjusted EBITDA
Cash adjusted EBITDA refers to adjusted EBITDA reduced by the value of capitalised development spend and any IFRS16
lease-related cash expenses classified as depreciation and interest. We consider this a good measure of cash profitability for
a modern SaaS business who continue to invest in product development to ensure they remain market leading.
Group cash adjusted EBITDA has also improved on the prior year, with £1.9m of the £3.1m improvement in adjusted EBITDA
(mentioned above) dropping through to improvement cash EBITDA. The £1.2m difference between the improvements in the
two EBITDA measures is as a result of a full year of capitalised development spend and IFRS 16 lease-related cash expenses
in the acquired Electra business. This has resulted in a cash adjusted EBITDA margin of 9%, 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 during 2022, becoming cash adjusted EBITDA positive for
the first time, generating a margin of 3%. As the Clareti business continues to scale this will continue to drive Group cash
adjusted EBITDA improvements.
Statutory profit/(loss) after tax and Adjusted diluted EPS
There has been an increase in statutory profit after tax to a profit of £2.9m from a loss of £1.0m in the prior year. This increase
of £3.9m is due to the combination of: improved adjusted operating profit of £2.9m as a result of the growth and improved
profitability of the Group; offset by: reduced exceptional expenses of £1.3m (see below); increased share-based payment
charges of £0.6m; increased amortisation on acquired intangibles largely due to a full year of amortisation of the intangibles
acquired through the Electra acquisition in June 2021 of £0.6m; and a reduced tax charge of £1.0m.
Adjusted diluted EPS has improved by 50% to 7.5 pence per share. Adjusted earnings used in this calculation adjust the
statutory result after tax for: exceptional items; amortisation of acquired intangibles, share-based payments and the deferred
tax charge in relation to the sale of the IP acquired with Electra from the US to the UK business (see taxation below).
Exceptional items
During the year, the Group recognised exceptional costs of £0.2m, all of which were one-off costs in relation to the integration
of the Electra business. In 2021, £1.8m of exceptional costs were recognised, of which: (i) £1.3m were acquisition costs in
relation to the acquisition of Electra on 22 June 2021; and (ii) £0.5m related to various integration expenses in relation to the
same acquisition. Offsetting the exceptional costs in 2021 was exceptional income of £0.3m, which occurred from currency
hedging activities taking place to fund the USD denominated Electra acquisition. There was no such exceptional income in
2022.
Taxation
For the year ended 31 December 2022, the Group has recorded a net tax charge of £0.4m (2021: £1.4m). The material drivers
for the variance from the prior year being: an increase in overseas current tax charges of £0.5m as a result of the increased
profits from our US and Australian operations as those businesses continue to grow, with US taxes also increasing as a result
of the Electra acquisition; and the prior year including a one-off deferred US tax charge of £1.4m as a result of the Group’s
long-term global tax planning, part of which included the sale of the IP acquired in the Electra acquisition from our US business
to our UK business to ensure the UK remains the centralised IP generating entrepreneur within the Group.
Cashflow
The Group’s financial position remained very strong throughout 2022. At a headline level, the cash balance at the year-end
of £6.3m was behind that of the prior year-end of £9.1m. Whilst the total deferred consideration payments from acquisitions
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made during the year of £4.4m 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 and exceptional items, has increased by £3.1m to £10.3m in the year as a
result of the improved cash EBITDA of the Group; including the Clareti business becoming cash EBITDA generative for the
first time.
Operating cash outflow from exceptional items has reduced by £1.3m to £0.2m. The prior year included increases that were
one-off in nature, with the significant majority being advisory and integration fees in respect of the Electra acquisition; the
outflow during 2022 being the finalisation of the Electra integration.
The movement in working capital has reduced by £2.1m to negative £0.8m. There are a number of one-off items causing this
swing, including a £0.5m payment of US sales tax in relation to the acquired Electra business which had originally been held
back from the acquisition fees paid, and £1.0m of customer payments made early in December 2021 with early payment not
occurring in 2022.
The Group received net tax of £0.6m in 2022, whereas during 2021 a net payment of £1.1m was made. Gross tax payments
were made in the year of £1.9m (2021: £1.1m), the increase on the prior year largely as a result of increased profitability in
Australia and the US; the latter also benefitting from a full year of the Electra business. During 2022 the Group also received
gross tax receipts of £2.5m as a result of research and development activities performed during 2020 and 2021, where
enhanced relief was available. No such reclaim was received in 2021, with the 2020 claim which was made during 2021 not
being received from HMRC until January 2022.
The capitalised development expenditure of £5.2m has increased by £1.0m from the prior year, the increase coming from a
full year of such expenditure from the acquired Electra business, as well as movements in foreign exchange rates and
inflationary increases.
During 2022 the Group spent £0.8m on other capital spend, an increase of £0.7m. £0.6m of this increase was one-off in
nature, in relation to the complete refurbishment of our New York office which re-opened in the third quarter.
During the year the Group paid £0.4m of contingent consideration in relation to the July 2020 Inforalgo acquisition, in the prior
year the initial consideration of £0.9m was paid. The Inforalgo contingent consideration payments are now complete and were
paid in full as the target metrics agreed with the sellers were fully met.
The Group paid £19.6m (net of cash acquired) of initial consideration to acquire Electra in June 2021, which was funded
through a £20.2m (net of costs) capital raise. During the third quarter of 2022, upon meeting the success criteria measured
on the first anniversary of the acquisition, the first contingent consideration payment was made in full of £4.0m.
The Group received £0.1m upon the exercise of share options during the year (2021: £0.1m).
Included within “Other” is the recording of negative effect of foreign exchange rate changes of £1.1m, arising upon the
revaluation of Group’s the non-GBP entity opening balance sheets upon consolidation, the equivalent in the prior year was a
positive £0.2m.
As has been the strategy of the Group for a number of years, with increasing Clareti sales (now including Electra) from the
growing annuity base and new customer wins, coupled with carefully selected and controlled investments, we expect the
cash-generation capacity of the business to continue and are looking at opportunities to best utilise 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.
2022
2021
Variance
%
Opening cash and cash equivalents at 1 January
£m
9.1
8.9
0.2
2%
Operating cashflow excluding exceptional items
£m
10.3
7.2
3.1
43%
Operating cashflow from exceptional items
£m
(0.2)
(1.5)
1.3
87%
Total operating cashflow excluding working capital
£m
10.1
5.7
4.4
77%
Movement in working capital
£m
(0.8)
1.3
(2.1)
(162%)
Cash inflow from operations
£m
9.3
7.0
2.3
33%
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Net tax receipts/(payments)
£m
0.6
(1.1)
1.7
155%
Capital expenditure - development costs
£m
(5.2)
(4.2)
(1.0)
(24%)
Capital expenditure - other
£m
(0.8)
(0.1)
(0.7)
(700%)
Principal paid on lease liabilities
£m
(0.6)
(0.6)
-
-
Inforalgo acquisition (net of cash acquired)
£m
(0.4)
(0.9)
0.5
56%
Electra acquisition
£m
(4.0)
(19.6)
15.6
80%
Shares issued – Electra acquisition (net of costs)
£m
-
20.2
(20.2)
(100%)
Shares issued - upon option exercises
£m
0.1
0.1
-
-
Dividend
£m
(0.6)
(0.5)
(0.1)
(20%)
Other
£m
(1.2)
(0.1)
(1.1)
(1100%)
Net increase/(decrease) in cash and cash
equivalents
£m
(2.8)
0.2
(3.0)
N/a
Closing cash and cash equivalents at 31
December
KPI
£m
6.3
9.1
(2.8)
(31%)
Consolidated statement of financial position
Property, plant and equipment and right-of use assets have increased to £0.9m and £1.6m, from £0.2m and £1.5m
respectively, largely as a result of the extension of our Sydney office lease and New York office refurbishment. Our lease
liabilities have also increased by equivalent amounts due to this lease extension.
Intangible fixed assets remain the largest item on the balance sheet at £62.8m (2021: £62.3m), consisting of software
development assets of £23.6m; separately identified assets acquired with previous acquisitions of £19.5m and goodwill of
£19.7m.
Trade receivables increased from £3.8m to £4.8m and accrued income (a contract asset) have increased from £1.2m to
£1.8m. Trade receivables have increased due to a combination of increased revenues and the prior year’s cash balance
benefitting from early receipts from a customer that did not reoccur in December 2022. Accrued income has also increased
due to the increased revenues in 2022 as well as timing differences in December invoicing.
Income tax receivable has reduced from £1.1m to nil due to a timing difference in the receipt of funds from HMRC in relation
to R&D credits, in which the cash from the 2021 claim in relation to 2020 activity was received in January 2022, whereas the
cash from the 2022 in relation to 2021 activity was received in December 2022.
Deferred tax liabilities have decreased by £0.7m to £6.1m as a result of further research and development spend qualifying
for enhanced tax relief increasing the liability by £1.1m offset by a reduction of £0.5m from the unwinding of timing difference
arising on acquired intangibles, a £0.4m increase in tax losses available and a £0.5m increase in deferred tax on share
options.
Non-current contingent consideration has reduced from £3.6m to nil and current contingent consideration has increased by
£3.9m to £4.0m. The prior year current contingent consideration was in relation to the final contingent consideration payment
due on the 2020 Inforalgo of £0.4m and the first contingent consideration payment of US$4.8m due on the 2021 Electra
acquisition – both were paid in full during 2022. The remaining contingent consideration payment, now classed as current, is
in relation to the final amount of US$4.8m due on the Electra acquisition, which is also expected to be paid in full during 2023.
Trade payables increased from £1.1m to £1.5m, which is largely aligned with the increased size of the business. Accruals
increased to £4.3m (2021: £3.9m) with the increase largely being in relation to an increased bonus provision due to both a
strong performance against set targets and reflecting a full years bonus at full rates for the former Electra employees. Contract
liabilities have decreased from £12.0m to £11.1m largely due to the timing of and size of prepayments made in the non-Clareti
business.
Financial outlook
Management are very pleased with the overall financial progress of the Group during 2022, delivering two upgrades to Group
numbers. We are delivering growth which in turn is driving improved profitability, aided by synergies gained through the Electra
acquisition. The constant currency organic growth in Clareti ARR was 10% for 2022, a respectable result but below our stated
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target of 20%+. Similarly, both net retention and new business generation growth rates were lower than in 2021, although the
Group expects to return to target levels in 2023 and future years.
Whilst the strategic decision was taken to discontinue support for the Group’s one remaining own-IP software product (EDT),
the other (non-Clareti) software portfolio as a whole has continued to surpass expectations, although without the own-IP
software revenues the general trend towards lower margin products and services will continue. We expect our contracting
services business to remain relatively stable in 2023.
As has been the strategy for many years, we are successfully continuing to increase the levels of revenue predictability
throughout the Group. In addition to the significantly increased Clareti recurring revenue base, we have high levels of
contracted backlog of Clareti services for ongoing implementations and innovation services, and a high portion of the non-
Clareti portfolio already is already under contract for 2023. Nevertheless, given the uncertain macro-economic environment,
we intend to invest prudently in 2023, prioritising distribution, product and customer success, to ensure we are best placed to
take advantage of the significant market opportunities.
Tom Mullan
Chief Financial Officer
13 March 2023
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Our aim is to recognise and address the key risks and uncertainties facing Gresham at all levels of the business.
There are a number of risk factors that could adversely affect the Group’s execution of its strategic plan and, more generally,
the Group’s operations, business model, financial results, future performance, solvency, or the value or liquidity of its equities.
The Board is committed to addressing these risks by implementing systems for effective risk management and internal control.
A report on the Board’s review of the effectiveness of the Group’s risk management and internal control systems can be found
in the Audit Committee Report, starting on page 55.
The Board has performed a robust assessment of the principal risks and uncertainties that could threaten Gresham’s business,
business model, strategies, financial results, future performance, solvency or liquidity. The items listed in the following table
represent the known principal risks and uncertainties, but the table does not list all known or potential risks and uncertainties
exhaustively. Where possible, mitigation steps are taken to safeguard against materialised risks.
Risk management framework
During 2022, the Group introduced a new risk management framework. This new framework includes the establishment of a
new Risk Review Board made up of senior management and an independent Non-Executive Director. The purpose of the
Risk Review Board will be to formally oversee Group-level risks, major operational risks, cyber security risks, climate-related
risks and any other material emerging risks, and to monitor the effectiveness of the Company’s risk management systems
generally, reporting to the Board of Directors. The Audit Committee remains responsible for financial control risks.
Identified risks are reported in the specified form (including, where applicable, details of existing risk controls and mitigation
plan) and then reviewed by senior management. Depending on the classification and severity of risk, details are reported to
the Risk Review Board, Audit Committee and/or the Board of Directors at the relevant time. On an ongoing basis, the Company
Secretarial team is responsible for the Group risk register and supports risk management processes across the Group’s
various departments with reviews of current risks and identification of new risks.
The following diagram sets out the risk framework and reporting lines.
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Principal risks and uncertainties
Failure to win new Clareti business in line with plan
Links to strategy: 1, 2, 3
Description
Commentary
Winning new Clareti business is central to our growth plan as it
supports ARR and professional services backlog. Failure to do so
would directly impact our strategic objectives. In particular, failure to
win new Clareti contracts early enough in the year would impact
annual growth and potentially jeopardise our ability to deliver the
implementations and recognise the associated revenues in the year.
Market conditions continue to be challenging, with macro headwinds
potentially affecting customer confidence which could materially
impact
sales.
Furthermore,
sales
cycles
remain
long
and
unpredictable, often necessitating significant investments of time or
expenditure to satisfy customer due diligence requirements. These
factors collectively present unquantifiable risks to growth aspirations
and business plan.
Key customer risks and failure to minimise churn rates
Links to strategy: 1, 2, 3
Description
Commentary
A significant portion of our revenue is generated from a small number
of key customer accounts. A cancellation of any one of these could
have a material impact on Group revenues and, depending on the
circumstances, potentially affect the Group’s position in the market
and its prospects. Furthermore, high churn rates in general would
adversely affect the Group’s growth.
We have not suffered any key account losses in the year and
continually monitor for cancellation risks. We maintain very strong
relationships at all levels in our key accounts to ensure we have early
warning of any issues. Outside of the key accounts, we have a long
tail of medium and lower value accounts with less frequent
touchpoints and, consequently, greater churn risks. We are
strengthening our renewal management processes to mitigate this.
Misdirected product, operational or strategic investments
Links to strategy: 2, 4, 5
Description
Commentary
Our model is to invest in product development and other areas to
support Clareti-led organic growth. Strategic investments such as
acquisitions present opportunity for accelerated growth. Failing to
achieve meaningful returns on investments would hinder the Group’s
strategic growth plan and potentially jeopardise the Group’s position
in the market and its prospects.
Our ongoing investments in product innovation are an essential part
of our strategy. In 2022, we continued our significant investments in
delivering production-ready market-differentiating features to enable
us to target the large market currently dominated by legacy
reconciliation providers. We also continued to invest in our strategic
cash management solution with ANZ, which we believe has strong
growth prospects over the medium to long-term.
Product and service delivery failures
Links to strategy: 1, 2, 3, 4
Description
Commentary
Issues or failures with our software products or services could lead
to failed implementations, project delays, cost overruns, data loss,
security issues, customer dissatisfaction, early termination, service
level breaches and contractual claims, all of which could adversely
impact the Group’s revenues, earnings and reputation.
Overall, our solutions and services were resilient and stable
throughout the year. There were no fundamental outages or service
failures in 2022, although certain projects or situations have
necessitated ongoing investments to ensure successful project
outcomes and customer satisfaction. Our systems, processes and
methodologies are designed to mitigate product and service delivery
failures, but this is not always avoidable.
Accelerated decline in non-Clareti revenues
Links to strategy: 4, 5
Description
Commentary
Non-Clareti revenues provide a strong contribution to revenues,
earnings and cashflow and are key to short-term financial success
and ongoing investments in Clareti. Whilst the Group expects these
contributions to decline over time, an unexpected or accelerated
decline could have an immediate and significant impact on financial
KPIs due to short-term planning assumptions.
Risks in the non-Clareti portfolio have remained stable this year and
we broadly expect this to remain the case in 2023. We regularly
review individual portfolio risks and will consider strategic options
such as discontinuations or disposals in mitigation where risk
reaches unacceptable levels. In 2022, we made the decision to
discontinue the EDT portfolio which eliminates the support risk of this
product.
Economic, international trade and market conditions
Links to strategy: 1, 2, 5
Description
Commentary
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The Group is generally exposed to political, economic, trade, market
and public health risk factors, such as global or localised economic
downturn,
changing
international
trade
relationships,
foreign
exchange fluctuations, consolidation or insolvency of existing or
prospective customers, or competitor products, all of which could
significantly threaten Gresham’s performance and prospects.
Trading conditions have been, and continue to be, impacted by
macro challenges, including Russia’s invasion of Ukraine and the
related trading/financial sanctions, FX volatility and, most recently,
rising inflation rates and costs. Nevertheless, our business remained
resilient throughout 2022 and expect this to remain the case in 2023,
although we will continue to manage our business, operations and
investments prudently in light of these uncertainties.
People risks
Links to strategy: 1, 2, 3, 4, 5
Description
Commentary
A loss or material issue with key members of staff could cause
material disruption and a skills shortage. Competitor poaching could
result in intellectual property leakage. Staff misconduct, negligence
or fraud could cause Gresham significant reputational damage and
potential financial loss.
People risks are generally increasing, as market conditions, and in
particular the current cost-of-living crisis, drive staff turnover and
significant salary inflation. These risks are expected to continue in
2023, although we are pleased that our annual survey results confirm
our staff remain highly engaged.
IP, data and cyber risks
Links to strategy: 2, 3
Description
Commentary
A significant IP loss, third party IP challenge, data loss, security
breach or cyber attack could significantly threaten Gresham’s ability
to do business, particularly in the short term, and could result in
significant financial loss.
Like all businesses, Gresham is exposed to an increasing range of
cyber-attacks. We have introduced several new security tools and
processes to mitigate the increasing risks. In addition, we secured
ISO27001 certification for one of our hosted solutions, with scope
expansion to follow 2023. We are making further investments to
consolidate our investments and introduce further risk reduction
measures.
Governance, regulatory and compliance risks
Links to strategy: 2
Description
Commentary
The
Group
operates
in
several
different
jurisdictions
and,
additionally, is subject to additional governance and disclosure
requirements as a listed company.
Failing to comply with applicable
laws, regulations and rules could lead to public censure, fines, or
other governmental or regulatory enforcement, which could result in
reputational damage and/or financial loss.
Governance, regulatory and compliance risks are generally overseen
and managed by the Group’s internal legal and corporate function,
which has been expanded in 2022 to provide additional resourcing.
We have introduced new compliance policies during 2022 and also
strengthened our risk management processes. We expect this to
remain stable in 2023.
Climate change
Links to strategy: 1, 2
Description
Commentary
Climate-related events could affect the Group’s ability to provide
services to its customers, or to do so cost-effectively and/or reliably.
Investors and customers have increasing expectations with regard to
climate matters. Failing to appropriately deal with and plan for these
matters could adversely impact the Group’s value proposition and its
long-term prospects.
This risk is introduced in 2022 to capture and manage the potential
long-term risks that may arise as a result of climate change and
climate-related events. We have conducted a detailed examination
of climate-related risks (and opportunities) which are set out starting
on page 32. Climate risks are reviewed by the Group’s Risk Review
Board on a quarterly basis.
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Approval of the Strategic Report
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The Strategic Report was approved by the Board of Directors on 13 March 2023.
On behalf of the Board
Ian Manocha
Tom Mullan
Chief Executive
Chief Financial Officer
13 March 2023
13 March 2023
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Chair’s introduction to governance
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The Board is committed to upholding high standards of corporate governance throughout the Group. As part of that, the Board
acknowledges its role in setting the culture, values and ethics of the Group, and its collective responsibility in developing a
healthy corporate culture and delivering long-term success.
Specifically, the Board acknowledges its role in leading and overseeing the Group’s environmental, social and governance
(“ESG”) strategy, which will continue to be refined and implemented over the coming months and years.
The Board’s aim is to operate as effectively as possible, in line with the governing principles of the UK Corporate Governance
Code 2018 (the “Code”). A description of the Group’s application of the Code’s principles for 2022 is set out in the Corporate
Governance Report. A Board effectiveness evaluation was carried out in the year with constructive input from all directors and
productive outcomes; further information can be found on page 52.
Board discussions are conducted openly and transparently, creating an environment for sustainable and robust debate. In the
year, the Board has constructively and proactively challenged management on Group strategies, proposals, operating
performance, and key decisions, as part of its ongoing work to assess and safeguard the position and prospects of the Group.
Key risks and uncertainties affecting the business are regularly assessed and updated. The Board has completed a full,
specific review of the Group’s key risks and uncertainties (see page 43) in light of the new and emerging risks or uncertainties
arising from the Group’s strategic growth plans and the economic, political and market conditions.
The Board continues to engage with shareholders and welcomes ongoing dialogue throughout the year, including at the
forthcoming Annual General Meeting.
Peter Simmonds
Non-Executive Chair
13 March 2023
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Board of Directors
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Peter Simmonds, Non-Executive Chair
Date of appointment: Non-Executive Director since August 2020, and Non-Executive Chair from September 2020.
Board tenure: 2 years.
Peter was previously CEO of dotDigital Group plc for eight years until his retirement in 2015, where he remained on the board
as a Non-Executive Director until 2018. Peter has been Non-Executive Chair of D4T4 Solutions plc since 2015 and, until
January 2022, of CloudCall. Peter is FCCA qualified and has more than 40 years of senior management and board-level
experience; principally in software, banking, insurance, finance and outsourcing. Peter is an advocate of high standards of
corporate governance, until recently holding the position of Deputy Chair of the Quoted Companies Alliance.
Key external appointments and changes:
Non-Executive Chair of D4T4 Solutions plc
Committees: Nomination (Chair), Remuneration (member).
Andy Balchin, Senior Independent Non-Executive Director
Date of appointment: Non-Executive Director since May 2017, and Senior Independent Non-Executive Director from October
2020.
Board tenure: 5 years.
Andy has over 30 years of financial experience in high-growth software companies, including Smartstream, SeeBeyond,
Documentum, and Clearswift. Until December 2018, he was Chief Financial Officer of the cyber division of RUAG Holding
AG, a major Swiss organisation. Andy is a Chartered Accountant and has experience working in a private equity environment,
in M&A and IPO transactions, as well as in external audit during his early career. As well as being a Non-Executive Director,
he also mentors a number of CFOs and prospective CFOs in hi-tech businesses.
Key external appointments and changes:
N/A
Committees: Audit (Chair), Remuneration (member), Nomination (member).
Jenny Knott, Non-Executive Director
Date of appointment: Non-Executive Director since October 2020.
Board tenure: 2 years.
Jenny brings unparalleled experience from an executive career in financial services, including CEO of Standard Bank Intl,
and, prior to that, senior roles at Nomura Securities and UBS; and was named one of the top 100 influencers by Financial
Technologist in 2018. In addition to her non-executive roles at the British Business Bank and Simply Health, Jenny is a trustee
for Domestic Abuse Volunteer Support Services and an adviser to many leaders, FinTechs’ and other young businesses.
Key external appointments and changes:
Non-Executive Director of British Business Bank, Chair of Board Audit Committee
Non-Executive Director of Simply Health, Chair of Risk and Capital Committee
Committees: Remuneration (Chair), Audit (member), Nomination (member)
Dr. Ruth Wandhöfer, Non-Executive Director
Date of appointment: Non-Executive Director since October 2020.
Board tenure: 2 years.
Career and experience: Ruth is a Global Fintech 50 Influencer and is currently Chair of the Payment Systems Regulator Panel
and a partner at Gauss Ventures, as well as holding Non-Executive Director positions at Permanent TSB (Ireland), Aquis
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Board of Directors
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Annual Financial Report 2022
Exchange, and RTGS Global. Her prior roles have included spearheading regulatory and market strategy for treasury and
trade solutions at Citi, advising the European Banking Federation on policy making for securities services and payments, and
serving as a NED of the London Stock Exchange Group.
Key external appointments and changes:
Chair of the Payment Systems Regulator Panel
Partner at Gauss Ventures
Non-Executive Director of Permanent TSB
Non-Executive Director of Aquis Exchange Group
Non-Executive Director of RTGS Global
Committees: Audit (member), Nomination (member)
Ian Manocha, Chief Executive Officer
Date of appointment: Chef Executive Officer and member of the Board since June 2015.
Board tenure: 7 years.
Career and experience: Ian has extensive experience in the business technology sector. He joined Gresham from SAS where
he worked for over 15 years, most recently as Vice President of the EMEA and AP business units. Ian has worked extensively
with many of the world’s leading financial institutions and has been successful in growing companies to significant scale
through securing and delivering high-value enterprise software deals.
Tom Mullan, Chief Financial Officer
Date of appointment: Chief Financial Officer and member of the Board since March 2018.
Board tenure: 4 years.
Tom spent seven years with Ernst & Young. After qualifying with them as a Chartered Accountant in Southampton, he spent
time working in the Australian business before joining the London office managing a portfolio of clients. Tom then joined
Guidewire Software, a Silicon Valley-based insuretech business, where he spent eight years scaling the finance and business
operations of their EMEA region. Before joining Gresham, Tom spent two years as CFO at Fadata, a PE backed insuretech
business.
Board skills table
Skill
Peter
Simmonds
Andy Balchin
Jenny Knott
Ruth
Wandhöfer
Ian Manocha
Tom Mullan
International growth
strategy and execution
3
3
3
2
3
3
Enterprise software sales
and marketing
2
2
2
1
3
2
Implementation and
service delivery
2
2
2
1
2
2
Software product
development
2
1
1
1
1
1
Financial services
industry
2
1
3
3
2
1
Talent management
3
3
3
2
3
3
Financial control and
planning
3
3
3
1
2
3
IT and cyber
2
2
1
1
2
2
Risk management
2
2
2
2
2
2
Governance, regulatory
and compliance
3
2
2
2
2
2
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Corporate Governance Report
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Statement by the Directors on compliance with the UK Corporate Governance Code
The Company has complied with the relevant provisions set out in the UK Corporate Governance Code 2018 (the “Code”)
throughout the year.
Board leadership and company purpose
The Board of Gresham Technologies PLC is the body responsible for the overall management and conduct of the Group’s
business, and for approving and overseeing the implementation of its strategy. Its role is to provide strategic leadership to the
Group within a framework of effective controls, enabling risk to be anticipated, assessed and managed appropriately. The
Board is responsible collectively to the Group’s shareholders for the long-term sustainable success of the Company,
generating value and contributing to wider society, and in establishing the Company’s purpose, values and strategy. In the
performance of its duties, the Board considers the interests of a range of stakeholders and the matters set out in Section 172
of the Companies Act 2006 (which can be found on page 25).
The Board is committed to maintaining a healthy corporate culture, recognising the importance of investing in and rewarding
its workforce. As part of this, the Group has established clear values, has systems in place to promote wellbeing at work,
seeks to create an environment where individuals are fulfilled, and operates a share incentive plan that ensures our people
share in the success of the Group. In 2022, the Board published a statement on Equality, Diversity and Inclusion, confirming:
our zero-tolerance approach to discrimination of any kind; how we value different backgrounds, experiences, expertise and
ways of thinking; and our support for equal opportunities and a place of belonging regardless of age, disability, sex, sexual
orientation, pregnancy and maternity, race, ethnicity or colour, religion or belief, gender, gender identity or expression, national
origin, genetics, marriage or civil partnership, or veteran status.
Dialogue with institutional shareholders
The Board as a whole is responsible for ensuring that a dialogue is maintained with shareholders based on the mutual
understanding of objectives. Members of the Board meet with major shareholders on a regular basis, including presentations
after the Company’s announcement of the half-year and year-end results. During 2022, there was additional dialogue as part
of the remuneration consultation (see page 78).
The Board is kept informed of the views of shareholders at Board meetings following investor meetings through a report from
the Chief Executive, together with formal feedback on shareholders’ views gathered and supplied by the Company’s advisers.
The views of private and smaller shareholders, typically arising from the AGM or from direct contact with the Company, are
also communicated to the Board on a regular basis.
Mr A Balchin, the Senior Independent Non-Executive Director, and Mr P Simmonds, the Non-Executive Chair, are available
to shareholders if they have concerns where contact through the normal channel of Chief Executive has failed to resolve or
for which such contact is inappropriate.
Constructive use of the AGM
Following a period of restricted meetings due to the COVID-19 pandemic, the Company’s 2022 AGM was open to shareholders
attending in person, in addition to being broadcast to allow the meeting to be followed remotely.
Details of resolutions to be proposed at the AGM can be found in the Notice of the Meeting. A separate resolution is proposed
for each substantially separate issue including a separate resolution relating to the Annual Financial Report 2022.
Engagement with the workforce
The Group does not currently have a formal workforce advisory panel or designated Non-Executive Director responsible for
workforce engagement, nor does it have a designated Director appointed to the Board from the workforce who is responsible
for this. However, the Board has alternative arrangements in place for workforce engagement which it considers to be effective,
including: an annual employee engagement survey, results of which are presented to the Board; occasional attendance by
Board members at the Group’s monthly “all-hands” CEO calls; direct Board presentations by the Group’s Director of People
& Culture; receipt of monthly Board reports on people and culture matters; and specific dialogue between the Director of
People & Culture and Chair of the Remuneration Committee in relation to remuneration arrangements affecting the workforce
as a whole.
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Division of responsibilities
Board membership, roles and responsibilities
As at 31 December 2022, the Board comprised of the Non-Executive Chair, one Senior Independent Non-Executive Director,
two Non-Executive Directors and two Executive Directors, details of which are set out on page 48. All Non-Executive Directors
are considered to be independent.
The roles of Chair and Chief Executive are distinct, set out in writing and agreed by the Board. The Chair is responsible for
the effectiveness of the Board and ensuring communication with shareholders, with the Chief Executive accountable for the
day to day management of the Group.
Non-Executive Directors constructively challenge and assist in the development of the Group’s strategy, scrutinising the
performance of management in meeting agreed goals and objectives, and monitoring the reporting of performance.
The Senior Independent Non-Executive Director, Mr A Balchin, acts as a sounding board for the Chair and serves as an
intermediary for other Directors. He also provides an alternative channel of communication for shareholders if they have
concerns which contact through the normal channels of Chair or Chief Executive has failed to resolve, or for which such
contact is inappropriate.
The Company Secretary, Mr J Cathie, has been in position since March 2014; and is not a Director of the Company. The
appointment and removal of the Company Secretary is a matter for the Board as a whole.
Operation of the Board
The Board is responsible to shareholders for the proper management of the Group.
The Board normally meets once per month and operates an annual cycle of matters for its consideration, supplemented with
strategic topics and governance matters. The frequency and focus of meetings, agendas and presentations are kept under
review to ensure the best possible use of the time of the Board of Directors and to ensure effective business decisions are
taken. A formal schedule of matters specifically reserved for the Board is in place.
Directors have access to the advice and services of the Company Secretary on matters related to their role on the Board, as
well as access to independent professional advice at the Company’s expense where they judge it necessary to discharge
their duties. The Company Secretary is present at all Board and Committee meetings and is responsible for ensuring Board
procedures are complied with.
The Company maintains appropriate insurance cover in respect of legal action against the Company’s Directors and the
Company Secretary, but no cover exists in the event that the Director is found to have acted fraudulently or dishonestly.
Where Directors have concerns which cannot be resolved about the running of the Company or a proposed action, these
concerns are recorded in Board minutes. On resignation, a Non-Executive Director is required to provide a written statement
to the Chair for circulation to the Board if there are any such concerns.
The Board has formed Audit, Remuneration and Nomination Committees in line with the UK Corporate Governance Code
2018, to deal with the specific aspects of the Group’s affairs. Details of the Committees’ constituent members and the roles,
responsibilities and activities of each of the Committees are described in more detail starting from page 55.
Meetings and attendance
The following table summarises the number of Board, Audit Committee, Remuneration Committee and Nomination Committee
meetings held during the year, and the attendance record of individual Directors at those meetings.
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Number of meetings attended
Board
Audit
Remuneration
Nomination
P Simmonds
12/12
-
5/5
2/2
A Balchin
11/12
3/3
5/5
2/2
J Knott
12/12
3/3
5/5
2/2
R Wandhöfer
9/12
3/3
-
2/2
I Manocha
12/12
-
-
-
T Mullan
12/12
-
-
-
Composition, succession and evaluation
Nomination Committee
A report from the Chair of the Nomination Committee is provided, starting on page 59.
Induction and training
New Directors receive a thorough and tailored induction on their appointment to the Board, covering the activities of the Group
and its key business and financial risks, the terms of reference of the Board and its Committees, and the latest financial
information about the Group.
The Chair, with the support of the Company Secretary, ensures Directors update their skills, knowledge and familiarity with
the Group required to fulfil their roles on the Board and Committees. Relevant training, advice and information is provided to
Directors to enable the Board to function both effectively and efficiently. This is achieved through internal and external advisor
presentations, papers and updates on legislative and regulatory changes, and updates from senior management on sector-
specific matters.
Evaluation of the Board’s performance
In accordance with the UK Corporate Governance Code, an evaluation of the Board, Committees, Directors and the Chair is
carried out annually. The evaluation carried out in the year was conducted by the Company Secretarial team at the Chair’s
instruction, the objective and scope of which was to assess all aspects of the Board’s effectiveness. A high level summary of
the 2022 evaluation results is set out below.
Division of responsibilities
: there was unanimous feedback that there remains an appropriate and clear division of
responsibilities between the Chair and Chief Executive.
Development, information and support
: Executive Directors with internal and external Gresham focussed knowledge, Non-
Executive Directors with more diverse external market-facing knowledge, and a range of internal and external resources from
advisors and the Company Secretarial team, collectively ensure the Board has a well-balanced set of information and support
available.
Time and commitment
: Board members were found to devote an adequate amount of time to their responsibilities, with
excellent attendance at Board and Committee meetings, although late notice availability was occasionally challenging and
some feedback indicated that too much time was allocated to governance relative to strategic matters. Steps are in place to
address these challenges in 2023.
Risk management and control
: there was positive feedback on the increased focus and attention given to risk in the last year,
whilst noting that the risk framework will be further developed in 2023 (see page 43).
Succession planning
: the last formal succession planning exercise took place in 2020, resulting in the appointment of directors
Peter Simmonds, Jenny Knott and Ruth Wandhöfer. In line with Listing Rule LR 9.8.6, succession planning will feature during
2023 for both Executive Directors and Non-Executive Directors, to ensure that their composition continues to be challenged
and addressed.
Retirement and re-election
All Directors are subject to election by shareholders at the first AGM immediately following their appointment. Thereafter,
Directors are subject to annual re-election. All Non-Executive Directors are appointed for fixed terms in line with corporate
governance requirements, subject to re-election.
Audit, risk and internal control
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Audit Committee
A report from the Chair of the Audit Committee is provided, starting on page 55.
Financial reporting
The Board is responsible for presenting a balanced and understandable assessment of the Company’s position and prospects,
extending to interim reports and other price-sensitive public reports and reports to regulators, as well as to information required
to be presented by statutory requirements. A statement of the Directors’ responsibilities is set out on page 83.
Management and specialists within the Group’s finance department are responsible for ensuring the appropriate maintenance
of financial records and processes that ensure all financial information is relevant, reliable, in accordance with the applicable
laws and regulations, and distributed both internally and externally in a timely manner. A review of the consolidation and
financial statements is completed by management to ensure that the financial position and results of the Group are
appropriately reported. All financial information published by the Group is subject to the approval of the Audit Committee.
Principal risks
A report on the principal risks and uncertainties affecting the Company is provided, starting on page 43.
Going concern
The Directors are required to report that the business is a going concern, with supporting assumptions and qualifications as
necessary. The Directors have concluded that the business is a going concern as further explained in the Directors’ Report
starting on page 79.
Viability statement
The Directors confirm that they have assessed the prospects of the Group over a three-year period commencing 1 January
2023 and that they have a reasonable expectation that the Group will be able to continue in operation and meet its liabilities
as they fall due for that period.
The Directors have selected a period of three years as they consider this to be a reasonable and appropriate duration on
which to make the assessment, based on the following two factors: firstly, the Group operates rolling financial scenarios which
extend for the current financial year and up to two subsequent financial years; and, secondly, the Directors’ evaluation of the
forward-looking order book, with Clareti software contracts typically being signed for three-year minimum contract terms,
balanced against the likely attrition rate of other, non-Clareti, revenues.
In making this statement, the Directors have considered the Group’s current position and the potential impact of the principal
risks and uncertainties described on pages 43 to 46 on the Group’s business model, future performance, solvency or liquidity,
taking account of severe but reasonable scenarios and the effectiveness of any mitigating actions, and have performed stress
test analyses based on likely outcomes.
Control environment
The Group operates within a control framework developed and strengthened over a number of years and communicated as
appropriate by a series of written procedures. These lay down accounting policies and financial control procedures, in addition
to controls of a more operational nature. The key procedures that the Directors have established with a view to providing
internal control are as follows:
•
the establishment of the organisational structure and the delegated responsibilities of operational management;
•
the definition of authorisation limits, including matters reserved for the Board;
•
regular site visits by the Executive Directors, with the results reported to Board meetings;
•
the establishment of detailed operational plans and financial budgets for each financial year;
•
maintenance of a register of principal risks, which is reviewed and updated at every Board meeting;
•
review of regular, detailed monthly management reporting provided for every Board meeting which encompasses
both a review of operational activities and entries arising on consolidation;
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•
reporting and monitoring performance against budgets and rolling forecasts;
•
the security of physical property and computer information; and
•
detailed due diligence on all acquisitions.
Remuneration
A report from the Chair of the Remuneration Committee is provided, starting on page 61.
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Audit Committee Report
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Dear shareholder
As Chair of the Audit Committee, I am pleased to present the Committee’s report for the year ended 31 December 2022. The
Committee’s main role remains unchanged – to monitor the integrity of the Group’s financial reporting, to assess the
effectiveness of its internal controls and risk management processes and to ensure that our external auditor, BDO LLP,
delivers a high-quality effective audit.
The Board considers that the Committee has recent and relevant financial experience, including competence in accounting,
relevant to the sector in which we operate, as well as operational skills. I am satisfied that the Committee has appropriately
discharged its duties in the year in accordance with its terms of reference, which are reviewed annually and are available at
www.greshamtech.com/investors.
In order for the Committee to properly discharge its role, it is critical that we have the opportunity to openly discuss with
management any matter which falls within our remit and probe and challenge where necessary. The Chief Executive Officer
and the Chief Financial Officer attend our meetings by invitation, and other senior managers (including the Director of Financial
Operations and Control) are invited to provide financial, technical or business information as necessary. In addition, our
meetings relevant to audit are attended by the lead audit partner from BDO and other representatives. Their attendance is
important as it gives us the opportunity to seek their independent and objective views on matters which they encounter during
their audit. At least once a year, we meet separately with the external auditor to discuss matters without executive
management present. On a more frequent basis, I meet with the Chief Financial Officer and other senior management to
ensure issues or concerns can be raised at an early stage, allowing sufficient time to be devoted at subsequent meetings.
There is an open and constructive communication between the Committee, management and external auditor.
In the prior year, the Committee specifically considered and challenged management on the impact and potential risks
associated with the financing, acquisition and integration of Electra Information Systems, Inc. This ensured a robust approach
to the related processes, including due diligence, risk management, internal controls and financial reporting. The Committee
has continued to pay significant attention to KPIs and segmental reporting including alternative performance measures of the
enlarged Group, with reporting continuing to evolve from transitional acquisition and integration metrics to be increasingly
combined as well as being reflective of the continued weighting of Group towards that of a subscription software business.
The Committee has continued to pay attention to the potential impact and risks to the Group arising from global economic,
international trade and market conditions. These matters are discussed in the Principal Risks and Uncertainties starting on
page 43. Whilst Brexit-related risks appear to have reduced, the Committee intends to continue monitoring the risks associated
with the impact of the geopolitical and economic instability caused by the deplorable actions of Russia in Ukraine.
Responsibilities
Our principal role is to assist the Board in performing its responsibilities in relation to financial reporting, internal controls and
risk management and in maintaining an appropriate relationship with our external auditor. The work of the Committee in
discharging its responsibilities includes:
•
monitoring the integrity of the reported financial statements of the Group, any formal announcements relating to the
Group’s financial performance, and reviewing significant financial issues and judgements contained in them;
•
challenging and monitoring the appropriateness, relevance and integrity of the Group’s alternative performance
measures (“APMs”); including their selection, measurement and presentation;
•
reviewing and assessing the process which management has put in place to support the Board when giving its
assurance on annual financial reports;
•
reviewing the Group’s internal financial controls, and internal control and risk management systems;
•
reviewing the Group’s speak-up (whistleblowing) arrangements;
•
reviewing the need for a separate internal audit function;
•
making recommendations to the Board, for it to put to shareholders for their approval in a general meeting, in relation
to the appointment, reappointment and removal of the external auditor; and to approve the remuneration and terms
of engagement of the external auditor;
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•
ensuring an appropriate relationship with the external auditor to include the reviewing and monitoring of its
independence and objectivity, and the effectiveness of the audit process, based on a sound plan to ensure it delivers
a high-quality effective audit;
•
developing and implementing policy on non-audit services; and
•
reporting to the Board, identifying any matters for which it considers that action or improvement is needed and making
recommendations as to the steps to be taken.
Significant judgements in relation to financial statements
Set out below are what the Committee considers to be the most significant accounting areas which required the exercise of
judgement or a high degree of estimation during the year, together with details of how these were addressed. These are all
considered to be recurring issues.
Significant issue and explanation
Work undertaken by the Committee in forming an opinion
Capitalised development costs
Development costs are accounted for in accordance with IAS 38
“Intangible Assets”, and costs that meet the qualifying criteria are
capitalised and systematically amortised over the useful economic
life of the intangible asset. Determining whether development costs
qualify for capitalisation as intangible assets requires judgement,
including estimates of the technical and commercial viability of the
asset created and its applicable useful economic life. These
estimates are continually reviewed and updated by management
based on past experience and reviews of competitor products
available in the market.
The Committee has reviewed reports from management identifying
the development costs capitalised, the technical and commercial
feasibility of the product being produced and whether further costs
continue to fulfil the required IAS 38 criteria. The Committee’s review
encompasses direct discussion with executive and operational
management, in addition to reviewing monthly formal reporting to the
Board on development and associated sales and implementation
activity. The treatment of development costs is an area of focus for
the external auditor, which reported its findings to us. We concluded
that management’s key assumptions, judgements, estimates and
disclosures were reasonable and appropriate.
Revenue and profit recognition
Revenue and the associated profit are recognised from the sale of
software
licences,
rendering
of
services,
subscriptions
and
maintenance and solution sales. Whilst in most cases performance
obligations
clearly
follow
the
commercial
and
contractual
arrangement agreed with the customer, in some cases the revenue
streams are combined within an overall commercial arrangement.
Such
bundling
requires
judgement
to
assess
performance
obligations associated with each revenue stream and further
judgement as to when and how such performance obligations have
been discharged in order to recognise the associated revenue. The
estimation of the stage of completion, along with the unbundling of
multi-element solution sales, represents a risk of incorrect revenue
recognition.
The Committee has reviewed management’s descriptions and status
reports on material new deals and on project work-in-progress
through the year, both through direct discussion and formal month-
end reporting to the Board. The Committee has furthermore
considered management’s assessments made on percentage of
completion of material work-in-progress, and other judgements such
as bundling or unbundling of revenue streams, and the resulting
impact on revenue and profit recognition. Revenue recognition is an
area of focus for the external auditor, which reported its findings to
us. We considered whether the accounting treatment for revenue
and profit recognition was in accordance with agreed methodology,
the Group’s accounting policies and IFRS 15 “Revenue from
Contracts with Customers” and concurred with management’s
opinion that it was.
Impairment reviews
The Group is required to perform impairment reviews of goodwill
annually at the reporting date and, in addition, performs impairment
reviews of capitalised development costs to identify any intangible
assets that have a carrying value that is in excess of their
recoverable value. Determining the recoverability of an intangible
asset requires judgement in both the methodology applied and the
key variables within that methodology. Where it is determined an
intangible asset is impaired, its carrying value will be reduced to its
recoverable value with the difference recorded as an impairment
charge in the income statement.
The Committee has considered management’s assessments of
value in use of cash-generating units of intangible assets (principally
goodwill and capitalised development costs) at the reporting date.
This included specifically considering and subsequently approving
business plans prepared by management supporting the future
performance expectations used in the calculation of the value in use.
Impairment reviews were also an area of focus for the external
auditor, which reported its findings to us. We considered whether the
accounting treatment performing impairment reviews was in
accordance with agreed methodology, the Group’s accounting
policies and IAS 36 “Impairment of Assets”. We concluded that
management’s key assumptions were reasonable.
Interaction with the Financial Reporting Council (“FRC”)
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During the year, the Group was made aware that the FRC included Gresham’s Annual Report and Accounts to 31 December
2021 in their sample for their thematic review of judgement and estimate disclosures. A limited scope review was carried out
by staff at the FRC who have an understanding of the legal and accounting frameworks that the Group operates within. The
FRC were pleased to report that they did not have any questions or queries to raise with regards to the Group’s judgement or
estimate disclosures within the 2021 Annual Report and Accounts. However, the FRC did raise some areas of potential
disclosure that they have considered might have relevance to readers of our accounts which the Board have given due
consideration to.
Fair, balanced and understandable
At the request of the Board, the Committee considered whether this Annual Report was a fair, balanced and understandable
assessment of the Group’s position and prospects. In reaching its conclusion, the following was considered:
•
skills and experience of the team with responsibility for the preparation and review of the Annual Report;
•
drafting stages of the report to ensure consistency of tone and message, with a balanced approach to the linkage of
various statements and sections of the report;
•
input of the Executive Directors and ultimately the Board of Directors on the layout, design and content of the Annual
Report;
•
review of applicable legislation and regulatory requirements to be incorporated into the Annual Report, by the
Company Secretarial team;
•
verification of financial numbers and commentary undertaken by the Executive Directors; and
•
review by the Committee before the Annual Report is presented to the Board for approval.
Risk management and internal control systems
The Board is responsible for maintaining a sound risk management and internal control system to safeguard shareholders’
investment and the Company’s assets. The Directors acknowledge their ultimate responsibility for ensuring that the Group
has in place systems of controls, financial and otherwise, and for managing risk, that are appropriate to the business
environment in which it operates and the risks to which it is exposed and for monitoring those systems.
During the year, a new risk management framework was implemented, which was reviewed by the Committee and Board
alongside the Group’s internal control systems (further details can be found on page 43). This review covered all material
controls, including financial, operational and compliance controls, and took into account the risks and potential impact arising
from Brexit and the war in Ukraine.
The Group’s risk management and internal control systems are designed to manage rather than eliminate the risk of failure
of business objectives and can only provide reasonable but not absolute assurance against material misstatement or loss.
The Board, and newly established Risk Review Board (see further details on page 43), consider risk management and the
internal control environment to be areas for continuous improvement, commensurate with the growth and complexity of the
Group. Ongoing discussions with, and challenge to, management aiming to further enhance the Group’s internal control and
risk management, occur through both formal and informal channels.
An embedded ongoing process for identifying, evaluating and managing the principal risks faced by the Group is regularly
reviewed by the Board, and remains in place up to the date of the approval of the financial statements.
Speak-up (whistleblowing) arrangements
The Committee has reviewed arrangements by which staff of the Group may, in confidence, raise concerns about possible
improprieties in matters of financial reporting or any other matters of concern and concluded that they remain appropriate.
Compliance policies
The Group has a number of compliance policies including, Whistleblowing, Data Protection, and Anti-Bribery. Any breach of
these policies is a disciplinary matter and dealt with accordingly.
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Internal audit function
During the year, the Committee considered the need for a separate internal audit function and its impact on the external audit
and concluded that, based on the size of the Group, a separate internal audit function is not necessary at this stage of the
Group’s maturity. The need for an internal audit function is reviewed at least annually.
External auditor
The Committee reviews and makes recommendations with regard to the appointment of the external auditor. In making these
recommendations, the Committee considers auditor effectiveness and independence, partner rotation and any other factors
which may impact the external auditor’s appointment.
In considering the effectiveness of BDO, the Committee discussed and approved the scope of and fees for the external audit
plan and reviewed the approach to the external audit, their assessment of the significant risks in the Group’s financial
statements and materiality levels, and associated work. In addition, the Committee considered the commercial experience
and expertise of the auditor, particularly in the Group’s industry sector; the fulfilment of the agreed audit plan and any variations
from this plan; and the robustness of BDO in its handling of key accounting and audit judgements.
Following this internal evaluation, the Committee concluded that there had been appropriate focus, challenge and
communication on the primary areas of audit focus from BDO in the year. The Committee is therefore satisfied with the
effectiveness and independence of the external auditor.
Non-audit services
The Committee reviews and controls the manner in which non-audit services are awarded, especially to the external auditor.
All significant non-audit work, and work of a non-compliance consultancy nature, requires Audit Committee approval. Non-
audit services will only be approved by the Committee if:
•
engagement of the auditor does not impair the independence or objectivity of the external auditor;
•
there are no conflicts of interest; and
•
aggregate fees for permitted non-audit services do not exceed 70% of the average audit fees over the past three
years.
In the year, there were no non-audit fees paid to the external auditor (2021: nil).
Andy Balchin
Chair of the Audit Committee
13 March 2023
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Nomination Committee Report
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Dear shareholder
I am pleased to present the report of the Nomination Committee for the year ended 31 December 2022.
The key activities of the Committee in the year were:
•
commissioning a Group-wide statement on Equality, Diversity and Inclusion;
•
arranging a Board skills review to identify any key skills gaps to take into account for succession planning; and
•
reviewing Board diversity requirements.
The Committee keeps under review, and takes appropriate action to ensure, orderly succession for appointments to the Board
and to senior management, so as to maintain an appropriate balance of skills and experience. As regards Non-Executive
Directors, the Committee considers, amongst other factors, their other significant outside commitments prior to making
recommendations, to ensure they have sufficient time to dedicate to their role. The Committee keeps any changes to these
commitments under review. The Committee has not approved any external appointment where such appointment is
considered to be significant.
The Board’s policy is to ensure that all appointments are merit-based and based on objective criteria, giving due regard to
equality of opportunity, and to promote inclusion and diversity. The Board notes that achieving diversity in the technology
sector is especially challenging due to the available pool of individuals with the right skills, experience and talent; however is
committed to keeping this under review. Given the relatively small size of the Board and the Group, the Committee does not
currently set any measurable objectives for implementing a diversity policy, but acknowledges the role of the Board in
promoting diversity throughout the Group. In the year the Committee commissioned a group-wide statement on Equality,
Diversity and Inclusion. See page 28 for wider gender balance data; which is being looked at holistically by the People &
Culture team.
To comply with Listing Rule 9.8.6(9), as at 31 December 2022 (chosen reference date) the following data was collected via
an anonymous e-survey from the Company Secretarial team for reporting purposes.
Number of
Board
members
Percentage of
the Board
Number of
senior
positions on
the Board
Number in
executive
management
Percentage of
executive
management
Men
4
66.6%
4
6
75%
Women
2
33.3%
0
2
25%
Other
0
0%
0
0
0%
Not specified/prefer not to say
0
0%
0
0
0%
Number of
Board
members
Percentage of
the Board
Number of
senior
positions on
the Board
Number in
executive
management
Percentage of
executive
management
White British or other White
(including minority-white groups)
6
100%
4
8
100%
Mixed/Multiple Ethnic Groups
0
0%
0
0
0%
Asian/Asian British
0
0%
0
0
0%
Black/African/Caribbean/Black
British
0
0%
0
0
0%
Other ethnic group, including
Arab
0
0%
0
0
0%
Not specified/prefer not to say
0
0%
0
0
0%
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In accordance with the UK Corporate Governance Code 2018, all Directors are subject to election or annual re-election (as
the case may be). Having considered the contribution of individuals on the Board, it is apparent to me that each Director brings
specific expertise to the Board and makes a valuable contribution to the Company’s long-term success. I therefore have no
hesitation in recommending them to shareholders.
Peter Simmonds
Chair of the Nomination Committee
13 March 2023
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Introduction to the Remuneration Report
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Dear shareholder
I am pleased to introduce the Directors’ Remuneration Report for the year ended 31 December 2022.
The key activities of the Committee in respect of 2022 included:
•
determining the increases to basic pay for the year commencing 1 April 2022 for Executive Directors in accordance
with the Company’s established methodology;
•
setting the performance measures and targets for variable pay awards under the Annual Bonus Scheme in respect
of 2021, and for matching awards under the LTIP in respect of the three financial years 2022 – 2024;
•
assessing the performance of the Group and each Executive Director against the pre-determined targets for 2022
and determining final outcomes for the year under the Annual Bonus Scheme, details of which are set out in the
following pages;
•
reviewing and approving the grant of awards to certain individuals under the Performance Share Plan;
•
conducting a consultation with major shareholders in relation to the vote on the Remuneration Report at the AGM in
2022, which was passed with less than an 80% majority;
•
engaging external remuneration consultants to carry out an independent review of our Directors’ Remuneration Policy
and Remuneration Report. Following this review, we are pleased to include in the following pages a fully updated
Directors’ Remuneration Policy, which will be put to shareholders for approval at the forthcoming AGM, and also a
revised Remuneration Report, which will be put to the usual advisory vote at the AGM. Both of these documents are
intended to improve transparency in our remuneration arrangements, adopt remuneration best practice and reflect
shareholder feedback where considered appropriate by the Committee.
Looking ahead to 2023, the Committee is mindful of the continued impact of the prevailing inflationary environment on pay
expectations and talent retention, which the Committee is considering carefully in its application of the Company’s established
methodology for determining pay increases across the Group. As a result of this, the average pay rise across the global
population is approximately 6.6%. Base pay increases for Chief Executive and Chief Financial Officer have been set at 6.5%.
Other information on how the Directors’ Remuneration Policy is expected to be applied in 2023, including in relation to the
Annual Bonus Scheme and the LTIP, is set out in the following pages.
I hope this introduction provides an informative overview of the key activities of the Committee in the year, and that our formal
Remuneration Report on the following pages demonstrates our ongoing commitment to ensuring that executive reward
incentivises positive outcomes for shareholders, by reflecting strong linkage with strategy and a fair, transparent and
collaborative corporate culture.
Jenny Knott
Chair of the Remuneration Committee
13 March 2023
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Directors’ Remuneration Policy
The Directors’ Remuneration Policy (the “Policy”) has been prepared in accordance with the requirements of the Large and
Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008 as amended in 2019, the provisions of the
UK Corporate Governance Code (2018) and the Listing Rules.
The Policy sets out the Company’s policy on remuneration for Executive and Non-Executive Directors and will be subject to
a binding shareholder vote at the Annual General Meeting to be held in May 2023. If approved, the Policy will take effect from
1 January 2023 and will last for three years.
General principles
Our policy for Directors’ remuneration arrangements and practices is based on certain general principles, which are that
remuneration should:
•
be sufficient to attract, motivate and retain Directors in order to deliver the Group’s strategic and financial goals;
•
support the Group’s vision, purpose and values;
•
align interests of Directors with those of shareholders and other key stakeholders;
•
be simple and transparent; and
•
for Executive Directors, ensure that an appropriate proportion of the overall remuneration package is incentive pay,
determined by reference to individual performance, Group performance and market conditions.
The Committee has been careful to take full account of the remuneration-related provisions contained in the Code in our
design considerations. With regard to the six factors outlined in Provision 40 of the Code, these have been addressed as
follows:
•
Clarity – Our remuneration framework is structured to support financial delivery and the achievement of strategic
objectives, aligning the interests of Executive Directors with those of our shareholders. Our Policy is transparent and
well understood by our senior executive team. It has been clearly articulated herein for the benefit of our shareholders
and representative bodies.
•
Simplicity – Our remuneration framework is straightforward to communicate and operate. We have operated the
same simple and transparent overarching structure for several years and applied it on a consistent basis.
•
Risk – Our incentives have been structured to ensure that they are aligned with the Board’s system of risk
management and risk appetite. Inappropriate risk-taking is discouraged and mitigated through, for example (i) the
operation of arrangements that provide an appropriate balance of fixed pay to short- and long-term incentive pay and
through multiple performance measures based on a blend of financial, non-financial and shareholder return targets,
(ii) the deferral of a proportion of annual bonus into shares and the operation of a post-vesting holding period for the
LTIP, (iii) the operation of significant in-employment and post-employment shareholding guidelines, and (iv) the
operation of robust recovery and withholding provisions.
•
Predictability – Our incentive plans are subject to individual caps, with our share plans also subject to dilution limits.
The Committee has full discretion to alter the pay-out level or vesting outcome to ensure payments are appropriately
aligned with the underlying performance of the Company.
•
Proportionality – Ensuring Executive Directors are not rewarded for failure underscores our approach to
remuneration. For example, the significant proportion of our packages is based on long-term performance targets
linked to the KPIs of the Company, and through our ability and openness to the use of discretion to ensure appropriate
outcomes. There is a clear link between individual awards, delivery of strategy and our long-term performance. As
mentioned above, formulaic incentive outcomes are reviewed by the Committee and may be adjusted having
consideration to overall Group performance and wider workforce remuneration policies and practices.
•
Alignment to culture – Our Policy is aligned to our culture and values. The Committee strives to instil a sustainable
performance and continuous improvement culture at the management level that can cascade down throughout the
Company. The Board sets the framework of KPIs against which we monitor the performance of the Company and
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the Committee links the performance metrics of our incentive arrangements to those KPIs. We are also keen to foster
a culture of share ownership throughout the Company and operate all-employee share arrangements in pursuit of
this objective.
Changes to the Policy
The key changes to this Policy from the one approved by shareholders on 30 December 2020 are as follows:
•
an increase to the shareholding guideline applying to Executive Directors;
•
removal of the ability to provide a pension contribution rate for new recruits which is higher than the workforce rate
and including the ability to pay a pension contribution in cash;
•
dividend equivalents may be payable on dividends payable during the relevant vesting and holding periods for vested
share awards;
•
the inclusion of additional malus and clawback triggers and to ensure consistency between our schemes;
•
the inclusion of Committee override provisions in the incentive schemes to take account of overall business and/or
individual performance over the relevant assessment periods; and
•
the inclusion of the ability to pay outplacement, professional legal fees and/or statutory entitlements or payments to
settle a claim in the event of termination of employment; and
•
Greater detail on our policies for recruitment and loss of office.
Remuneration Policy table
The table below sets out the Directors’ Remuneration Policy for each element of pay.
Element of remuneration and link
to strategy
Operation
Framework
Maximum opportunity
Base salary
Supports the recruitment,
motivation and retention of
Directors of the calibre required
to deliver the Group’s strategy.
Base salary is set on
appointment, paid monthly and
typically reviewed annually, with
any increases normally applying
from 1 April.
Base salary and reviews are
assessed by the Committee on
both Group and individual
performance and, in the case of
new Directors, their prior
experience and skills.
Consideration is also given to pay
increases for other employees in
the Group and to comparable pay
for similar roles at similar
companies. Where appropriate,
the Committee will engage
external remuneration
consultants for benchmarking.
Salaries will be eligible for
increases during the period that
this policy operates. Executives’
increases will take into
consideration a number of factors
including the wider workforce
increase, country-specific inflation,
and individual performance.
Increases beyond workforce pay
awards may be made, for
example, where there is a change
of incumbent, in responsibility,
experience or a significant
increase in the scale of the role
and/or size, value and/or
complexity of the Group.
Pension
Supports the recruitment,
motivation and retention of
Directors of the calibre required
to deliver the Group’s strategy.
Pension contributions are made
by the Company to a defined
contribution scheme operated by
a third party provider or may be
payable as a cash allowance in
lieu of pension.
Directors are eligible to make
pension contributions by utilising
the Company’s approved
pension scheme arrangements
from time to time. The Company
will match the Director’s pension
contributions up to the specified
maximum.
The Company matches the
Director’s pension contribution up
to a maximum of 5% of base
salary, in line with the general UK
employee population.
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Benefits
Supports the recruitment,
motivation and retention of
Directors of the calibre required
to deliver the Group’s strategy.
Benefits include private
healthcare/medical insurance,
dental insurance and death in
service insurance (life assurance
cover equal to 4 times base
salary). Executives will be
eligible for any other benefits
which are introduced for the
wider workforce on similar terms.
Any reasonable business-related
expenses (and any tax thereon)
can be reimbursed if determined
to be a taxable benefit.
For external and internal
appointments or relocations, the
Company may pay certain
relocation and/or incidental
expenses as appropriate.
Directors are eligible to subscribe
for benefits by selecting their
preferred benefits options via the
Company’s approved benefits
provider from time to time.
The value of benefits may vary
from year to year depending on
the cost of the Company from third
party providers.
Annual Bonus
Rewards and incentivises the
Executive Directors to deliver
annual strategic, financial and
operational goals.
The annual bonus is calculated
after the end of the financial year
based on predetermined targets.
The annual bonus consists of a
mix of cash and shares. The
Committee retains discretion to
determine the annual bonus split
between cash and shares (which
by default is 50:50) and to make
appropriate adjustments having
regard to the prevailing
circumstances.
The cash element of the bonus is
normally paid at or after the time
of release of the final audited
results. The shares are deferred
for two years and then released.
Dividends or dividend
equivalents may accrue on
vested deferred bonus awards.
The Committee has discretion to
amend the pay-out should any
formulaic outcome not reflect the
Committee’s assessment of
overall business and/or individual
performance.
The Committee determines the
relevant performance targets at
the start of each financial year.
Targets are set predominantly (at
least 75%) in relation to financial
measures, with the balance
based on non-financial
objectives.
Payments and awards are
subject to malus and clawback.
The maximum potential annual
bonus is 100% of base salary.
Long-Term Share Incentive Plan
Rewards and incentivises
Executive Directors to deliver
sustainable long-term financial
growth and shareholder returns.
Acts as a retention mechanism.
Aligns Directors’ interests with
the long-term interests of
shareholders and other key
stakeholders.
This plan is operated pursuant to
the rules of the Deferred Share
Bonus Plan 2017 and is linked to
the Annual Bonus.
At the time that the Annual
Bonus is determined, an annual
award of matching shares is
granted under this plan, the
quantum of which is linked to the
number of deferred shares
awarded in the Annual Bonus.
The Committee determines the
relevant targets for growth and
returns measures.
The performance is assessed
over three years.
The maximum award in respect of
a year is 4x the number of (gross
of tax) deferred shares awarded
under the Annual Bonus in the
year of grant.
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Matching awards are subject to a
three-year vesting period and will
only vest if and to the extent that
pre-determined targets are
achieved over that period.
Awards are subject to continuous
employment, post-vesting
holding and malus and clawback.
Dividends or dividend
equivalents may accrue on
vested matching share awards.
The Committee retains discretion
to adjust vesting levels in
exceptional circumstances,
including but not limited to an
assessment of the overall
performance of the business or
individual over the three-year
period.
Performance Share Plan 2020
Rewards and incentivises
Executive Directors for creation
of shareholder value.
Acts as a retention mechanism.
Directly aligns financial
incentives with returns to
shareholders.
This plan is operated pursuant to
the rules of the Performance
Share Plan 2020.
Share awards are made at the
Committee’s discretion. Awards
are subject to performance
conditions specified at the time
of grant by the Committee and a
three-year vesting period.
Awards are subject to continuous
employment, post-vesting holding
and malus and clawback.
Dividends or dividend
equivalents may accrue on
vested performance share
awards.
The Remuneration Committee
retains discretion to adjust
vesting levels in exceptional
circumstances, including but not
limited to an assessment of the
overall performance of the
business or individual over the
three-year period.
Awards vest subject to the
achievement of performance
criteria. A material proportion of
an award is linked to performance
conditions directly aligned to
shareholder value growth. An
award will not vest unless and
until the Company’s share price
has increased by at least 20%
relative to the share price at the
date of grant.
The maximum award in respect of
a year is 100% of base salary or up
to 200% in exceptional
circumstances.
Chair and Non-Executive Director fees
Supports the recruitment and
retention of individuals of the
calibre required to constitute an
effective Board and contribute to
the Company’s long-term
success.
Fees for Non-Executive Directors
are set by the Board (excluding
Non-Executive Directors) and
paid monthly.
A basic fee is set for normal
duties, commensurate with fees
paid for similar roles in other
similar companies, taking
account of the time commitment
and responsibilities. A
supplemental fee is paid for the
Chair role, SID role and for each
Committee Chair role.
Additional fees may be paid for
services outside of the normal
duties subject to prior agreement
with the Company.
Fees for the Chair and Non-
Executive Directors are reviewed
annually. Current fees are set out
in the Directors’ Remuneration
Report.
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Non-Executive Directors are not
eligible for pensions, incentives,
bonus or any similar payments
other than normal out-of-pocket
expenses incurred on behalf of
the business.
Compensation for loss of office is
not payable to Non-Executive
Directors.
Remuneration Policy considerations
Selection of performance measures
The performance measures for the Annual Bonus and awards under the Long-Term Share Incentive Plan are selected to
reflect the main KPIs and strategic priorities for the Group. The performance measures for awards under the Performance
Share Plan are selected to directly align awards with shareholder value growth and to reflect key drivers of shareholder value
growth. The Committee’s policy is to set performance targets which are both challenging and achievable and that the maximum
outcomes are only available for outstanding performance.
Performance conditions applying to subsisting awards may be amended or substituted by the Committee if an event occurs
(such as a change in strategy, a material acquisition or divestment of a Group business or a change in prevailing market
conditions) which causes the Committee to determine that the measures are no longer appropriate and that amendment is
required in order that they achieve their original purpose.
Operation of share plans and exercise of discretion
The Remuneration Committee operates the annual bonus, Long-Term Share Incentive Plan and Performance Share Plan
according to the rules of each respective plan which, consistent with market practice, include certain discretions in relation to
the operation of each plan, such as:
•
who participates in the plan, the quantum of an award and/or payment and the timing of awards and/or payments;
•
determining the extent of vesting;
•
treatment of awards and/or payments on a change of control or restructuring of the Group;
•
whether an Executive Director or a senior manager is a good/bad leaver for incentive plan purposes and whether
the proportion of awards that vest do so at the time of leaving or at the normal vesting date(s);
•
how and whether an award may be adjusted in certain circumstances (e.g. for a rights issue, a corporate restructuring
or for special dividends);
•
what the weighting, measures and targets should be for the annual bonus plan, matching and performance share
plan awards from year to year;
•
the Committee also retains the ability, within the policy, if events occur that cause it to determine that the conditions
set in relation to an annual bonus plan, share matching plan or performance share plan award are no longer
appropriate or unable to fulfil their original intended purpose, to adjust targets and/or set different measures or
weightings for the applicable annual bonus plan, share matching plan and performance share plan awards with, in
the case of share awards held by Executive Directors, adjusted performance conditions being not materially less
difficult to satisfy than the original conditions would have been but for the relevant event(s); and
•
the ability to override formulaic outcomes in line with policy.
All assessments of performance are ultimately subject to the Committee’s judgement and discretion is retained to adjust
payments in appropriate circumstances as outlined in this Policy. Any material discretion exercised (and the rationale) will be
disclosed.
Share ownership guidelines
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The Company expects Executive Directors to build up and maintain a shareholding in the Company of a market value equal
to 200% of base salary or more, including beneficially owned shares and any fully vested share awards/options (after
deducting any unpaid acquisition or exercise costs). Executive Directors are expected not to dispose of any shares acquired
under any Company share plan until he or she meets the minimum share ownership guideline.
Shares acquired by Executive Directors pursuant to the Long-Term Share Incentive Plan and the Performance Share Plan
are subject to a two-year post vesting holding period during which acquired shares may not be disposed of, save in cases of
hardship or other circumstances where the Committee considers it appropriate. Any shares that are sold to discharge the
option holder’s fiscal (including tax) obligations are not treated as having been acquired.
Post-employment, the Company expects Executive Directors to retain a shareholding valued at not less than 100% of base
salary based on the share price at cessation (or, if lower, the value of shareholding upon cessation), for a period of one year
following termination of employment, save in cases of hardship or other circumstances where the Committee considers it
appropriate. Any shares disposed of during this period are required to be done in co-ordination with the Company and its
brokers in order to ensure an orderly market is maintained.
Malus and clawback
In the event of gross misconduct, fraud, malpractice, a material misstatement of results, a material breach of risk management,
error in assessing performance conditions, corporate failure or insolvency, or other circumstances that, in the opinion of the
Committee, have a sufficiently serious impact on the reputation of any Group business, the Committee may:
•
require repayment of some or all of any Annual Bonus payment (including by way of reduction in the number of
deferred shares released) for up to three years following payment; and/or
•
reduce or cancel a vested or unvested share award made under any Company plan or require the participant to
make a payment to the Company at any time from the date of grant of the award until three years after vesting of the
award.
Legacy arrangements
The Committee reserves the right to make any remuneration payments and payments for loss of office, notwithstanding that
they are not in line with the Remuneration Policy, where the terms of the payment were agreed (i) before the policy came into
effect or (ii) at a time when the relevant individual was not a Director of the Company and, in the opinion of the Committee,
the payment was not in consideration for the individual becoming a Director of the Company. For these purposes “payments”
includes the Committee satisfying awards of variable remuneration and, in relation to an award over shares, the terms of the
payment are “agreed” at the time the award is granted.
Recruitment of Directors
The Company’s Nomination Committee is responsible for leading the process for Board appointments and making
recommendations to the Board. Refer to the Nomination Committee Report for details.
New Directors will be offered remuneration packages in line with the Directors’ Remuneration Policy in force at the time, with
new appointments subject to the same remuneration principles as apply to incumbent Directors.
Individuals who are recruited or promoted to the Board may have their initial basic salary set at a lower level than would
otherwise be the case, until they become established in their Board role. Subsequent increases in their salary may be higher
than the average, subject to their ongoing performance and development.
Depending on the timing of the appointment, the Committee may deem it appropriate to set different annual bonus
performance conditions for the first performance year of appointment. A Performance Share Plan award can be made shortly
following an appointment (assuming the Company is not in a close period). In the case of an internal appointment, any variable
pay element awarded in respect of the prior role would be allowed to pay out according to its terms, adjusted as relevant to
take into account the appointment.
In addition, the Committee may offer additional cash and/or share-based buyout awards when it considers these to be in the
best interests of the Company (and therefore shareholders) to take account of remuneration given up at the individual’s former
employer. This includes the use of awards made under 9.4.2 of the Listing Rules. Such awards would be capped at a
reasonable estimate of the value foregone and would reflect, as far as possible, the delivery mechanism, time horizons and
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whether performance requirements are attached to that remuneration. Shareholders will be informed of any such payments
at the time of appointment and/or in the next published Annual Report.
For the appointment of a new Chair or Non-Executive Director, the fee arrangement would be set in accordance with the
approved Remuneration Policy.
Service contracts, letters of appointment
It is the Company’s policy to offer Executive Directors service contracts terminable with a maximum of twelve months’ rolling
notice from either side.
None of the Non-Executive Directors have a service contract. Appointments are for three-year terms, which may be renewed
by mutual agreement, subject always to termination by either party at any time on three months’ notice. Chair and Non-
Executive Director appointments are subject to Board approval and election by shareholders at each Annual General Meeting.
Copies of service contracts and letters of appointment are held at the Company’s registered office.
Leavers and policy on payments for loss of office
The Company may terminate the contract with immediate effect with or without cause by making a payment in lieu of notice
by monthly instalments of salary and benefits, with reductions for any amounts received from providing services to others
during this period. There are no obligations to make payments beyond those disclosed elsewhere in this report.
The Remuneration Committee strongly endorses the obligation on an Executive Director to mitigate any loss on early
termination and will seek to reduce the amount payable on termination where it is appropriate to do so. The Committee will
also take care to ensure that, while meeting its contractual obligations, poor performance is not rewarded. The Executive
Directors’ contracts contain early termination provisions consistent with the Policy outlined above.
The Group may pay reasonable outplacement and professional legal fees incurred by Executives in finalising their termination
arrangements, where considered appropriate, and may pay any statutory entitlements or settle compromise claims in
connection with a termination of employment, where considered in the best interests of the Company. Outstanding
savings/shares under all-employee share plans would be transferred in accordance with the terms of the plans.
A pro-rated bonus may be paid subject to performance, for the period of active service only. Outstanding share awards may
vest in accordance with the provisions of the various scheme rules.
Deferred shares awarded under the Annual Bonus are beneficially owned by the Executive and will be available to them upon
leaving, save for forfeiture for serious misconduct. Clawback and malus provisions will also apply.
Under the Long-Term Share Incentive Plan and PSP, any outstanding awards will ordinarily lapse, however in “good leaver”
cases the default treatment is that awards will vest subject to the original performance condition and time proration and the
holding period will normally continue to apply.
For added flexibility, the rules allow for the Committee to decide not to pro-rate (or pro-rate to a lesser extent) if it decides it is
appropriate to do so, and to allow vesting to be triggered at the point of leaving by reference to performance to that date,
rather than waiting until the end of the performance period. On a change of control, any vesting of awards will be subject to
assessment of performance against the performance conditions and normally be pro-rated.
Where a buy-out award is made under the Listing Rules then the leaver provisions would be determined at the time of the
award.
Wider staff employment conditions
The Committee considers pay and employment conditions of other staff members of the Group when designing and setting
executive remuneration. Executive Directors are compensated following similar frameworks as the general employee
population, although the quantum differs due to the responsibilities attached to such roles. Executive Director pay reviews are
set within the context of employee increases, with changes reflecting not only performance (individual and Group) but relevant
competence and skills as would be applied to any other employee, as well as country-specific inflationary rates. Underpinning
all pay is an intention to be fair to all staff, taking into account the individual’s seniority and local market practices.
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Consultation with shareholders
The Committee is committed to an ongoing dialogue with shareholders and seeks the views of significant shareholders when
any major changes are being made to remuneration arrangements. The Committee takes into account the views of significant
shareholders when formulating and implementing the policy. All shareholders are encouraged to attend the Company’s AGM,
and the Chair of the Remuneration Committee is available for meetings with shareholders should they have any concerns
about remuneration matters.
Consultation with employees and consideration of employment conditions
The Company does not consult directly with employees when formulating and implementing the Directors’ Remuneration
Policy. However, when making decisions in relation to Executive pay and structures, the Committee takes into consideration
terms and conditions elsewhere in the Group and the results of the Group's annual engagement survey
.
The Group’s
remuneration strategy and practices for the general employee population is determined in terms of best practice and ensuring
that the Company is able to attract, motivate and retain the people with the necessary skills and experience to advance the
Group’s strategic, financial and operational objectives. All employees are eligible to share in the success of the Group through
performance-related remuneration and share ownership through an annual bonus and annual share matching plan (operated
pursuant to the Deferred Share Bonus Plan). At the recommendation of Executive Directors and discretion of the Committee,
certain key employees also participate in the Performance Share Plan.
The Committee is kept updated throughout the year on general employment conditions and makes recommendations to the
Board for the budget for annual salary increases. Furthermore, the Committee’s oversight extends to the first level of
management below Executive Directors, for which it approves and monitors the level and structure of remuneration. Where
share awards are granted, the conditions are substantially the same for all participants, with the size of awards determined
by seniority or other relevant factors.
Illustration of Remuneration scenarios
The following graphs set out an illustration of Executive Director pay for 2023. The potential reward opportunities for 2023 are
based on the Remuneration Policy described herein. Projected values exclude the impact of share price movement (except
in scenario 4) and the payment of dividends and actual outcomes may differ from those shown. Projected values also exclude
any potential discretionary awards under the Performance Share Plan 2020.
Four different remuneration scenarios for 2023 are provided, as follows:
•
the “minimum” scenario includes base salary, pension and benefits (“fixed remuneration”) which are the elements of
Executive Director pay that are not at risk;
•
the “on-target” scenario includes fixed remuneration, plus an on-target bonus of 50% of base salary under the Annual
Bonus (50% cash and 50% shares) and an assumption that related matching shares will vest three years later under
the Long-Term Share Incentive
Plan based on a 2x multiple of the shares awarded under the Annual Bonus, and
PSP awards vesting at 50% of maximum;
•
the “maximum” scenario includes fixed remuneration, plus a maximum bonus of 100% of base salary under the
Annual Bonus (50% cash and 50% shares) and an assumption that
matching shares will vest three years later under
the Long-Term Share Incentive
Plan based on a 4x multiple of the shares awarded under the Annual Bonus, and
PSP awards vest at full on the basis of a 100% of salary grant; and
•
the “maximum plus 50% share price increase” scenario, which includes the maximum scenario as described above
plus the impact of a 50% increase to share price applied to matching and PSP share awards.
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Annual Report on Remuneration
Role of the Remuneration Committee
The Committee’s key role is to determine and operate a Remuneration Policy that supports the Company’s strategy and
promotes long-term sustainable success and aligns the interests of Directors and Senior Executives with those of
shareholders.
The Committee’s primary responsibilities include:
•
setting remuneration incentives to attract, retain and motive Senior Executives and other key employees of the quality
required to run the Company successfully and support its strategy and its long-term success, without paying more
than is necessary;
•
approving the total individual remuneration package of each Executive Director and each member of the Senior
Executive team;
•
reviewing and setting performance targets for Executive Director and Senior Management incentive plans including
annual bonus and long-term share plans;
•
determining remuneration outcomes in relation to performance-related pay for Executive Directors and Senior
Management;
•
reviewing and approving equity awards under the Performance Share Plan for Executive Directors and Senior
Management; and
•
having oversight of pay across the wider workforce when making decisions on Senior Executive pay.
Details of the Committee’s operation, roles and responsibilities are set out in terms of reference, which are available on the
Company’s website.
The Committee addressed the following main topics during the year:
•
reviewed and approved the remuneration packages for the executive directors including base salary increases for
2022;
•
determined the annual bonus and LTIP/PSP outcomes in respect of the financial period ending 31 December 2021;
•
reviewed and approved the metrics applying to incentive schemes granted in 2022; and
•
carried out a review of the Directors’ Remuneration Policy.
The Committee seeks professional advice where it considers it appropriate to do so. In the year, the Committee engaged FIT
Remuneration Consultants to carry out a review of the Directors’ Remuneration Policy with total fees paid in the year of £4,800
(2021: £7,000 to Grant Thornton).
Implementation of Policy for 2023
•
Base salary: base salary for the Executive Directors is increased by 6.5% effective 1 April 2023. The average staff
increase is 6.6%.
•
Pension: a maximum matching contribution of 5% will be provided.
•
Annual bonus: the annual bonus opportunity will be 100% of base salary, with target measures and weightings to be
consistent with 2022 and the Remuneration Policy. In line with the Company’s standard practice, details of the targets
will be disclosed retrospectively in next year’s report.
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•
Long-Term Share Incentive Plan: matching shares will be granted in 2023 based on the 2022 annual bonus outcome.
The maximum matching awards will be 4x the value of the deferred bonus. These awards will vest after three years
and are subject to the performance criteria for growth (Group revenue (excluding low fixed-margin contracting
business)) and returns (“TSR”). The targets applying to each measure are not disclosed on the grounds of being
commercially sensitive but retrospective disclosure of the targets and outcomes will be provided in the report for the
year in which the award has vested.
•
Performance Share Plan: the Committee retains discretion to make PSP awards in the year. Any awards granted to
Directors will be disclosed through regulatory announcements and reported on in next year’s report.
•
Chair and NED fees: to be increased by 5% effective 1 April 2023.
Single figure for total remuneration (audited information)
The following table sets out the single figure for total remuneration for Directors for the financial years ended 31 December
2022 and 2021:
31 December
2022
Base salary
/ fees
(4)
Benefits in
kind
(3)
Annual
bonus
(1)
Pension
Long Term
Share
Incentive
plan
(2)
Total fixed
pay
Total
variable
pay
(5)
Total
2022
£
£
£
£
£
£
£
£
Executive
Directors
I Manocha
274,057
1,166
156,467
13,691
160,172
288,914
331,639
620,553
T Mullan
168,610
3,374
94,363
8,418
103,999
180,402
230,362
410,764
Non-Executive
Directors
P Simmonds
80,000
-
-
-
-
80,000
-
80,000
A Balchin
45,000
-
-
-
-
45,000
-
45,000
J Knott
45,000
-
-
-
-
45,000
-
45,000
R Wandhöfer
40,000
-
-
-
-
40,000
-
40,000
652,667
4,540
250,830
22,109
264,171
679,316
562,001
1,241,317
(1)
Comprises the total value of bonus of which 50% is paid in shares.
(2)
These figures represent the estimated value of Long Term Share Incentive Plan awards granted on 20 March 2020 based on the average share price for the three-month
period ending 31 December 2022 of 154 pence.
(3)
Benefits in kind include provision of private healthcare and death in service insurance.
(4)
Mr I Manocha and Mr T Mullan received a base salary increase of 0.6% and 1.2% respectively in 2022. The average increase across Group employees in 2022 was 4.7%.
(5)
Includes an additional bonus of £15,000 (CEO) and £32,000 (CFO), in line with disclosures made in 2021.
31 December
2021
Base salary
/ fees
Benefits in
kind
(3)
Annual
bonus
(1)
Pension
IFRS 2
share-
based
payment
charge
(2)
Total fixed
pay
Total
variable
pay
(4)
Total 2021
£
£
£
£
£
£
£
Executive
Directors
I Manocha
271,717
1,887
135,057
13,574
64,813
287,178
329,870
617,048
T Mullan
166,595
3,103
83,173
8,317
51,367
178,015
187,540
365,555
Non-Executive
Directors
P Simmonds
80,000
-
-
-
-
80,000
-
80,000
A Balchin
45,000
-
-
-
-
45,000
-
45,000
J Knott
45,000
-
-
-
-
45,000
-
45,000
R Wandhöfer
40,000
-
-
-
-
40,000
-
40,000
648,312
4,990
218,230
21,891
116,180
675,193
517,410
1,192,603
(1)
Comprises the total value of bonus of which 50% is paid in shares.
(2)
IFRS 2 share-based payment charges referred to in the table above are accounting charges that are calculated in accordance with applicable accounting rules as set
out in note 23 of the Group financial statements. These charges do not represent cash payments.
(3)
Benefits in kind include provision of private healthcare and death in service insurance.
(4)
Includes an additional bonus of £130,000 (CEO) and £53,000 (CFO), in line with disclosures made in 2021.
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Variable pay outcomes for 2022
The variable element of Director pay in 2022 comprises a performance-based bonus under the Annual Bonus Scheme and
an equity award under the Long-Term Share Incentive Plan. In addition, details of the Directors’ unvested and/or unexercised
(as the case may be) awards under the Performance Share Plan and the Share Option Plan 2010 are included in this section.
Performance-based bonus under the Annual Bonus Scheme
The annual bonus awards in respect of 2022 for Executive Directors are set out in the table below. These awards have been
initially assessed by the Committee by reference to predetermined annual performance targets linked to Group objectives and
individual performance objectives.
Measure
Weighting
Threshold
Target
(3)
Actual
% achieved
(CEO)
(3)
% achieved
(CFO)
(3)
Clareti ARR
33.75%
£22.5m
£28.9m
£28.1m
(1)
67%
67%
Group revenue
11.25%
£33.6m
£43.3m
£48.7m
145%
145%
Group cash EBITDA
15%
£2.6m
£3.3m
£4.4m
(2)
143%
143%
Group adjusted EBITDA
15%
£7.4m
£9.5m
£10.3m
(2)
242%
242%
Personal objectives
25%
-
-
-
70%
60%
Bonus Payment outcome
114%
112%
(1)
For the purposes of calculating bonus award, Clareti ARR constant currency was used, which was £26.3m. This resulted in a downward adjustment of bonus outcome, being deemed appropriate by the
Committee for this measure due to the significant impact of currency fluctuations on this measure.
(2)
In line with normal practice, Group cash EBITDA and Group Adjusted EBITDA were normalised to £4.6m and £10.6m respectively for the purposes of calculating % achievement to align with on-target
bonus accruals at start of year.
(3)
Target figures shown represent the attainment required to achieve 100% of on-target bonus. The % achieved is a reference to the % of the target for that measure earned.
The measures and weightings applied in 2022 were updated from 2021 by the Committee to recognise the evolution and
changing shape of the business. In particular, the weighting of Clareti ARR was increased to 33.75% (from 30%) with a
corresponding reduction to the weighting allocated to Group revenue, reflecting the Group’s strategic focus on growing Clareti
ARR. Furthermore, the Group cash EBITDA measure was introduced instead of Clareti cash EBITDA to emphasise the
importance of cash profitability at Group level.
Each of the CEO and CFO were set personal objectives, the aggregate of which made up 25% of their respective bonus
opportunity. For the CEO, these objectives included key account wins, Electra ARR and net retention growth, successful
completion of certain strategic customer projects, execution of product strategy, improvement in sales metrics, employee
engagement targets, and expansion of the institutional investor base. For the CFO, these objectives included management
reporting enhancements, development of the FP&A function, realisation of investment synergies, as well as certain finance,
and investor relations targets.
As disclosed in the 2021 report, an additional performance-related bonus was paid to the CEO and CFO in relation to certain
pre-determined integration-related objectives; the amounts paid were £32,000 and £15,000 respectively.
Equity awards under the Long-Term Share Incentive Plan
Awards were made under the Long-Term Share Incentive Plan on 20 March 2020 and were granted in accordance with the
rules of the plan and the Remuneration Policy.
These awards were subject to the following measures, calculated over the three financial years 2020, 2021 and 2022.
Weighting
Threshold
Maximum
Actual
performance
% vesting
TSR
50%
112%
140%
160%
100%
Group Revenue
(1)
50%
116%
144%
146%
100%
(1)
Excluding Electra
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Overall, the March 2020 awards are expected to vest at 100% of maximum. As these awards will vest on 20 March 2023
which is after the date this report has been signed off, the figures in the single figure table are based on an estimated share
price of 154p, being the 3-month average share price to 31 December 2022.
Equity awards granted during 2022
The table below provides details of share awards made to I Manocha and T Mullan on 31 March 2022:
The performance conditions applying to the LTIP awards are as follows:
Measure
Weighting
Threshold
Maximum
TSR
50%
20%
75%
Group Revenue
50%
10%
37%
Interests in options and conditional share awards (audited information)
The Group operated the Long-Term Share Incentive Plan and the Performance Share Plan (as shown in the Remuneration
Policy) during the year, as well as the Share Option Plan 2010 (which is closed for new awards). The interests of the Directors
under those plans at the start and end of the year are as set out in the tables below. The interests of the Directors to subscribe
for or acquire ordinary shares have not changed since the year end. Further details concerning the plans, including vesting
conditions, can be found in note 23 of the Group financial statements.
Long-Term Share Incentive Plan
The following table sets out the outstanding awards to Directors pursuant to the Long-Term Share Incentive Plan. Vesting is
subject to performance and retention conditions in accordance with the rules of the plan. No awards are made to Non-
Executive Directors.
Awards at 1
January
2022
Granted
Cancelled
Exercised
Awards at
31
December
2022
Date of
grant
Exercise
price
Date first
exercisable
Expiry date
Executive Directors
I Manocha
(1) (2)
104,008
-
-
-
104,008
20.03.20
nil
20.03.23
20.03.30
I Manocha
(1) (2)
137,937
-
-
137,937
31.03.21
nil
31.03.24
31.03.31
I Manocha
(1) (2)
-
87,472
-
-
87,472
31.03.22
nil
31.03.25
31.03.32
T Mullan
(1) (2)
67,532
-
-
-
67,532
20.03.20
nil
20.03.23
20.03.30
T Mullan
(1) (2)
84,456
-
-
-
84,456
31.03.21
nil
31.03.24
31.03.31
T Mullan
(1) (2)
-
53,868
-
-
53,868
31.03.22
nil
31.03.25
31.03.32
393,933
141,340
-
-
535,273
(1)
Options over which the Director has agreed to pay any employer’s National Insurance arising from the exercise of the options.
(2)
Yet to vest.
Performance Share Plan 2020
Type of award
Basis of award
Number of
shares
under award
Face value of
award (£’000)
% vesting
at threshold
Vesting/End of
performance
period
I Manocha
Deferred bonus
award
50% of 2021
bonus
23,018
£35,540
n/a
31 March 2025
I Manocha
LTIP award
Nil cost option
4x deferred
bonus award
87,472
£135,057
0%
31 March 2025
T Mullan
Deferred bonus
award
50% of 2021
bonus
14,175
£21,886
n/a
31 March 2025
T Mullan
LTIP award
Nil cost option
4x deferred
bonus award
53,868
£83,173
0%
31 March 2025
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The following table sets out the number of outstanding awards granted to Directors pursuant to the Performance Share Plan
2020. Vesting is subject to performance conditions in accordance with the rules of the plan. There are no outstanding awards
to Non-Executive Directors.
Awards at 1
January
2022
Granted
Cancelled
Exercised
Awards at
31
December
2021
Date of
grant
Exercise
price
Date first
exercisable
Expiry date
Executive Directors
I Manocha
(1) (2) (3)
203,000
-
-
-
203,000
21.10.21
nil
21.10.24
21.10.31
T Mullan
(3)
75,000
-
-
-
75,000
21.10.21
nil
21.10.24
21.10.31
278,000
-
-
-
278,000
(1)
Awards over which the Director has agreed to pay any employer’s National Insurance arising upon vesting.
(2)
The share award includes a base award of 135,000 shares and an additional potential award of up to 68,000 shares in the event of exceptional performance.
(3)
Yet to vest.
Share Option Plan 2010
The following table sets out the number of outstanding options granted to Directors pursuant to the Share Option Plan 2010.
Vesting is subject to performance conditions in accordance with the rules of the plan. There are no outstanding awards to
Non-Executive Directors.
Options at 1
January
2021
Granted
Cancelled
Exercised
Options at
31
December
2021
Date of
grant
Exercise
price
Date first
exercisable
Expiry date
Executive Directors
I Manocha
(1) (2)
1,500,000
-
-
-
1,500,000
01.06.15
111p
01.06.18
01.06.25
T Mullan
(2)
200,000
-
-
-
200,000
14.03.18
227p
14.03.21
14.03.28
T Mullan
(2)
100,000
-
-
-
100,000
28.03.19
97p
28.03.22
28.03.29
1,800,000
-
-
-
1,800,000
(1)
Options over which the Director has agreed to pay any employer’s National Insurance arising from the exercise of the options.
(2)
Vested.
Directors’ shareholding and share interests
Beneficial interests of Directors, their families and trusts in ordinary shares of the Company at 31 December 2022 were:
No. of Shares
owned outright
(including
connected
persons)
Unvested
LTIP awards
Unvested
PSP awards
Vested
share option
awards
(subject to
exercise)
Shareholding
as a
% of
salary as
31
December
2022
(1)
Sharehold
ing as a % of
salary as at 31
December 2021
(1)
I Manocha
136,052
329,417
203,000
1,500,000
88%
72%
T Mullan
48,238
205,856
75,000
300,000
51%
35%
P Simmonds
92,500
-
–
–
N/A
N/A
A Balchin
17,608
-
–
–
N/A
N/A
J Knott
31,250
-
–
–
N/A
N/A
R Wandhöfer
19,653
-
–
–
N/A
N/A
(1)
Based solely on No of Shares owned outright, by reference to share price as at 31 December.
Payments for loss of office (audited information)
No payments for loss of office were made during the year ended 31 December 2022 (2021: £nil).
Percentage change in Directors’ remuneration
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The following table shows the percentage change in each Executive and Non-Executive Directors’ remuneration compared
with the average change for all employees of the Group for the year ended 31 December 2022. The prior year change is also
shown and this will build up over time to cover a rolling five-year period.
Salary/Fee
Pension and other benefits
Annual bonus
2022
2021
2022
2021
2022
2021
I Manocha
+1%
+2%
-4%
-1%
+16%
+21%
T Mullan
+1%
+2%
+3%
+4%
+13%
+22%
P Simmonds
(2)
0%
N/A
N/A
N/A
N/A
N/A
A Balchin
0%
+9%
N/A
N/A
N/A
N/A
J Knott
(2)
0%
N/A
N/A
N/A
N/A
N/A
R Wandhöfer
(2)
0%
N/A
N/A
N/A
N/A
N/A
All employees
(1)
+5%
+2%
+3%
+6%
+9%
+22%
(1)
The comparative is all staff (around 220 people) because this group is considered to be the most relevant, due to the structure of total remuneration.
(2)
J Knott, P Simmonds and R Wandhöfer appointed in 2020
The CEO to employee pay ratio disclosures have not been provided as the Group has fewer than 250 UK employees.
Relative importance of spend on pay
The chart below shows the total Directors remuneration compared to total employee pay cost and profit before tax (for
continuing operations and before exceptional items but including distributions) for the five years ended 31 December 2022.
There were no share buy backs in the year.
Comparison of Company performance
The graph below shows the Company’s performance, as measured by total shareholder return, for each of the last six financial
years in terms of the change in value (with dividends reinvested) of an initial investment of £100 on 31 December 2012 in a
holding of the Company’s shares against the corresponding total shareholder return in a hypothetical holding of shares in the
FTSE TechMark All-Share Index. The FTSE TechMark All-Share Index was selected as it represents a broad equity market
index in which the Company is a constituent member.
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Remuneration Report
Gresham Technologies plc
77
Annual Financial Report 2022
CEO remuneration history
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
CEO
Bonus (% of maximum)
0%
0%
0%
0%
8%
0%
22.5%
41.5%
49.7%
57%
Pension
7,500
7,500
10,417
12,500
12,765
12,980
33,056
13,350
13,574
13,691
LTIP (% of maximum)
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
100%
PSP (% of maximum)
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
Total single figure of
remuneration
£158,66
5
£158,83
4
£255,72
8
£339,92
4
£508,88
9
£349,44
6
£356,33
0
£420,37
7
£617,04
8
£620,553
Service contracts
The table below summarises key details in respect of each Executive Director’s contract.
Contract date
Company notice
period
Executive notice period
I Manocha
15 February 2015
12 months
12 months
T Mullan
5 February 2018
6 months
6 months
The date of each Non-Executive appointment is set out below, together with the date of their last re-election by shareholders.
Each of the Non-Executive Directors has a letter of appointment. Appointments are for three-year terms, which may be
renewed by mutual agreement, subject always to termination by either party at any time on three months’ notice.
Date of initial
appointment
Date of last re-election
P Simmonds
1 August 2020
10 May 2022
J Knott
12 October 2020
10 May 2022
R Wandhofer
12 October 2020
10 May 2022
A Balchin
15 May 2017
10 May 2022
All Director service contracts and letters of appointment are available for inspection by shareholders at the Company’s
registered office, Aldermary House, 10–15 Queen Street, London EC4N 1TX.
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Remuneration Report
Gresham Technologies plc
78
Annual Financial Report 2022
Shareholder voting on remuneration resolutions
At the last AGM, held on 10 May 2022, the following resolution was approved by shareholders:
Resolution
For
(1)
Against
Withheld
Remuneration Report
45,698,087
14,207,636
-
76.28%
23.72%
-
(1)
Includes votes giving the Chairman discretion.
In line with Code requirement to consult with shareholders on any vote passing with less than 80% majority, the Committee
undertook consultations with major shareholders during the year in order to ascertain the reasons behind the results of the
vote on the Remuneration Report.
Shareholders representing in excess of 70% of the voting capital of the Company were invited to participate, with a very high
shareholder engagement rate (c.60% of voting share capital). Based on their feedback, the Committee ascertained that a
small number of shareholders did not support the resolution as they do not consider that the payment of transaction-related
bonuses is appropriate as they represent a departure from UK remuneration best practice; they also stated that they would
not support a further resolution involving the payment of transaction-related bonuses. By contrast, the majority of shareholder
respondents did not object to these bonuses in 2021; and, furthermore, they confirmed that they did not intend to object to the
proposal to pay the second, smaller part of the bonus during 2022 in relation to integration-related objectives).
Having completed the consultation, the Committee is confident that it has a clear understanding of the reasons behind the
result and has reached certain conclusions; which have been outlined in its published statement on the remuneration
consultation available at greshamtech.com/shareholder-documents.
The Directors’ Remuneration Policy was last approved by shareholders at a General Meeting held on 30 December 2020.
Shareholder voting on this resolution was as follows:
Resolution
For
(1)
Against
Withheld
Directors’ Remuneration Policy
33,487,558
93.19%
2,445,354
6.81%
3,000
(1)
Includes votes giving the Chairman discretion.
Jenny Knott
Chair of the Remuneration Committee
13 March 2023
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Directors’ Report
Gresham Technologies plc
79
Annual Financial Report 2022
Registered number 01072032
The Directors present their report and the Group financial statements for the year ended 31 December 2022.
The Group’s business activities, together with the factors likely to affect its future development, performance and position, are
set out within the Strategic Report. Disclosures in respect of principal risks and uncertainties, people (including employees
and disabled employees), global greenhouse gas emissions and product development (incorporating research and
development activities) are included within the Strategic Report under section 414(c) of the Companies Act 2006. In addition,
note 21 to the financial statements includes: the Group’s objectives; policies and processes for managing its capital; its
financial risk management objectives; details of its financial instruments and, if any, hedging activities; and its exposures to
credit risk and liquidity risk. The Corporate Governance Report beginning on page 50 forms part of the Directors’ Report.
Directors and officers
The Directors who served on the Board during the year are set out on page 48. Mr J Cathie served as Company Secretary
throughout the year.
Results and dividends
The Group’s profit for the year, after taxation, attributable to equity shareholders amounted to £2,882,000 (2021: loss of
£1,012,000). A final dividend of 0.75 pence per ordinary share (2021: 0.75 pence) has been recommended by the Directors.
There has been no interim dividend (2021: £nil).
If approved by the passing of a resolution at the forthcoming Annual General Meeting, it is intended to pay the final dividend
on 26 May 2023 to all shareholders on the register at close of business on 28 April 2023. The ex-dividend date will be 27 April
2023.
The profit for the year has been transferred to reserves.
Going concern and viability statement
The Group has sufficient financial resources together with good relationships with a number of customers and suppliers across
different geographic areas and industries. The Group has access to a strong underlying cashflow arising from long-established
recurring revenue businesses with blue-chip customers and strong growth prospects being realised with its flagship Clareti
solutions.
After making enquiries, the Directors have a reasonable expectation that the Company and the Group have adequate
resources to continue in operational existence for a period of at least twelve months from the date of approval of the financial
statements. For this reason, they continue to adopt the going concern basis in preparing the Annual Financial Report 2022.
Refer to page 53 for the viability statement required pursuant to Provision C2.2 of the Code.
Post-balance sheet events
Events after the reporting date are set out in note 27 to the financial statements.
Significant relationships
In 2022, the Group had one customer relationship considered to be individually significant to the Group. This relates to APAC
operations and generates a mix of revenues from Clareti Solutions and Other Solutions, including strategic non-recurring
revenues. Revenues from this customer relationship individually exceeded 10% of the Group’s revenue in 2022. In the opinion
of the Directors, the Group does not have any other individually significant relationships.
Fostering relationships with stakeholders
Refer to page 25 for details of the Company’s engagement with stakeholders.
Directors and their interests
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Directors’ Report
Gresham Technologies plc
80
Annual Financial Report 2022
The Directors at 31 December 2022 and their connected persons’ interests in the share capital of the Company (all beneficially
held, other than with respect to options to acquire ordinary shares which are detailed in the analysis of options included in the
Directors’ Remuneration Report) are as follows:
Ordinary shares of 5 pence each
31 Dec 2022
1 Jan 2022
P Simmonds
92,500
92,500
A Balchin
17,608
17,608
J Knott
31,250
31,250
R Wandhöfer
19,653
19,653
I Manocha
136,052
113,034
T Mullan
48,238
34,063
There have been no further changes in the Directors’ interests disclosed above from 31 December 2022 to 13 March 2023.
Directors’ liabilities
The Company has granted an indemnity to one or more of its Directors against liability in respect of proceedings brought by
third parties, subject to the conditions set out in section 234 of the Companies Act 2006. Such qualifying third-party indemnity
provision remains in force as at the date of approving the Directors’ Report. Directors’ and officers’ liability insurance with an
indemnity limit of £10m has been purchased in order to minimise the potential impact of proceedings against Directors.
Major interests in shares
The Company has been notified, either directly or in response to a section 793 request made on its behalf, of the following
interests representing 3% or more of the issued ordinary share capital of the Company as at 24 February 2023:
Ordinary shares
of 5 pence each
Percentage
held (%)
Kestrel Investment Partners
18,951,178
22.71
Canaccord Genuity Wealth Management
7,561,113
9.06
Schroder Investment Management
7,083,000
8.49
Amati Global Investors
5,789,500
6.94
JO Hambro Capital Management
4,475,000
5.36
Tellworth Investments
4,257,425
5.10
BlackRock Investment Management
4,050,000
4.85
Herald Investment Management
3,471,274
4.16
Mrs M A Green
3,073,290
3.68
Jupiter Asset Management
2,928,133
3.51
Political donations
No donations were made in 2022 or 2021.
Social and community
No social or community review has been performed for 2022 or 2021.
Special business at the Annual General Meeting
The special business to be conducted at the AGM includes:
•
the Directors’ authority to allot shares and the partial disapplication of pre-emption rights. Resolutions will be
proposed to renew the general authorities given to the Directors to allot and grant rights over the unissued share
capital up to one-third of the issued ordinary share capital (and, in the case of an allotment of shares made pursuant
to a rights issue (pre-emptive offer), up to two-thirds of the issued ordinary share capital), and to allot and grant rights
over shares for cash up to 10% of the issued ordinary share capital, without first making a pro rata offer to all existing
shareholders (plus up to an additional 10% where the share issue is proposed in connection with an acquisition or
capital investment);
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Directors’ Report
Gresham Technologies plc
81
Annual Financial Report 2022
•
the renewal of the authority of the Company to make market purchases of its own ordinary shares. The Company’s
authority will be limited to 10% of the issued ordinary share capital of the Company; and
•
the authority to call meetings (other than Annual General Meetings) on not less than 14 clear days’ notice.
In the opinion of the Directors, the passing of these resolutions is in the best interests of the shareholders.
Additional information for shareholders
At 31 December 2022, the Company’s issued share capital comprised:
Number
Nominal
value
£
% of total
share capital
Ordinary shares of 5 pence each
83,449,458
4,172,472
100%
The Company is not aware of any agreements between shareholders that may result in restrictions on the transfer of securities
and for voting rights.
During the year ended 31 December 2022, certain share options granted under the Share Option Scheme 2010 were
exercised and as a result the Company issued 85,000 ordinary shares (2021: 83,000), such shares ranking pari passu with
ordinary shares then in issue. There were no other issues of shares during the year ended 31 December 2022 (2021:
13,125,000 in connection with the acquisition of Electra).
See note 22 of the Group financial statements for further details.
Ordinary shares
On a poll, every member present in person or by proxy and entitled to vote shall have one vote for every ordinary share held;
on a show of hands at a general meeting of the Company, every holder of ordinary shares present in person and entitled to
vote shall have one vote. The notice of the general meeting specifies deadlines for exercising voting rights either by proxy
notice or present in person or by proxy in relation to resolutions to be passed at general meeting. All proxy votes are counted
and the numbers for, against or withheld in relation to each resolution are announced at the Annual General Meeting and
published on the Group’s website after the meeting.
There are no restrictions on the transfer of ordinary shares in the Company other than certain restrictions that may from time
to time be imposed by laws and regulations (for example, insider trading laws and market requirements relating to close
periods).
The Company’s Articles of Association may only be amended by a special resolution at a general meeting of the shareholders.
Directors are reappointed by ordinary resolution at a general meeting of the shareholders. The Board may appoint a Director
but anyone so appointed must be elected by an ordinary resolution at the next Annual General Meeting. Any Director who has
held office for more than three years since their last appointment by shareholders at a general meeting must offer themselves
up for re-election at the following Annual General Meeting.
Significant interests
Directors’ interests in the share capital of the Company are shown in the table on page 80. Major interests (being those greater
than 3%) of which the Company has been notified are shown on page 80.
Change of control
In the event of a change of control of the Company, employee share options granted under the Share Option Scheme 2010,
the Deferred Share Bonus Plan 2017 and the Performance Share Plan 2020 will either accelerate vesting, will be rolled over
to the acquiring company’s shares or will lapse, depending on the circumstances of the change. Further details are provided
in note 23 to the Group financial statements.
There are no agreements between the Group and its Directors or employees providing for compensation for loss of office or
employment (whether through resignation, purported redundancy or otherwise) because of a takeover bid.
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Directors’ Report
Gresham Technologies plc
82
Annual Financial Report 2022
Power of Directors to issue or buy back shares
The Directors’ existing authorities to allot and grant rights over the unissued share capital, to allot and grant rights over the
unissued share capital for cash without first making a pro rata offer to all existing shareholders and to make market purchases
of shares in the issued share capital of the Company are due to expire at the upcoming AGM. Resolutions will be put to
shareholders at the upcoming AGM of the Company to renew previous authorities granted.
Information to be included in the Annual Financial Report 2021
As part of our requirements under the FCA Listing Rules (“LR”), the information required to be disclosed by LR 9.8.4 R can
be found in the following locations in this Annual Financial Report 2022:
LR 9.8.4 R
Topic
Location
(1)
Interest capitalised
Not applicable
(2)
Publication of unaudited financial information
Not applicable
(4)
Details of long-term incentive schemes
Not applicable
(5)
Waiver of emoluments by a director
Not applicable
(6)
Waiver of future emoluments by a director
Not applicable
(7)
Non-pre-emptive issues of equity for cash
Page 133
(8)
Item (7) in relation to major subsidiary undertakings
Not applicable
(9)
Parent participation in a placing by a listed subsidiary
Not applicable
(10)
Contracts of significance
Page 79
(11)
Provision of services by a controlling shareholder
Not applicable
(12)
Shareholder waivers of dividends
Not applicable
(13)
Shareholder waivers of future dividends
Not applicable
(14)
Agreements with controlling shareholders
Not applicable
All the information cross-referenced above is hereby incorporated by reference into this Directors’ Report.
Auditor
A resolution to reappoint BDO LLP as the Group’s auditor will be put to the forthcoming Annual General Meeting.
Directors’ statement as to disclosure of information to the auditor
The Directors who were members of the Board at the time of approving the Directors’ Report are listed on page 48. Having
made enquiries of fellow Directors and of the Group’s auditor, each of these Directors confirms that:
•
to the best of each Director’s knowledge and belief, there is no information (that is, information needed by the Group’s
auditor in connection with preparing its report) of which the Group’s auditor is unaware; and
•
each Director has taken all the steps a Director might reasonably be expected to have taken to be aware of relevant
audit information and to establish that the Group’s auditor is aware of that information.
By order of the Board
Jonathan Cathie
Company Secretary
13 March 2023
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Statement of Directors’ responsibilities
Gresham Technologies plc
83
Annual Financial Report 2022
Directors’ responsibilities
The Directors are responsible for preparing the Annual Financial Report 2022 in accordance with applicable law and
regulations.
Company law requires the Directors to prepare financial statements for each financial year. Under that law, the Directors are
required to prepare the Group financial statements in accordance with international accounting standards in conformity with
the requirements of the Companies Act 2006 and in accordance with international financial reporting standards as issued by
the International Accounting Standards Board (“IASB”) and have elected to prepare the Company financial statements in
accordance with Financial Reporting Standard 100 “Application of Financial Reporting Requirements” and Financial Reporting
Standard 101 “Reduced Disclosure Framework” and applicable law. Under company law, the Directors must not approve the
financial statements unless they are satisfied that they give a true and fair view of the assets, liabilities and financial position
of the Group and Company, and of the profit or loss of the Group for that period.
In preparing these financial statements, the Directors are required to:
•
select suitable accounting policies and then apply them consistently;
•
make judgements and accounting estimates that are reasonable and prudent;
•
state whether they have been prepared in accordance with IFRSs as adopted by the European Union, subject to any
material departures disclosed and explained in the financial statements; and
•
prepare a Strategic Report, Directors’ Report and Directors’ Remuneration Report which comply with the
requirements of the Companies Act 2006.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company’s
transactions and disclose with reasonable accuracy, at any time, the financial position of the Company and enable them to
ensure that the financial statements comply with the Companies Act 2006 and, as regards the Group financial statements,
Article 4 of the International Accounting Standards (“IAS”) Regulation. They are also responsible for safeguarding the assets
of the Company, and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The Directors are responsible for ensuring that the Annual Financial Report 2022, taken as a whole, is fair, balanced and
understandable and provides the information necessary for shareholders to assess the Group’s position and performance,
business model and strategy.
Website publication
The Directors are responsible for ensuring the Annual Financial Report 2022 is made available on a website. Financial
statements are published on the Company’s website in accordance with legislation in the United Kingdom governing the
preparation and dissemination of financial statements; which may vary from legislation in other jurisdictions. The maintenance
and integrity of the Company’s website is the responsibility of the Directors. The Directors’ responsibility also extends to the
ongoing integrity of the financial statements contained therein.
Directors’ responsibilities pursuant to DTR 4
The Directors confirm to the best of their knowledge:
•
the Group financial statements have been prepared in accordance with IFRS as issued by IASB 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 2022 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.
On behalf of the Board.
Ian Manocha
Chief Executive
13 March 2023
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Independent auditor’s report
Gresham Technologies plc
84
Annual Financial Report 2022
Independent auditor’s report to the members of Gresham Technologies Plc
Opinion on the financial statements
In our opinion:
•
the financial statements give a true and fair view of the state of the Group’s and of the Parent Company’s affairs as
at 31 December 2022 and of the Group’s profit for the year then ended;
•
the Group financial statements have been properly prepared in accordance with UK adopted international accounting
standards;
•
the Parent Company financial statements have been properly prepared in accordance with United Kingdom Generally
Accepted Accounting Practice; and
•
the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
We have audited the financial statements of Gresham Technologies Plc (the ‘Parent Company’) and its subsidiaries (the
‘Group’) for the year ended 31 December 2022 which comprise the Consolidated Income Statement, the Consolidated
Statement of Comprehensive Income, the Consolidated Statement of Financial Position, the Consolidated Statement of
Changes in Equity, the Consolidated Statement of Cashflow, notes to the Consolidated financial statements, the Company
Balance Sheet, the Company Statement of Changes in Equity and the notes to the financial statements, including a summary
of significant accounting policies. The financial reporting framework that has been applied in the preparation of the Group
financial statements is applicable law and UK adopted international accounting standards.
The financial reporting framework that has been applied in the preparation of the Parent Company financial statements is
applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard
101 Reduced Disclosure
Framework
(United Kingdom Generally Accepted Accounting Practice).
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our
responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial
statements section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide
a basis for our opinion. Our audit opinion is consistent with the additional report to the audit committee.
Independence
Following the recommendation of the audit committee, we were reappointed by the Directors on 09 October 2010 to audit the
financial statements for the year ended 31 December 2010 and subsequent financial periods. The period of total uninterrupted
engagement including retenders and reappointments is 13 years, covering the years ended 31 December 2010 to 31
December 2022. We remain independent of the Group and the Parent Company in accordance with the ethical requirements
that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard as applied to listed
public interest entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements. The non-
audit services prohibited by that standard were not provided to the Group or the Parent Company.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the Directors’ use of the going concern basis of accounting in the
preparation of the financial statements is appropriate. Our evaluation of the Directors’ assessment of the Group and the Parent
Company’s ability to continue to adopt the going concern basis of accounting included:
•
Assessing the Directors’ method including the relevance and reliability of underlying data used to make the
assessment, and whether assumptions and changes to assumptions from prior years are appropriate and consistent
with each other. This included assessing forecast revenue against actual results post year end and the sales pipeline.
We also assessed the accuracy of previous forecasts by comparing to actual results for the current year.
•
Reviewing the Directors’ plans for future actions within their going concern assessment including whether such plans
are feasible in the circumstances.
•
Assessing the appropriateness of the Directors’ stress-testing of the forecasts to the extent of reasonable worst-case
scenarios comparing to our own sensitivity analysis performed also considering the likelihood of these scenarios
occurring.
•
Reviewing the adequacy and appropriateness of disclosures in the financial statements relative to the going concern
statement.
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Independent auditor’s report
Gresham Technologies plc
85
Annual Financial Report 2022
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that,
individually or collectively, may cast significant doubt on the Group and the Parent Company’s ability to continue as a going
concern for a period of at least twelve months from when the financial statements are authorised for issue.
In relation to the Parent Company’s reporting on how it has applied the UK Corporate Governance Code, we have nothing
material to add or draw attention to in relation to the Directors’ statement in the financial statements about whether the
Directors considered it appropriate to adopt the going concern basis of accounting.
Our responsibilities and the responsibilities of the Directors with respect to going concern are described in the relevant sections
of this report.
Overview
Coverage
100% (2021: 100%) of Group revenue
100% (2021: 100%) of Group total assets
Key audit matters
2022
2021
Development costs
P
P
Goodwill and intangible asset impairment
P
P
Revenue recognition
P
P
Acquisition of Electra Information Systems Inc*
O
P
* The Acquisition of Electra Information Systems Inc was a one off event occurring in the prior
year and therefore no longer represents a key audit matter
Materiality
Group financial statements as a whole
£365,000 (2021: £277,000) based on 0.75% (2021: 0.75%) of revenue.
An overview of the scope of our audit
Our Group audit was scoped by obtaining an understanding of the Group and its environment, including the Group’s system
of internal control, and assessing the risks of material misstatement in the financial statements.
We also addressed the risk
of management override of internal controls, including assessing whether there was evidence of bias by the Directors that
may have represented a risk of material misstatement.
The Group engagement team performed full scope audits of the significant components in the UK and the Americas,
comprising 57% of the Group revenue and 85% of Group total assets. The full scope audit of the Asia Pacific region significant
component, comprising of 43% of Group revenue and 15% of Group total assets, was performed by a BDO member firm in
Australia.
In respect of insignificant components, the Group engagement team, carried out specified audit procedures in respect of the
revenue and profit recognition key audit matter as noted in the key audit matters section of this report.
Our involvement with component auditors
For the work performed by component auditors, we determined the level of involvement needed in order to be able to conclude
whether sufficient appropriate audit evidence has been obtained as a basis for our opinion on the Group financial statements
as a whole. Our involvement with component auditors included the following:
•
The issuance of instructions that included materiality and detailed procedures to be performed on the significant risks
of material misstatement;
•
Further involvement in directing the audit strategy through remote meetings and a review of the component auditor’s
planning;
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Independent auditor’s report
Gresham Technologies plc
86
Annual Financial Report 2022
•
Supervision of the audit process that included regular communication with the component auditor and a remote
review of their audit files;
•
Attending an audit close meeting.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial
statements of the current period and include the most significant assessed risks of material misstatement (whether or not due
to fraud) that we identified, including those which had the greatest effect on: the overall audit strategy, the allocation of
resources in the audit, and directing the efforts of the engagement team. These matters were addressed in the context of our
audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on
these matters.
Key audit matter
How the scope of our audit addressed the key audit
matter
Development costs
Refer to the accounting
policies on page 99, and
significant estimates and
judgements on page 97
.
During the year, development costs
of £5,195k (2021: £4,105k) have
been capitalised.
Development costs are recognised
as an intangible asset if specific
capitalisation criteria as set out in
the applicable accounting standards
have been met. Judgement is
required in determining whether the
capitalisation criteria has been met
and the allocation of the
development costs to particular
Clareti Control and Clareti Connect
products.
There is also a risk that
development costs may be
maintenance by nature or
supersede costs previously
capitalised.
Due to the level of judgement, there
is considered to be an inherent risk
of management override of controls.
For these reasons we considered
development costs to be a key audit
matter.
We evaluated the Group’s accounting policy in this
area to ensure their recognition and measurement
principles were in accordance with the applicable
accounting standards.
We agreed a sample of capitalised costs to underlying
supporting documentation This included obtaining
time records to corroborate the allocation of cost
between products and inspecting employee contracts
to check that their stated job roles support their
involvement in development activities. We also
recalculated the on-costs and overheads capitalised
with reference to source data and checked that the
five criteria for capitalisation, as required by the
applicable accounting standard, had been met and
that the costs were not maintenance by nature.
The testing included gaining an understanding of the
projects from the development team, as well as
obtaining evidence of future economic benefits such
as customer contracts and pipeline opportunities. We
assessed assumptions such as the level of non-
productive time inherent in the development of each
product based on factors including the product’s stage
of maturity.
Furthermore, we specifically reviewed the nature of
costs capitalised as enhancements to software
available for sale; checked that the enhancements did
not supersede existing development costs; and
determined whether such enhancements met each of
the five criteria for capitalisation under the applicable
accounting standard. This included discussions with
the Group’s software developers and sales team to
understand the
roadmap for software products to which the
development costs relate, and specifically where
enhancements were made to existing products.
Key observations:
Based on the audit work performed we consider that
development costs have been capitalised
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appropriately in accordance with the applicable
accounting standard.
Goodwill and intangible
asset impairment
As detailed in the
accounting policies on
page 99, and significant
estimates and
judgements on page 97
and as detailed in Note 2
and 97.
The carrying value of intangible
assets of £62,788k (2021:
£62,267k) is significant to the
Group.
Goodwill, capitalised development
costs and other intangible assets
are tested for impairment at least
annually through comparing the
recoverable amount of the cash-
generating unit, based on a value-
in-use calculation, to the carrying
value.
Furthermore, once available for use,
capitalised development costs are
tested for impairment where an
indicator of impairment arises.
The impairment assessments
require significant estimates relating
to forecasted growth of annual
recurring revenues and associated
margins. Management has to apply
judgement to determine if these
assets are impaired; hence there is
an opportunity for management bias
within the impairment model
assumptions and impairment
indicators for particular intangible
assets not being identified.
For these reasons we considered
goodwill and intangible impairment
to be a key audit matter.
We performed a review of the Group’s goodwill,
development costs and other intangible assets and
examined for indicators of impairment.
We assessed the impairment reviews prepared by
management, specifically the integrity of
management’s value-in-use model and, with the
assistance of our internal valuation experts, we
challenged the key inputs and assumptions, including
forecast growth rates, operating cash flows and the
discount rate.
Our procedures for the review of operating cash flows
and forecast growth rates included comparing the
forecast to recent financial performance and budgets
approved by the Board. We also ensured the
forecasts were consistent with those used in the
Group’s going concern assumptions. We used market
data to independently calculate a discount rate and
compared to that used by management.
We also performed a sensitivity analysis on the key
valuation inputs and evaluated the relevant
disclosures of management’s source of estimation
uncertainty.
Key observations:
Based on the procedures performed, we are satisfied
that the intangible assets are appropriately
recognised in the financial statements and that
appropriate disclosure has been made regarding the
estimation uncertainty in determining its recoverable
amount.
Revenue recognition
As detailed in the
accounting policies on
page 99.
The Group earns revenue from the
sale of software licenses, rendering
of services, subscriptions and
maintenance and solution sales.
Management exercises judgement
in the unbundling of multi- element
solution sales, with reference to the
estimated standalone selling prices
of the deemed performance
obligations, both of which determine
the recognition of revenue and
therefore presents a revenue
recognition existence risk.
In line with the requirements of
applicable accounting standards
management continue to exercise
judgement in determining whether
performance obligations of solution
We reviewed the revenue recognition principles
applied to significant new contracts written and
performed during the year and ensured that the
revenue recognition policies were in accordance with
the applicable accounting standards and the Group’s
accounting policy.
In particular, we checked a sample of solution sales
and assessed the appropriateness of unbundling
contract revenue into separate performance
obligations along with any judgements in the
allocation of the consideration across the
performance obligations based on estimated
standalone selling prices.
We assessed the
unbundling judgement through benchmarking with
reference to historic contracts executed by the Group
and external sources in relation to the sector.
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sales, such as software licences
and support and maintenance
contracts, are considered distinct;
the level of consideration to be
allocated to the performance
obligations based on standalone
selling prices; and whether the
revenue in respect of the
performance obligations is
recognised at a point in time or
overtime.
Revenue and profit recognition is
considered a significant risk due to
the manual adjustments required in
order to appropriately recognise the
distinct performance obligations
within revenue contracts, which can
involve management judgement.
For these reasons we considered
revenue recognition to be a key
audit matter.
For the licence revenue element of new contracts
executed in close proximity to the year end, we
obtained evidence that the software had been
delivered to the customer prior to the end of the
financial year with the licence fee being recognised up
front on installation. For the licence element we
agreed a sample of sales and, where relevant,
underlying time costs to supporting contracts and
other documentation, including user acceptance
evidence, statements of works and time records.
Key observations:
Based on the work performed, we consider that
revenue has been recognised appropriately and in
accordance with the applicable accounting standard.
Our application of materiality
We apply the concept of materiality both in planning and performing our audit, and in evaluating the effect of misstatements.
We consider materiality to be the magnitude by which misstatements, including omissions, could influence the economic
decisions of reasonable users that are taken on the basis of the financial statements.
In order to reduce to an appropriately low level the probability that any misstatements exceed materiality, we use a lower
materiality level, performance materiality, to determine the extent of testing needed. Importantly, misstatements below these
levels will not necessarily be evaluated as immaterial as we also take account of the nature of identified misstatements, and
the particular circumstances of their occurrence, when evaluating their effect on the financial statements as a whole.
Based on our professional judgement, we determined materiality for the financial statements as a whole and performance
materiality as follows:
Group financial statements
Parent Company financial statements
2022
£m
2021
£m
2022
£m
2021
£m
Materiality
365
277
160
150
Basis for
determining
materiality
0.75% of revenue
44% of Group
materiality
56% of Group
materiality
Rationale for the
benchmark applied
As a growing technology business we consider
revenue to be the key performance measure in
driving the valuation of the Group and
informing the economic decisions of the users
of the financial statements. This is particularly
in light of lower levels of profitability in the
current environment and revenues being an
Capped at 44% (2021: 56%) of Group
materiality given the assessment of the
components aggregation risk.
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increasing basis of business valuation in the
sector.
Performance
materiality
237
180
104
97.5
Basis for
determining
performance
materiality
On the basis of our risk assessment, together with our assessment of the Group and Parent
Company’s control environment and a history of minimal errors, our judgement is that
performance materiality for the financial statements should be 65%. (PY: 65%)
C
omponent materiality
We set materiality for each component of the Group based on a percentage of between 37% (PY: 46%) and 75% (PY:75%)
of Group materiality dependent on the size and our assessment of the risk of material misstatement of that component.
Component materiality ranged from £135,000 (PY: £83,100). to £274,000 (PY: £207,750). In the audit of each component,
we further applied performance materiality levels of 65% (PY: 65%) of the component materiality to our testing to ensure that
the risk of errors exceeding component materiality was appropriately mitigated.
Reporting threshold
We agreed with the Audit Committee that we would report to them all individual audit differences in excess of £7,300 (2021:
£5,540).
We also agreed to report differences below this threshold that, in our view, warranted reporting on qualitative
grounds.
Other information
The Directors are responsible for the other information. The other information comprises the information included in the annual
financial report other than the financial statements and our auditor’s report thereon. Our opinion on the financial statements
does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any
form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether
the other information is materially inconsistent with the financial statements or our knowledge obtained in the course of the
audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material
misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements
themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other
information, we are required to report that fact.
We have nothing to report in this regard.
Corporate governance statement
The Listing Rules require us to review the Directors’ statement in relation to going concern, longer-term viability and that part
of the Corporate Governance Statement relating to the Parent Company’s compliance with the provisions of the UK Corporate
Governance Code specified for our review.
Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the Corporate
Governance Statement is materially consistent with the financial statements or our knowledge obtained during the audit.
Going concern and
longer-term viability
•
The Directors' statement with regards to the appropriateness of adopting the going
concern basis of accounting and any material uncertainties identified as set out on page
53; and
•
The Directors’ explanation as to their assessment of the Group’s prospects, the period
this assessment covers and why the period is appropriate as set out on page 79.
Other Code
provisions
•
Directors' statement on fair, balanced and understandable as set out on page 83;
•
Board’s confirmation that it has carried out a robust assessment of the emerging and
principal risks as set out on page 43;
•
The section of the annual report that describes the review of effectiveness of risk
management and internal control systems as set out on page 57 and
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Annual Financial Report 2022
•
The section describing the work of the audit committee as set out on page 55.
Other Companies Act 2006 reporting
Based on the responsibilities described below and our work performed during the course of the audit, we are required by the
Companies Act 2006 and ISAs (UK) to report on certain opinions and matters as described below.
Strategic report and
Directors’ report
In our opinion, based on the work undertaken in the course of the audit:
•
the information given in the Strategic report and the Directors’ report for the financial year for
which the financial statements are prepared is consistent with the financial statements; and
•
the Strategic report and the Directors’ report have been prepared in accordance with
applicable legal requirements.
In the light of the knowledge and understanding of the Group and Parent Company and its
environment obtained in the course of the audit, we have not identified material misstatements in
the strategic report or the Directors’ report.
Directors’
remuneration
In our opinion, the part of the Directors’ remuneration report to be audited has been properly
prepared in accordance with the Companies Act 2006.
Matters on which we
are required to
report by exception
We have nothing to report in respect of the following matters in relation to which the Companies
Act 2006 requires us to report to you if, in our opinion:
•
adequate accounting records have not been kept by the Parent Company, or returns
adequate for our audit have not been received from branches not visited by us; or
•
the Parent Company financial statements and the part of the Directors’ remuneration
report to be audited are not in agreement with the accounting records and returns; or
•
certain disclosures of Directors’ remuneration specified by law are not made; or
•
we have not received all the information and explanations we require for our audit.
Responsibilities of Directors
As explained more fully in the statement of Directors’ responsibilities, the Directors are responsible for the preparation of the
financial statements and for being satisfied that they give a true and fair view, and for such internal control as the Directors
determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether
due to fraud or error.
In preparing the financial statements, the Directors are responsible for assessing the Group’s and the Parent Company’s
ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern
basis of accounting unless the Directors either intend to liquidate the Group or the Parent Company or to cease operations,
or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance
is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a
material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually
or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of
these financial statements.
Extent to which the audit was capable of detecting irregularities, including
fraud
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Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with
our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to
which our procedures are capable of detecting irregularities, including fraud is detailed below.
Based on our understanding of the Group and sector in which it operates, we identified that the principal risks of non-
compliance with laws and regulations relate to The Corporate Governance Code, Corporate and VAT legislation, Employment
Taxes and Health and Safety, and the extent to which non-compliance might have a material effect on the financial statements.
We also considered those laws and regulations which have a direct impact on the preparation of the financial statements such
as the Companies Act 2006 and the applicable accounting frameworks.
As a result of performing the above we identified the principal risks were related to bias in accounting estimates, with the most
significant considered to relate to revenue recognition and capitalisation of development costs. The Group audit engagement
team shared this risk assessment with the component auditors to ensure that appropriate audit procedures were applied in
response to these risks. Our procedures included:
-
Discussions with Management and the Audit Committee regarding known or suspected instances of non-compliance
with laws and regulations;
-
Ensuring all audit team and component team members were cognizant of relevant laws and regulations through
engagement discussions and the issuing of specific audit instructions;
-
Obtaining and understanding of controls designed to prevent and detect irregularities;
-
Review of board minutes for any evidence of fraud or non-compliance with laws and regulations;
-
Evaluation of management incentives and opportunities for fraudulent manipulation of the financial statements
including management override with a particular focus on judgements and estimates inherent in the key audit matters
and exercising professional scepticism in considering the impact of those estimates and judgements on the reported
results and key performance measures such as annually recurring revenues and cash EBITDA;
-
The evaluation also involved gaining an understanding of Management remuneration schemes and the extent to
which remuneration is influenced by reported results;
-
Testing journal entries made to accounts that are considered to carry a greater risk of fraud as part of our planned
audit approach by agreeing to supporting documentation; and
-
Incorporating unpredictability into the nature, timing and/or extend of our testing by specifically performing audit
procedures on bank transactions within dormant entities within the Group.
Our audit procedures were designed to respond to risks of material misstatement in the financial statements, recognising that
the risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error,
as fraud may involve deliberate concealment by, for example, forgery, misrepresentations or through collusion. There are
inherent limitations in the audit procedures performed and the further removed non-compliance with laws and regulations is
from the events and transactions reflected in the financial statements, the less likely we are to become aware of it.
A
further
description
of
our
responsibilities
is
available
on
the
Financial
Reporting
Council’s
website
at:
www.frc.org.uk/auditorsresponsibilities
.
This description forms part of our auditor’s report.
Use of our report
This report is made solely to the Parent Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the
Companies Act 2006.
Our audit work has been undertaken so that we might state to the Parent Company’s members those
matters we are required to state to them in an auditor’s report and for no other purpose.
To the fullest extent permitted by
law, we do not accept or assume responsibility to anyone other than the Parent Company and the Parent Company’s members
as a body, for our audit work, for this report, or for the opinions we have formed.
Malcolm Thixton (Senior Statutory Auditor)
For and on behalf of BDO LLP, Statutory Auditor
Southampton
United Kingdom
13 March 2023
BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).
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Consolidated income statement
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Annual Financial Report 2022
Notes
Year ended 31
December
2022
Year ended 31
December
2021
£'000
£'000
Revenue
4,5
48,719
37,026
Cost of sales
(14,774)
(11,799)
Gross profit
33,945
25,227
Adjusted administrative expenses
(26,999)
(21,146)
Adjusted operating profit
6,946
4,081
Adjusting administrative items:
Exceptional costs
5
(153)
(1,821)
Exceptional income
5
-
330
Amortisation of acquired intangibles
14
(2,315)
(1,673)
Share-based payments
23
(1,027)
(369)
(3,495)
(3,533)
Total administrative expenses
(30,494)
(24,679)
Operating profit
5,6
3,451
548
Finance revenue
9
6
4
Finance costs
9
(219)
(121)
Profit before taxation
3,238
431
Taxation
10
(356)
(1,443)
Profit/(loss) after taxation attributable to the equity holders of the Parent
2,882
(1,012)
Earnings per share
Statutory
pence
pence
Basic earnings per share
11
3.46
(1.31)
Diluted earnings per share
11
3.41
(1.31)
Adjusted
Basic earnings per share
11
7.65
5.08
Diluted earnings per share
11
7.54
5.02
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Consolidated statement of comprehensive income
Gresham Technologies plc
93
Annual Financial Report 2022
Notes
Year ended 31
December
2022
Year ended
31 December
2021
£'000
£'000
Profit/(loss) after taxation attributable to the equity holders of the Parent
2,882
(1,012)
Other comprehensive expenses
Items that will or may be re-classified into profit or loss:
Exchange differences on translating foreign operations
24
(937)
(184)
Total other comprehensive expenses
(937)
(184)
Total comprehensive income/(expense) for the year
1,945
(1,196)
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Consolidated statement of financial position
Gresham Technologies plc
94
Annual Financial Report 2022
Notes
At 31 December
2022
At 31 December
2021
£'000
£'000
Assets
Non-current assets
Property, plant and equipment
13
899
218
Right-of-use assets
16
1,592
1,466
Intangible assets
14
62,788
62,267
Deferred tax assets
10
-
232
65,279
64,183
Current assets
Trade and other receivables
18
6,515
5,403
Contract assets
18
2,558
1,665
Income tax receivable
18
-
1,204
Cash and cash equivalents
19
6,280
9,139
15,353
17,411
Total assets
80,632
81,594
Equity and liabilities
Equity attributable to owners of the Parent
Called up equity share capital
22
4,172
4,168
Share premium account
24
23,941
23,876
Own share reserve
22
(296)
(609)
Other reserves
24
536
536
Foreign currency translation reserve
24
(1,315)
(378)
Retained earnings
24
21,968
18,288
Total equity attributable to owners of the Parent
49,006
45,881
Non-current liabilities
Contract liabilities
20
354
60
Lease liabilities
16
953
770
Deferred tax liability
10
6,067
6,831
Provisions
20
146
144
Contingent consideration
20
-
3,575
7,520
11,380
Current liabilities
Trade and other payables
20
19,166
19,616
Lease liabilities
16
709
642
Income tax payable
20
244
131
Contingent consideration
20
3,987
3,944
24,106
24,333
Total liabilities
31,626
35,713
Total equity and liabilities
80,632
81,594
The financial statements were approved by the Board of Directors and authorised for issue on 13 March 2023.
On behalf of the Board
Ian Manocha
Tom Mullan
Chief Executive
Chief Financial Officer
13 March 2023
13 March 2023
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Consolidated statement of changes in equity
Gresham Technologies plc
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Annual Financial Report 2022
Notes
Share
capital
Share
premium
account
Own share
reserve
Other
reserves
Foreign
currency
translation
reserve
Retained
earnings
Total
£'000
£'000
£'000
£'000
£'000
£'000
£'000
At 1 January 2021
3,508
4,341
(778)
536
(194)
19,453
26,866
Attributable loss for the period
-
-
-
-
-
(1,012)
(1,012)
Other comprehensive expenses
-
-
-
-
(184)
-
(184)
Total comprehensive (expenses)/income
-
-
-
-
(184)
(1,012)
(1,196)
Issue of equity shares
22
656
20,344
-
-
-
-
21,000
Share issue costs
22
-
(870)
-
-
-
-
(870)
Exercise of share options
22
4
61
-
-
-
-
65
Transfer of own shares held by Employee
Share Ownership Trust to employees
22
-
-
169
-
-
-
169
Share-based payments
23
-
-
-
-
-
369
369
Dividend paid
-
-
-
-
-
(522)
(522)
At 31 December 2021
4,168
23,876
(609)
536
(378)
18,288
45,881
Attributable profit for the period
-
-
-
-
-
2,882
2,882
Other comprehensive expenses
-
-
-
-
(937)
-
(937)
Total comprehensive (expenses)/income
-
-
-
-
(937)
2,882
1,945
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
4,172
23,941
(296)
536
(1,315)
21,968
49,006
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Consolidated statement of cash flow
Gresham Technologies plc
96
Annual Financial Report 2022
Notes
Year ended 31
December 2022
Year ended 31
December 2021
£'000
£'000
Cash flows from operating activities
Profit/(loss) after taxation
2,882
(1,012)
Depreciation of property, plant and equipment
13
191
175
Amortisation of intangible assets
14
4,723
4,042
Amortisation of right-of-use assets
16
714
581
Share-based payments
23
1,027
369
Increase in trade and other receivables
(886)
(776)
Increase in contract assets
(775)
(220)
Increase in trade and other payables
1,560
1,996
(Decrease)/increase in contract liabilities
(199)
256
Decrease in sales tax provision arising on acquisition
(496)
-
Taxation
10
356
1,443
Exchange gain on financial instrument
5
-
(330)
Net finance costs
9
213
117
Cash inflow from operations
9,310
6,641
Income taxes received
2,473
-
Income taxes paid
(1,893)
(1,114)
Net cash inflow from operating activities
9,890
5,527
Cash flows from investing activities
Interest received
9
6
4
Exchange gain on financial instrument
5
-
330
Purchase of property, plant and equipment
13
(806)
(145)
Payments to acquire subsidiary undertaking (net of cash)
-
(19,639)
Payment of contingent consideration on acquisition of Inforalgo
20
(369)
(923)
Payment of contingent consideration on acquisition of Electra
20
(3,987)
-
Payments to acquire intangible fixed assets
14
(5,195)
(4,150)
Net cash used in investing activities
(10,351)
(24,523)
Cash flows from financing activities
Interest paid
9
(138)
(39)
Principal paid on lease liabilities
16
(645)
(590)
Dividends paid
12
(622)
(522)
Share issue proceeds (net of costs)
22
69
20,195
Net cash (used in)/from financing activities
(1,336)
19,044
Net (decrease)/increase in cash and cash equivalents
(1,797)
48
Cash and cash equivalents at beginning of year
9,139
8,876
Effect of foreign exchange rate changes
(1,062)
215
Cash and cash equivalents at end of year
19
6,280
9,139
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Notes to the financial statements
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1. Authorisation of financial statements and statement of compliance with International Financial Reporting
Standards
Gresham Technologies plc is a public limited company incorporated and domiciled in England and Wales. The Company’s
ordinary shares are traded as a premium listing on the London Stock Exchange.
The financial statements of Gresham Technologies plc and its subsidiaries (“the Group”) for the year ended 31 December
2022 were authorised for issue by the Board of Directors on 13 March 2023 and the Consolidated Statement of Financial
Position was signed on the Board’s behalf by Mr I Manocha and Mr T Mullan.
The Group’s financial statements have been prepared in accordance with UK adopted International Financial Reporting
Standards (“IFRSs”) as they apply to the financial statements of the Group for the year ended 31 December 2022.
2. Accounting judgements and estimation uncertainty
The preparation of financial statements requires management to make judgements, estimates and assumptions that affect
the amounts reported for assets and liabilities as at the statement of financial position date and the amounts reported for
revenues and expenses during the year. However, the nature of estimation means that actual outcomes could differ from
those estimates. We review our estimates and underlying assumptions on an ongoing basis and recognise revisions to
accounting estimates in the period in which we revise the estimate and in any future periods affected. It is considered that
all judgements have an element of estimation.
Judgements
The key judgements that have a significant risk of causing a material adjustment to the carrying amounts of assets and
liabilities within the next financial year are discussed below.
Revenue and profit recognition
Revenue and the associated profit are recognised from sale of software licences, rendering of services, subscriptions and
maintenance and solution sales. When software licences are sold, we must exercise judgement as to when the appropriate
point in time has passed at which all performance obligations for that software licence have been performed, at which
point revenue in relation to the stand-alone sales price of the software licence is recognised. Whilst in most cases
performance obligations clearly follow the commercial and contractual arrangement we have agreed with the customer, in
some cases the revenue streams are combined as within an overall commercial arrangement. Such combined
circumstances require judgement to assess performance obligations associated with each revenue stream and further
judgement as to when and how such performance obligations have been discharged in order to recognise the associated
revenue. The determination of the distinct performance obligations of multi-element solution sales, represents a risk of
incorrect revenue recognition.
Where licences are delivered to customers on commencement of the contract, the licence fee is recognised upon
completion of performance obligations and the remaining revenue for support and maintenance is subsequently
recognised over the contract term.
In considering the distinct performance obligations of multi-element solutions, instances may arise whereby the substance
of the performance obligations differs from the legal form of the contract. In such circumstances, judgement is required to
assess the estimated stand-alone selling price of the constituent elements and recognise revenue accordingly. In such
instances we must first determine whether:
1.
The satisfaction of a performance obligation with a stand-alone selling price is operationally, technically,
functionally separate, and deliverable separately, from other deliverables to the customer; or
2.
The satisfaction of a performance obligation with a stand-alone selling price is not operationally, technically,
functionally and deliverable separate from other deliverables to the customer.
If the agreement is determined to be under category 1 above, then the stand-alone sales price of each element of a typical
software, support and maintenance is determined, unbundled and recognised appropriately for each element. If the
agreement is determined to be under category 2 above then the bundled fee is recognised as the bundled services are
delivered over the term of the contract.
Judgement is exercised in setting the stand-alone selling prices of distinct performance element of each individual contract.
It was concluded that the annual stand-alone sales price of standard support and maintenance offerings will be equal to
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20% of the five-year software licence fee, or of the total combined five-year licence, support and maintenance fees, the
stand-alone sales price of the licence will be 50% and the support and maintenance 50%. This ratio is aligned to the
proportion of development costs capitalised in proportion to our annual support and maintenance costs and is consistent
with previous years.
Estimates and assumptions
The key assumptions concerning the future and other key sources of estimation uncertainty at the statement of financial
position date that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities
within the next financial year are discussed below.
Contingent consideration
Contingent consideration relating to acquisitions is measured at fair value based on discounted cashflows, with
consideration payable based on performance targets. Management have assessed the probability of meeting agreed
revenue targets and have determined that there is a high probability that these targets will be met.
Contingent consideration included within the financial statements is £3,987,000 (2021: £7,519,000). If revenue is 5% lower
than the agreed targets, the contingent consideration payable will be reduced by £1,595,000. Further details are disclosed
in note 20 to the financial statements.
Capitalised development costs
The Group invests in the development of new and enhanced features to its products. Development costs are accounted
for in accordance with IAS 38 “Intangible Assets” and costs that meet the qualifying criteria are capitalised and
systematically amortised over the useful economic life of the intangible asset.
Determining whether development costs qualify for capitalisation as intangible assets requires judgement as to the
technical and commercial viability of each asset created. These judgements are applied consistently year to year with the
Group evaluating whether there are future economic benefits beyond the current period, the stage at which technical
feasibility has been achieved, management’s intention to use or sell the product, the likelihood of success of completion,
the availability of technical resources to complete the development and the ability to measure reliably the expenditure
attributed to each product.
The net carrying amount of development costs at 31 December is £23,556,000 (2021: £20,694,000).
The capitalised development cost is disclosed in note 14.
Impairment reviews
The Group performs impairment reviews at the reporting period end to identify any intangible assets that have a carrying
value that is in excess of its recoverable value.
Determining the recoverability of an intangible asset requires judgement
in both the methodology applied and the key variables within that methodology. Where it is determined that an intangible
asset is impaired, its carrying value will be reduced to its recoverable value with the difference recorded as an impairment
charge in the income statement.
The intangible asset impairment reviews are disclosed in note 15.
Sensitivity analysis has been performed on the key assumptions for discount rate, growth rate and revenue growth rates
to determine when impairment would occur these are disclosed in note 15.
Useful economic life of capitalised development costs
The assessment of the useful economic life of capitalised development costs is estimated by management based on past
experience and reviews of competitor products available in the market.
Estimates are made to the applicable useful economic life of each asset created. The amortisation charge for the year
ended 31 December 2022 was £2,360,000 (2021: £2,326,000). The impact of reducing the useful economic life by one
year would increase the amortisation charge for the year by £178,000, if the useful economic life was increased by one
year the amortisation charge is reduced by £270,000.
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3. Accounting policies
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 2022.
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 Group’s functional currency. All values are
rounded to the nearest thousand pounds (£’000) except when otherwise indicated.
Basis of consolidation
The Group financial statements consolidate the financial statements of Gresham Technologies plc and the entities it
controls (its subsidiaries) drawn up to 31 December each year.
The consolidated financial statements incorporate the financial statements of the Company and its subsidiaries made up
to the reporting date. Investees are classified as subsidiaries where the Company has control, which is achieved where
the Company has the power to govern the financial and operating policies of an investee entity, exposure to variable
returns from the investee and the ability to use its power to affect those variable returns. All intra-group transactions,
balances, income and expenses are eliminated on consolidation.
The consolidated financial statements incorporate the results of business combinations using the acquisition method. In
the statement of financial position, the acquiree’s identifiable assets and liabilities are initially recognised at their fair values
at acquisition date. The results of acquired entities are included in the Consolidated Statement of Comprehensive Income
from the date at which control is obtained and are deconsolidated from the date control ceases.
Going concern
The Group’s business activities, together with the factors likely to affect its future development, performance and position
are set out in the Strategic Report on pages 3 to 46. The financial position of the Group and the principal risks and
uncertainties are also described in the Strategic Report.
The Group has sufficient financial resources together with good relationships with a number of customers and suppliers
across different geographic areas and industries. The Group has access to a strong underlying cash flow arising from
long-established businesses with long-standing blue-chip customers. The Group also benefits from high levels of
contracted revenue providing predictability of future revenues.
After making enquiries, the Directors have a reasonable expectation that the Company and the Group have adequate
resources to continue in operational existence for a period of at least twelve months from the date of approval of the
financial statements. For this reason, they continue to adopt the going concern basis in preparing the Annual Financial
Report 2022.
The principal accounting policies adopted by the Group are set out below.
Functional currency and presentation currency
Items included within the financial statements of each of the Group’s entities are measured using the currency of the
primary economic environment in which each entity operates (“the functional currency”). The consolidated financial
statements are prepared in sterling, which is the Group’s presentation currency.
Foreign currency translation
Transactions in foreign currencies are initially recorded in the functional currency by applying an approximation of the spot
exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are
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retranslated at the functional currency rate of exchange ruling at the statement of financial position date. All differences
are taken to the income statement; in the instance where the differences on monetary assets and liabilities form part of
the Group’s net investment in foreign operations, they are moved to the Statement of Other Comprehensive Income on
consolidation and held in a separate component of equity until the disposal of the net investment, at which time they are
recognised in profit or loss.
The assets and liabilities of foreign operations are translated into Sterling at the rate of exchange ruling at the statement
of financial position date. Income and expenses are translated at weighted average exchange rates for the year. The
resulting exchange differences are taken to the Statement of Other Comprehensive Income and recognised directly to a
separate component of equity. On disposal of a foreign entity, the deferred cumulative amount recognised in equity relating
to that particular foreign operation is recognised in the Income Statement.
Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange
rates as at the dates of the initial transactions, on consolidation; all assets and liabilities of overseas subsidiaries which
report in a different functional currency are retranslated using the closing rate.
Goodwill
Goodwill represents the excess of the cost of acquisition over the fair value of the identifiable assets, liabilities and
contingent liabilities of the acquired entity at the date of acquisition. At the date of acquisition, goodwill is allocated to cash-
generating units for the purpose of impairment testing. Goodwill is recognised as an asset and assessed for impairment
annually. Any impairment is recognised immediately in the Group Statement of Comprehensive Income. Once recognised,
an impairment of goodwill is not reversed.
Intangible assets
Acquired intangibles
Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in
a business combination is fair value as at the date of acquisition. Following initial recognition, intangible assets are carried
at cost less any accumulated amortisation and any accumulated impairment losses. Internally generated intangible assets
are subject to the same recognition tests as development costs, and if met, they are capitalised.
Intangible assets with finite lives are amortised over their useful economic lives and assessed for impairment whenever
there is an indication that they may be impaired. The amortisation period and the amortisation method for an intangible
asset with a finite useful life is reviewed at least at each financial year end. Changes in the expected useful life or the
expected pattern of consumption of future economic benefits embodied in the asset are accounted for by changing the
amortisation period or method, as appropriate, and are treated as changes in accounting estimates. The amortisation
expense on intangible assets with finite lives is recognised in the income statement in the expense category consistent
with the function of the intangible asset. The useful economic lives of separately acquired software is deemed to be ten
years and the useful economic life of customer relations is between six and twelve years; the charge in the income
statement is made within the amortisation for acquired intangibles.
Internally generated intangibles
Development expenditure on an individual project is recognised as an intangible asset when the Group can demonstrate
the technical feasibility of completing the intangible asset so that it will be available for use or sale, its intention to complete
and its ability to use or sell the asset, how the asset will generate future economic benefits, the availability of resources to
complete the asset and the ability to measure reliably the expenditure during development.
Capitalised product development expenditure is stated at cost less accumulated amortisation and impairment losses.
Product development costs that have been capitalised are amortised from the time the product or related enhancement
becomes available for use as part of a version release issued to customers on a straight-line basis over two to twelve
years depending on the useful economic life of the asset assessed. During the period of development, the asset is tested
for impairment annually.
The amortisation charge is recognised in the income statement.
Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal
proceeds and the carrying amount of the asset and are recognised in the income statement when the asset is
derecognised.
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Other intangible assets
Purchased intangibles with finite lives, including purchased patents, know-how, trademarks, licences and distribution
rights, are capitalised at cost and amortised on a straight-line basis over their estimated useful lives. The estimated useful
life of these intangible assets range between two and ten years depending on their nature. Amortisation charges in respect
of other intangible assets are included in administrative expenses.
Research costs
Research costs are expensed as incurred.
Property, plant and equipment
Property, plant and equipment is stated at cost less accumulated depreciation and accumulated impairment losses. Cost
comprises the aggregate amount paid and the fair value of any other consideration given to acquire the asset and includes
costs directly attributable to making the asset capable of operating as intended.
Depreciation is provided on all property, plant and equipment on a straight-line basis over its expected useful life as follows:
•
Fixtures and fittings - over the term of the underlying property lease.
•
Plant and equipment - over lives ranging between one and ten years to write down the assets to their residual
value based on current prices for an asset of the age the plant and equipment is expected to be at the end of its
useful life.
The carrying values of property, plant and equipment are reviewed for impairment if events or changes in circumstances
indicate the carrying value may not be recoverable, and are written down immediately to their recoverable amount. Useful
lives and residual values are reviewed annually and where adjustments are required these are made prospectively.
An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected
to arise from the continued use of the asset. Any gain or loss arising on derecognition of the asset is included in the income
statement in the period of derecognition.
Leases
All leases are accounted for by recognising a right-of-use asset and a lease liability except for leases of low value assets;
and leases with a duration of twelve months or less.
Lease liabilities are measured at the present value of the contractual payments due to the lessor over the lease term, with
the discount rate determined by reference to the rate inherent in the lease unless (as is typically the case) this is not readily
determinable, in which case the Group’s incremental borrowing rate on commencement of the lease is used.
Variable
lease payments are only included in the measurement of the lease liability if they depend on an index or rate.
In such
cases, the initial measurement of the lease liability assumes the variable element will remain unchanged throughout the
lease term.
Other variable lease payments are expensed in the period to which they relate.
On initial recognition, the carrying value of the lease liability also includes: amounts expected to be payable under any
residual value guarantee; the exercise price of any purchase option granted in favour of the Group if it is reasonably certain
to assess that option; and any penalties payable for terminating the lease, if the term of the lease has been estimated on
the basis of termination option being exercised.
Right-of-use assets are initially measured at the amount of the lease liability, reduced for any lease incentives received,
and increased for: lease payments made at or before commencement of the lease; initial direct costs incurred; and the
amount of any provision recognised where the Group is contractually required to dismantle, remove or restore the leased
asset.
Subsequent to initial measurement, lease liabilities increase as a result of interest charged at a constant rate on the
balance outstanding and are reduced for lease payments made. Right-of-use assets are amortised on a straight-line basis
over the remaining term of the lease or over the remaining economic life of the asset if, rarely, this is judged to be shorter
than the lease term.
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When the Group revises its estimate of the term of any lease (because, for example, it re-assesses the probability of a
lessee extension or termination option being exercised), it adjusts the carrying amount of the lease liability to reflect the
payments to make over the revised term, which are discounted at the same discount rate that applied on lease
commencement.
The carrying value of lease liabilities is similarly revised when the variable element of future lease
payments dependent on a rate or index is revised.
In both cases an equivalent adjustment is made to the carrying value
of the right-of-use asset, with the revised carrying amount being amortised over the remaining (revised) lease term.
When the Group renegotiates the contractual terms of a lease with the lessor, the accounting depends on the nature of
the modification:
•
if the renegotiation results in one or more additional assets being leased for an amount commensurate with the
stand-alone price for the additional rights-of-use obtained, the modification is accounted for as a separate lease
in accordance with the above policy;
•
in all other cases where the renegotiation increases the scope of the lease (whether that is an extension to the
lease term, or one or more additional assets being leased), the lease liability is remeasured using the discount
rate applicable on the modification date, with the right-of-use asset being adjusted by the same amount; and
•
if the renegotiation results in a decrease in the scope of the lease, both the carrying amount of the lease liability
and right-of-use asset are reduced by the same proportion to reflect the partial or full termination of the lease with
any difference recognised in profit or loss.
The lease liability is then further adjusted to ensure its carrying amount
reflects the amount of the renegotiated payments over the renegotiated term, with the modified lease payments
discounted at the rate applicable on the modification date. The right-of-use asset is adjusted by the same amount.
For contracts that both convey a right to the Group to use an identified asset and require services to be provided to the
Group by the lessor, the Group has elected to account for the entire contract as a lease, i.e. it does allocate any amount
of the contractual payments to, and account separately for, any services provided by the supplier as part of the contract.
Impairment of non-financial assets
The Group assesses at each reporting date whether there is an indication that any non-financial assets may be impaired.
If any such indication exists, or when annual impairment testing for an asset is required, the Group makes an estimate of
the asset’s recoverable amount. An asset’s recoverable amount is the higher of an asset’s or cash-generating unit’s fair
value less costs to sell and its value in use and is determined for an individual asset, unless the asset does not generate
cash inflows that are largely independent of those from other assets or groups of assets. Where the carrying amount of
an asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount.
In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount
rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining
fair value less costs to sell, an appropriate valuation model is used incorporating industry standard valuation multiples or
other available fair value indicators. Impairment losses on continuing operations are recognised in the income statement
in those expense categories consistent with the function of the impaired asset.
An assessment is made at each reporting date as to whether there is any indication that previously recognised impairment
losses may no longer exist or may have decreased. If such indication exists, the recoverable amount is estimated. A
previously recognised impairment loss is reversed only if there has been a change in the estimates used to determine the
asset’s recoverable amount since the last impairment loss was recognised. If that is the case the carrying amount of the
asset is increased to its recoverable amount. Impairment charges on goodwill are considered permanent and cannot be
reversed. That increased amount cannot exceed the carrying amount that would have been determined, net of
depreciation, had no impairment loss been recognised for the asset in prior years. Such reversal is recognised in profit or
loss. After such a reversal the depreciation charge is adjusted in future periods to allocate the asset’s revised carrying
amount, less any residual value, on a systematic basis over its remaining useful life.
The Group assesses at each reporting date whether there is an indication that contract assets may be impaired by applying
the IFRS 9 simplified approach to measuring expected credit losses using a lifetime expected credit loss provision.
Provisions
A provision is recognised when the Group has a legal or constructive obligation as a result of a past event, it is probable
that an outflow of economic benefits will be required to settle the obligation, and a reliable estimate can be made of the
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amount of the obligation. If the effect is material, expected future cash flows are discounted using a current pre-tax rate
that reflects, where appropriate, the risks specific to the liability.
Where the Group expects some or all of a provision to be reimbursed, for example under an insurance policy, the
reimbursement is recognised as a separate asset but only when recovery is virtually certain. The expense relating to any
provision is presented in the income statement net of any reimbursement. Where discounting is used, the increase in the
provision due to unwinding the discount is recognised as a finance cost.
Financial assets
Impairment of financial assets
The Group assesses at each statement of financial position date whether a financial asset or group of financial assets is
impaired.
Financial assets
The Group's financial assets are all classified within the amortised cost category. The Group's accounting policy for this
category is as follows:
Assets carried at amortised cost
These assets arise principally from the provision of sales and services of software and support and maintenance to
customers (e.g. trade receivables), but also incorporate other types of financial assets where the objective is to hold these
assets in order to collect contractual cash flows and the contractual cash flows are solely payments of principal and
interest.
They are initially recognised at fair value plus transaction costs that are directly attributable to their acquisition or
issue, and are subsequently carried at amortised cost using the effective interest rate method, less provision for
impairment.
Impairment provisions for current and non-current trade receivables are recognised based on the simplified approach
within IFRS 9 using a provision matrix in the determination of the lifetime expected credit losses.
During this process the
probability of the non-payment of the trade receivables is assessed.
This probability is then multiplied by the amount of
the expected loss arising from default to determine the lifetime expected credit loss for the trade receivables. For trade
receivables, which are reported net, such provisions are recorded in a separate provision account with the loss being
recognised within cost of sales in the consolidated statement of comprehensive income.
On confirmation that the trade
receivable will not be collectable, the gross carrying value of the asset is written off against the associated provision.
If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an
event occurring after the impairment was recognised, the previously recognised impairment loss is reversed. Any
subsequent reversal of an impairment loss is recognised in the income statement to the extent that the carrying value of
the asset does not exceed its amortised cost at the reversal date.
The Group's financial assets measured at amortised cost comprise trade and other receivables and cash and cash
equivalents in the consolidated statement of financial position.
Cash and cash equivalents include cash in hand, deposits held at call with banks, other short-term highly liquid investments
with original maturities of three months or less, and – for the purpose of the statement of cash flows - bank overdrafts.
Bank overdrafts are shown within loans and borrowings in current liabilities on the consolidated statement of financial
position.
Cash and cash equivalents
Cash and short-term deposits in the consolidated statement of financial position comprise cash at bank and in hand and
short-term deposits with an original maturity of three months or less.
For the purpose of the consolidated statement of cash flow, cash and cash equivalents consist of cash and cash
equivalents as defined above, net of outstanding bank overdrafts.
Restricted cash and cash equivalent balances are those which meet the definition of cash and cash equivalents but are
not available for immediate use are disclosed separately within the financial statements.
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Income taxes
Current tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation
authorities, based on tax rates and laws that are enacted or substantively enacted by the statement of financial position
date.
Research and development tax credits are recognised on an accruals basis and recorded as a credit in the taxation line
of the income statement.
Deferred income tax is recognised on all temporary differences arising between the tax bases of assets and liabilities and
their carrying amounts in the financial statements, with the following exceptions:
•
where the temporary difference arises from the initial recognition of goodwill or of an asset or liability in a
transaction that is not a business combination that at the time of the transaction affects neither accounting nor
taxable profit or loss;
•
in respect of taxable temporary differences associated with investments in subsidiaries, associates and joint
ventures, where the timing of the reversal of the temporary differences can be controlled and it is probable that
the temporary differences will not reverse in the foreseeable future; and
•
deferred income tax assets are recognised only to the extent that it is probable that taxable profit will be available
against which the deductible temporary differences, carried forward tax credits or tax losses can be utilised.
Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply when the related asset
is realised or liability is settled, based on tax rates and laws enacted or substantively enacted at the statement of financial
position date.
The carrying amount of deferred income tax assets is reviewed at each statement of financial position date. Deferred
income tax assets and liabilities are offset only if a legally enforceable right exists to set off current tax assets against
current tax liabilities, the deferred income taxes relate to the same taxation authority and that authority permits the Group
to make a single net payment.
Income tax is charged or credited to other comprehensive income or directly to equity if it relates to items that are credited
or charged to other comprehensive income or directly to equity. Otherwise, income tax is recognised in the income
statement.
Purchases and sales of financial assets measured at fair value through other comprehensive income are recognised on
settlement date with any change in fair value between trade date and settlement date being recognised in the fair value
through other comprehensive income reserve.
Financial liabilities
The Group classifies its financial liabilities into one of two categories, depending on the purpose for which the liability was
acquired.
The Group's accounting policy for other financial liabilities (which include trade payables and other short-term monetary
liabilities), are initially recognised at fair value and subsequently carried at amortised cost using the effective interest
method.
Other financial liabilities include the following items:
•
Bank borrowings are initially recognised at fair value net of any transaction costs directly attributable to the issue
of the instrument.
Such interest-bearing liabilities are subsequently measured at amortised cost using the
effective interest rate method, which ensures that any interest expense over the period to repayment is at a
constant rate on the balance of the liability carried in the consolidated statement of financial position. For the
purposes of each financial liability, interest expense includes initial transaction costs and any premium payable
on redemption, as well as any interest or coupon payable while the liability is outstanding.
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•
Trade payables and other short-term monetary liabilities, which are initially recognised at fair value and
subsequently carried at amortised cost using the effective interest method.
Derecognition of financial assets and liabilities
A financial asset or liability is generally derecognised when the contract that gives rise to it is settled, sold, cancelled or
expires.
Where an existing financial liability is replaced by another from the same lender on substantially different terms, or the
terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of
the original liability and the recognition of a new liability, such that the difference in the respective carrying amounts
together with any costs or fees incurred are recognised in profit or loss.
Pensions
Contributions to defined contribution schemes are recognised in the income statement in the period in which they become
payable.
Dividends
Dividends are recognised when they become legally payable. In the case of interim dividends to equity shareholders, this
is when declared by the Directors.
In the case of final dividends, this is when approved by the shareholders at the AGM.
Revenue recognition
Revenue, comprising sales of products and services to third parties, is recognised to the extent that satisfaction of
contractual performance obligations has occurred and it is probable that the economic benefits will flow to the Group and
the revenue can be reliably measured. Revenue is measured at the stand-alone selling price of the performance obligation
delivered, excluding discounts, rebates, VAT and other sales taxes.
To note there is no material impact of variable
consideration or financing components across all revenue streams.
The following criteria must also be met before revenue is recognised:
Software licences
Revenue on software licences is recognised when all of the following criteria are met:
•
persuasive evidence of an arrangement exists, such as a signed contract or purchase order;
•
satisfaction of the contracted performance obligations has been met, which in the case of software licences
typically means delivery has occurred and no future elements to be delivered are essential to the functionality of
the delivered element;
•
a stand-alone selling price of the performance obligation can be measured; and
•
collectability is probable.
Provision of services
Revenue and profits from the provision of professional services, such as implementation, development, training and
consultancy, are delivered under a time and materials type contract and are therefore recognised over time and based
upon number of hours worked. On occasion fixed price services contracts are entered into, upon which revenue is
recognised on a percentage-of-completion basis, as costs incurred relate to total costs for the contract, when the outcome
of a contract can be estimated reliably. Determining whether a contract’s outcome can be estimated reliably requires
management to exercise judgement, whilst calculation of the contract’s profit requires estimates of the total contract costs
to completion. Cost estimates and judgements are continually reviewed and updated as determined by events or
circumstances.
Revenue from this revenue stream creates contract assets through yet to be billed time input and expenses at the reporting
date.
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Support and maintenance
Revenue from support and maintenance services is recognised rateably over the period of the contract.
Revenue is
recognised when the provision of support and maintenance and completion of the performance obligations are carried out
which is deemed to be evenly throughout the term of the contract. The customer simultaneously receives and consumes
the benefits provided by the Group’s performance as the Group performs.
Revenue from this revenue stream creates contract liabilities through the invoicing of services prior to performance
obligations being performed.
Data services
Revenue related to providing data services is based on a consumption basis whereby revenue is recognised based on the
customer utilisation of such services.
Solution sales
Contracts for the delivery of solutions with multiple elements, typically involving software licences, rendering of services,
support, maintenance and infrastructure are unbundled where possible and revenue is recognised based on the
accounting policy applicable to each constituent part, for example the stand-alone selling price of the software licence is
recognised at a point in time, upon satisfaction of the performance obligations associated to that licence, and the stand-
alone selling price of software maintenance and support is recognised over the period over which the service is provided.
A typical example of such a scenario is where we sell a subscription licence but are not contracted to provide the hosted
infrastructure to deploy the software upon – the customer deploys the software on-premise or on a cloud environment for
which we are not responsible.
We have many instances where unbundling is not possible, this is where a bundled element cannot technically or
operationally be provided without another. The typical example of this is when the customer contracts our hosted Cloud
software offerings, under which the customer cannot gain benefit from the software without the Group also providing, and
continuing to provide, the hosted infrastructure upon which software is deployed. Where objective unbundling of a solution
is not possible, revenue is recognised over the period of the contractual service provision.
Interest income
Interest income is recognised as finance revenue as interest accrues using the effective interest method. The effective
interest rate is the rate that exactly discounts estimated future cash receipts through the expected life of the financial
instrument to its net carrying amount.
Share-based payments
Equity-settled transactions
The cost of equity-settled transactions with employees is measured by reference to the fair value at the date at which they
are granted and is recognised as an expense over the vesting period, which ends on the date on which the relevant
employees become fully entitled to the award.
Fair value of awards with a market condition-based performance target is determined by an external valuer using a Monte
Carlo simulation pricing model. In valuing equity-settled transactions, no account is taken of any vesting conditions, other
than conditions linked to the price of the shares of the Company (market conditions).
Fair value of awards with a financial result-based performance target is determined by management using the Black
Scholes pricing model.
No expense is recognised for awards that do not ultimately vest, except for awards where vesting is conditional upon a
market condition, which are treated as vesting irrespective of whether or not the market condition is satisfied, provided
that all other vesting conditions are satisfied.
At each statement of financial position date before vesting, the cumulative expense is calculated, representing the extent
to which the vesting period has expired and management’s best estimate of the achievement or otherwise of non-market
conditions and of the number of equity instruments that will ultimately vest or, in the case of an instrument subject to a
market condition, be treated as vesting as described above. The movement in cumulative expense since the previous
statement of financial position date is recognised in the income statement, with a corresponding entry in equity.
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Where the terms of an equity-settled award are modified or a new award is designated as replacing a cancelled or settled
award, the cost based on the original award terms continues to be recognised over the original vesting period. In addition,
an expense is recognised over the remainder of the new vesting period for the incremental fair value of any modification,
based on the difference between the fair value of the original award and the fair value of the modified award, both as
measured on the date of the modification.
No reduction is recognised if this difference is negative.
Where an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation, and any cost not
yet recognised in the profit and loss account for the award is expensed immediately. Any compensation paid up to the fair
value of the award at the cancellation or settlement date is deducted from equity, with any excess over fair value being
treated as an expense in the income statement.
The share-based payment expense is recognised as a staff cost and the associated credit entry is made against equity.
Financial instruments
The Group, outside of normal business operations, enters into forward currency contracts. Forward currency contracts are
valued at fair value through profit or loss.
Employee Share Ownership Trust (ESOT)
The Company is deemed to have control of its ESOT therefore the trust is included within the consolidated financial
statements. The ESOT investment in the Company’s shares is deducted from equity in the consolidated statement of
financial position. The shares are valued at the average purchase price.
Exceptional items
Exceptional items are disclosed separately in the financial statements where it is necessary to do so to provide further
understanding of the financial performance of the Group. They are non-recurring items of income or expense that have
been shown separately due to the significance of their nature or amount.
Cost of sales
Costs of sales include costs incurred to achieve the financial years revenue and are recognised within the Income
statement primarily consisting of the following costs:
•
Customer specific third-party costs incurred in providing our cloud hosted cloud solutions
•
Third party contractor costs incurred by our contracting services business
•
Payrolled employees that provide fixed margin contracting services
Administrative expenses
Administrative expenses are recognised within the Income Statement in the period that they are incurred and primarily
consist of the following costs:
•
Staff costs including salaries, bonuses and commissions excluding payrolled employees provided fixed margin
contracting services which are within costs of sale
•
Marketing costs including travel and entertainment costs
•
Property costs excluding any costs disclosed as amortisation under IFRS 16
•
IT and communication costs
•
Professional advisory fees and general administration costs
•
Depreciation and amortisation
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Changes in accounting policies
New standards, interpretations and amendments effective from 1 January 2022
A number of new standards, interpretations and amendments are effective for the year ended 31 December 2022, which
have been listed below, these have had no material impact on the Group’s accounting policies and disclosures in these
financial statements.
•
Annual Improvements to IFRS Standards 2018-2020 Cycle
•
Amendments to IFRS 3 – Reference to the Conceptual Framework
•
Amendments to IAS 16 – Property, Plant and Equipment: Proceeds before intended use
•
Amendments to IAS 37 – Onerous Contracts: Cost of Fulfilling a Contract
New standards, interpretations and amendments not yet effective
At the date of approval of these Group financial statements, the Group has not applied the following new and revised
Accounting standards, amendments and interpretations that have been issued by the IASB but that are not yet effective
for and in some cases had not yet been updated by the UK Endorsement Board (UKEB).
Effective 1 January 2023 – adopted by UKEB
•
IFRS 17 – Insurance Contracts (including the June 2020 and December 2021 Amendments to IFRS 17)
•
Amendments to IAS 1 and IFRS Practice Statement 2 – Disclosure of Accounting policies
•
Amendments to IAS 8 – Definition of Accounting Estimates
•
Amendments to IAS 12 – Deferred Tax related to Assets and Liabilities arising from a Single Transaction
Effective 1 January 2024 – not yet adopted by UKEB
•
Amendments to IFRS 16 – Leases on sale and leaseback
•
Amendments to IAS 1 - Classification of Liabilities as Current or Non-current
The above standards, amendments and interpretations are not expected to have a significant impact on the Group’s
financial statements.
There are no new standards, and amendments to standards and interpretations which are effective for annual periods
beginning after 1 January 2023 which have been adopted in these financial statements.
4.
Revenue
Revenue disclosed in the income statement is analysed as follows:
2022
2021
£'000
£'000
Provision of software and services
48,719
37,026
Total revenue
48,719
37,026
The Group has disaggregated revenue into various categories in the following table which is intended to:
•
depict how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic data;
and
•
enable users to understand the relationship with the revenue segment information provided in note 5.
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Clareti
Solutions
Other
Solutions
Contracting
Services
Total
2022
£’000
£’000
£’000
£’000
Non-recurring software revenue (software licences)
154
-
-
154
Recurring software revenue (annually recurring software
licences, support and maintenance and managed services)
27,384
4,343
-
31,727
Rendering of services
7,981
633
8,224
16,838
35,519
4,976
8,224
48,719
Timing of revenue recognition
Non-annually recurring - at a point in time
154
-
-
154
Annually recurring - at a point in time
4,432
-
-
4,432
Rateably recognised - over contract period
30,933
4,976
8,224
44,133
35,519
4,976
8,224
48,719
Clareti
Solutions
Other
Solutions
Contracting
Services
Total
2021
£’000
£’000
£’000
£’000
Non-recurring software revenue (software licences)
137
73
-
210
Recurring software revenue (annually recurring software
licences, support and maintenance and managed services)
18,800
4,581
-
23,381
Rendering of services
6,532
569
6,334
13,435
25,469
5,223
6,334
37,026
Timing of revenue recognition
Non-annually recurring - at a point in time
137
73
-
210
Annually recurring - at a point in time
3,286
-
-
3,286
Rateably recognised - over contract period
22,046
5,150
6,334
33,530
25,469
5,223
6,334
37,026
Contract balances
Contract
assets
Contract
assets
Contract
liabilities
Contract
liabilities
2022
2021
2022
2021
£'000
£'000
£'000
£'000
At 1 January
5,460
3,431
(12,108)
(11,096)
Amounts included in contract liabilities that were
recognised as revenue during the period
-
-
12,048
11,030
Acquisitions
-
1,447
-
(756)
Excess of revenue recognised over cash (or rights to
cash) being recognised during the period
1,863
582
-
-
Cash received in advance of performance and not
recognised as revenue during the period
-
-
(11,364)
(11,286)
At 31 December
7,323
5,460
(11,424)
(12,108)
In the table above, contract assets, relate to services performed but do not have an unconditional right to payment and
trade receivables.
Contract liabilities relate to subscription, support and maintenance contracts invoiced with performance obligations yet to
be satisfied and arise when the Group enters into a contract which results in cumulative payments received from customers
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at the Statement of Financial Position date which do not necessarily equal to the amount of revenue recognised on the
contracts and relate to performance obligations yet to be satisfied. These are disclosed within trade and other payables.
Amounts due to be recognised in more than one year are £354,000 (2021: £60,000). Trade receivables included in the
above as at 1 January 2021 were £2,508,000.
The Group applies the IFRS 9 simplified approach to measuring credit losses using a lifetime expected credit loss provision
for trade receivables and contract assets. The Group has provided for an impairment as at 31 December 2022 of £15,000
(2021: £nil). See note 18 for further details.
5. 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
•
Contracting Services – Supply of IT contracting services to one banking customer
Transfer prices between segments are set on an arm’s length basis in a manner similar to transactions with third parties.
Segment revenue, segment expense and segment result include transfers between business segments. Those transfers
are eliminated on consolidation.
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Other
Notes
Clareti
Solutions
Solutions
Contracting
Services
Adjustment
s, central
overheads
and
elimination
Consolidat
ed
2022
£'000
£'000
£’000
£'000
£'000
Revenue
4
35,519
4,976
8,224
48,719
Cost of sales
(5,032)
(2,546)
(7,196)
(14,774)
Gross profit
30,487
2,430
1,028
33,945
Gross profit %
86%
49%
13%
70%
Adjusted administrative expenses
(26,898)
(101)
-
(26,999)
Adjusted operating profit
3,589
2,329
1,028
6,946
Adjusting administrative items:
Exceptional costs
5
(153)
(153)
Amortisation of acquired intangibles
14
(2,315)
(2,315)
Share-based payments
23
(1,027)
(1,027)
Adjusting administrative expenses
(3,495)
(3,495)
Operating profit
3,451
Finance revenue
9
6
Finance costs
9
(219)
Profit before taxation
3,238
Taxation
10
(356)
Profit after taxation
2,882
Adjusted operating profit
6,946
Amortisation of intangibles
14
2,408
Depreciation of property, plant and
equipment
13
191
Amortisation of right-of-use assets
16
714
Adjusted EBITDA
10,259
Development costs capitalised
14
(5,195)
Principal paid on lease liabilities
16
(645)
Cash adjusted EBITDA
4,419
Segment assets
80,632
Segment liabilities
(31,626)
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Other
Notes
Clareti
Solutions
Solutions
Contracting
Services
Adjustment
s, central
overheads
and
elimination
Consolidat
ed
2021
£'000
£'000
£’000
£'000
£'000
Revenue
4
25,470
5,222
6,334
-
37,026
Cost of sales
(3,978)
(2,338)
(5,483)
-
(11,799)
Gross profit
21,492
2,884
851
-
25,227
Gross profit %
84%
55%
13%
68%
Adjusted administrative expenses
(20,996)
(150)
-
-
(21,146)
Adjusted operating profit
496
2,734
851
-
4,081
Adjusting administrative items:
Exceptional costs
5
(1,491)
(1,491)
Amortisation of acquired intangibles
14
(1,673)
(1,673)
Share-based payments
23
(369)
(369)
Adjusting administrative expenses
(3,533)
(3,533)
Operating profit
548
Finance revenue
9
4
Finance costs
9
(121)
Profit before taxation
431
Taxation
10
(1,443)
Loss after taxation
(1,012)
Adjusted operating profit
4,081
Amortisation of intangibles
14
2,369
Depreciation of property, plant and
equipment
13
175
Amortisation of right-of-use assets
16
581
Adjusted EBITDA
7,206
Development costs capitalised
14
(4,105)
Principal paid on lease liabilities
16
(590)
Cash adjusted EBITDA
2,511
Segment assets
81,594
Segment liabilities
(35,713)
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 £20,593,000 (2021:
£17,618,000) which includes low margin contracting revenue of £10,229,000 (2021: £8,442,000).
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
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represents a non-cash expense. Adjusting for these items is also consistent with the manner in which similar small and
mid cap LSE (or AIM) listed present their results and how we understand the investment community to assess
performance, where, for growth shares the recurring cash performance of the business is considered most important. In
addition, these adjustments are also aligned with the performance methodology used by the panel of debt providers that
tendered for the revolving credit facility established during the year in order to assess and continually monitor credit
worthiness, risk and upon which covenants are set.
The adjusting administrative items are:
2022
2021
£'000
£'000
Acquisition and associated integration costs
153
1,814
Advisory fees for new share option scheme
-
7
Exceptional costs
153
1,821
Exceptional income
-
(330)
Total exceptional items
153
1,491
Amortisation on acquired intangibles
2,315
1,673
Share-based payments
1,027
369
Total adjusting administrative items
3,495
3,533
During the year the Group incurred £153,000 exceptional costs relating to legal and professional fees for the integration
costs of prior year acquisitions.
During the year ended 31 December 2021 the Group incurred exceptional costs of £1,814,000 which included legal, due
diligence and professional fees for the acquisition of Electra Information Systems and associated integration costs.
Exceptional legal and tax advisory costs were incurred in the year ended 31 December 2021 of £7,000 associated with
implementation of a new ten-year share option incentive scheme. These costs are not expected to occur for a further ten
years.
Exceptional income of £330,000 was recognised in the year ended 31 December 2021 on realising a gain on the
completion of a contract to forward purchase US dollars. The contract was entered into to minimise the currency risk on
the acquisition of Electra Information Systems. This income has been treated as exceptional as it is non-recurring.
Due to the amount and nature of amortisation of acquired intangibles and share-based payments both costs were treated
as an adjusting administrative item.
Adjusted EBITDA
Adjusted EBITDA is disclosed within the financial statements to show the underlying performance of the group on a
consistent basis and to aid understanding of the financial performance during the year.
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Notes
2022
2021
£’000
£’000
Profit before taxation
3,238
431
Adjusting items:
Amortisation of intangibles
14
4,723
4,042
Depreciation of property, plant and equipment
13
191
175
Amortisation of right-to-use assets
16
714
581
Notional interest on lease liabilities
9
45
43
Finance revenue
9
(6)
(4)
Interest payable
9
174
78
EBITDA
9,079
5,346
Exceptional items
5
153
1,491
Share-based payments
23
1,027
369
Adjusted EBITDA
10,259
7,206
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
2022
2021
£'000
£'000
Revenues from external customers (by destination)
UK
6,953
5,998
EMEA
4,460
3,151
United States
14,607
9,096
Americas
1,307
517
Australia
20,840
17,738
Asia Pacific
552
526
48,719
37,026
EMEA includes revenue from external customers located primarily in the Netherlands, Luxembourg, Switzerland,
Finland and South Africa. Americas includes revenue primarily from Canada. Asia Pacific includes revenue from
external customers located primarily in Malaysia and Singapore.
2022
2021
£’000
£’000
Non-current assets
UK
63,077
62,777
EMEA
425
448
North America
740
396
Asia Pacific
1,037
562
65,279
64,183
Non-current assets consist of property, plant and equipment, right-of-use assets, intangible assets and deferred tax assets.
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6. Group operating profit
The Group operating profit is stated after charging:
Notes
2022
2021
£'000
£'000
Research costs written off
2,616
1,721
Amortisation of deferred development costs recognised in administration expenses
14
2,360
2,326
Total research and development costs
4,976
4,047
Depreciation of property, plant and equipment
13
191
175
Amortisation of right to use assets
16
714
581
Amortisation of intangible assets (excluding development costs)
14
2,363
1,716
Total depreciation, impairment and amortisation expense
3,268
2,472
Employee benefit expenses
8
27,570
20,521
Net foreign currency differences (gains)/losses
(218)
69
7. Auditor’s remuneration
The Group paid the following amounts to its auditor in respect of the audit of the financial statements and for other services
provided to the Group.
2022
2021
£'000
£'000
Audit fees
Audit of the Group financial statements and associated company
32
29
Other fees to the auditor
- auditing the accounts of subsidiaries
190
111
- audit of acquisition
-
14
222
154
Non-audit fees
Accountants report on historical financial information
-
160
Audit of bank covenant certificates
3
6
3
166
8.
Staff costs and Directors’ emoluments
Staff and Director costs
2022
Income
statement
Capitalised
development
costs
Total
excluding
contracting
Contracting
costs
expensed
Total
£'000
£'000
£'000
£'000
£'000
Wages and salaries
17,556
3,974
21,530
3,228
24,758
Social security costs
1,272
372
1,644
212
1,856
Other pension costs
518
108
626
330
956
19,346
4,454
23,800
3,770
27,570
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2021
Income
statement
Capitalised
development
costs
Total
excluding
contracting
Contracting
costs
expensed
Total
£'000
£'000
£'000
£'000
£'000
Wages and salaries
13,120
3,031
16,151
2,250
18,401
Social security costs
833
246
1,079
131
1,210
Other pension costs
581
109
690
220
910
14,534
3,386
17,920
2,601
20,521
Included in wages and salaries is a total expense of share-based payments of £1,027,000 (2021: £369,000) all of which
arises from transactions accounted for as equity-settled share-based payment transactions.
The average monthly number of employees during the year was made up as follows:
2022
2021
Management
14
12
Sales and administration
48
42
Technical
160
128
Total
222
182
Contracting services
37
33
Details of Directors’ compensation are included in the Directors’ Remuneration Report.
9. Finance revenue and costs
2022
2021
Finance revenue
£'000
£'000
Bank interest receivable
6
4
Finance costs
Notional interest on lease liabilities
45
43
Bank interest payable
19
-
Other interest payable
6
1
Other bank charges
149
77
Total finance costs
219
121
10. Taxation
Tax on profit on ordinary activities
Tax charge in the income statement
2022
2021
£’000
£’000
Current income tax
Overseas tax charge/(credit) - adjustment to prior years
45
(93)
Overseas tax charge - current year
1,570
1,118
UK corporation tax credit - adjustment to prior years
(1,293)
(1,045)
Total current income tax
322
(20)
Deferred income tax
Movement in net deferred tax liability
34
1,231
Tax rate change adjustments
-
232
Total deferred income tax
34
1,463
Total charge in the income statement
356
1,443
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The UK corporation tax credit included £1,273,000 (2021: £1,045,000) 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 lower (2021: higher) than the standard rate of corporation tax in the
UK of 19.0% (2021: 19.0%). The differences are reconciled below:
2022
2021
£'000
£'000
Profit before taxation
3,238
431
Profit before taxation multiplied by the UK standard rate of corporation tax of 19.0% (2021: 19.0%)
615
82
Effects of:
Expenses not deductible for tax purposes
573
288
Impact of tax rate change on timing differences
139
234
Difference in overseas tax rates
375
785
Movement in unprovided deferred tax losses
(86)
(305)
Adjustments to prior years in respect of current tax
(1,248)
(1,138)
Adjustments to prior years in respect of deferred tax
2,165
1,802
Research and development enhanced relief claim
(2,177)
(1,703)
Deferred tax on the inter-group sale of intellectual property
-
1,398
Total tax charge reported in the income statement
356
1,443
Tax credit recognised in equity
2022
2021
£'000
£'000
Deferred tax credit recognised directly in equity
301
-
Total tax credit recognised directly in equity
301
-
Deferred tax
Deferred tax liabilities
The movement on the deferred tax liability is shown below:
2022
2021
£'000
£'000
At 1 January
(6,599)
(737)
Recognised in income
(34)
(1,463)
Recognised in equity
301
-
Arising on acquisition of intangibles in subsidiaries
-
(4,055)
Foreign exchange
265
(344)
At 31 December
(6,067)
(6,599)
DocuSign Envelope ID: B92A7465-54C5-4236-B0C5-93C23487FCF7
Notes to the financial statements
Gresham Technologies plc
118
Annual Financial Report 2022
Deferred tax recognised relates to the following:
2022
2021
£’000
£’000
Tax losses available for offset against future taxable income
3,979
3,639
Employee share award schemes
766
310
Capitalised development costs
(5,577)
(4,545)
Accelerated depreciation for tax purposes on fixed assets
540
828
Other timing differences
379
-
Inter-group sale of intellectual property
(1,300)
(1,398)
Acquired intangibles – software and customer relationships
(4,854)
(5,433)
31 December
(6,067)
(6,599)
Comprising:
2022
2021
£’000
£’000
Asset
-
232
Liability
(6,067)
(6,831)
31 December
(6,067)
(6,599)
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
£178,000 (2021: £35,000).
Temporary differences associated with Group investments
At 31 December 2022, there was no recognised deferred tax liability (2021: £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:
2022
2021
£'000
£'000
Gresham Technologies (Luxembourg) S.A.
793
816
Gresham Technologies (Holdings) SARL
109
103
Inforalgo Information Technology Limited
-
243
Gresham Technologies (Singapore) Limited
137
125
Gresham Technologies (TDI) Limited
119
116
Tax losses
1,158
1,403
Gross tax losses unrecognised
5,155
5,857
DocuSign Envelope ID: B92A7465-54C5-4236-B0C5-93C23487FCF7
Notes to the financial statements
Gresham Technologies plc
119
Annual Financial Report 2022
Future tax rates
The main UK corporation tax rate is due to increase to 25% from 1 April 2023 as substantively enacted by the Finance Act
2021. Therefore, the rate used to calculate deferred tax balances at 31 December 2022 is 25%.
The Group’s recognised and unrecognised deferred tax assets in the UK, Luxembourg, Australian and US subsidiaries
have been shown at the rates in the following table, being the substantively enacted rates in these countries.
2022
2021
%
%
UK
25
25
Luxembourg
25
25
Australia
30
30
US
27
27
11. 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:
2022
2021
Basic weighted average number of shares
83,393,061
77,132,796
Employee share options - weighted (note 23)
1,133,957
890,100
Diluted weighted average number of shares
84,527,018
78,022,896
Notes
2022
2021
£'000
£'000
Adjusted earnings attributable to owners of the Parent
6,377
3,919
Adjusting items:
Exceptional items
5
(153)
(1,491)
Amortisation of acquired intangibles
14
(2,315)
(1,673)
Deferred tax charge on inter-group sale of intellectual property
10
-
(1,398)
Share-based payments
23
(1,027)
(369)
Statutory earnings attributable to owners of the Parent
2,882
(1,012)
Earnings per share
Statutory
pence
pence
Basic earnings per share
3.46
(1.31)
Diluted earnings per share
3.41
(1.31)
Adjusted
Basic earnings per share
7.65
5.08
Diluted earnings per share
7.54
5.02
DocuSign Envelope ID: B92A7465-54C5-4236-B0C5-93C23487FCF7
Notes to the financial statements
Gresham Technologies plc
120
Annual Financial Report 2022
During the year ended 31 December 2022, share options granted under share option schemes were exercised and the
Group issued 85,000 (2021: 83,000) ordinary shares accordingly (ranking pari passu with existing shares in issue). See
note 22 for further details.
There have been no other transactions involving ordinary shares or potential ordinary shares between the reporting date
and the date of completion of this Annual Financial Report 2022.
12. Dividends paid and proposed
The final dividend for the year ended 31 December 2021 was approved at the Company Annual General Meeting on 10
May 2022 and paid on 19 May 2022 of 0.75 pence per share, equating to a total of £622,000. The Company will be
proposing a final dividend for approval at the AGM for the year ended 31 December 2022 of 0.75 pence per share.
13. Property, plant and equipment
Fixtures and
fittings
Property,
plant and
equipment
Total
2022
£'000
£'000
£'000
Cost
At 1 January
745
1,073
1,818
Additions
463
343
806
Disposals
-
(293)
(293)
Exchange adjustment
63
21
84
At 31 December
1,271
1,144
2,415
Depreciation and impairment
At 1 January
(723)
(877)
(1,600)
Charge for year
(33)
(158)
(191)
Disposals
-
293
293
Exchange adjustment
(12)
(6)
(18)
At 31 December
(768)
(748)
(1,516)
Net carrying amount
At 31 December
503
396
899
At 1 January
22
196
218
DocuSign Envelope ID: B92A7465-54C5-4236-B0C5-93C23487FCF7
Notes to the financial statements
Gresham Technologies plc
121
Annual Financial Report 2022
Fixtures and
fittings
Property,
plant and
equipment
Total
2021
£'000
£'000
£'000
Cost
At 1 January
756
1,009
1,765
Additions
1
144
145
Additions acquired as part of a business combination
-
9
9
Disposals
-
(83)
(83)
Exchange adjustment
(12)
(6)
(18)
At 31 December
745
1,073
1,818
Depreciation and impairment
At 1 January
(691)
(831)
(1,522)
Charge for year
(43)
(132)
(175)
Disposals
-
83
83
Exchange adjustment
11
3
14
At 31 December
(723)
(877)
(1,600)
Net carrying amount
At 31 December
22
196
218
At 1 January
65
178
243
14. Intangible assets
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
DocuSign Envelope ID: B92A7465-54C5-4236-B0C5-93C23487FCF7
Notes to the financial statements
Gresham Technologies plc
122
Annual Financial Report 2022
Separately identified
intangibles on acquisition
Development
costs
Patents and
licences
Software
Customer
relationships
Goodwill
Total
2021
£'000
£'000
£'000
£'000
£'000
£'000
Cost
At 1 January
26,996
832
7,161
2,410
5,625
43,024
Additions
4,105
45
4,959
11,800
14,279
35,188
Disposals
-
(6)
-
-
-
(6)
Exchange adjustment
(29)
(13)
-
-
(56)
(98)
At 31 December
31,072
858
12,120
14,210
19,848
78,108
At 1 January
(8,117)
(739)
(2,141)
(669)
(250)
(11,916)
Charge for year
(2,326)
(43)
(964)
(709)
-
(4,042)
Eliminated on disposal
-
6
-
-
-
6
Exchange adjustment
65
13
-
-
33
111
At 31 December
(10,378)
(763)
(3,105)
(1,378)
(217)
(15,841)
Net carrying amount
At 31 December
20,694
95
9,015
12,832
19,631
62,267
At 1 January
18,879
93
5,020
1,741
5,375
31,108
Development costs
Development costs are internally generated and are capitalised at cost. These intangible assets have been assessed as
having a finite life and are amortised on a straight-line basis over their useful lives of two to eleven years. These assets
are tested for impairment where an indicator of impairment arises and annually prior to them being made available for use.
For the years ended 31 December 2022 and 31 December 2021 the Group has capitalised development costs in respect
of individual Clareti applications which have been individually assessed against the required capitalisation criteria and
been individually assigned useful economic lives reflecting the maturity and availability of comparable applications in our
markets. These useful economic lives are assessed to be between two and eleven years.
No changes have been made to development costs capitalised in prior years in respect of the Clareti platform, which
continue to be amortised on a systematic basis over the existing useful economic life of eleven years.
Patents and licences
Patents and licences are the third-party costs incurred in seeking and obtaining protection for certain of the Group’s
products and services. These intangible assets have been assessed as having a finite life and are being amortised evenly
over their useful economic life, to a maximum of ten years. Patents have a remaining life of three years and licences have
a remaining life of one to ten years.
Separately identified acquired intangibles
Separately identified intangibles acquired through business combinations represent software and customer relationships
which arose through the acquisitions of C24 Technologies Limited, B2 Group, Inforalgo and Electra Information Systems.
Software is amortised over its useful economic life, which is deemed to be ten years.
Customer relationships acquired in the year are amortised over their useful economic life, which is deemed to be twelve
years for the Electra acquisition, eight years for the Inforalgo and C24 Technologies Limited acquisitions and six years for
B2 Group.
DocuSign Envelope ID: B92A7465-54C5-4236-B0C5-93C23487FCF7
Notes to the financial statements
Gresham Technologies plc
123
Annual Financial Report 2022
Goodwill
Goodwill arose on the acquisition of our Asia Pacific real-time financial solutions business, C24 Technologies Limited, B2
Group, Inforalgo and Electra Information Systems. It is assessed as having an indefinite life and is assessed for impairment
at least annually.
15. Impairment of intangible assets
The Group performs impairment reviews at the reporting period end for all intangible assets to identify any intangible
assets that have a carrying value that is in excess of its recoverable amount.
Goodwill
Goodwill acquired through business combinations has been allocated to one individual cash-generating unit (“CGU”), the
lowest level at which goodwill is monitored for internal management purposes, for impairment testing.
Carrying amount of goodwill
2022
2021
£'000
£'000
Clareti Solutions CGU
19,653
19,631
Separately identified acquired intangibles
Intangibles assets acquired through business combinations are reviewed for impairment on an annual basis. The following
table summarises the net book value of separately identified acquired intangibles:
2022
2021
£'000
£'000
Software
7,803
9,015
Customer relationships
11,729
12,832
19,532
21,847
Development costs (finite life)
Development costs are reviewed for impairment on an annual basis prior to being made available for use, or sooner where
an indicator of impairment exists. The following table summarises the net book value of development costs:
2022
2021
£'000
£'000
Clareti Solutions CGU
23,556
20,694
Clareti Solutions cash-generating unit
The recoverable amount of this CGU has been determined based on a value-in-use calculation. The cash flow projections
are based on the 2023 financial budget, as approved by the Board, which are extrapolated for five years and extended
beyond five years using a long-term growth rate. The Board considers this approach appropriate given the long-term
opportunities that exist in the Asia Pacific, EMEA and North American regions.
The discount rate applied to cash flow projections is 17% (2021: 15%) and cash flows beyond the five-year period are
extrapolated using a 2% growth rate (2021: 2%) that is a prudent approximation to the long-term average growth rate for
the region in which the CGU operates. The recoverable amount of the Clareti Solutions CGU supports the value of goodwill
on the statement of financial position.
Key assumptions used in the value-in-use calculations
Key assumptions are made by management based on past experience taking into account external sources of information
around gross margins, growth rates and discount rates for similar businesses.
DocuSign Envelope ID: B92A7465-54C5-4236-B0C5-93C23487FCF7
Notes to the financial statements
Gresham Technologies plc
124
Annual Financial Report 2022
The calculation of value in use is most sensitive to assumptions around:
•
operating cash flows, based on financial budgets for 2023 approved by the Board;
•
growth rates, based on internally estimated growth rates for the market and business offerings; and
•
the discount rate, based on the pre-tax weighted average cost of capital of the Group.
Sensitivity to changes in assumptions
A change in our key assumption in respect of operating cash flows could cause the carrying value of the goodwill or
development costs to exceed the recoverable amount, resulting in an impairment charge.
If any one of the following changes were made to the above key assumptions, the carrying amount and recoverable amount
would be equal.
Pre-tax discount rate
Increase from 17% to 26%
Growth rate beyond year 5
Reduction from 2% to -16%
Revenue growth
Reduction from 18% average over five years to 9% average
We are confident the assumptions in respect of operating cash flows remain appropriate. Where the operating cash flows
incorporate products or solutions that will be sold in an existing known market, past experience is used as a guide to the
level of sales achievable, growth rates and associated margins.
Where the operating cash flows relate to products or
solutions that will be sold into a new or emerging market, past experience with similar products or solutions is combined
with relevant information from external market sources, such as competitor pricing and discussions with potential
customers, in arriving at the level of sales achievable, growth rates and associated margins.
16. Leases
All leases are accounted for by recognising a right-of-use asset and a lease liability except for leases of low value assets
or leases with a duration of twelve months or less. The expense relating to short-term leases of twelve months or less was
£nil (2021: £nil). The Group held no low value asset leases.
Right-of-use assets are initially measured at the amount of lease liability reduced for any lease incentives received and
increased for initial direct costs incurred and any provision contractually required. Right-of-use assets are amortised on a
straight-line basis over the period of the lease.
Lease liabilities are measured at the present value of the contractual payments due to the lessor over the lease term with
the discount rate determined by reference to the interest rate inherent in the lease and where that is not readily
determinable the incremental borrowing rate between 3.1% and 5.8%. Subsequent to the initial measurement lease
liabilities are increased as a result of interest charged and reduced for lease payments made.
The Group leases a number of office buildings where payments are fixed until the contracts expire. The average lease
term is 2.4 years (2021: 2.5 years). During the year, one office lease expired, which was replaced by a new lease for the
identical underlying asset. This resulted in an addition to right of use assets of £55,000 (2021: £nil).
In addition during the year, the Group has reassessed the lease term of one of the leases where the original lease contract
includes an extension option. The extension option allows the original lease term of 5 years to be extended by a further 5
years. Incorporating the extended lease term resulted in an addition to right of use assets of £538,000 in 2022 (2021: £nil).
The Group has entered a rent review for one of its office leases which includes rent for the years ending 31 December
2022 and 31 December 2021, which has not been agreed as at 31 December 2022. The related lease liability and right of
use asset has been reassessed as at 31 December 2022 resulting in an addition to right of use assets of £215,000. The
estimated cash outflow of the additional rent in relation to these years is £71,000.
There are no other extension or termination options on the lease arrangements.
DocuSign Envelope ID: B92A7465-54C5-4236-B0C5-93C23487FCF7
Notes to the financial statements
Gresham Technologies plc
125
Annual Financial Report 2022
Right-of-use assets
2022
Property
Motor
vehicles
Total
£'000
£'000
£'000
Cost
At 1 January
2,846
62
2,908
Additions
808
-
808
Disposals
(439)
(62)
(501)
Exchange adjustment
90
-
90
At 31 December
3,305
-
3,305
Amortisation
At 1 January
(1,384)
(58)
(1,442)
Charge for year
(710)
(4)
(714)
Disposals
439
62
501
Exchange adjustment
(58)
-
(58)
At 31 December
(1,713)
-
(1,713)
Net carrying amount
At 31 December
1,592
-
1,592
At 1 January
1,462
4
1,466
2021
Cost
At 1 January
3,183
99
3,282
Additions
232
-
232
Acquisition
293
-
293
Disposals
(810)
(31)
(841)
Exchange adjustment
(52)
(6)
(58)
At 31 December
2,846
62
2,908
Amortisation
At 1 January
(1,570)
(66)
(1,636)
Charge for year
(556)
(25)
(581)
Disposals
704
31
735
Exchange adjustment
38
2
40
At 31 December
(1,384)
(58)
(1,442)
Net carrying amount
At 31 December
1,462
4
1,466
At 1 January
1,613
33
1,646
Lease liabilities
Land and
buildings
Motor
vehicles
Total
£’000
£'000
£'000
At 1 January 2022
1,406
6
1,412
Cash items:
Lease payments
(639)
(6)
(645)
Non-cash items:
Additions
808
-
808
Interest expense
45
-
45
Foreign exchange movements
42
-
42
At 31 December 2022
1,662
-
1,662
DocuSign Envelope ID: B92A7465-54C5-4236-B0C5-93C23487FCF7
Notes to the financial statements
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126
Annual Financial Report 2022
£’000
£'000
£'000
At 1 January 2021
1,510
29
1,539
Cash items:
Lease payments
(566)
(24)
(590)
Non-cash items:
Additions
125
-
125
Acquisitions
306
-
306
Interest expense
42
1
43
Foreign exchange movements
(11)
-
(11)
At 31 December 2021
1,406
6
1,412
2022
2021
£'000
£'000
Due between 0-3 months
194
161
Due between 3-12 months
515
481
Due less than one year
709
642
Due more than one year
953
770
Lease liabilities
1,662
1,412
17. Investments
Details of Group undertakings
Details of the investments in which the Group holds 20% or more of the nominal value of any class of share capital are as
follows:
Name of subsidiary company
Registered address
Holding
(shares)
Proportion of voting
rights and shares
held
Nature of business
Gresham Technologies (UK) Limited
(4)
Aldermary House, London,
England
Ordinary
100%
Software solutions
Gresham Technologies (Solutions) Limited
(4)
Aldermary House, London,
England
Ordinary
100%
Software solutions
C24 Technologies Limited
(4)
Aldermary House, London,
England
Ordinary
100%
Software solutions
Gresham Technologies (Australia) Pty
Limited
(3)
Level 6, 1 Pacific Highway,
North Sydney, Australia
Ordinary
100%
Software solutions
Gresham Technologies (TDI) Limited
(1,4)
Aldermary House, London,
England
Ordinary
100%
Software solutions
Gresham Technologies (Malaysia) SDN BHD
(1)
Level 7, Menara Milenium,
Jalan Damanlela, Malaysia
Ordinary
100%
Software solutions
Gresham Technologies (Singapore) Pte.
Limited
138
Cecil
Street,
Cecil
Court, Singapore
Ordinary
100%
Software solutions
Gresham Technologies (US) Inc.
(1,3)
381 Park Ave S, New York,
US
Ordinary
100%
Software solutions
Gresham Enterprise Storage Inc.
(1,3)
381 Park Ave S, New York,
US
Ordinary
100%
Software solutions
Electra Information Systems Inc.
(1,3)
381 Park Ave S, New York,
US
Ordinary
100%
Software solutions
Electra Solutions Inc.
(1,3)
381 Park Ave S, New York,
US
Ordinary
100%
Software solutions
Electra Information Systems Limited
(1,4)
Aldermary House, London,
England
Ordinary
100%
Software solutions
Gresham Technologies (International)
Limited
(4)
Aldermary House, London,
England
Ordinary
100%
Dormant
Gresham Technologies (Holdings) SARL
(3)
6E route de Treves, L-
2633, Luxembourg
Ordinary
100%
Holding company
Gresham Technologies (Luxembourg) S.A.
(1)
6E route de Treves, L-
2633, Luxembourg
Ordinary
100%
Software solutions
DocuSign Envelope ID: B92A7465-54C5-4236-B0C5-93C23487FCF7
Notes to the financial statements
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127
Annual Financial Report 2022
GMS Loan Technologies Limited
(4)
Aldermary House, London,
England
Ordinary
100%
Dormant
Inforalgo Information Technology Limited
(4)
Aldermary House, London,
England
Ordinary
100%
Software solutions
Gresham Consultancy Services Limited
(2)
Aldermary House, London,
England
Ordinary
100%
Dormant
Gresham Tech Limited
(2)
Aldermary House, London,
England
Ordinary
100%
Dormant
Gresham Telecomputing Limited
(2)
Aldermary House, London,
England
Ordinary
100%
Dormant
Circa Business Systems Limited
(2)
Aldermary House, London,
England
Ordinary
100%
Dormant
Cheerkeep Limited
(2)
Aldermary House, London,
England
Ordinary
100%
Dormant
(1)
Held by a subsidiary undertaking.
(2)
Subsidiary exempt from UK audit under section 480a of the Companies Act 2006.
(3)
Subsidiary has no requirement for a local statutory audit.
(4)
Subsidiary exempt from UK audit under section 479a of the Companies Act 2006.
18. Current assets
2022
2021
£'000
£'000
Trade receivables
4,765
3,795
Prepayments
1,213
1,032
Other receivables
537
576
Trade and other receivables
6,515
5,403
Accrued income
1,822
1,234
Prepaid commission
736
431
Contract assets
2,558
1,665
Income tax receivable
-
1,204
Trade receivables are denominated in the following currencies:
2022
2021
£'000
£'000
Sterling
1,034
342
Euro
718
740
US Dollar
1,863
2,009
Canadian Dollar
22
10
Australian Dollar
1,098
531
Malaysian Ringgit
5
163
South African Rand
25
-
Total trade receivables
4,765
3,795
Trade receivables are non-interest bearing and are generally on 30 to 60 day terms and are shown net of a provision for
impairment.
DocuSign Envelope ID: B92A7465-54C5-4236-B0C5-93C23487FCF7
Notes to the financial statements
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128
Annual Financial Report 2022
At 31 December, the analysis of trade receivables that were past due but not impaired is as follows:
Total
Due not
impaired
Past due but not impaired
<30
days
30-60
days
60-90
days
90-120
days
>120 days
£'000
£'000
£'000
£'000
£'000
£'000
£'000
2022
4,765
2,849
1,524
161
75
-
156
2021
3,795
1,774
1,625
122
28
47
199
The Group’s customers primarily comprise national and international banks, Government bodies and substantial private
and public companies. As a result, the credit quality of trade receivables that are neither past due nor impaired has been
assessed by the Directors to be relatively high, taking account of a low historical experience of bad debts and relatively
good ageing profiles.
The Group applies the IFRS 9 simplified approach to measuring expected credit losses using a lifetime expected credit
loss provision for trade receivables and contract assets.
To measure expected credit losses on a collective basis, trade
receivables and contract assets are grouped based on similar credit risk and ageing.
The contract assets have similar
risk characteristics to the trade receivables for similar types of contracts.
The expected loss rates are based on the Group’s historical credit losses experienced over the three year period prior to
the period end.
The historical loss rates are then adjusted for current and forward-looking information on macroeconomic
factors affecting the Group’s customers, such factors include but are not limited to gross domestic product (“GDP”),
unemployment rate and inflation rates.
19. Cash and cash equivalents
2022
2021
£'000
£'000
Cash at bank and in hand
6,280
9,139
Cash at bank earns interest at both fixed-term rates and floating rates based on daily bank deposit rates. Short-term
deposits are made for varying periods of between one day and three months depending on the immediate cash
requirements of the Group, and earn interest at the respective short-term deposit rates. The fair value of cash and cash
equivalents is the same as stated above.
For the purpose of the consolidated statement of cash flow, cash and cash equivalents comprises cash at bank and in
hand and short-term deposits.
20. Trade, other payables, provisions and financial liabilities
Trade and other payables
Trade payables, other payables and contract liabilities are non-interest bearing.
Current
2022
2021
£'000
£'000
Trade payables
1,536
1,059
Accruals
4,252
3,909
Social security and other taxes
618
492
Other payables
1,690
2,108
Contract liabilities
11,070
12,048
19,166
19,616
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Annual Financial Report 2022
2022
2021
£'000
£'000
Income tax payable
244
131
Non-current
2022
2021
£'000
£'000
Contract liabilities
354
60
Provisions
Property provisions
2022
2021
£'000
£'000
At 1 January
- Current
-
-
- Non-current
144
146
144
146
Foreign exchange movements
2
(2)
At 31 December
- Current
-
-
- Non-current
146
144
146
144
The provisions relate to the Group’s property portfolio and the resulting lease liabilities, comprising end-of-lease
dilapidation costs and empty property costs.
Contingent consideration
2022
2021
£'000
£'000
At 1 January
- Current
3,944
909
- Non-current
3,575
349
7,519
1,258
Payments made during the year
(4,356)
(923)
Increase in contingent consideration arising on the acquisition of Inforalgo
-
34
Arising on the acquisition of Electra
-
6,938
Foreign exchange movements
824
212
At 31 December
3,987
7,519
Current
3,987
3,944
Non-current
-
3,575
3,987
7,519
21. Financial instruments
The Group is exposed through its operations to credit risk, interest rate risk, capital risk, liquidity risk and currency risk.
The Group is exposed to risks that arise from its use of financial instruments.
This note describes the Group's objectives,
policies and processes for managing those risks and the methods used to measure them.
Further quantitative information
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in respect of these risks is presented throughout these financial statements. There have been no substantive changes in
the Group's exposure to financial instrument risks, its objectives, policies and processes for managing those risks or the
methods used to measure them from previous periods unless otherwise stated in this note.
Categories of financial assets and liabilities
Set out below is an analysis by category of the Group’s financial assets and liabilities that are carried in the financial
statements (there is no material difference between the carrying amounts and fair values):
Fair value
Amortised
Total
through
cost
carrying
profit and loss
amount
2022
£'000
£'000
£'000
Financial assets
Trade receivables
-
4,765
4,765
Cash and cash equivalents
-
6,280
6,280
-
11,045
11,045
Financial liabilities
Trade payables
-
1,536
1,536
Contingent consideration
3,987
-
3,987
Accruals
-
4,252
4,252
Other payables
-
1,690
1,690
3,987
7,478
11,465
Fair value
Amortised
Total
through
cost
carrying
profit and loss
amount
2021
£'000
£'000
£'000
Financial assets
Trade receivables
-
3,795
3,795
Cash and cash equivalents
-
9,139
9,139
-
12,934
12,934
Financial liabilities
Trade payables
-
1,059
1,059
Contingent consideration
7,519
-
7,519
Accruals
-
3,909
3,909
Other payables
-
2,108
2,108
7,519
7,076
14,595
The Group determined the fair value of the contingent consideration based on expected achievement of agreed revenue
targets. If revenue is 5% lower than the agreed targets, the contingent consideration payable will be reduced by
£1,595,000. This liability is classed as level 3 of the fair value hierarchy, ie. fair value measurements are derived from
valuation techniques that include inputs for assets or liabilities that are not based on observable market data (unobservable
inputs).
The Group applies the IFRS 9 simplified approach to measuring expected credit losses using a lifetime expected credit
loss provision for trade receivables and contract assets.
To measure expected credit losses on a collective basis, trade
receivables and contract assets are grouped based on similar credit risk and ageing.
The contract assets have similar
risk characteristics to the trade receivables for similar types of contracts.
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The expected loss rates are based on the Group’s historical credit losses experienced over the three-year period prior to
the period end.
The historical loss rates are then adjusted for current and forward-looking information on macroeconomic
factors affecting the Group’s customers.
As at 31 December 2022 and 31 December 2021 the Group held no foreign exchange instruments.
Reconciliation of financial liabilities and related cashflows are shown below:
2022
At 1
January
Cash flows
New
leases
Interest
Foreign
exchange
movements
At 31
December
£'000
£'000
£'000
£'000
£'000
£'000
Bank loans
-
-
-
-
-
-
Lease liabilities
1,412
(645)
808
45
42
1,662
Contingent consideration
7,519
(4,356)
-
-
824
3,987
Total liabilities from financing activities
8,931
(5,001)
808
45
866
5,649
During the year $1.25m was drawndown from the Group’s $10m bank facility with the Bank of Ireland. The amount was
repaid in full during the year.
2021
At 1
January
Cash
flows
New
leases
Acquisitions
Interest
Foreign
exchange
movements
At 31
December
£'000
£'000
£'000
£'000
£'000
£'000
£'000
Lease liabilities
1,539
(590)
125
306
43
(11)
1,412
Contingent consideration
1,258
(923)
-
6,972
-
212
7,519
Total liabilities from financing activities
2,797
(1,513)
125
7,278
43
201
8,931
Objectives, policies and strategies
The Group’s objective is to finance the business through management of existing liquidity, focusing on working capital
acceleration to cash and converting illiquid assets to liquid assets and, ultimately, cash. Investments in non-current assets
have been made with the benefit of research and development tax credits taken as cash.
The Group’s policy towards using financial instruments is to manage credit, liquidity and currency exposure risk without
exposing the Group to undue risk or speculation. The policy is kept under review by the Directors according to the Group’s
foreign exchange and treasury policy.
Risk management
The risks arising from the Group’s operations and financial instruments are explained below.
Credit management
The Group monitors exposure to credit risk on an ongoing basis. The risk of financial loss due to a counterparty failure to
honour its obligations arises principally in relation to transactions where the Group provides solutions and services on
deferred terms and where it invests or deposits surplus cash.
Group policies are aimed at minimising such losses, and require that deferred terms are granted only to customers who
demonstrate an appropriate payment history and satisfy creditworthiness procedures. Individual exposures are monitored
with customers subject to credit limits to ensure that the Group’s exposure to provisions for bad debts is not significant.
Solutions and services may be sold on a cash-with-order basis to mitigate credit risk. Bad debt provision insurance is not
carried.
Performance of individual businesses is monitored at both operating unit and Group level allowing the early identification
of major risks and reducing the likelihood of an unmanaged concentration of credit risk.
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Cash investments are only allowed in liquid securities with major financial institutions that satisfy specific criteria. The
maximum credit risk exposure at the statement of financial position date is represented by the carrying value of financial
assets. There are no significant concentrations of credit risk.
Interest rate risk
The Group has limited exposure to interest rate risk since it has no bank borrowings and interest receivable on cash
deposits does not form a material part of Group income.
Capital risk
The Group defines its capital as the Group’s total equity and manages capital based on the level of net cash held. Its
objective when managing capital is to safeguard the Group’s ability to continue as a going concern in order to provide
returns for shareholders, to provide an adequate return to investors based upon the level of risk undertaken, to have
available the necessary financial resources to allow the Group to invest in areas that may deliver future benefit to investors
and to maintain sufficient financial resources to mitigate risks and unforeseen events.
In order to maintain or adjust the capital structure, the Group may issue new shares or sell assets to provide additional
capital.
Liquidity risk
The Group’s liquidity risk falls within the following main categories:
•
Trade receivables - a significant element of the Group’s liquidity is tied up in working capital, which primarily
comprises trade receivables. The settlement risk associated with these assets comprises both credit risk (the risk
that the counterparty will not settle at all) and liquidity risk (the risk that the counterparty will not settle on time).
•
Non-current assets - a significant element of the Group’s liquidity is tied up in intangible and tangible fixed assets.
For those assets required in the business for day to day operations, the Group considers the use of finance lease
arrangements to reduce the amount of liquidity tied up in such assets. The Group keeps its investment in fixed
assets under review and actively considers converting such assets to more liquid assets.
•
Other payables – the Group’s liquidity depends on the ability to fund future operating activities, the Group believes
that there is sufficient cash reserves to cover any short and long-term requirements.
•
Currency risk - this risk is discussed below.
The table below summarises the remaining contractual maturity for the Group’s financial liabilities, based on contractual
undiscounted payments:
Between
Between
Between 0 and 3
months
Between 3 and
12 months
one and two
two and five
years
years
2022
£'000
£'000
£'000
£'000
Trade payables
1,326
-
-
-
Accruals
4,252
-
-
-
Other payables
1,690
-
-
-
Contingent consideration
-
3,987
-
-
Lease liabilities
194
515
766
187
7,462
4,502
766
187
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Annual Financial Report 2022
Between
Between
Between 0 and 3
months
Between 3 and
12 months
one and two
two and five
years
years
2021
£'000
£'000
£'000
£'000
Trade payables
1,059
-
-
-
Accruals
3,909
-
-
-
Other payables
1,237
871
-
-
Contingent consideration
369
3,575
3,575
-
Lease liabilities
161
481
394
376
6,735
4,927
3,969
376
All current liabilities are expected to fall due within one year of the statement of financial position date at their carrying
amount.
The Group monitors and controls liquidity through the following key controls:
•
weekly cash and overdue trade receivables are reported to the Executive Board;
•
cash forecasts are maintained;
•
foreign exchange risks are hedged where significant; and
•
credit control is operated locally with Group oversight.
Where appropriate, discounts are offered for early payment by customers and finance lease and deferred payment
arrangements are considered to retain or improve liquidity.
In June 2021 the Group arranged a $10m revolving credit facility with the Bank of Ireland. There was no outstanding
liability as at 31 December 2022.
Liquidity risk is not considered as a significant risk to the Group.
Currency risk
The Group has significant exposures to the following currencies: US Dollar, Australian Dollar, Euro, Malaysian Ringgit,
Singapore Dollar and South African Rand.
Currency exposure arises through intra-group loans and trading balances throughout all Group locations. Natural hedging
is employed, to the extent possible, to minimise net exposures; however, where significant exposures arise outside of
intra-group trading, it is Group policy to enter into formal hedging arrangements where these can be shown to be effective.
At 31 December 2022, the Group had no foreign currency forward contracts (2021: none).
Currency exposures comprise the monetary assets and monetary liabilities of the Group that are not denominated in the
functional currency of the operating unit involved. In general, all overseas operating units trade and hold assets and
liabilities in their functional currency.
An analysis of trade receivables by currency is included in note 18.
Sensitivities
The following table details the Group’s sensitivities to a change in Sterling exchange rates against the respective foreign
currencies. The sensitivities represent management’s assessment of the effect on monetary assets of the possible
changes in foreign exchange rates, which for 2022 and 2021 take account of the potential fluctuations seen in the most
recent periods. The sensitivity analysis of the Group’s exposure to foreign currency risk at the year end has been
determined based on the assumption that the change is effective throughout the financial year and all other variables
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Annual Financial Report 2022
remain constant. The impact of translating the net assets of foreign operations into Sterling is excluded from the sensitivity
analysis.
A positive number indicates an increase in profit after taxation and other components of equity where Sterling weakens
against the respective currencies.
Net foreign
currency
financial assets
Increase/decrease in
exchange rates
Effect on profit before
tax
2022
£’000
£'000
Euro
1,251
+20%
(208)
-20%
313
Australian Dollar
4,451
+20%
(742)
-20%
1,113
US Dollar
2,365
+20%
(394)
-20%
591
Malaysian Ringgit
35
+20%
(6)
-20%
9
Singapore Dollar
52
+20%
(9)
-20%
13
South African Rand
25
+20%
(4)
-
20%
6
Net foreign
currency financial
assets
Increase/decrease in
exchange rates
Effect on profit before
tax
2021
£’000
£'000
Euro
1,000
+20%
(167)
-20%
250
Australian Dollar
4,723
+20%
(787)
-20%
1,181
US Dollar
4,492
+20%
(749)
-20%
1,123
Malaysian Ringgit
285
+20%
(48)
-20%
71
Singapore Dollar
31
+20%
(5)
-20%
8
South African Rand
24
+20%
(4)
-20%
6
The Group has no material exposure to interest rate sensitivities; however, in addition to the year-end risk quantified we
remain susceptible to the changes on foreign exchange rates on our future currency cash inflows and outflows which
although are notable, are mitigated through the use of forward exchange contracts from time to time and are not anticipated
to materially affect the earnings in the future periods.
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22. Issued share capital
Ordinary shares allotted, called up and fully paid
Number
Nominal value
£'000
At 1 January 2021
70,156,458
3,508
Exercise of share options (note 23)
83,000
4
Issue of new shares
13,125,000
656
At 31 December 2021
83,364,458
4,168
Exercise of share options (note 23)
85,000
4
At 31 December 2022
83,449,458
4,172
The Company’s ordinary share capital consists of individual shares having a nominal value of 5 pence each.
During the year ended 31 December 2022, share options granted under share option schemes were exercised at a price
between 68.5 and 96.3 pence with the Group issuing 85,000 (2021: 83,000) ordinary shares accordingly (ranking pari
passu with existing shares in issue). Share premium of £65,000 (2021: £61,000) was recognised as a result.
In June 2021 the Company issued 13,125,000 ordinary shares at a price of 160 pence (ranking pari passu with existing
shares in issue). Share premium of £19,474,000 was recognised as a result after deduction of £870,000 directly
attributable expenses.
At 31 December 2022 and 2021 there were outstanding options granted to acquire ordinary shares in the Company. See
note 23 for further details.
There are no preference shares in issue (2021: none).
An explanation of the Group’s capital management process and objectives is set out in the discussion of capital
management in the Strategic Report and capital risk disclosures in note 21.
Shares held by Employee Share Ownership Trust (“ESOT”)
£’000
Number
At 1 January 2021
778
831,600
Issue of shares
(169)
(202,292)
At 31 December 2021
609
629,308
Issue of shares
(313)
(323,761)
At 31 December 2022
296
305,547
The shares held by the ESOT are expected to be issued under share option contracts. The shares are held at the average
purchase price.
23. Share-based payments
The following disclosures are in respect of both the Company and the Group.
The grant of all options and awards is made by the remuneration committee and such grants involve equity settlement. In
granting executive share options the remuneration committee has regard to both the participant's level of responsibility
within the Group and to individual and Group performance.
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Share Option Schemes
Performance Share Plan 2020
The Performance Share Plan 2020, was approved by shareholders in December 2020. The plan enables the remuneration
committee to grant share options to key employees following the expiry of the Share Option Plan 2010 on 29 December
2020. Any conditional share award is granted on an ad hoc discretionary basis at nil cost to the participant. The share
award will vest on the later of a three-year vesting period and the achievement of objective performance targets which will
be specified by the remuneration committee.
332,750 (2021: 950,500) share options have been awarded in the year to 31 December 2022 under the 2020 share option
scheme.
Share Option Plan 2010
The Share Option Schemes 2010 were approved by shareholders on 30 December 2010, with amendments subsequently
approved by shareholders on May 2012 and February 2015. The scheme was created for a ten-year period and expired
in December 2020 replaced by the Performance Share Plan 2020.
No share options have been granted under the 2010 scheme during the year and no options will be granted in the future.
Deferred Share Bonus Plan 2017
The Deferred Share Bonus Plan operates in conjunction with the annual cash bonus scheme, a percentage of each
participating employee’s net annual bonus entitlement will continue to be paid in cash with the remaining amount of the
bonus being paid to the trustee of a employee benefit trust which has been constituted to acquire existing issued ordinary
shares and facilitate the Deferred Share Bonus Plan. These bonus-related shares will be beneficially owned by each
participant but held by the trustee as its nominee.
At the same time, a corresponding matching award will be made by the Company, entitling the participant to receive, at nil
cost, an entitlement to further ordinary shares. These awards will vest subject to the following conditions:
•
the related bonus shares being retained for a specified period;
•
any relevant performance targets being met; and
•
the participant remaining in employment with the Gresham Group until the end of the specified retention period.
The matching awards granted to Senior Management are subject to a multiple of a maximum of 4 times the bonus shares
awarded. These awards are subject to a 3 year vesting period and are subject to performance criteria in each year of the
vesting period.
In April 2022 745,048 share options were granted at nil cost with two-year and three-year vesting periods; the options
expire March 2032.
In previous years vested awards under the Deferred Share Bonus Plan were settled using existing ordinary shares held
by the employee benefit trust.
For each of the share schemes exercise is permitted in conjunction with a takeover or similar transaction and in such
circumstances the vesting period does not apply. In the event of a takeover, an option holder may, by agreement with the
acquirer, exchange their options for options over shares in the acquiring Company.
At 31 December 2022, 166 participants held awards under the share option schemes (2021: 48).
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Annual Financial Report 2022
Outstanding options to subscribe for ordinary shares of 5 pence at 31 December 2022, including those noted in the
Directors' Remuneration Report, are as follows:
2022
Number
WAEP
2021
Number
WAEP
(pence)
(pence)
Outstanding at 1 January
3,455,500
92
2,588,000
123
Deferred bonus shares awarded in prior years
815,336
5
-
-
Granted during the year
1,077,798
5
950,500
5
Forfeited during the year
(53,202)
5
-
-
Exercised during the year
(85,000)
(77)
(83,000)
(79)
Outstanding at 31 December
5,210,432
61
3,455,500
92
Exercisable at 31 December
2,438,309
121
2,255,000
125
Weighted average remaining contractual life (years)
6.49
6.10
During the year 85,000 options were exercised under during the period when the Company share price was between 142
pence and 145.5 pence.
No price is payable on award of share options.
Outstanding options and awards to subscribe for ordinary shares of 5 pence at 31 December 2022, including those noted
in the Directors' Remuneration Report showing the range of exercise prices and dates, are as follows:
Number
Date of
Exercise
Date first
Expiry
Cash
of share
grant
price
exercisable
date
receivable if
options
£
exercised £
Share Option Schemes 2010
185,000
01-Aug-13
0.9630
01-Aug-16
01-Aug-23
178,155
50,000
07-Oct-13
1.3230
07-Oct-16
07-Oct-23
66,150
1,500,000
01-Jun-15
1.1057
01-Jun-18
01-Jun-25
1,658,550
50,000
21-Jun-16
1.0945
21-Jun-19
21-Jun-26
54,725
140,000
20-Mar-17
1.7352
20-Mar-20
20-Mar-27
242,928
45,000
28-Nov-17
2.1505
28-Nov-20
28-Nov-27
96,773
200,000
14-Mar-18
2.2715
14-Mar-21
14-Mar-28
454,300
100,000
28-Mar-19
0.9720
28-Mar-22
28-Mar-29
97,200
75,000
25-Oct-19
1.2210
25-Oct-22
25-Oct-29
91,575
75,000
24-Dec-20
1.5180
24-Dec-23
24-Dec-30
113,850
Performance Share Plan 2020
943,000
21-Oct-21
0.0500
21-Oct-24
21-Oct-31
4,715
327,250
08-Nov-22
0.0500
08-Nov-25
08-Nov-32
1,636
Deferred Share Bonus Plan
38,668
27-Mar-19
0.0500
27-Mar-21
27 Mar-29
1,933
54,641
18-Mar-20
0.0500
18-Mar-22
18 Mar-30
2,732
267,834
18-Mar-20
0.0500
18-Mar-23
18 Mar-30
13,392
67,373
31-Mar-21
0.0500
31-Mar-23
31 Mar 31
3,369
386,820
31 Mar 21
0.0500
31 Mar 24
31 Mar 31
19,341
183,452
31 Mar 22
0.0500
31 Mar 24
31 Mar 32
9,173
521,394
31 Mar 22
0.0500
31 Mar 25
31 Mar 32
26,070
5,210,432
3,136,567
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Outstanding options to subscribe for ordinary shares of 5 pence at 31 December 2021, including those noted in the
Directors' Remuneration Report showing the range of exercise prices and dates, are as follows:
Number
Date of
Exercise
Date first
Expiry
Cash
of share
grant
price
exercisable
date
receivable if
options
£
exercised £
Share Option Schemes 2010
45,000
15-Aug-12
0.6850
15-Aug-15
15-Aug-22
30,825
225,000
01-Aug-13
0.9630
01-Aug-16
01-Aug-23
216,675
50,000
07-Oct-13
1.3230
07-Oct-16
07-Oct-23
66,150
1,500,000
01-Jun-15
1.1057
01-Jun-18
01-Jun-25
1,658,550
50,000
21-Jun-16
1.0945
21-Jun-19
21-Jun-26
54,725
140,000
20-Mar-17
1.7352
20-Mar-20
20-Mar-27
242,928
45,000
28-Nov-17
2.1505
28-Nov-20
28-Nov-27
96,773
200,000
14-Mar-18
2.2715
14-Mar-21
14-Mar-28
454,300
100,000
28-Mar-19
0.9720
28-Mar-22
28-Mar-29
97,200
75,000
25-Oct-19
1.2210
25-Oct-22
25-Oct-29
91,575
75,000
24-Dec-20
1.5180
24-Dec-23
24-Dec-30
113,850
Share Option Schemes 2020
950,500
21-Oct-21
0.0500
21-Oct-24
21-Oct-31
4,753
3,455,500
3,128,304
The fair value of equity-settled share options granted by the Share Option Schemes are estimated as at the date of grant
using a Black Scholes model, taking into account the terms and conditions upon which the options were granted.
The following table lists the range of inputs to the model used for the grants made during the year:
Vesting date
08-Nov-25
Expiry date (number of years after grant)
10
Exercise price
£0.05
Share price at valuation
£1.455
Vested options' expected life
5.8 years
Volatility
30%
Dividend yield
0%
Risk free rate
1.0%
Impact of continued employment conditions
0%
Vesting of options is reliant on achievement of any relevant performance conditions set by the remuneration committee,
which typically take the form of sales-based targets and share price growth.
The expected life of the options is based on historical data and is not necessarily indicative of exercise patterns that may
occur. The expected volatility reflects the assumption that the historical volatility is indicative of future trends, which may
also not necessarily be the actual outcome. No other features of options granted were incorporated into the measurement
of fair value.
DocuSign Envelope ID: B92A7465-54C5-4236-B0C5-93C23487FCF7
Notes to the financial statements
Gresham Technologies plc
139
Annual Financial Report 2022
Share-based payments
The expense recognised in the income statement for all equity-settled share-based payments in respect of employee
services received is as follows:
2022
2021
£'000
£'000
Expense recognised in respect of share-based payments
1,027
369
24. Reserves
Share capital
The balance classified as share capital represents the nominal value arising from the issue of the Company’s equity share
capital, comprising 5 pence ordinary shares.
During the year ended 31 December 2022, share options granted under the 2010 Share Option Plans were exercised and
the Group issued 85,000 (2021: 83,000) ordinary shares accordingly (ranking pari passu with existing shares in issue).
See note 22 for further details.
In June 2021 the Company issued 13,125,000 ordinary shares at a price of 160 pence (ranking pari passu with existing
shares in issue).
Share premium account
The balance classified as share premium represents the premium arising from the issue of the Company’s equity share
capital, comprising 5 pence ordinary shares, net of share issue expenses. There are restrictions on the use of the share
premium account. It can only be used for bonus issues, to provide for the premium payable on redemption of debentures,
or to write off preliminary expenses, or expenses of, or commissions paid on, or discounts allowed on, the same issues of
shares or debentures of the Company.
Own share reserve
Weighted average cost of own shares held in trust by the ESOT.
Other reserves
The balance classified as other reserves comprises a special reserve of £536,000. The special reserve arose on the
cancellation of deferred ordinary shares in June 1992. In 2018, 134,440 shares were issued as part consideration for the
acquisition of B2 Group at a placing price of £1.71. The excess over the nominal value of the shares issued has been
credited to other reserves (merger reserve) in compliance with s612 and s613 of the Companies Act 2006.
Foreign currency translation reserve
The currency translation reserve is used to record exchange differences arising from the translation of the financial
statements of foreign subsidiaries.
Retained earnings
All other net gains and losses and transactions with owners (e.g. dividends) that are not recognised elsewhere.
25. Capital commitments
There were no capital commitments at 31 December 2022 (2021: none).
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Notes to the financial statements
Gresham Technologies plc
140
Annual Financial Report 2022
26. Related party transactions
Key management compensation (including Directors)
2022
2021
£'000
£'000
Directors’ emoluments
Remuneration
652
648
Social security costs
137
145
Bonuses
298
401
Pension
22
22
Share-based payments
406
116
1,515
1,332
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 80 for details of all significant shareholders that the Company has been notified of.
27. Events after the reporting date
A dividend of 0.75 pence per share has been approved by the Board to propose to shareholders at the Annual General
Meeting.
DocuSign Envelope ID: B92A7465-54C5-4236-B0C5-93C23487FCF7
Company balance sheet
Gresham Technologies plc
141
Annual Financial Report 2022
At 31
December
At 31
December
2022
2021
Notes
£'000
£'000
Fixed assets
Lease receivable
8
781
945
Investments
5
42,665
41,638
43,446
42,583
Current assets
Debtors
6
38,372
39,000
Cash at bank and in hand
419
643
38,791
39,643
Creditors: amounts falling due within one year
7
(42,823)
(42,253)
Net current liabilities
(4,032)
(2,610)
Total assets less current liabilities
39,414
39,973
Creditors: amounts falling due more than one year
7
(473)
(553)
Total assets less liabilities
38,941
39,420
Capital and reserves
Called up share capital
9
4,172
4,168
Share premium
10
23,941
23,876
Own share reserve
9
(296)
(609)
Special reserve
10
313
313
Merger reserve
10
1,583
1,583
Profit and loss account
10
9,228
10,089
Shareholders' funds - equity interests
38,941
39,420
The Company made a retained loss in the year of £1,319,000 (2021: £2,309,000).
The financial statements were approved by the Board of Directors and authorised for issue on 13 March 2023.
On behalf of the Board.
Ian Manocha
Tom Mullan
Chief Executive
Chief Financial Officer
13 March 2023
13 March 2023
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Company statement of changes in equity
Gresham Technologies plc
142
Annual Financial Report 2022
Notes
Share
capital
Share
premium
Own
shares
Special
reserve
Merger
reserve
Profit and
loss account
Total
£'000
£'000
£’000
£'000
£'000
£'000
£'000
At 1 January 2021
3,508
4,341
(778)
313
1,583
12,551
21,518
Issue of equity shares
656
20,344
-
-
-
-
21,000
Share issue costs
-
(870)
-
-
-
-
(870)
Exercise of share options
9
4
61
-
-
-
-
65
Share-based payments
13
-
-
-
-
-
369
369
Transfer of own shares held by Employee
Share Ownership Trust to employees
9
-
-
169
-
-
-
169
Dividend paid
4
-
-
-
-
-
(522)
(522)
Retained loss for the year
-
-
-
-
-
(2,309)
(2,309)
At 31 December 2021
4,168
23,876
(609)
313
1,583
10,089
39,420
Exercise of share options
9
4
65
-
-
-
-
69
Share-based payments
13
-
-
-
-
-
1,027
1,027
Transfer of own shares held by Employee
Share Ownership Trust to employees
9
-
-
313
-
-
53
366
Dividend paid
4
-
-
-
-
-
(622)
(622)
Retained loss for the year
-
-
-
-
-
(1,319)
(1,319)
At 31 December 2022
4,172
23,941
(296)
313
1,583
9,228
38,941
DocuSign Envelope ID: B92A7465-54C5-4236-B0C5-93C23487FCF7
Notes to the Company financial statements
Gresham Technologies plc
143
Annual Financial Report 2022
1. Accounting policies
Basis of preparation
The Company financial statements of Gresham Technologies plc (the “Company”) have been prepared in accordance with
Financial Reporting Standard 100 “Application of Financial Reporting Requirements” and Financial Reporting Standard
101 “Reduced Disclosure Framework” and as required by the Companies Act 2006.
The financial statements are prepared under the historical cost convention as modified for financial instruments that are
measured at fair value and were approved for issue on 13 March 2023.
No income statement is presented by the Company as permitted by section 408 of the Companies Act 2006. For the year
ended 31 December 2021, the Company recorded a retained loss of £1,319,000 (2021: loss £2,309,000).
The balance sheet heading relating to the Company’s investments in subsidiaries has been amended to “Fixed assets”
from “Non-current assets” to be consistent with the Company’s presentation of its balance sheet in accordance with the
balance sheet formats of the Companies Act 2006. Assets are classified in accordance with the definitions of fixed and
current assets in the Companies Act instead of the presentation requirements of IAS 1 Presentation of Financial
Statements.
Going concern
The Group and the Company’s business activities, together with the factors likely to affect its future development,
performance and position are set out in the Strategic report on pages 3 to 46.
After making enquiries, the Directors have a reasonable expectation that the Company has adequate resources to continue
in operational existence for a period of at least twelve months from the date of approval of the financial statements. For
this reason, they continue to adopt the going concern basis in preparing the Annual Financial Report 2022.
Disclosure exemptions adopted
In preparing these financial statements the Company has taken advantage of all disclosure exemptions conferred by FRS
101. Therefore these financial statements do not include:
•
certain comparative information as otherwise required by adopted IFRSs;
•
certain disclosures regarding the Company's capital;
•
a statement of cash flows;
•
the effect of future accounting standards not yet adopted;
•
the disclosure of the remuneration of key management personnel; and
•
disclosure of related party transactions with other wholly owned members of the Gresham Technologies plc
Group.
In addition, and in accordance with FRS 101, further disclosure exemptions have been adopted because equivalent
disclosures are included in the consolidated financial statements. These financial statements do not include certain
disclosures in respect of:
•
share-based payments;
•
business combinations;
•
assets held for sale and discontinued operations; and
•
impairment of assets.
Investments
Investments are recorded at cost less provision for impairment.
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Notes to the Company financial statements
Gresham Technologies plc
144
Annual Financial Report 2022
Financial assets
Impairment of financial assets
The Company assesses at each balance sheet date whether a financial asset or group of financial assets is impaired.
Assets carried at amortised cost
These assets arise principally from the provision of services to the Company’s subsidiary, but also incorporate other types
of financial assets where the objective is to hold these assets in order to collect contractual cash flows and the contractual
cash flows are solely payments of principal and interest.
They are initially recognised at fair value plus transaction costs
that are directly attributable to their acquisition or issue, and are subsequently carried at amortised cost using the effective
interest rate method, less provision for impairment.
Impairment provisions from related parties and loans to related parties are recognised based on a forward-looking
expected credit loss model.
The methodology used to determine the amount of the provision is based on whether there
has been a significant increase in credit risk since initial recognition of the financial asset.
For those where the credit risk
has not increased significantly since initial recognition of the financial asset, twelve-month expected credit losses along
with gross interest income are recognised.
For those for which credit risk has increased significantly, lifetime expected
credit losses along with the gross interest income are recognised.
For those that are determined to be credit impaired,
lifetime expected credit losses along with interest income on a net basis are recognised.
The Company's financial assets measured at amortised cost comprise intercompany receivables and cash and cash
equivalents in the consolidated statement of financial position.
Cash and cash equivalents include cash in hand for the purpose of the statement of cash flows - bank overdrafts. Bank
overdrafts are shown within loans and borrowings in current liabilities on the consolidated statement of financial position.
Taxation
Income taxes
Current tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation
authorities, based on tax rates and laws that are enacted or substantively enacted by the statement of financial position
date.
Research and development tax credits are recognised on an accruals basis and recorded as a credit in the taxation line
of the income statement.
Deferred income tax is recognised on all temporary differences arising between the tax bases of assets and liabilities and
their carrying amounts in the financial statements, with the following exceptions:
•
where the temporary difference arises from the initial recognition of goodwill or of an asset or liability in a transaction
that is not a business combination that at the time of the transaction affects neither accounting nor taxable profit or
loss;
•
in respect of taxable temporary differences associated with investments in subsidiaries, associates and joint ventures,
where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary
differences will not reverse in the foreseeable future; and
•
deferred income tax assets are recognised only to the extent that it is probable that taxable profit will be available
against which the deductible temporary differences, carried forward tax credits or tax losses can be utilised.
Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply when the related asset
is realised or liability is settled, based on tax rates and laws enacted or substantively enacted at the statement of financial
position date.
The carrying amount of deferred income tax assets is reviewed at each statement of financial position date. Deferred
income tax assets and liabilities are offset only if a legally enforceable right exists to set off current tax assets against
current tax liabilities, the deferred income taxes relate to the same taxation authority and that authority permits the Group
to make a single net payment.
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Notes to the Company financial statements
Gresham Technologies plc
145
Annual Financial Report 2022
Income tax is charged or credited to other comprehensive income or directly to equity if it relates to items that are credited
or charged to other comprehensive income or directly to equity. Otherwise, income tax is recognised in the income
statement.
Foreign currencies
Transactions denominated in foreign currencies are translated at an approximation of the exchange rate ruling on the date
of the transaction.
Assets and liabilities denominated in foreign currencies are translated at the exchange rate ruling on the balance sheet
date. Resulting exchange gains and losses are taken to the income statement.
Related party transactions
The Company has taken advantage of the exemption under FRS 101 from disclosing related party transactions with entities
that are wholly owned subsidiary undertakings of the Gresham Technologies plc Group.
Share-based payments – equity-settled transactions
The cost of equity-settled transactions with employees is measured by reference to the fair value at the date at which they
are granted and is recognised in the Company financial statements as a capital contribution to the subsidiaries for whom
the employees perform services, with the credit entry being made to reserves, over the vesting period, which ends on the
date on which the relevant employees become fully entitled to the award.
Fair value of awards with a market condition-based performance target is determined by an external valuer using a Monte
Carlo simulation pricing model. In valuing equity-settled transactions, no account is taken of any vesting conditions, other
than conditions linked to the price of the shares of the Company (market conditions). Fair value of awards with a financial
result-based performance target is determined by management using the Black Scholes pricing model.
No capital contribution is recognised for awards that do not ultimately vest, except for awards where vesting is conditional
upon a market condition, which are treated as vesting irrespective of whether or not the market condition is satisfied,
provided that all other vesting conditions are satisfied.
At each balance sheet date before vesting, the cumulative expense is calculated, representing the extent to which the
vesting period has expired and management’s best estimate of the achievement or otherwise of non-market conditions
and of the number of equity instruments that will ultimately vest or, in the case of an instrument subject to a market
condition, be treated as vesting as described above. The movement in cumulative expense since the previous balance
sheet date is recognised as a capital contribution, with a corresponding entry in equity.
Where the terms of an equity-settled award are modified or a new award is designated as replacing a cancelled or settled
award, the cost based on the original award terms continues to be recognised as a capital contribution over the original
vesting period. In addition, an expense is recognised as a capital contribution over the remainder of the new vesting period
for the incremental fair value of any modification, based on the difference between the fair value of the original award and
the fair value of the modified award, both as measured on the date of the modification. No reduction is recognised if this
difference is negative.
Where an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation, and any cost not
yet recognised in the income statement for the award is recorded as a capital contribution immediately. Any compensation
paid up to the fair value of the award at the cancellation or settlement date is deducted from equity, with any excess over
fair value being treated as a capital contribution in the balance sheet.
Employee Share Ownership Trust (ESOT)
The Company is deemed to have control of its ESOT therefore the investment in the Company’s shares is deducted from
equity. The shares are valued at the average purchase price.
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Notes to the Company financial statements
Gresham Technologies plc
146
Annual Financial Report 2022
Leases
All leases are accounted for by recognising a right-of-use asset and a lease liability except for leases of low value assets;
and leases with a duration of twelve months or less.
Lease liabilities are measured at the present value of the contractual payments due to the lessor over the lease term, with
the discount rate determined by reference to the rate inherent in the lease unless (as is typically the case) this is not readily
determinable, in which case the Company’s incremental borrowing rate on commencement of the lease is used.
Variable
lease payments are only included in the measurement of the lease liability if they depend on an index or rate.
In such
cases, the initial measurement of the lease liability assumes the variable element will remain unchanged throughout the
lease term.
Other variable lease payments are expensed in the period to which they relate.
On initial recognition, the carrying value of the lease liability also includes: amounts expected to be payable under any
residual value guarantee; the exercise price of any purchase option granted in favour of the Company if it is reasonably
certain to assess that option; and any penalties payable for terminating the lease, if the term of the lease has been
estimated on the basis of termination option being exercised.
Right-of-use assets are initially measured at the amount of the lease liability, reduced for any lease incentives received,
and increased for: lease payments made at or before commencement of the lease; initial direct costs incurred; and the
amount of any provision recognised where the Company is contractually required to dismantle, remove or restore the
leased asset.
Subsequent to initial measurement, lease liabilities increase as a result of interest charged at a constant rate on the
balance outstanding and are reduced for lease payments made. Right-of-use assets are amortised on a straight-line basis
over the remaining term of the lease or over the remaining economic life of the asset if, rarely, this is judged to be shorter
than the lease term.
When the Company revises its estimate of the term of any lease (because, for example, it re-assesses the probability of
a lessee extension or termination option being exercised), it adjusts the carrying amount of the lease liability to reflect the
payments to make over the revised term, which are discounted at the same discount rate that applied on lease
commencement.
The carrying value of lease liabilities is similarly revised when the variable element of future lease
payments dependent on a rate or index is revised.
In both cases an equivalent adjustment is made to the carrying value
of the right-of-use asset, with the revised carrying amount being amortised over the remaining (revised) lease term.
When the Company renegotiates the contractual terms of a lease with the lessor, the accounting depends on the nature
of the modification:
•
if the renegotiation results in one or more additional assets being leased for an amount commensurate with the
stand-alone price for the additional rights-of-use obtained, the modification is accounted for as a separate lease
in accordance with the above policy;
•
in all other cases where the renegotiation increases the scope of the lease (whether that is an extension to the
lease term, or one or more additional assets being leased), the lease liability is remeasured using the discount
rate applicable on the modification date, with the right-of-use asset being adjusted by the same amount; and
•
if the renegotiation results in a decrease in the scope of the lease, both the carrying amount of the lease liability
and right-of-use asset are reduced by the same proportion to reflect the partial or full termination of the lease with
any difference recognised in profit or loss.
The lease liability is then further adjusted to ensure its carrying amount
reflects the amount of the renegotiated payments over the renegotiated term, with the modified lease payments
discounted at the rate applicable on the modification date. The right-of-use asset is adjusted by the same amount.
For contracts that both convey a right to the Company to use an identified asset and require services to be provided to the
Company by the lessor, the Company has elected to account for the entire contract as a lease, i.e. it does allocate any
amount of the contractual payments to, and account separately for, any services provided by the supplier as part of the
contract.
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Notes to the Company financial statements
Gresham Technologies plc
147
Annual Financial Report 2022
2. Auditor’s remuneration
The figures within the auditor’s remuneration note in the Gresham consolidated financial statements include fees charged
by the Company’s auditor to Gresham Technologies plc in respect of audit and non-audit services. As such, no separate
disclosure has been given above.
3. Directors’ remuneration
Information concerning Directors’ remuneration and gains on exercise of share options can be found in the Directors’
Remuneration Report beginning on page 62. There are no staff employed or costs recognised in relation to the Parent
Company.
4. Dividends paid and proposed
The final dividend for the year ended 31 December 2021 was approved at the Company Annual General Meeting on 10
May 2022 and paid on 19 May 2022 of 0.75 pence per share, equating to a total of £622,000. The Company will be
proposing a final dividend for approval at the AGM for the year ended 31 December 2022 of 0.75 pence per share.
5. Investments
2022
2021
Investment in subsidiaries
£'000
£'000
Cost
At 1 January
55,230
34,058
Acquisitions
-
23,866
Disposals
-
(3,063)
Capital contribution - share-based payments
1,027
369
At 31 December
56,257
55,230
Impairment provisions
At 1 January
13,592
13,592
At 31 December
13,592
13,592
Net book value
At 31 December
42,665
41,638
Details of the investments in which the Company holds 20% or more of the nominal value of any class of share capital are
included within note 17 to the Group financial statements.
6. Debtors
2022
2021
£'000
£'000
Amounts owed by subsidiary undertakings
38,311
38,904
Prepayments and accrued income
61
96
38,372
39,000
All amounts that fall due for repayment within one year and are presented within current assets as required by the
Companies Act. The loans to Group companies are repayable on demand with no fixed repayment date although it is
noted that a significant proportion of the amounts may not be sought for repayment within one year depending on activity
in the group companies.
The amounts owed by subsidiary undertakings are net of a provision for expected credit losses of £1,315,000 (2021:
£1,315,000). The expected credit losses are assessed following a review of the recoverability of amounts owed by group
undertakings. Where these arrangements are on-demand and non-interest bearing, we consider the subsidiary
undertakings ability to pay as at 31 December 2022 as well as alternative recovery scenarios.
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Notes to the Company financial statements
Gresham Technologies plc
148
Annual Financial Report 2022
7. Creditors
Amounts falling due within one year
2022
2021
£'000
£'000
Amounts owed to subsidiary undertakings
42,425
41,447
Lease liabilities
338
313
Trade creditors
34
50
Contingent consideration
-
379
Other creditors and accruals
26
64
42,823
42,253
Amounts falling due more than one year
2022
2021
£'000
£'000
Lease liabilities
473
553
8. Leases
The Company holds a number of leases in respect of office buildings which are utilised by subsidiary companies. These
leases are disclosed within the Company as a lease receivable, representing the amounts due from the subsidiaries in
respect of these leases.
Lease liabilities are measured at the present value of the contractual payments due to the lessor over the lease term with
the discount rate determined by reference to the Group’s incremental external borrowing rate, between 3.1% and 5.8%.
Subsequent to the initial measurement, lease liabilities are increased as a result of interest charged and reduced for lease
payments made.
The table below represents the maturity of the lease receivable:
2022
2021
£'000
£'000
Less than 3 months
89
78
3 to 12 months
194
233
1 to 2 years
209
237
2 to 5 years
289
397
Total
781
945
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Notes to the Company financial statements
Gresham Technologies plc
149
Annual Financial Report 2022
Lease liabilities
Total
£'000
At 1 January 2021
1,025
Cash items:
Lease payments
(308)
Non-cash items:
Additions
232
Disposals
(109)
Interest expense
26
At 31 December 2021
866
Cash items:
Lease payments
(312)
Non-cash items:
Additions
224
Interest expense
33
At 31 December 2022
811
2022
2021
£'000
£'000
Due between 0-3 months
80
73
Due between 3-12 months
258
240
Due less than one year
338
313
Due more than one year
473
553
Lease liabilities
811
866
9. Issued share capital
Ordinary shares allotted, called up and fully paid
Number
Nominal
value
£'000
At 1 January 2021
70,156,458
3,508
Exercise of share options
83,000
4
Issue of new shares
13,125,000
656
At 31 December 2021
83,364,458
4,168
Exercise of share options
85,000
4
At 31 December 2022
83,449,458
4,172
The Company’s ordinary share capital consists of individual shares having a nominal value of 5 pence each.
During the year ended 31 December 2021, share options granted under the 2010 Share Option Plans were exercised and
the Group issued 85,000 (2021: 83,000) ordinary shares accordingly (ranking pari passu with existing shares in issue).
See note 22 of the Group financial statements for further details.
At 31 December 2022 and 2021 there were outstanding options granted to acquire ordinary shares in the Company. See
note 22 of the Group financial statements for further details.
There are no preference shares in issue (2021: none).
Shares held by Employee Share Ownership Trust (“ESOT”)
£’000
Number
At 1 January 2021
778
831,600
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Notes to the Company financial statements
Gresham Technologies plc
150
Annual Financial Report 2022
Issue of shares
(169)
(202,292)
At 31 December 2021
609
629,308
Issue of shares
(313)
(323,761)
At 31 December 2022
296
305,547
The shares held by the ESOT are expected to be issued under share option contracts. The shares are held at the average
purchase price.
10. Reserves
Share capital
The balance classified as share capital represents the nominal value arising from the issue of the Company’s equity share
capital, comprising 5 pence ordinary shares.
During the year ended 31 December 2022, share options granted under the 2010 Share Option Plans were exercised and
the Group issued 85,000 (2021: 83,000) ordinary shares accordingly (ranking pari passu with existing shares in issue).
See note 22 of the Group financial statements for further details.
In June 2021 the Company issued 13,125,000 ordinary shares at a price of 160 pence (ranking pari passu with existing
shares in issue).
Share premium
The balance classified as share premium represents the premium arising from the issue of the Company’s equity share
capital, comprising 5 pence ordinary shares, net of share issue expenses.
There are restrictions on the use of the share
premium account. It can only be used for bonus issues, to provide for the premium payable on redemption of debentures,
or to write off preliminary expenses, or expenses of, or commissions paid on, or discounts allowed on, the same issues of
shares or debentures of the Company.
Own share reserve
Weighted average cost of shares held in trust by the ESOT.
Special reserve
The special reserve arose on the cancellation of deferred ordinary shares in June 1992.
Merger reserve
The merger reserve arose on issue of shares in respect of acquisitions and mergers in the period 1992 to 1999 and in
2018.
Profit and loss account
All other net gains and losses and transactions with owners (e.g. dividends) that are not recognised elsewhere.
11. Capital commitments
There were no capital commitments at 31 December 2022 (2021: none).
12. Contingent liabilities
In the normal course of business, the Company has issued general guarantees in respect of the contractual obligations of
certain subsidiary undertakings. The Company has assessed the risk of defaults by subsidiary undertakings and should
Gresham Technologies plc have to assume the debt and make settlement, the appropriate provisioning would be provided
for within the Company.
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Notes to the Company financial statements
Gresham Technologies plc
151
Annual Financial Report 2022
13. Share-based payments
Share-based payments in respect of both the Company and the Group are disclosed in note 23 of the consolidated financial
statements.
14. Related party transactions
The Company is exempt from disclosing transactions within the wholly owned subsidiaries in the Group. Other related
party transactions are included within those given in note 26 of the Group financial statements.
15. Events after the reporting date
A dividend of 0.75 pence per share has been approved by the Board to propose to shareholders at the Annual General
Meeting.
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Corporate information
Gresham Technologies plc
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Annual Financial Report 2022
Registered office
Aldermary House
10–15 Queen Street
London
EC4N 1TX
Broker and financial adviser
Singer Capital Markets Limited
One Bartholomew Lane
London
EC2N 2AX
Auditor
BDO LLP
Arcadia House
Maritime Walk
Ocean Village
Southampton
SO14 3TL
Registrars
Equiniti Limited
Aspect House
Spencer Road
Lancing
West Sussex
BN99 6DA
Solicitors
Blake Morgan LLP
Tollgate
Chandler's Ford
Eastleigh
SO53 3LG
Bankers
HSBC Bank plc
55 Above Bar Street
Southampton
SO14 7DZ
Annual General Meeting
23 May 2023
Blake Morgan LLP
6 New Street Square
London
EC4A 3DJ
DocuSign Envelope ID: B92A7465-54C5-4236-B0C5-93C23487FCF7
Aldermary House
10-15 Queen Street
London
EC4N 1TX
investorrelations@greshamtech.com
www.greshamtech.com
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