20
23
ANNUAL FINANCIAL REPORT
OUR VISION
To remove friction from today’s data
challenges to unlock tomorrow’s
business opportunities.
OUR MISSION
We empower businesses to simplify
complexity and break down barriers
to profitable growth.
BE THE CHAMPION
Take ownership for delivering
success, delighting ou
r
customers,
and helping our business and our
people to grow
and flourish.
FIND THE FRICTION
We can always be better. Focus where
it matters most and seek the 1%
improvement every day – in the big
things and the small things.
OUR VALUES
EMBRACE LEARNING
Harness the value of different
perspectives, backgrounds and
experience. Everyone has the potential
for extraordinary ideas and action.
CREATE TOGETHER
The sum is greater than its parts. Lean
in and together we will find innovative
solutions for today’s problems and
tomorrow’s opportunities.
Strategic report
CORPORATE STATEMENT, MISSION AND VALUES
CORPORATE STATEMENT
Gresham Technologies plc is a global leader in mission-
critical software and automation solutions for financial
services. Our award-winning Clareti platform helps firms
operate efficiently, manage risk, stay compliant, and focus
on their customers knowing that their data and digital
processes are under control. Listed on the main market
of the London Stock Exchange (“GHT.L”) and headquartered
in the City of London, our industry-recognised Connect and
Control Solutions, Data and Managed Services are proven at
nearly 300 organisations worldwide, including many of the
world’s largest banks, investment managers and corporates.
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
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CONTENTS
STRATEGIC REPORT
IFC
Corporate statement, mission and values
02
Investment case
04
Highlights
06
At a glance
08
Chair’s statement
10
Business model
12
CEO’s statement
16
Strategy
18
Strategy in action
20
Key performance indicators
22
Stakeholder engagement
25
Environmental, social and governance
28
Task force on climate-related
financial disclosures
35
Financial review
41
Principal risks and uncertainties
GOVERNANCE
44
Chair’s introduction to governance
46
Board of Directors
48
Corporate Governance Report
51
Audit Committee Report
55
Nomination Committee Report
57
Introduction to the Remuneration Report
58
Remuneration Report
71
Directors’ Report
74
Statement of Directors’ responsibilities
FINANCIAL STATEMENTS
75
Independent auditor’s report
81
Consolidated Income Statement
82
Consolidated Statement of
Comprehensive Income
83
Consolidated Statement of Financial Position
84
Consolidated Statement of Changes in Equity
85
Consolidated Statement of Cashflow
86
Notes to financial statements
122
Company Balance Sheet
123
Company Statement of Changes in Equity
124
Notes to the Company financial statements
IBC
Corporate information
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INVESTMENT CASE
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 270
customers across 30 countries, including several of
the world’s largest banks.
A CULTURE OF INNOVATION
Our 220 staff across ten 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 21% 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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FINANCIAL STATEMENTS
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ESG
Page 25
Financial review
Page 35
10%
CLARETI REVENUE GROWTH
(1)
CEO’s statement
Page 12
21%
CASH ADJUSTED EBITDA GROWTH
8%
CLARETI ARR GROWTH
(2)
4,500+
Unique and accessible data feeds
20tn
In mission-critical data
assets moved daily
(1) Excluding abandoned operations.
(2) On a constant currency basis.
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HIGHLIGHTS
STRONG CLARETI RECURRING
REVENUES DRIVING
PROFITABLE GROWTH
Group revenue
£49.0m
+2%
2021
37.0
2020
24.8
2019
25.0
2023
49.0
2022
48.2
Clareti revenue
£36.3m
+10%
2023
36.3
2022
32.9
2021
23.4
2020
15.2
2019
15.5
Cash adjusted EBITDA
£4.7m
+21%
Clareti ARR net retention rate
105%
+3%
Adjusted diluted earnings per share
6.32p
(10)%
2021
5.02
2020
3.96
2019
2023
6.32
2022
7.03
Cash
£4.8m
(24)%
2021
9.1
2020
8.9
2019
9.6
2023
4.8
2022
6.3
Clareti recurring revenue
£29.6m
+10%
2021
18.8
2020
11.5
2019
10.4
2023
29.6
2022
26.9
Adjusted EBITDA
£10.7m
+9%
Clareti ARR
£29.5m
+5%
2023
29.5
2022
28.1
2021
24.0
2020
12.3
2019 9.5
2023
105
2023
10.7
2022
9.8
2021
7.2
2020
4.5
2019
4.1
2022
102
2021
106
2023
4.7
2022
3.9
2.5
2021
2020
2019
0.3
0.3
1.99
(1) 2022 financials have been restated. Refer to Financial Review and to note 3 of the Group financial statements for full details.
(2)
Adjusted EBITDA refers to earnings before interest, tax, depreciation and amortisation, adjusted for one-off exceptional charges,
share-based payments and foreign exchange differences on intercompany balances (see note 5 of the Group financial statements).
(3) Adjusted EBITDA less capitalised development spend and any IFRS 16 lease-related cash payments.
(4) Diluted earnings per share, adjusted to add back share-based payment charges, exceptional items, amortisation from acquired
intangible assets and foreign exchange differences on intercompany balances.
(5) Excludes any IFRS 16 lease-related payables.
(6)
Percentage increases stated above are based on rounding to the nearest £’000 as disclosed at detailed level within this report.
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
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FINANCIAL
(1)
▪
Forward-looking Clareti Annualised Recurring Revenue (“ARR”)
up 5% to £29.5m (2022: £28.1m) as at 31 December 2023.
▪
Group revenues up 2% to £49.0m (2022: £48.2m).
▪
Clareti revenues up 10% to £36.3m (2022: £32.9m).
▪
Clareti recurring revenues up 10% to £29.6m (2022: £26.9m).
▪
Adjusted EBITDA(2) up 9% to £10.7m
(2022: £9.8m).
▪
Cash adjusted EBITDA(3) of £4.7m, an increase of 21% on the prior year
(2022: £3.9m).
▪
Profit before tax as reported up £2.2m to £4.1m (2022: £1.9m), including
expenses adjusted in EBITDA metrics above of £2.4m (2022: £4.4m).
▪
Adjusted diluted earnings per share(4) at 6.3 pence
(2022: 7.0 pence).
▪
Cash at 31 December 2023 of £4.8m and no debt after payment of £4.0m
in contingent consideration for previous acquisitions (2022: £6.3m and
no debt)(5
)
.
▪
Interim dividend declared at 0.75 pence per share (2022: £nil).
OPERATIONAL
▪
Standalone Clareti business continuing to grow after becoming
cash profitable for the first time in 2022, generating cash EBITDA(3)
of £1.6m (2022: £0.6m), as growth, scale and operating leverage begin
to take effect.
▪
Twelve new-name wins, including several global Tier 1 financial
institutions, bringing total direct customers to 270 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 105% (2022: 102%), highlighting growth
within existing customer base.
▪
Continued growth and development of key accounts.
▪
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 deployed into production use.
OUTLOOK
▪
Larger, more resilient Group, with more than £38m of FY24 revenues under
contract upon entering the year, providing significant visibility and a robust
platform to execute growth strategy.
▪
Management confident about the ongoing execution of its strategy for the
Group and the potential for further value creation over the longer term.
RECOMMENDED OFFER
▪
On 9 April 2024, the Boards of Gresham and Alliance Bidco Ltd (“Bidco”)
announced the recommended acquisition of Gresham by Bidco at a
price of 163 pence per Gresham share, plus the interim dividend of 0.75
pence per Gresham share declared today. The transaction is conditional
on, amongst other things, the approval of Gresham shareholders by the
requisite majorities of resolutions to be proposed at a Court Meeting and
a General Meeting, both convened for 16 May 2024. The scheme document
(“Scheme Document”) and other documentation in this regard were
published on 18 April 2024 and are available on the Investor Hub on the
Gresham website.
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AT A GLANCE
82
CONTRACTS
265
CONTRACTS
11
CONTRACTS
155
EMPLOYEES
61
EMPLOYEES
24
EMPLOYEES
AMERICAS
EMEA
⚫
New York
⚫
Florida
⚫
London
⚫
Bristol
⚫
Solihull
⚫
Southampton
⚫
Luxembourg
ASIA PACIFIC
⚫
Australia
⚫
Singapore
⚫
Malaysia
105%
ARR NET
RETENTION
32%
FIVE-YEAR
ARR CAGR
A GLOBAL PLATFORM
FOR GROWTH
We are building a global fintech champion.
We are made up of three regional hubs:
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FINANCIAL STATEMENTS
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TECHNOLOGY SOLUTIONS FOR
CONTROL AND AUTOMATION IN
FINANCIAL SERVICES
Our technology continuously ensures that customers’ actions
and decisions are based on data and trustworthy processes.
CLARETI IS OUR ENTERPRISE-GRADE SAAS PLATFORM TO CONNECT,
RECONCILE AND CONTROL “ANY AND ALL” DATA AND PROCESSES.
DATA EXCHANGE
Post-trade data validated,
transformed, and delivered
through cloud-native
APIs and Kafka, from over
3,500 data providers, the
industry’s largest provision
and dissemination of critical
financial information.
CLOUD CONNECTIVITY
Drag and drop canvas enabling
customers to connect to all
industry venues and regulatory end
points. Operating pre-trade, post-
trade and in payments, Connect
offers in the cloud Connectivity to
350+ industry end points across
North America, Europe and Asia.
RECONCILIATION
Simplify the complexity
of buy-side and sell-
side reconciliations and
trade reporting to scale
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.
OUR SOLUTIONS
GROWTH STRATEGY
OUR PLATFORM
OUR INDUSTRIES
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 relationships to engage in further consolidation.
BANKING
PAYMENTS, FINTECH AND
DIGITAL ASSETS
BROKERS
INSURANCE
INVESTMENT
MANAGEMENT
ENERGY AND COMMODITIES
CORPORATES
GOVERNMENT
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DEAR SHAREHOLDER
OVERVIEW
I am pleased to present my first annual results as Chair
of Gresham, having joined the Group in October. At the time of
my appointment, the Group was making good progress against
its strategic objectives, and I am delighted to report that this has
continued with the Group closing the year on a high. Alongside
eight new customer wins and meaningful strategic progress, whilst
navigating through a challenging market environment, the Group
delivered a robust financial performance with increased recurring
revenues, enhanced profitability and cash ahead of expectations.
A major development in the year was the accelerated transition
of the Group to a pure-play SaaS business, a transformation
the Board has led over the last decade, utilising the Group’s
cashflows to invest in its next generation Clareti platform. This
journey culminated with a decision in the latter part of FY23
to discontinue the Group’s legacy, non-core IT sub-contracting
business, enabling the Group to intensify focus on the high-
margin Clareti opportunity.
Over those ten years we have invested to evolve towards an
own-IP pure-play software business model, characterised by
higher margins, sustained growth, multi-year recurring revenue
contracts and significantly reduced customer concentration,
enhancing our position and resilience in the market.
Against the backdrop of a turbulent financial services and
banking environment in the first half of 2023, this has been a
busy and productive year for Gresham and is testament to the
quality of our team. We remain focused on building a supportive
and rewarding environment, ensuring we maintain our excellent
culture as we scale. As such, we were pleased to see our
Employee Engagement Survey producing an overall engagement
score of 76% (2022: 82%), with our employee turnover rate of
15.3% (2022: 16.3%).
FIRST IMPRESSIONS
In taking up the position as Chair, there were a number of
qualities that attracted me to the Group.
The first thing was the scale of the opportunity. The highly
complex data landscape in financial markets means that
generic, legacy IT systems that dominate the sector are not fit
for purpose. This is exacerbated by accelerating growth in data
volumes, predicted to increase 40% by 20251 in the financial
services sector, along with changing regulation. The scope to
drive efficiencies, improved resilience, adherence to compliance
and improved decision-making through the application of
automation and modern technology is substantial, and I believe
we are only seeing the start of this journey in our target markets.
Furthermore, I have been impressed by the professionalism and
dedication of our team. Our people exhibit a depth of expertise
and a commitment to serving our clients and developing
software that can genuinely make a difference to our clients’
operations. The quality and reliability of our solutions and
services has consistently been reflected in the year-on-year
growth in our client numbers and ARR.
1
BFSI Security Market Size & Share Report, 2025
CHAIR’S STATEMENT
WITH CLEAR OPPORTUNITY FOR OUR
PRODUCTS AND A STRONG OPERATIONAL
FOUNDATION, THE POTENTIAL FOR
GRESHAM IS CLEAR
It is a pleasure to be presenting my
maiden results as Chair of Gresham,
having been drawn to the business by
the strength of our product set, highly
skilled and motivated team, and a
clear market opportunity to meet
the need to digitise the operations
of financial institutions, globally.
In spite of a turbulent financial
services and banking environment
in 2023, Gresham continued to make
solid progress with that momentum
continuing into the new year, supported
by recurring revenue growth.”
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FINANCIAL STATEMENTS
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Finally, the evolution of the Group’s financial profile and business
model, following prior years of investment and M&A, mean we
have the potential to realise the benefits of operational leverage.
OPERATING THE BUSINESS IN A SUSTAINABLE WAY
The Board remains focused on advancing the Group’s
Environmental, Social and Governance (“ESG”) agenda. This
includes managing our impact on the environment; our social
responsibilities to our people and our communities; improving
outcomes for our customers; having consideration for our
suppliers; and operating as an ethical business.
To further our support of the Task Force on Climate-related
Financial Disclosures (“TCFD”), we created a Sustainability
Committee, and conducted our first climate-related
scenario analysis.
DIVIDEND
Having considered the Group’s financial performance for the
year, together with the cash within the business and capital
allocation priorities, and in light of the current offer for
Gresham mentioned below, the Board is declaring an interim
dividend of 0.75 pence per share (FY22: £nil) instead of a final
dividend (2022: 0.75 pence). It is intended to pay the interim
dividend on 10 June 2024 to all shareholders on the register
at close of business on 10 May 2024. The ex-dividend date
will be 9 May 2024.
OUTLOOK
We closed the financial year with good momentum, new
customer wins adding to the Group’s base of recurring
revenues, and an improved pipeline. Despite a challenging
macro environment, trading is in line with the Board’s
expectations.
We have a substantial opportunity to expand within our 270
clients, the market drivers for new companies to engage with us
have never been more acute and the recent launch of Floe, the
Group’s smart bank account platform, highlights the new ideas
and IP that sits within Gresham today.
On 9 April 2024, the Boards of Gresham and Alliance Bidco
Ltd (“Bidco”) announced the recommended acquisition of
Gresham by Bidco at a price of 163 pence per Gresham share,
plus the interim dividend of 0.75 pence per Gresham share
declared today.
The transaction is conditional on, amongst other things, the
approval of Gresham shareholders by the requisite majorities
of resolutions to be proposed at a Court Meeting and a General
Meeting, both convened for 16 May 2024. The scheme document
(“Scheme Document”) and other documentation in this regard
were published on 18 April 2024 and are available on the Investor
Hub on the Gresham website.
RICHARD LAST
NON-EXECUTIVE CHAIR
29 APRIL 2024
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DELIVERING MISSION-CRITICAL
FINANCIAL TECHNOLOGY TO BUILD
RECURRING REVENUES GLOBALLY
OUR STRENGTHS
BUSINESS MODEL
OU
R
B
U
S
I
N
E
S
S
SALES & MARKETING
Our direct sales team are based
in major financial centres and focus
on winning and growing customer
accounts in our target markets.
We run targeted marketing and
business development initiatives
to generate leads and drive
demand whilst facing end
market consolidation and
lengthy sales cycles. We
also generate indirect
sales through our
partner channels.
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. Subscription and
managed services fees are generally
charged annually in advance; with
one-off professional services
normally charged on a time
spent basis.
$
GROWING MARKET OPPORTUNITY
The financial services industry is being re-imagined through
digital transformation and regulatory changes, but firms are
constrained by their legacy systems and manual processes.
This creates growing demand for smarter data automation
and technology controls.
CEO’s statement
Page 12
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.
CEO’s statement
Page 12
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 advisers.
CEO’s statement
Page 12
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FINANCIAL STATEMENTS
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Our business model is to earn high-margin, recurring revenues
by providing innovative and mission-critical data control and
automation solutions for financial services.
CREATING VALUE
FOR INVESTORS
A trusted partner to
build capital value
through protected growth
consistently over time in
a sustainable manner.
FOR CUSTOMERS
Every action and decision
can be based on data and
processes which can be
trusted. We will remove friction
and provide data confidence
and digital integrity.
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.
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.
FOR EMPLOYEES
A growth experience that
is challenging, fulfilling,
meaningful and where our
people are appreciated and
valued as individuals and
as part of the team.
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DEAR SHAREHOLDER
OVERVIEW: SIGNIFICANT MILESTONE IN OUR
STRATEGIC JOURNEY
In 2023, Gresham achieved key milestones in its journey towards
becoming a global leader in mission-critical data control and
automation solutions for financial services. As a result of our
strategic acquisition of Electra in the US in 2021 and subsequent
efforts in defining our integrated technology roadmap, and
executing on our sales plan and global marketing strategies,
we have extended our position in the market.
This year marked an acceleration in this journey, with nearly
300 organisations globally trusting our solutions to drive their
operations forward and our commitment to innovation evidenced
by the successful launch of Floe, our new innovative banking
platform. With our extended international reach and a firm
foothold across banking, capital markets, insurance, and energy
trading sectors, we are well positioned for continued growth
and success.
As we reflect on our achievements, a number of contract wins
helped validate our market standing. This included a Clareti
contract win with a major US investment manager where our
cloud solution is helping to automate and reduce costs in its
operations. We also welcomed two new Tier 1 banking customers
later in the year who are using our Control solutions across their
business operations.
Our robust financial performance during a year of dramatic
events in capital markets underscores our resilience, with Clareti
Annualised Recurring Revenue reaching £29.5 million (up 5% on
FY22) or £30.4 million on a constant currency basis (up 8% on
FY22) by year-end. With EBITDA reaching £10.7 million and healthy
cash reserves exceeding our expectations at £4.8 million, we
started the new year with confidence and determination to drive
further innovation and value for our clients and stakeholders.
MARKET: TRENDS OF DIGITAL TRANSFORMATION,
REGULATION AND AI ARE ACCELERATING
2023 has been another challenging year for financial markets and
the wider finance sector. With continued concerns over banking
liquidity at the start of the year, the broader economic and
geo-political challenges as well as the mixed benefits throughout
the year of higher interest rates on Banks and Asset Managers,
it has been a difficult market for organisations to navigate. More
broadly, however, several asset classes performed much better
than expected in the year which together with an expectation
that monetary policy will normalise through 2024 should support
increasing confidence for consumers, corporates and therefore
our target clients. Importantly, all the drivers that create a need
for banks, fund managers and other financial institutions to
engage with us are key boardroom agenda items in both better
and tougher years.
CEO’S STATEMENT
ACCELERATION OF STRATEGIC VISION
AND ROBUST FINANCIAL PERFORMANCE
The Group has taken great strides
towards achieving its strategic goal of
creating a pure-play financial technology
company, following the successfully
managed exit from the legacy Australian
sub-contracting business.”
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FINANCIAL STATEMENTS
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CONTINUING PACE OF REGULATORY CHANGES
The regulatory landscape does not stand still, and the last
year has only reinforced the need for intra-day monitoring
and rule-based reporting. Governments have the challenge
of regulating traditional banks and engaging with emerging
technologies, particularly in areas like fintech, digital payments,
and cryptocurrencies. In Europe the new EMIR Refit reporting
rules which go live during 2024 have focused attention on
more accurate data for regulatory reporting. In the US, there
is an ambitious agenda of change planned in the coming year,
including significant proposed changes to capital, resolution
planning, consumer compliance, and supervision, among
many others. The move to T+1 settlement comes into effect in
2024 in the US, representing a substantial shift in the industry,
with Europe and the UK currently debating the switch to a T+1
environment. For banks, these changes will further necessitate
building and maintaining effective governance, risk management,
and control frameworks, intra-day processing and particularly
how they interact with consumers.
INNOVATION IN FINANCIAL SERVICES
Technology-led product and service innovation continues to have
a transformative impact on financial services with generative AI,
open data, APIs and embedded finance, the digitisation of money,
digital identity and concerns over cyber security all likely to grow
further in 2024.
The interest and adoption of blockchain technology,
cryptocurrencies and other digital assets have been growing.
Several US asset managers are planning to launch exchange
traded funds (“ETFs”) with leveraged bitcoin exposure and
expand into bitcoin-based options and other cryptocurrencies
after SEC approval. More broadly, financial institutions
continue to explore how to integrate blockchain for secure and
transparent transactions within their systems and specifically
how they can reconcile and report transactions for digital asset
classes. This is a good example of where it becomes harder for
banks to stretch existing legacy IT systems and we are seeing
some banking clients that have implemented our systems over
the last five years are returning in a second wave of investment
to remain competitive and compliant.
CONTROLLING ARTIFICIAL INTELLIGENCE AND MACHINE
LEARNING IN THE FINANCIAL SERVICES SECTOR
The use of artificial intelligence (“AI”) and machine learning (“ML”)
in the financial sector is increasing. These technologies have
been deployed for a while for fraud detection, marketing and
customer service and are becoming increasingly prevalent as
applications are found across the entirety of a bank’s internal
and external operations. The priority for boards is to ensure
automation tools, especially those which are AI driven, are used
appropriately and the outputs and decisions taken are compliant,
transparent, optimal and explainable. AI has always been a key
component of our technology and roadmap but the rapid
advances in the potential of the technology are providing us with
a range of options to both improve our products, streamline our
development cycles, and operate more efficiently as a business.
DIGITAL TRANSFORMATION
Fintech companies continue to challenge traditional banking
models, and established financial institutions continually need
to adapt, compete and adopt digital technologies to improve
efficiency and enhance customer experiences. This includes
investing in cloud computing, APIs, mobile applications, and
other digital technologies that enable banks to deliver products
and services to their customers in a fast, efficient, and seamless
manner. This remains the over-arching main driver of our new
business discussions.
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CLARETI A LEADING SOLUTION IN THE SECTOR
Our conversations with banks, asset managers and a range
of institutions encompass all these challenges. Our Data and
Connect solutions provide a comprehensive suite for seamless
integration into global financial systems, supporting third-party
data access and lowering integration risks, costs, and saving
time. The Data service offers a cloud-based aggregation platform
collecting data from 2,500 sources, processing 14.5 billion records
annually, and serving close to 300 clients. The goal is to become
a leading independent provider of bank and custodian account
data. Meanwhile, Connect solutions enable interaction with bank
partners for payments and statements, streamline trading
processes, ensuring regulatory compliance, and enhancing
real-time data flows through a cloud platform.
Clareti is therefore a clear choice in supporting many companies
in delivering optimised business processes, enhanced data
accuracy, all while ensuring compliance with regulatory
frameworks. Most importantly, our software and managed
services enables customers to prioritise and focus on improving
their own client service levels and propositions. This is why
we grow our client numbers year-on-year and why many of
our existing clients return each year to expand and upgrade
their systems.
CLIENT WINS WITH MAJOR BANKS
AND BUY-SIDE FIRMS
A good example of Clareti in action was our major win during
the year with a major player in the US investment management
industry. This contract was particularly pleasing because of the
size and importance of the client but it also highlighted the
end-to-end service and transformation we can deliver.
The firm, which offers active equity and fixed-income solutions
to institutional and private clients, selected us to help automate
and reduce costs in its investment operations with a cloud
solution covering data collection from custodians and brokers,
data aggregation, reconciliation against internal books and
records, and exception management processes. Following
an extensive evaluation of market options, the firm selected
Control for Investment Management delivered as a service
in the Clareti Cloud.
The contract includes minimum subscription fees of $240k per
annum over an initial five-year committed term, with potential for
incremental subscription fees through optimal managed services
and usage expansion and additional service income.
The Group also secured a number of wins to close the year.
In December, contracts for initial deployments with two
new Control customers were signed including a Tier 1 global
investment bank and one of the world’s largest sovereign wealth
funds. In addition, an agreement was reached with two recently
merged Tier 1 bank customers for the adoption of Control as
standard across the combined business operations, providing
a high level of certainty over existing recurring revenues.
CEO’S STATEMENT
CONTINUED
We remain focused on
our ambition to build a
substantial global SaaS
business, delivering
highly profitable and
cash generative recurring
cloud revenues.”
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FINANCIAL STATEMENTS
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CURRENT TRADING AND OUTLOOK:
ENCOURAGING CLIENT INTERACTIONS IN Q1
We have had a positive start to 2024 and while sales cycles
remain elongated and end markets are consolidating, there are
some signs of improving trends across our clients which gives us
confidence for the year ahead. The successful transformation of
the Group presents us with opportunities to enhance efficiencies
across the organisation while remaining steadfast in our roadmap
and go-to-market strategy. This dual emphasis on growth and
operational refinement positions us for sustained success
and innovation in the marketplace, driven by our commitment
to client success and our own operational excellence.
IAN MANOCHA
CHIEF EXECUTIVE
29 APRIL 2024
INNOVATION: FLOE – OUR NEXT GENERATION
BANK ACCOUNT PLATFORM
It is that focus on the end banking customer that has driven one
of our most exciting innovation programmes over the last few
years. In Q3 2023 after nearly four years of development funded
by our partner, ANZ Bank, we launched our next generation
banking platform, Floe.
The partnership, first announced in September 2019, has focused
on developing next generation solutions for digital corporate
banking and particularly targeting corporate cash management
workflows and embedded bank account solutions. We have
made remarkable progress over the past three and a half years
and our collaboration with ANZ has been transformative in terms
of the product and go-to-market plans we have today. From
2020 to 2021 we engaged in intensive design, development and
deployment phases, culminating in early releases of our product.
Through 2022 rigorous testing procedures led to the realisation
of a product-grade solution, now actively deployed with ANZ
Bank. As we enter the next phase, our focus now shifts towards
monetisation.
At the core of Floe’s mission lies our commitment to facilitating
faster, more flexible, and frictionless corporate banking
experiences. Floe is a cloud native, modular and configurable
application that can build on existing legacy systems to provide
a modern, real-time, digital banking platform. Future solutions
included embedded bank accounts, in-house banking, and
banking-as-a-service offerings, all enabled with a modern API
centric and cloud-native architecture.
The cloud design makes it flexible for different banking
environments, it is highly scalable and secure and is based on
industry standards for communication, making it easy to connect
to other systems, and therefore offer new services quickly.
We believe our target market encompasses approximately 250
to 300 middle-sized transaction banks globally, with a focus on
those seeking innovative solutions without the need for extensive
in-house development or core system replacements.
Financially, we expect scaling Floe to be broadly self-funding in
the near term. Beyond that we believe Floe has the potential
to extend our strategic importance in our target markets and
become a material contributor to ARR.
ANZ SERVICES RELATIONSHIP
As the Floe programme has progressed, we have taken the
opportunity to review our ongoing relationship. In consultation
with ANZ, the Company agreed to exit the lower margin legacy
sub-contracting business under which locally based freelance IT
contractors are provided to the Bank on short-term agreements.
We recognised £8.1m in revenue from these arrangement in
FY23 with fixed margins of 13%, and the business was being
abandoned from December 2023. In line with the Group’s
strategy, these changes will continue the Group’s transformation
to a pure-play SaaS company and lead to an immediate
improvement in gross and adjusted EBITDA margins.
PEOPLE
In 2023, as we largely completed our transition to a pure
fintech-focused software business, we have taken the
opportunity to re-evaluate our marketing strategy. A key
part of this new approach is the investment in our brand
and our commitment to maintaining a challenger culture
in product development and client interaction. In July we
were therefore pleased to welcome Geneva Loader to our
team, to lead the Group-wide marketing strategy.
Looking forward as we think about our technology
roadmap over the next five years, post year-end we
announced the appointment of Andrew Elmore as Chief
Technology Officer. With his industry experience, he will
not only add valued insight and knowledge into our R&D
roadmap but also provides a fresh opportunity to look
at our processes and how we best allocate product
development capital.
Importantly, Neil Vernon, CTO from the start of our Clareti
journey, has transitioned to the newly created role of Chief
Product and Innovation Officer, with a focus on identifying
and driving next generational product strategy; including
artificial intelligence and machine learning to serve the
evolving needs of the financial services data landscape.
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BUILD A HIGH-MARGIN,
RECURRING REVENUE STREAM
BASED ON CLARETI SOFTWARE
AND CLOUD SERVICES.
ESTABLISH CLARETI AS THE
ENTERPRISE DATA INTEGRITY
PLATFORM “CATEGORY LEADER”.
CREATE A VALUABLE FINANCIAL
TECHNOLOGY BUSINESS THROUGH
CLARETI-LED GROWTH AND
COMPLEMENTARY ACQUISITIONS.
FOCUS OUR PRODUCT
INVESTMENT ON INNOVATIVE
CLARETI SOLUTIONS FOR OUR
CHOSEN MARKETS.
RETAIN STRATEGIC NON-CLARETI
REVENUES TO SUPPORT
CLARETI-LED GROWTH.
1
3
2
4
5
STRATEGY
OUR KEY STRATEGIC OBJECTIVES
FOR PROFITABLE GROWTH
Our strategic plan is designed to drive profitable
growth and create long-term shareholder value.
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We will continue to invest in sales and marketing capacity
generally. We will look for opportunities to strengthen our
team. We will refine our strategies and processes and
increase our focus on renewals management.
We will increase our focus on digital marketing
initiatives to promote our brand and our solutions,
and generate demand in a highly effective manner. We
will host customer forums, provide thought leadership
and strengthen our position as a category leader in
data control.
Our aim is to increase Clareti ARR and profit margins
by prioritising revenue-generating investments and
implementing cost optimisations throughout the Group. We
will continue to explore appropriate acquisition opportunities.
We plan to deliver major new features and functions in
2024 across our product sets that will increase the value
of our propositions, including thin UIs and further APIs.
We also intend to expand our use of AI in products to
increase automation and useability.
We will continue to operate the residual non-Clareti
business as efficiently as possible, whilst minimising risk
and operational complexity. We will keep legacy products
under review and consider changes or discontinuations
where appropriate.
We increased Clareti ARR by 5% (see KPIs, page 20). Clareti
ARR now represents 90% of Group ARR (2022: 89%),
and 59% of our Clareti ARR is generated from our cloud
solutions (2022: 57%).
We won Best Regulatory Reporting Solution in the Financial
Technologies Forum (“FTF”) 2023 Tech Innovation Awards.
We refreshed our corporate website and developed new
collateral to support our credentials.
We have delivered Clareti revenue and profitability growth,
with Clareti becoming increasingly cash positive, thereby
increasing the inherent value of the Group.
We continued to invest in product improvements throughout
2024, with a number of new features released including
API enhancements and natural language business rules.
We delivered architectural changes to support platform
optimisations and future product roadmap plans.
Our non-Clareti business has operated strongly, and its
contribution has supported Clareti investments. We decided
to discontinue the contracting services business in Australia.
KEY ACHIEVEMENTS IN 2023
KEY PRIORITIES FOR 2024
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STRATEGY IN ACTION
50%
typical reduction in
exception handling by firms
using Control
97%
reduction in time to onboard
new controls
42
countries using Connect and
Control at one multi-national
corporation
350+
adaptors and
transformations, for out-of-
the-box connectivity
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.”
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 OPERATIONS
NEXT GENERATION PAYMENTS BANK
HEAD OF MIDDLE OFFICE
PRIMARY DEALER
PUTTING STAKEHOLDERS IN CONTROL OF
THEIR DATA, OPERATIONS AND GROWTH
CONTROL
CONNECT
Control is the industry-leading solution for
ensuring consistency of data within and across
organisations. It is engineered to handle any
type of data, of any complexity, and with support
for the extreme volumes which are typical
within the largest Tier 1 financial institutions.
Fully managed intelligent connectivity, data
migration and integration with trading partners,
banks, clients, regulators and other venues
across the financial services ecosystem.
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Gresham’s Data Services saves an
immeasurable amount of time each
day in collecting data, checking and
chasing down feeds, managing and
adding accounts, and normalising and
delivering the data to our reconciliation
workflows, portfolio accounting systems,
and wherever we need to drive back-
office efficiencies.”
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.”
1,600+
global data sources
4,800
unique data feeds
1.2bn
The average number of
records acquired each
month on behalf of our
customers
£20tn
in assets moved daily by
our solutions
£3m
in yearly savings
delivered for a Tier 1
investment bank
MARLYN MORRIS
HEAD OF OPERATIONS
AXIOM INVESTORS
JULIANNA JONES
OPERATIONS MANAGER
WCM INVESTMENT MANAGEMENT
DATA SERVICES
RECONCILIATION
MANAGED SERVICES
A fully managed cloud service that aggregates,
normalises and delivers accurate, reliable
data on securities, cash positions, transactions
and investigations.
Gresham’s Managed Services provides flexible
service options, cloud deployment, operations
and technical services while supporting our
Connect and Control Solutions, giving you
the ability to simplify, streamline and scale
multiple workflows and platforms through
one trusted provider.
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KEY PERFORMANCE INDICATORS
MEASURING OUR PROGRESS
Group revenue
£49.0m
+2%
Clareti ARR
£29.5m
+5%
Clareti revenue
£36.3m
+10%
Adjusted EBITDA
(2)
£10.7m
+9%
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.
DESCRIPTION
Total revenue generated and recognised in the year from all operations,
including Clareti Solutions and Other Solutions.
WHY IS IT A KPI?
Measures the Group’s overall performance at revenue level, which is an
indicator of the Group’s overall size and complexity.
DESCRIPTION
Total revenue generated and recognised in the year from Clareti Solutions.
WHY IS IT A KPI?
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.
2023
(1)
49.0
2022
48.2
2021
37.0
2020
24.8
2023
(1)
36.3
2022
32.9
2021
23.4
2020
15.5
DESCRIPTION
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 2023.
WHY IS IT A KPI?
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.
2023
(1)
29.5
2022
28.1
2021
24.0
2020
12.3
DESCRIPTION
Group earnings before interest, tax, depreciation and amortisation,
adjusted for share-based payment charges and exceptional items.
WHY IS IT A KPI?
Key measure of the Group’s effectiveness in converting revenue to
earnings, excluding the effects of certain non-operational and/or
exceptional transactions.
2023
(1)
10.7
2022
9.8
2021
7.2
2020
4.5
Notes
(1)
All KPI data excludes abandoned operations, except for profit before tax
which includes abandoned 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).
DESCRIPTION
Clareti ARR divided by number of direct Clareti customers.
WHY IS IT A KPI?
Growing the customer base, with higher value or potential value
customers provides additional predictability and revenue as well
as opportunities for future expansion.
AVERAGE CLARETI ARR PER DIRECT CUSTOMERS
£117k
(2022: £111k)
DESCRIPTION
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.
WHY IS IT A KPI?
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.
CLARETI ARR NET RETENTION RATE
105%
(2022: 102%)
DESCRIPTION
The overall score derived from the Group’s employee
engagement survey.
WHY IS IT A KPI?
A highly engaged workforce tends to be more productive, so
this measure provides an assessment of the overall engagement.
The survey results enable the Group to take targeted action
as appropriate.
PEOPLE ENGAGEMENT SCORE
76%
(2022: 82%)
STRATEGIC REPORT
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FINANCIAL STATEMENTS
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Cash adjusted EBITDA
(2)
£4.7m
+21%
Net cash
£4.8m
(24)%
Adjusted diluted earnings per share
(2)
6.32p
(10)%
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.
DESCRIPTION
Adjusted EBITDA less capitalised development spend and any IFRS 16
lease-related cash payments.
WHY IS IT A KPI?
A reflection of cash generation in the year, reflecting the Group’s
effectiveness in converting revenue to cash generation.
2023
(1)
4.7
2022
2021
3.9
2.5
2020
0.3
DESCRIPTION
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.
WHY IS IT A KPI?
Measure of Group profitability that identifies performance on a per
share metric and enables comparisons against other companies.
2023
(1)
6.32
2022
7.03
2021
5.02
2020
3.96
DESCRIPTION
Aggregate net cash balance as at 31 December 2023 including bank
deposits after operational, investing and financing activities during the
financial year.
WHY IS IT A KPI?
Provides a measure of the Group’s financial strength and
self-sufficiency to support operations, make investments
and withstand unexpected headwinds.
2023
(1)
4.8
2022
6.3
2021
9.1
2020
8.9
INVESTORS
WHY ENGAGEMENT IS IMPORTANT
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.
HOW MANAGEMENT AND/OR DIRECTORS ENGAGE
AGM, analyst presentations, investor presentations, investor
roadshows and, periodically, capital markets days.
Individual investor meetings with CEO, CFO, SID, Chair, and
Committee Chairs.
Investor relations reports, including roadshow feedback, from
broker and financial PR advisers.
STRATEGIC DECISIONS IN THE YEAR
We held an investor event in early 2023 for existing and
prospective investors and analysts focused on FY22 results,
strategic execution, and market opportunity; as well as an
investor briefing in October 2023 focused on Floe.
We continued to enhance our investor communications, website
and corporate materials in collaboration with our Financial
PR advisers.
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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 they consider, 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.
For further information, see Corporate
Governance Report, starting page 48.
STAKEHOLDER ENGAGEMENT
WORKFORCE
WHY ENGAGEMENT IS IMPORTANT
To retain talent, maintain high productivity rates and increase
customer satisfaction.
To promote our positive organisational culture, purpose
and values, foster a healthy working environment, support
individual wellbeing, learning and development opportunities,
and be a responsible business.
To maintain competitive advantage and deliver
market-leading solutions.
HOW MANAGEMENT AND/OR DIRECTORS ENGAGE
Engagement surveys, all-company communications, and
Executive and SMT visits to global offices.
Performance reviews and objective setting, with people policies
and initiatives that support engagement, inclusion, professional
development, and wellbeing.
Initiatives such as mental health awareness, charity fundraisers,
and social events.
STRATEGIC DECISIONS IN THE YEAR
We continue to monitor the effectiveness and success of our
hybrid working policy and our flexible approach, ensuring our
people are able to drive results and benefit from an improved
work-life balance.
Boosting engagement with our learning platform to ensure our
people and teams have access to learning when they need it.
We continued to enhance our investor communications, website
and corporate materials in collaboration with our Financial
PR advisers.
CUSTOMERS
WHY ENGAGEMENT IS IMPORTANT
To ensure we meet or exceed our customers’ requirements and
maintain competitive advantages.
To build a highly referenceable customer base with low
attrition rates.
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.
HOW MANAGEMENT AND/OR DIRECTORS ENGAGE
Quarterly customer success meetings involving management
representatives, and customer satisfaction surveys.
Executive sponsorship programme for key accounts.
Chairing industry roundtables and customer forums to
communicate and consult on product development priorities
and new features addressing emerging market requirements.
Webinars and market/sector specific reports and articles.
Monthly Board updates and twice-yearly deep-dive reports
on Information and Cyber Security.
STRATEGIC DECISIONS IN THE YEAR
We made strategic product investments to enhance our value
proposition for customers.
We committed further resources to cyber security to enhance our
security posture and give our customers greater assurance around
the security and resilience of our solutions and operations.
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For further information, see ESG and People
and Culture, starting page 25.
For further information, see CEO’s statement,
starting page 12 and ESG, starting page 25.
COMMUNITIES & ENVIRONMENT
WHY ENGAGEMENT IS IMPORTANT
Developing our reputation as a responsible and
sustainable business.
Implementing strategies to support our communities
and environment under threat from adverse effects of
climate change.
HOW MANAGEMENT AND/OR DIRECTORS ENGAGE
Leadership of ESG, sustainability and climate-related matters
through Risk Review Board and ESG Champions Network.
Twice-yearly reports to the Board on sustainability and
climate-related matters.
Engagement with ratings agencies, customers and suppliers
on ESG and climate-related matters.
STRATEGIC DECISIONS IN THE YEAR
Creation of a Sustainability Committee with executive sponsorship.
Investment in upskilling Company Secretariat skills and
experience in ESG and wider sustainability measures and
regulatory requirements.
SUPPLIERS
WHY ENGAGEMENT IS IMPORTANT
To ensure 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.
HOW MANAGEMENT AND/OR DIRECTORS ENGAGE
Quarterly customer success meetings, iKey supplier relationships
are managed by the relevant members of the management team.
We participate in supplier reviews when requested.
STRATEGIC DECISIONS IN THE YEAR
No strategic decisions made in the year to alter our
commitments made to date.
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STAKEHOLDER ENGAGEMENT
CONTINUED
ENVIRONMENTAL, SOCIAL AND GOVERNANCE
STRATEGIC REPORT
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SCALING UP RESPONSIBLY
SCALING UP RESPONSIBLY
As a Group we remain committed to our ESG strategy of “Scaling
up responsibly”. Built across 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
Engagement from our ESG Champions Network continued
to support the implementation of the Group’s ESG strategy;
representing individuals, business functions and geographies
passionate about ESG, accelerating positive impact for our
people, our customers and our world, and championing ESG
initiatives across the Group.
PEOPLE AND CULTURE
Our aim is to be a highly valued, engaging and responsible
employer, 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.
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.
ATTRACTING, RETAINING AND DEVELOPING OUR TALENT
We implement Group-wide strategies designed to attract, retain
and develop our people that reflect local geographic and industry
economic climates. These 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 Scheme, linked
to personal objectives and wider team and Group objectives. The
annual bonus scheme is complemented by our employee share
scheme, 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 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 leadership development programmes to equip
our people leaders with the fundamental tools, techniques
and resources to coach and mentor 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.
ENVIRONMENTAL, SOCIAL AND GOVERNANCE
CONTINUED
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ENGAGING WITH OUR PEOPLE
We have an “always on” approach to employee engagement and
communications, including regular meetings within individual
teams, Group-wide communications, 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 our people
receive support and feedback to be successful in their roles and
continue to grow at Gresham.
Trust is vital in order to support and promote the exceptional
levels of employee engagement we enjoy and helps ensure that
the working environment balances wellbeing, provides motivating
opportunities for growth, and operates with compassion.
EQUALITY, DIVERSITY AND INCLUSION
Gresham is an equal opportunity employer. We celebrate diversity
and are committed to creating an inclusive environment for our
people. We are committed to ensuring our workplaces remain
free from unlawful or unfair discrimination in accordance with
applicable legislation, as well as our values. We are determined
to ensure that no applicant or employee receives less favourable
treatment on the grounds of any difference in diversity;
publishing a statement on equality, diversity and inclusion, which
can be found at www.greshamtech.com/edi.
GENDER ANALYSIS
Female
Male
Total
2023
2022
2021
2023
2022
2021
2023
2022
2021
Executive Directors
—
—
—
2
2
2
2
2
2
Senior managers
2
2
2
7
6
6
9
8
8
Staff
57
51
42
173
155
156
230
206
198
Total
59
53
44
182
163
164
241
216
208
Non-Executive
Directors
1
2
2
2
2
2
3
4
4
COMMUNITY
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.
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 expect the highest standards of ethical
conduct from our people and organisations we work with. We
have a zero-tolerance approach to unethical activities such as
corruption and bribery, as well as issues affecting fundamental
human rights. Our annual statement on modern slavery can be
found at www.greshamtech.com/modern-slavery.
ENVIRONMENT
POLICY STATEMENT
Gresham recognises its duty to manage its 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 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 28.
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
Gresham Technologies plc
Annual Financial Report 2023
27
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
2023, 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; not having 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 2023 is made below.
UK
Group
Metric
Unit
2020
2021
2022
2023
2020
2021
2022
2023
Global %
YoY change
Absolute
Scope 1 & 2
emissions
tCO
2
e
24
19
17
23.1
37
40
39
48
20-21: +8%
21-22: -3%
22-23: +23%
Absolute
Scope 3
emissions
tCO
2
e
n/a
n/a
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
1.9
1.5
1.1
0.8
1.0
20-21: -27%
21-22: -27%
22-23: +25%
Energy
consumption
kWh
104,000
88,000
90,000
110,000
158,000
186,000
200,000
230,000
20-21: 18%
21-22: 7%
22-23: +15%
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.
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.
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2023 TCFD COMPLIANCE
We recognise that changes to the climate present extensive risks and opportunities; with the
TCFD recommendations representing 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; which is why we continued
our support throughout 2023.
The Company’s TCFD compliance statement for the year ended 31 December 2023 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
Fully compliant
⚫
The Board has overall responsibility for risk
management and internal control (including
climate-related); formally reviewing climate-
related matters twice-yearly, alongside updates
on developments within the climate space, and
monthly Board packs containing climate-related
risk updates.
⚫
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.
⚫
The Risk Review Board, made up of departmental
management and a Non-Executive Director,
carries out quarterly reviews of Group-level
risks; with a section specifically dedicated to
climate-related risks.
⚫
Group COO, Jonathan Cathie, appointed to chair
future Sustainability Committee meetings to aid
in the governance around ESG, climate change
and sustainability.
b) Management’s role
in assessing and
managing climate-
related risks and
opportunities
Fully compliant
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
Fully 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 conduct annual Group-wide climate risk
and opportunity evaluations (see heat map and
table below).
⚫
Climate-related scenario analysis was undertaken
in the year to develop a more comprehensive
understanding of the Group’s material climate-
related risks (see page 30). Noting the IPCC’s AR6
report, our scenario analysis models have been
based on average global temperatures of 1.5°C, 2°C
and 3+°C above pre-industrial levels.
b) Impact on the
organisation’s
businesses, strategy,
and financial planning
Fully compliant
c) Resilience of the
organisation’s strategy
Fully compliant
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
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Annual Financial Report 2023
29
RECOMMENDATION
DISCLOSURE
COMPLIANCE
SUMMARY OF PROGRESS
RISK MANAGEMENT
How the organisation
identifies, assesses,
and manages climate-
related risks.
a) Risk identification and
assessment process
Fully compliant
⚫
Our risk management framework ensures
a dedicated climate risk and opportunity
assessment; with any climate-related
risks considered by the Risk Review Board
having oversight before reporting to the Board
of Directors.
⚫
A climate-related scenario analysis was carried
out by the company secretariat with input from
departmental managers.
⚫
For risks identified, assessments were carried out
to determine potential impact to the business
within various scenarios before considering
financial impacts.
⚫
Where climate-related risks have a risk rating
outside of tolerance, these were further
considered as potential principal risks in the
context of our business.
b) Risk management
process
Fully compliant
c) Integration into
overall risk
management
Fully compliant
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
Not compliant
⚫
Following our climate-related scenario analysis, we
plan to develop our climate-related metrics.
⚫
Our Scope 1 and 2 GHG emissions are disclosed in
the table below.
⚫
In future we plan to collect and measure our
Scope 3 GHG emissions, setting targets against
metrics in our most relevant areas for reduction.
b) Disclose Scope
1, Scope 2, and if
appropriate Scope
3 greenhouse gas
(“GHG”) emissions,
and the related risks
Partially compliant
c) Describe the
targets used by
the organisation to
manage climate-
related risks and
opportunities
and performance
against targets
Not compliant
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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
service delivery, affecting
client relationships with
negative impact on revenue
and trust in Gresham’s
platform and products.
⚫
The business could face
increased 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 keep this
under review.
FACILITIES AND
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
our people.
⚫
Lost revenue through impacts
on business continuity.
⚫
Increased costs through
reduced workforce
productivity and absenteeism.
⚫
Damage to buildings and
equipment could result in
financial impact through
uninsured losses and
increased insurance premiums.
Short-
medium
⚫
Our hybrid working policy
continues to enable 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 landlords take all
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.
⚫
Consideration given to reducing
our physical server footprint in
our office locations.
TRANSITION RISKS
COST PRESSURES
Climate-related
operational cost
pressures due to
supplier energy
price rises (due to
increased energy
costs, renewables
investment and
global conflicts) and
increased costs of
cloud computing.
⚫
If increased operating costs
could not be passed onto
customers, margins and
profitability could affect
inward investment through
perceived attractiveness to
investors.
⚫
Subsequent cost increases
to our services could impact
customer relationships
and ultimately revenue
if customers decide to
“shop around”.
Short-
medium
⚫
By considering the reduction of
our server footprint throughout
our office locations, cost
pressures would increase due to
higher cloud-hosted costs.
⚫
Regularly review suppliers to
ensure positive tackling of
climate-related issues as well as
best value for money.
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
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Annual Financial Report 2023
31
RISK
RISK
DESCRIPTION
POTENTIAL FINANCIAL
IMPACTS
TIME
HORIZON
OUR RESPONSE/
MITIGATING ACTIONS
TRANSITION RISKS
CONTINUED
REPUTATION
Reputational risks
if we are unable to
fully understand,
reduce or evidence
our total carbon
footprint in line
with stakeholder
expectations,
or through our
association
with customers,
suppliers and
third parties.
⚫
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 external
support, and switching
to more sustainable data
service providers.
Medium
⚫
Our newly created Sustainability
Committee will focus on ESG,
climate-related and sustainability
matters to ensure consideration
as part of key business decisions
and strategy.
⚫
Our climate-related scenario
analysis (see page 34) has
enabled the business to
understand its longer-term risks.
⚫
Board reviews of sustainability
on a twice-yearly basis ensure
matters are regularly considered
in strategic decision-making.
⚫
Sustainability experience and
knowledge within the company
secretariat team has been
expanded during the year.
PRODUCT AND
COMPETITION
If our 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 seeing very few
product requests related
to climate change.
CHANGES IN
CONSUMER/
CLIENT
PREFERENCES
Client preferences,
exacerbated by
climate policy, see
their global supply
chain focused
only on those
suppliers who are
able to commit
to, and deliver,
net zero business
operations, products
and services.
⚫
Reduced revenues through
cost reduction pressures from
customers and suppliers.
⚫
Reduced revenues through
customer churn.
Medium-
long
⚫
We respond to all client and
supplier procurement/sourcing
requests related to climate
change and sustainability.
⚫
Our climate change programme
is designed to support a range
of stakeholders, and 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
resources (internal and
external) to comply with
increasing climate-related
legislation and regulation
reporting requirements.
⚫
Regulation and/or pricing of
GHG emissions and policy
could increase expenditure
related to data centres,
estate operations and
supplier pricing.
⚫
Costs from any fines or
penalties as a result of
non-compliance.
Short-
medium
⚫
We continue to invest in our
people to ensure our company
secretariat team remain
on top of legislation and
regulatory changes, specifically
climate-related.
⚫
We collaborate with a range of
advisers to ensure we remain
compliant with reporting
requirements.
⚫
Climate change features on
meeting agendas of our Board
and Risk Review Board.
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RISK
RISK
DESCRIPTION
POTENTIAL FINANCIAL
IMPACTS
TIME
HORIZON
OUR RESPONSE/
MITIGATING ACTIONS
TRANSITION RISKS
CONTINUED
INVESTMENT
Technology
companies who
use data centres,
such as Gresham,
becoming less
attractive to
investors; especially
those with ESG
and climate-
change scoring
matrixes within
their investment
decision-making
frameworks, making
the Group less
attractive.
⚫
Reduced external investment
as a result of negative
impacts on our attractiveness
to investors.
Short-
medium
⚫
We continue to invest to support
our climate change programme
and broader ESG strategy.
⚫
We undertake externally
facilitated assessments to
consider areas of improvements
to our ESG strategy and reporting.
⚫
We respond to investor
enquiries on climate change
and ESG matters.
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.
Medium-
long
⚫
Ensure the Group continues to
address climate-related issues
in accordance with regulation
and legislation.
⚫
Strong engagement with our
people on climate-related
issues, including via our ESG
Champions Network.
LIABILITY RISKS
LITIGATION
Climate change
litigation could
manifest as a result
of a perceived
failure to consider,
mitigate or adapt
to risks associated
with climate change.
⚫
Increased legal costs to cover
litigation; including those
related to “greenwashing”.
⚫
Reduced external investment
if investors lose appetite to
invest in the business.
⚫
Reduced revenues if
brand equity is damaged,
affecting customer
attraction and retention.
Medium-
long
⚫
Ensuring climate-related, ESG
and sustainability matters
remain a focus for the Board
of Directors in strategy setting
and business reviews.
TRANSBOUNDARY RISKS
FINANCIAL
SYSTEM
INSTABILITY
Financial stability is
under threat from
climate change and
increased volatility
in the market
could affect our
future ability to
raise capital.
⚫
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.
⚫
Increased expenditure
on data centres due to a
higher level of customer
transactions being processed
by our software.
Medium-
long
⚫
Maintaining the stability of
the financial system under
close review.
⚫
Ensuring financial system risks
are taken into account in major
and strategic decisions.
⚫
Customer base predominantly
made up of blue-chip financial
services firms with significant
financial resilience.
⚫
Monitoring customer and
supplier base for exposure to
financial stability risks.
CLIMATE-RELATED RISKS AND IMPACT
CONTINUED
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GOVERNANCE
FINANCIAL STATEMENTS
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Annual Financial Report 2023
33
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; with integration into business
strategy; could strengthen our reputation
with 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 reputation (and thereby
increased revenue) by reducing carbon
footprints of customers using on-premise
solutions, by moving to the Cloud.
⚫
Lower recruitment costs due to increased
ability to attract and retain talent.
Short
SERVICE
OFFERINGS
Innovating, evolving or developing products
and/or services that support climate
mitigation or adaptation activities, or
help facilitate a low carbon transition,
for our customers.
⚫
Increased revenue through new channels
and product diversification.
Medium-
long
COST
EFFICIENCIES
Assessing our impacts and investing in new
and improved ways of working that are more
climate-friendly could lead to cost savings
and increased resilience.
⚫
Reduced operational costs through,
for example, reduced travel, energy
efficient measures, and reduced office
estate costs.
⚫
Productivity and efficiency gains.
Short-
medium
ENHANCED
REPORTING
INFRASTRUCTURE
Formulating and acting on a deliberate
climate action and net zero strategy,
supported by a robust governance and
risk management reporting framework
could enable better understanding and
management of business performance.
⚫
Potential to further understand the
non-financial metrics that drive long-term
stakeholder value; accessing an expanded
pool of investors who are focused on
ESG performance.
Medium
1
Regularity
2
Market risk – reputation
3
Facilities & workforce
4
Cost pressures
5
Financial system instability
6
Investment
7
People
8
Litigation
9
Market risk –
product & competition
10
Digital infrastructure
Imminent
Very likely
Likely
Unlikely
Very unlikely
Insignificant
Minor
Moderate
Major
Catastrophic
1
2
3
4
5
9
6
7
8
10
CLIMATE-RELATED RISK MATRIX
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CLIMATE-RELATED SCENARIO ANALYSIS
The Group has chosen three climate scenarios with differing temperature models through to 2050 to run its first climate-related
scenario analysis. Using the NGFS Climate Scenarios has enabled integrated assessment modelling, which has considered the
inter-relationships between physical and transitional risks. Impact ranges are considered against FY23 Group revenue.
RISK
RISK
DESCRIPTION
CURRENT POLICIES
(3°C+ by 2050)
DELAYED
TRANSITION
(2°C by 2050)
NET ZERO 2050
(1.5°C by 2050)
ENERGY AND
COMMODITY
MARKET
VOLATILITY
Increased uncertainty
in financial planning
and forecasting for key
commodities, as well as
higher costs associated
with energy consumption
and spend.
LOW IMPACT
Costs remain steady
with lack of investment
in renewable sources,
carbon pricing and net
zero plans by energy and
commodity markets.
LOW IMPACT
Net zero plans, carbon
pricing and renewable
energy investment cause
increases to energy and
commodity costs.
LOW IMPACT
Net zero plans, carbon
pricing and renewable
energy investment
cause sharp and high
rises to energy and
commodity costs.
CLIMATE
CHANGE RISKS
TO DATA CENTRES
Inability of suppliers to
cool data centres due to
droughts and increased
global temperatures,
which Gresham relies on
to deliver core services.
HIGH IMPACT
Data centre costs
increase as air and
land temperatures
increase, and cooling
efficiencies require
further investment.
HIGH IMPACT
Data centre costs
increase as air and
land temperatures
increase, and cooling
efficiencies require
further investment;
as well as investment
in renewables.
LOW IMPACT
Data centre costs would
increase due to a drive
to ensure a net zero
future, by investing in
renewables.
CLIMATE
CHANGE RISK
TO BUSINESS
OPERATIONS,
OFFICE
LOCATIONS
AND PEOPLE
Increases in the
frequency and/or severity
of climate-related events
affecting business
operations, working
locations and our people
1
.
HIGH IMPACT
Greater focus on cross-
regional support required
in regions susceptible
to climate change; with
their long-term viability
of consideration.
MEDIUM IMPACT
BCPs would plan
for short-term
interruptions in regions
most susceptible to
climate change to be
accommodated across
the wider Group.
LOW IMPACT
Business interruptions
which could not
be managed in the
short-term across the
wider organisation
would remain rare.
CARBON
PRICES AND
OFFSET COSTS
Financial costs of carbon
prices and offsetting
of carbon emissions
(via voluntary removal)
that cannot be reduced
by the business or its
supply chain.
LOW IMPACT
Policy reaction remains
low, with little appetite
to increase offset costs
or carbon pricing.
LOW IMPACT
Policy reaction sees
offset costs and carbon
pricing increasing to
~$276 per t/CO₂e
2
.
LOW IMPACT
Greater policy reaction,
resulting in rapid
increases in offset costs
and carbon pricing
(significantly higher than
~$276 per t/CO₂e)
2.
Impact ranges
LOW
<1%-5% Group revenue
MEDIUM
5%-10% Group revenue
HIGH
+10% Group revenue
1
GDP impact data: Swiss Re Institute The economics of climate change: no action is not an option.
2
WorldBank State and Trends of Carbon Pricing 2023.
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
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Annual Financial Report 2023
35
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.
2023
2022
Variance
%
Clareti ARR
Clareti ARR at start of year
£m
28.1
24.0
n/a
Organic increase in ARR
£m
2.2
2.3
(0.1)
(4%)
Foreign exchange movement
£m
(0.8)
1.8
(2.6)
(144%)
Clareti ARR at end of year
KPI
£m
29.5
28.1
1.4
5%
Other ARR
Other ARR
£m
3.2
3.5
(0.3)
(9%)
Group ARR
Group ARR
£m
32.7
31.6
1.1
4%
Our ARR from our strategic growth business, Clareti, is a critical KPI for the Group as it provides a forward-looking view of the minimum
expected revenues in the next twelve months; which gives confidence to business planning and investment decisions. The organic Clareti
ARR growth in 2023 was £2.2m, an increase of 8% on the opening Clareti ARR position, and broadly aligned with the £2.3m organic growth
achieved in the previous year, we were disappointed with the Clareti ARR growth performance in 2023 and confident in improving this
in 2024. Foreign exchange movements in the opening ARR position, largely the strengthening of the GBP against the USD and AUD, were
negative £0.8m, compared to the positive £1.8m experienced in 2022. Our retention and upsell measures improved on the previous year,
with the trailing twelve-month net Clareti ARR retention rate being 105%, increasing from the 102% rate achieved in the prior year (both
on a constant currency basis). We calculate our net ARR retention rate as ARR from the end of the period from customers’ existing at the
start of the period, divided by ARR at the start of the period. There remains a significant market opportunity to both upsell and cross-sell
to our continually growing existing customer base that we are strategically investing in capturing. Going forward, we expect our net ARR
retention rate to further improve in 2024.
ARR from our Other businesses have fallen by £0.3m to £3.2m in 2023. The significant majority of this ARR is denominated in AUD.
Therefore the movement is largely due to the strengthening of the GBP against the AUD since the prior year. It remains encouraging
to see the ongoing longevity of the remaining non-Clareti business line continuing to provide predictability and further ability to invest
with confidence in the Clareti business.
In addition to Group ARR of £32.7m, expected revenues from non-recurring contracts in place as at 31 December 2023 provide visibility
for over £38.0m of revenue for 2024 before any new or incremental contracts are won.
Having delivered another year of
growth, and with cash ahead of
expectations, we are confident in
the robust foundations we have built
across the Group which provide the
platform from which we will further
build our position in the market.”
FINANCIAL REVIEW
FURTHER CLARETI GROWTH AND
DRIVING EFFICIENCIES WILL ENHANCE
OUR PERFORMANCE MOVING FORWARD
36
Gresham Technologies plc
Annual Financial Report 2023
Strategic report
PRIOR YEAR RESTATEMENT
The Group identified two items requiring restatement in relation to a change in the treatment of non-Gresham hosted licence revenue
and an error in the accounting for foreign exchange differences on the retranslation of intercompany trading and loan balances.
Full details of these restatements are disclosed in full within note 3 to the financial statements. The financial statements and all
commentary and references to the year’s performance or year-end position of the Group for 2022 and 2023 are presented post the
application of these changes, as has the opening balance sheet position at 1 January 2022. Where commentary and references are
made to performance and positions prior to 1 January 2022, these are based upon the previously published results. A summary of
these restatements for the year ended 31 December 2022 is as follows.
2022 – as previously reported
Restatements
2022 - as restated
Group revenues
£m
48.7
(0.5)
48.2
Group gross profit
£m
33.9
(0.5)
33.5
Group adjusted EBITDA
£m
10.3
(0.5)
9.8
Group cash adjusted EBITDA
£m
4.4
(0.5)
3.9
Statutory profit after tax
£m
2.9
(1.3)
1.6
INCOME STATEMENT
ABANDONED OPERATIONS
During November we announced that in line with the Group’s strategy to continue our transformation to a pure-play SaaS company,
we were abandoning our Contracting Services business with ANZ bank; with all material operations ceasing before 31 December 2024.
This business was the lower-margin legacy sub-contracting business under which locally based IT contractors were provided to the
Bank on short-term agreements.
The majority of the sub-contracting business has been reported as its own contracting services business segment, with a smaller
proportion being reported within Clareti non-recurring revenue where a small number of contractors have been provided specifically
as part of the Floe project (now presented separately in note 5 to the financial statements). Revenues and profits from this operation
have been disclosed below and are described separately to the ongoing operations of the Group. Revenues from this contract were
£8.1m for the year, 22% lower than 2022, with the reduction being due to lower demand from ANZ for these non-strategic services. In
addition to the transition away from these services, these revenues have also been impacted by foreign exchange differences due to
the AUD weakness experienced throughout the year against the GBP.
2023
2022
Variance
%
Abandoned operations
Clareti revenues(1)
Non-recurring
£m
1.5
2.2
(0.7)
(32%)
Other services revenues(1)
Non-recurring
£m
6.6
8.2
(1.6)
(20%)
Group revenues
£m
8.1
10.4
(2.3)
(22%)
Group gross margin
£m
1.1
1.4
(0.3)
(22%)
%
13%
13%
–
n/a
Group adjusted EBITDA
£m
1.1
1.4
(0.3)
(22%)
%
13%
13%
—
n/a
Group cash adjusted EBITDA
£m
1.1
1.4
(0.3)
(22%)
%
13%
13%
—
n/a
(1)
Abandoned operations under both the Clareti and Non-Clareti business segments were performed under the same master contract and carried the same fixed margin.
FINANCIAL REVIEW
CONTINUED
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
Gresham Technologies plc
Annual Financial Report 2023
37
CONSTANT CURRENCY INCOME STATEMENT HEADLINES
Due to the levels of transactions occurring in currencies other than the Company’s functional reporting currency of GBP, largely USD
and AUD, the Group suffered to a material degree from the strengthening of the GBP throughout the year. The table below shows 2023
performance if transactions had been reported on the same average exchange rates for the year as 2022.
2023
2022
Variance on
constant
currency
basis
%
Actual
basis
Constant
currency
basis
Group revenue
£m
49.0
50.2
48.2
2.0
4%
Group gross margin
£m
36.2
36.9
33.5
3.4
10%
Group gross margin %
%
74%
74%
70%
4%
Group adjusted EBITDA
£m
10.7
11.0
9.8
1.2
12%
Group adjusted EBITDA %
%
22%
22%
21%
1%
Cash adjusted EBITDA
£m
4.7
5.0
3.9
1.1
28%
Cash adjusted EBITDA %
%
10%
10%
8%
1%
REVENUES
Our income is analysed between revenues from Clareti Solutions and from ‘Other’ non-strategic solutions and services, revenues from
each business of these business segments are then broken into:
▪
Recurring revenues – which are generated for software and software-related services such as support, maintenance, and other
ongoing managed services; all of which are contracted or expected to continue for the foreseeable future.
▪
Non-recurring revenues – include professional services, contracting, training, and other services that are expected to be one-off or
periodic in nature.
2023
2022
Variance
%
Clareti solutions
Recurring
KPI
£m
29.6
26.9
2.7
10%
Non-recurring
6.6
6.0
0.6
10%
Total Clareti revenues
KPI
£m
36.2
32.9
3.3
9%
Other solutions &
services
Recurring
£m
4.2
4.6
(0.4)
(9%)
Non-recurring
£m
0.5
0.3
0.2
67%
Total
£m
4.7
4.9
(0.2)
(4%)
Abandoned
operations
Non-recurring
£m
8.1
10.4
(2.3)
(22%)
Group
Total
KPI
£m
49.0
48.2
0.8
2%
CLARETI SOLUTIONS
Clareti recurring revenues increased by 10%, up £2.7m on 2022 or 12% and £3.2m on a constant currency basis. These increases were as a result
of both new recurring revenue sales and increased consumption of Clareti solutions from our existing customers.
Clareti non-recurring revenues increased by 10%, up £0.6m on the prior year. The increase driven by new implementations associated with
the increase in Clareti recurring revenues and improved discipline in ensuring services work from the Electra business, acquired in 2021,
is fully chargeable.
OTHER SOLUTIONS & SERVICES
The vast majority of the remaining and ongoing ‘Other Solutions & Services’ relate to a legacy partner relationship where we act as a
reseller of third party software to a single customer. We continue to benefit from very good visibility of customer intentions in relation
to this remaining product line.
Recurring revenues within the ‘Other Solutions & Services’ portfolio decreased by 9% to £4.2m as a result of the discontinuation of
our own-IP software product (EDT) from 31 December 2022, and the weakening of the AUD, which the vast majority of the remaining
recurring business is contracted in. Non-recurring Other revenues increased from £0.3m to £0.5m due to a one-off purchase of
extended rights for unsupported source code usage of one of our legacy products.
38
Gresham Technologies plc
Annual Financial Report 2023
Strategic report
INCOME STATEMENT
CONTINUED
EARNINGS
2023
2022
Variance
%
Clareti
Solutions
Gross margin
£m
32.9
29.7
3.2
11%
Gross margin
%
91%
90%
1%
n/a
Other solutions
& services
Gross margin
£m
2.3
2.5
(0.2)
(8%)
Gross margin
%
50%
49%
1%
n/a
Abandoned
operations
Gross margin
£m
1.0
1.3
(0.3)
(20%)
Gross margin
%
13%
13%
—
n/a
Group
Gross margin
£m
36.2
33.5
2.7
8%
Gross margin
%
74%
69%
5%
n/a
Adjusted EBITDA
KPI
£m
10.7
9.8
0.9
9%
Adjusted EBITDA
KPI
%
22%
20%
2%
n/a
Cash Adjusted EBITDA
KPI
£m
4.7
3.9
0.8
21%
Cash Adjusted EBITDA
KPI
%
10%
8%
2%
n/a
Statutory profit after tax
£m
3.1
1.6
1.5
94%
Adjusted diluted EPS
KPI
Pence
6.32
7.03
(0.71)
(10%)
GROSS MARGIN
The majority of our cost of sales within the Clareti business
is made up of: (i) customer-specific third party costs incurred
in providing our hosted cloud solutions; and (ii) third party
contractor costs providing non-recurring services to customers.
Gross margins achieved within the Clareti business segment
have increased from 90% in 2022 to 91% in 2023 as high margin
recurring revenues have increased as a proportion of total
Clareti revenues.
Within the ‘Other Solutions & Services’ business segment, cost
of sales are incurred in relation to the fees paid to the software
IP owner at fixed margins under reselling contracts. Gross
margins generated in this business segment for the year are 50%,
relatively consistent with those in 2022 of 49%.
Group gross margins have improved from 69% to 74% as the
mix of the Group’s business has continued to move, in line with
Group strategy, to the high-margin Clareti business.
ADJUSTED EBITDA
Adjusted EBITDA (earnings before interest, tax, depreciation and
amortisation) is analysed excluding exceptional items, share-
based payment charges and foreign exchange differences on
intercompany balances; which is consistent with the way in
which the Board reviews the financial results of the Group.
We also consider this to be consistent with the manner in
which similar small-cap LSE (or AIM) listed companies present
their results, and how we understand the global investment
community assesses performance, with this particularly being
the case for growth shares in which recurring cash performance
is considered important. However, whilst we consider them
consistent and appropriate, this EBITDA measure and cash
adjusted EBITDA measure below are not necessarily directly
comparable to other companies as they are not strictly governed
IFRS accounting measures, nor should they be considered as
a substitute for, or superior to, any IFRS measures.
Group adjusted EBITDA has improved by £0.9m, or 9%, since the
prior year with margins improving by 2% to 22% in 2023. This is as
a result of the existing higher margin Clareti business continuing
to grow and beginning to drive improved operational leverage
as it scales. Whilst we will ensure that we maximise the current
market opportunity through appropriate strategic investments,
we do expect to continue to see improvements to these margins
in future years.
CASH ADJUSTED EBITDA
Cash adjusted EBITDA refers to adjusted EBITDA reduced by the
value of capitalised development spend and any IFRS 16 lease-
related cash expenses classified as depreciation and interest. We
consider this a good measure of cash profitability for a modern
SaaS business who continue to invest in product development to
ensure they remain market leading.
Cash adjusted EBITDA has also improved on the prior year, with
£0.8m of the £0.9m improvement in adjusted EBITDA (mentioned
above) dropping through to improvement cash EBITDA. This
has resulted in a cash adjusted EBITDA margin of 10%, an
improvement of 2% on the prior year. Like adjusted EBITDA,
we expect to see continued improvements in these margins in
future years.
The Clareti standalone business reached an important milestone
in 2022, becoming cash adjusted EBITDA positive for the first
time, generating a margin of 2%. As was anticipated, this margin
further improved to 4% in 2023. As the Clareti business continues
to scale this will continue to drive Group cash adjusted EBITDA
improvements.
STATUTORY PROFIT AFTER TAX AND ADJUSTED
DILUTED EPS
There has been an increase in statutory profit after tax of
£1.5m to £3.1m due to the combination of improved adjusted
operating profit of £0.4m as a result of the growth and improved
profitability of the Group; offset by an increase in tax charge of
£0.7m (see below).
Adjusted diluted EPS has reduced by 10% to 6.3 pence per
share, the reduction is largely due to the increased taxation
charge for the year (refer to taxation section below). Adjusted
earnings used in this calculation adjust the statutory result after
tax for exceptional items; amortisation of acquired intangibles,
share-based payments and foreign exchange differences on
intercompany balances.
EXCEPTIONAL ITEMS
During the year, the Group recognised exceptional costs of £0.1m
in relation to the termination of supplier contracts following
the closure of the EDT business in December 2022. In the prior
year, £0.2m of exceptional costs were incurred in relation to the
Electra acquisition and associated integration. The Group also
received £0.1m of exceptional income in the year from a one-off
tax credit in relation to the
COVID
-19 pandemic relief scheme;
there was no such exceptional income in 2022.
FINANCIAL REVIEW
CONTINUED
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
Gresham Technologies plc
Annual Financial Report 2023
39
TAXATION
For the year ended 31 December 2023, the Group has recorded
a net tax charge of £1.0m (2022: £0.3m). This is made up of a
current tax charge of £0.6m (2022: £0.3m) and deferred tax
charge of £0.4m (2022: £nil).
The current tax charge increased by £0.3m, largely due to the
credit generated upon the surrender of tax losses for a cash
rebate related to the enhanced relief available from qualifying
R&D activity being lower than the prior year as a result of their
being fewer losses available.
The deferred tax charge increased by £0.4m as a result of: the
recognition of tax asset due to losses generated being £0.4m
lower than the prior year upon the reduction in rate of enhanced
tax relief on qualifying R&D activity from 130% to 86%; and a
£0.3m reduction in deferred tax asset due unexercised employee
share awards, which are valued at the current share price for tax
purposes which has reduced since the prior year.
CASHFLOW
The Group’s financial position remained very strong throughout
2023. At a headline level, the cash balance at the year-end of
£4.8m was behind that of the prior year-end of £6.3m. Whilst
the final deferred consideration payments from 2021’s Electra
acquisition during the year of £4.0m explains much of this, there
are also a number of other movements beneath the headline
balances which are described below.
Operating cashflow, excluding working capital, abandoned and
exceptional items, has increased by £0.8m to £9.7m in the year
as a result of the improved cash EBITDA of the Group, particularly
the strategic Clareti business.
Operating cash outflow from exceptional items has reduced
from £0.2m to £nil, and operating cashflows from abandoned
operations have reduced by £0.4m to £1.0m.
The movement in working capital, excluding the impact of the
abandoned operations, has improved from negative £0.8m to
a positive £1.3m; a trend which is expected to continue due to
the ‘paid annually in advance’ commercial model in the Clareti
business (this was after a number of one-off items caused
the negative movement in the prior year). The movement in
working capital from abandoned operations was a negative
£1.9m, reflecting the quarterly advance payments model of the
Contracting Services business.
The Group paid net tax of £0.6m in 2023, whereas £0.6m was
received in 2022. Gross tax payments were made in the year
of £1.9m (2022: £1.9m). During 2023 the Group received gross
tax receipts of £1.3m as a result of research and development
activities performed. During 2022, two years’ worth of equivalent
receipts were received relating to 2020 and 2021, totalling £2.5m.
The capitalised development expenditure of £5.2m is £0.2m higher
than 2022 largely due to inflationary related salary increases.
During 2023 the Group spent £0.2m on other capital spend,
a return to normal levels, after 2022 saw a one-off increase in
relation to the complete refurbishment of our New York office.
During the prior year the Group paid the final contingent
consideration payment of £0.4m in relation to the July 2020
Inforalgo acquisition. As such, there was no equivalent payment
in the current year.
Upon meeting the success criteria measured on the second
anniversary of the 2021 Electra acquisition, the second and
final contingent consideration payment was made in full of
£4.0m (2022: £4.0m).
The Group received £0.2m upon the exercise of share options
during the year (2022: £0.1m).
Included within ‘Other’ is the recording of negative effect
of foreign exchange rate changes of £0.1m, arising upon the
revaluation of the Group’s non-GBP entity opening balance sheets
upon consolidation; the equivalent in the prior year was £1.1m.
As has been the strategy of the Group for a number of years, with
increasing Clareti sales from the growing annuity base and new
customer wins, coupled with carefully selected and controlled
investments, we expect the cash-generation capacity of the
business to continue and are looking at opportunities to best
utilise excess cash generated. In order to maximise our returns, we
plan to increase levels of investment in distribution and customer
success, whilst continuing to invest excess cash efficiently in bank
deposits and giving appropriate consideration to M&A opportunities.
2023
2022
Variance
%
Opening cash and cash equivalents at 1 January
£m
6.3
9.1
(2.8)
(31%)
Operating cashflow excluding abandoned and
exceptional items
£m
9.7
8.9
0.8
9%
Operating cashflow from abandoned operations
£m
1.0
1.4
(0.4)
(29%)
Operating cashflow from exceptional items
£m
—
(0.2)
0.2
(100%)
Total operating cashflow excluding working capital
£m
10.7
10.1
0.6
6%
Movement in working capital
£m
1.0
(0.8)
1.8
(225%)
Movement in working capital – abandoned operations
£m
(1.6)
—
(1.6)
n/a
Cash inflow from operations
£m
10.1
9.3
0.8
9%
Net tax (payments)/receipts
£m
(0.6)
0.6
(1.2)
(200%)
Capital expenditure – development costs
£m
(5.4)
(5.2)
(0.2)
4%
Capital expenditure – other
£m
(0.2)
(0.8)
0.6
(75%)
Principal paid on lease liabilities
£m
(0.7)
(0.6)
(0.1)
17%
Inforalgo acquisition (net of cash acquired)
£m
—
(0.4)
0.4
100%
Electra acquisition
£m
(4.0)
(4.0)
—
—
Shares issued – upon option exercises
£m
0.2
0.1
0.1
100%
Dividend
£m
(0.6)
(0.6)
—
—
Other
£m
(0.3)
(1.2)
0.9
(75%)
Net increase/(decrease) in cash and cash equivalents
£m
(1.5)
(2.8)
1.3
(46%)
Closing cash and cash equivalents at
31 December
KPI
£m
4.8
6.3
(1.5)
(24%)
40
Gresham Technologies plc
Annual Financial Report 2023
Strategic report
CONSOLIDATED STATEMENT OF FINANCIAL
POSITION
Intangible fixed assets remain the largest item on the balance
sheet at £62.9m (2022: £62.8m), consisting of software
development assets of £25.9m (2022: £23.6m), separately
identified assets acquired with previous acquisitions of £17.2m
(2022: £19.5m), and goodwill of £19.6m (2022: £19.7m).
Trade receivables increased from £4.8m to £5.7m and accrued
income (a contract asset) has reduced from £1.8m to £1.0m.
The combined balance of trade receivables and accrued income
remains fairly consistent year on year, however the balance
between the two has shifted due to the timing of a single large
customer invoice being raised.
Contract liabilities are split between non-current, £0.8m (2022:
£0.4m) and current liabilities, £13.0m (2022: £13.5m). Non-
current contract liabilities have increased by £0.4m due to two
customers negotiating non-standard renewal terms under which
they paid the full three-year renewal term upfront. Current
contract liabilities have reduced by £0.5m due to the abandoning
of the non-Clareti Contracting Services business, which is
partially offset by the increase in Clareti ARR which is typically
paid annually in advance.
Deferred tax liabilities, which are presented net of deferred
tax assets, have increased from £5.7m to £6.5m as a result of
research and development spend qualifying for enhanced tax
relief being £0.4m lower than the prior year as a result of the
rate reducing from 130% to 86%; offset by a reduction of £0.6m
from the unwinding of timing difference arising on acquired
intangibles, a £1.0m decrease in tax losses available and a £0.3m
decrease in deferred tax on employee share awards.
Contingent consideration has reduced from £4.0m to £nil as a
result of the final amount of $4.8m due on the Electra acquisition
being paid during the third quarter of 2023.
Trade payables decreased from £1.5m to £1.0m, largely due to
the Contracting Services business being abandoned. Accruals
decreased to £3.6m (2022: £4.3m), largely in relation to a reduced
bonus provision as 2023 performance was not as strong against
set targets as it was in 2022.
FINANCIAL OUTLOOK
Management were pleased to deliver continued growth in 2023
in Clareti revenues, Group adjusted EBITDA and Group cash
adjusted EBITDA against the continued turbulent economic
environment in which our customers operate, and the foreign
exchange headwinds experienced. Management are confident
of the building blocks in place to drive expected improvements
in Clareti growth rates; which will be achieved through new
customer wins, expanding the existing ARR base from existing
customers, and reducing losses and down-sells.
The decision with ANZ to abandon the non-core low-margin
Contracting Services business simplifies the Group towards a
pure-play SaaS company, generating Group margins expected of
such a business.
We are also focused on improving our profit margins through
targeted cost optimisations across the Group whilst prioritising
investments that maximise growth generation.
TOM MULLAN
CHIEF FINANCIAL OFFICER
29 APRIL 2024
FINANCIAL REVIEW
CONTINUED
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
Gresham Technologies plc
Annual Financial Report 2023
41
PRINCIPAL RISKS AND UNCERTAINTIES
EFFECTIVE RISK
MANAGEMENT SYSTEMS
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 51.
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
The Group’s risk management framework involves a 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 COO
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.
Customer Success
Security
Finance
Product
Internal System
People and Culture
Sales
Marketing
Legal and Corporate
Board of Directors
Principal and Enterprise Risks
Executive Board
Customer/Project Risks
Risk Review Board
Department Risks
COO Support
Audit Committee
Financial and Fraud Risks
Environmental, Social and Governance
42
Gresham Technologies plc
Annual Financial Report 2023
Strategic report
LINKS TO STRATEGY
2
4
5
DESCRIPTION
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.
COMMENTARY
Our ongoing investments in product
innovation are an essential part of
our strategy. In 2023, 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 Floe,
our strategic cash management
solution with ANZ, which we believe
has strong growth prospects over
the medium to long-term.
FAILURE TO WIN NEW CLARETI BUSINESS
IN LINE WITH PLAN
LINKS TO STRATEGY
1
2
3
DESCRIPTION
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.
COMMENTARY
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. These factors
collectively present unquantifiable
risks to growth aspirations and
business plan.
MISDIRECTED PRODUCT, OPERATIONAL OR
STRATEGIC INVESTMENTS
LINKS TO STRATEGY
1
2
3
4
DESCRIPTION
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.
COMMENTARY
Our systems, processes and
methodologies are designed to
mitigate product and service
delivery failures, although this is not
guaranteed. Overall, our solutions
and services were resilient and
stable throughout 2023. Whilst
there were no fundamental outages
or service failures, certain projects
or situations have necessitated
ongoing investments to ensure
successful project outcomes and
customer satisfaction.
KEY CUSTOMER RISKS AND FAILURE TO
MINIMISE CHURN RATES
LINKS TO STRATEGY
1
2
3
DESCRIPTION
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.
COMMENTARY
Our overall gross retention rate
for 2023 was 96% (2022: 91%). We
have not suffered any key account
losses in the year, although two
key accounts announced a merger
during the year, which presents
a potential risk in the longer
term. We endeavour to maintain
strong relationships at all levels
in our key accounts to promote
customer success and mitigate
cancellation risks.
PRODUCT AND SERVICE DELIVERY FAILURES
ACCELERATED DECLINE IN NON-CLARETI
REVENUES
LINKS TO STRATEGY
4
5
DESCRIPTION
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.
COMMENTARY
Risks in the non-Clareti portfolio
have remained stable 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 2023, we made the decision to
discontinue the sub-contracting
business in Australia which impacts
revenues and earnings in 2024.
ECONOMIC, INTERNATIONAL TRADE AND
MARKET CONDITIONS
LINKS TO STRATEGY
1
2
5
DESCRIPTION
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.
COMMENTARY
Trading conditions were challenging
in 2023, with some high-profile
insolvency concerns affecting
some major financial institutions,
amidst a backdrop of geopolitical
instability. These factors negatively
affected the Group’s performance,
although the business remained
resilient. We continue to manage
our business, operations and
investments prudently.
PRINCIPAL RISKS AND UNCERTAINTIES
CONTINUED
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
Gresham Technologies plc
Annual Financial Report 2023
43
LINKS TO STRATEGY
1
2
5
DESCRIPTION
The Group is significantly exposed
to foreign exchange volatility. A
weakening of GBP against other
major currencies, particularly USD,
could significantly impact the Group’s
financial performance and, therewith,
its value and future prospects.
Furthermore, high inflation rates can
also impact financial performance as
a result of cost increases.
COMMENTARY
The strengthening of GBP against
USD in the year has negatively
affected the Group’s overall
financial performance as reported.
Inflation rates decreased in the
year and are now more stable,
although still impacted financial
performance as revenue growth
rates from inflationary price rises
did not match salary/cost inflation
in the year.
FOREIGN EXCHANGE AND INFLATION
LINKS TO STRATEGY
1
2
3
4
5
DESCRIPTION
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.
COMMENTARY
There were no major people issues
in the year. The situation in 2023
was generally more stable than in
2022 when cost-of-living concerns
were driving significant wage
inflation and employee retention
challenges. These risks reduced
in the year and, whilst we remain
exposed to a number of key person
risks, our annual survey results
confirm our staff remain highly
engaged which is a mitigating factor.
PEOPLE RISKS
APPROVAL OF THE STRATEGIC REPORT
The Strategic Report was approved by the Board of Directors on 28 April 2024.
On behalf of the Board.
IAN MANOCHA
CHIEF EXECUTIVE
29 APRIL 2024
TOM MULLAN
CHIEF FINANCIAL OFFICER
29 APRIL 2024
LINKS TO STRATEGY
2
DESCRIPTION
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.
COMMENTARY
Governance, regulatory and
compliance risks are generally
overseen and managed by the
Group’s internal legal and corporate
function, with the support of
external advisers. A formal schedule
of applicable laws and regulation
is maintained to track existing and
emerging requirements, which
is reviewed on a quarterly basis.
Specific risks arising are captured
in the Group’s risk register.
IP, DATA AND CYBER RISKS
CLIMATE CHANGE
LINKS TO STRATEGY
2
3
DESCRIPTION
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.
COMMENTARY
Like all businesses, Gresham is
exposed to an increasing range
of cyber-attacks. In the year
we strengthened our security
team and made further security
improvements in various areas
to mitigate risks. We successfully
completed security re-certification
audits. There were no major cyber
incidents in the year.
LINKS TO STRATEGY
1
2
DESCRIPTION
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.
COMMENTARY
The Group did not experience any
direct impact of climate change in
2023, but is mindful of potential
future risks. We have conducted a
detailed examination of climate-
related risks (and opportunities) in
the year, which are set out starting
on page 30. Climate risks are
reviewed by the Group’s Risk Review
Board on a quarterly basis.
GOVERNANCE, REGULATORY AND
COMPLIANCE RISKS
The Gresham Board is committed to
setting and championing the highest
standards of corporate governance
across the Group to ensure a healthy
corporate environment exists for our
people and customers.”
CHAIR’S INTRODUCTION TO GOVERNANCE
CORPORATE GOVERNANCE OF THE
HIGHEST STANDARDS IS AN INTEGRAL
PILLAR IN THE GROUP’S MAKEUP
The Board is committed to upholding the highest of 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 for
all stakeholders.
Specifically, the Board acknowledges its role in leading and
overseeing the Group’s environmental, social and governance
(“ESG”) strategy.
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 2023 is set out in the Corporate
Governance Report. A Board performance review was carried out
in the year with further information available on page 49.
Board discussions are conducted openly and transparently,
creating an environment for sustainable and robust debate. In
the year, the Board 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 and
specific review of the Group’s key risks and uncertainties (see
page 42) 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.
RICHARD LAST
NON-EXECUTIVE CHAIR
29 APRIL 2024
Governance
44
Gresham Technologies plc
Annual Financial Report 2023
Years
Board Tenure
Richard Last
Jenny Knott
Andy Balchin
Tom Mullan
Ian Manocha
0
1
2
3
4
5
6
7
8
9
Non-Executive
Executive
Board Independence
Board Gender Mix
Board Tenure
Executive Directors
Independent Non-Executive Directors
Non-Executive Director
Non-Executive Chair
KEY
Experienced
Competent
Familiar
Female NED
Male NED
Male ED
0-3 years
4-6 years
7+ years
Board and Director skills table
Skill
Richard Last
Andy Balchin
Jenny Knott
Oliver Scott
Ian Manocha
Tom Mullan
International markets
l l l
l l l
l l l
l l
l
l l l
l l
l
Enterprise s
tw
e sal
es
l l l
l l l
l l l
l
l l
l l l
l l
l
Product management
l l
l
l
l l
l l l
l
l l
l
l l
l
l l
Software product development
l l
l
l l
l
l l l
l
l l
l
l l
l
l l
Financial services in
l l l
l l l
l l l
l l l
l l l
l l l
Talent management
l l
l
l l l
l l l
l l
l
l l
l
l l
l
Financial c
trol and planning
l l l
l l l
l l l
l l l
l l
l
l l l
Cyber security
l l
l
l l l
l l
l
l
l l
l
l l
l
l l
Risk manage
t
l l l
l l l
l l l
l l
l
l l
l
l l
l
Governance, regulatory and compliance
l l l
l l l
l l l
l l
l
l l
l
l l
l
Oliver Scott
Gresham Technologies plc
Annual Financial Report 2023
45
FINANCIAL STATEMENTS
STRATEGIC REPORT
GOVERNANCE
BOARD OF DIRECTORS
OUR HIGHLY EXPERIENCED BOARD
DATE OF APPOINTMENT:
Non-Executive Chair from October 2023.
BOARD TENURE:
0.5 years.
Richard joined Gresham as Chair in
October 2023, bringing a wealth of public
company experience and leadership to the
Board. Richard also has experience leading
privately-held companies, in both Chair
and Non-Executive Director positions; as
well as international experience from his
time at CSE Global Limited, a Singapore
listed company.
KEY EXTERNAL APPOINTMENTS
AND CHANGES:
▪
Non-Executive Chair of Tribal Group plc
▪
Non-Executive Director of Corero
Network Security plc
COMMITTEES:
▪
Nomination (Chair), Remuneration
(member)
DATE OF APPOINTMENT:
Non-Executive Director since
October 2020.
BOARD TENURE:
3 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
Simplyhealth Group, Chair of Risk
and Capital Committee
COMMITTEES:
▪
Audit (Chair), Remuneration (member),
Nomination (member)
DATE OF APPOINTMENT:
Non-Executive Director since May 2017,
and Senior Independent Non-Executive
Director from October 2020.
BOARD TENURE:
6 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:
▪
None
COMMITTEES:
▪
Audit (Chair), Remuneration (member),
Nomination (member)
RICHARD LAST
NON-EXECUTIVE CHAIR
JENNY KNOTT
NON-EXECUTIVE DIRECTOR
ANDY BALCHIN
SENIOR INDEPENDENT
NON-EXECUTIVE DIRECTOR
N
R
A
R
N
N
A
R
Governance
46
Gresham Technologies plc
Annual Financial Report 2023
DATE OF APPOINTMENT:
Chief Executive Officer and member of the
Board since June 2015.
BOARD TENURE:
8 years.
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 enterprise software companies
to significant scale and creating value for
customers and other stakeholders.
COMMITTEES:
▪
N/A
DATE OF APPOINTMENT:
Non-Executive Director since
January 2024.
BOARD TENURE:
0 years.
Oliver is a managing partner of the
Group’s largest shareholder, Kestrel
Partners LLP, and joined the Board in
January 2024. Spending the first 20 years
of his career advising smaller quoted
and unquoted companies, latterly as
a director of KBC Peel Hunt Corporate
Finance, he co-founded Kestrel Partners
in 2009. Kestrel specialises in investing in
smaller quoted technology companies,
and Oliver represents them as a non-
executive director at K3 Business
Technology PLC and Redcentric PLC. The
Board does not consider Oliver to be an
independent director.
COMMITTEES:
▪
N/A
DATE OF APPOINTMENT:
Chief Financial Officer and member of the
Board since March 2018.
BOARD TENURE:
5 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.
COMMITTEES:
▪
N/A
IAN MANOCHA
CHIEF EXECUTIVE OFFICER
OLIVER SCOTT
NON-EXECUTIVE DIRECTOR
TOM MULLAN
CHIEF FINANCIAL OFFICER
COMMITTEE MEMBERSHIP
A
Audit Committee
N
Nomination Committee
R
Remuneration Committee
Committee chair
Gresham Technologies plc
Annual Financial Report 2023
47
FINANCIAL STATEMENTS
STRATEGIC REPORT
GOVERNANCE
CORPORATE GOVERNANCE REPORT
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 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 22).
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.
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.
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 R Last, 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
The Company’s 2023 AGM was open to shareholders attending in
person, as well as 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 2023.
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: employee engagement surveys; attendance
by Board members at the Group’s quarterly “all-hands” CEO calls;
Board meetings held in UK offices to enable engagement with
our people; Board presentations by the Group’s Director of People
& Culture and receipt of monthly Board reports on people and
culture matters; and dialogue between the Director of People &
Culture and Chair of the Remuneration Committee relating to
remuneration arrangements affecting the workforce as a whole.
DIVISION OF RESPONSIBILITIES
BOARD MEMBERSHIP, ROLES AND RESPONSIBILITIES
As at 31 December 2023, the Board comprised of the Non-
Executive Chair, one Senior Independent Non-Executive Director,
one Non-Executive Director and two Executive Directors; details
of which are set out on page 49. With Non-Executive Directors
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. During the period of July to October, Mr A Balchin
held the role of Interim Chair whilst the search for a permanent
new Chair took place; with Mrs J Knott holding the interim
position of Senior Independent Non-Executive Director.
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 remains 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 convenes once per month and operates
an annual cycle of matters for its consideration, supplemented
with sector and strategic topics, and governance matters. The
frequency and focus of meetings, agendas and presentations are
kept under review to ensure 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 Directors are
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 51.
Governance
48
Gresham Technologies plc
Annual Financial Report 2023
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.
Number of meetings attended
Board
Audit
Remuneration
Nomination
P Simmonds*
6/16
—
5/8
1/5
R Last**
6/16
—
1/8
1/5
A Balchin***
16/16
2/2
8/8
5/5
J Knott
14/16
2/2
8/8
5/5
R Wandhöfer*
5/16
2/2
1/8
1/5
I Manocha
16/16
—
—
—
T Mullan
16/16
—
—
—
*
P Simmonds and R Wandhöfer stepped down from the Board on 25 July 2023.
** R Last was appointed to the Board on 17 October 2023.
*** A Balchin held the position of Interim Chair from 25 July 2023 to 16 October 2023.
COMPOSITION, SUCCESSION AND EVALUATION
NOMINATION COMMITTEE
A report from the Chair of the Nomination Committee is
provided, starting on page 55.
INDUCTION AND TRAINING
New Directors receive a tailored induction on their appointment
to the Board, covering their duties as Directors and what is
expected of them during their tenure, 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 adviser
presentations, papers and updates on legislative and regulatory
changes, and updates from the Company Secretariat and senior
management on sector-specific matters.
BOARD PERFORMANCE REVIEW
In accordance with the UK Corporate Governance Code,
a performance review of the Board, Committees, Company
Secretary, and Directors is carried out annually. The review
carried out in the year was conducted internally by the Company
Secretarial team. The objective and scope was to assess all
aspects of the Board’s performance and effectiveness; and
agreed following discussions with the Chair. A high level summary
of the 2023 results is set out below, which will be monitored
in Nomination Committee meetings throughout 2024.
Division of responsibilities: feedback was positive on the
appropriate and clear division of responsibilities between
the Chair and Chief Executive.
Development, information and support: Executive Directors
with internal and external Gresham focused knowledge, Non-
Executive Directors with more diverse external market-facing
knowledge, and a range of internal and external resources from
advisers, and regular updates from the Company Secretarial
team, collectively ensure the Board has a well-balanced set
of information and support available to them.
Time and commitment: improvements had been made with
Board members devoting adequate time to their responsibilities,
with excellent attendance at Board and Committee meetings;
although late notice availability continued to be a challenge. The
2022 concern with too much time spent on governance issues
compared to strategic matters was addressed and reflected in
more positive scores in 2023.
Risk management and control: there were marked improvements
on the increased focus on risk; with mention given to the monthly
updates to the Board on principal risks, and six-monthly updates
on wider company risks and risk management framework.
Succession planning: the last formal succession planning
exercise took place in 2020. Changes in Board composition
during 2023 considered the skills and experience required to
support the business; resulting in a new Chair and Non-Executive
Director appointment (O Scott appointed in January 2024).
However, it was noted that the diversity of the Board is lacking,
and should be of focus when considering future changes to
the Board.
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
AUDIT COMMITTEE
A report from the Chair of the Audit Committee is provided,
starting on page 51.
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 74.
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
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.
Gresham Technologies plc
Annual Financial Report 2023
49
FINANCIAL STATEMENTS
STRATEGIC REPORT
GOVERNANCE
CORPORATE GOVERNANCE REPORT
CONTINUED
AUDIT, RISK AND INTERNAL CONTROL
CONTINUED
PRINCIPAL RISKS
A report on the principal risks and uncertainties affecting the
Company is provided, starting on page 41.
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 71.
VIABILITY STATEMENT
The Directors confirm that they have assessed the prospects of
the Group over a three-year period commencing 1 January 2024
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 41 to 43
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:
▪
establishment of the organisational structure and delegated
responsibilities of operational management;
▪
definition of authorisation limits, including matters reserved
for the Board;
▪
regular site visits by Executive Directors, with results reported
to the Board of Directors;
▪
establishment of detailed operational plans and financial
budgets for each financial year;
▪
establishment of a risk management framework, detailing risk
metrics and risk appetite;
▪
maintenance of a register of principal risks, which is reviewed
and updated at every Risk Review Board meeting;
▪
review of regular, detailed monthly management reporting
provided for every Board meeting; which encompasses
a review of operational activities and entries arising on
consolidation;
▪
reporting and monitoring performance against budgets and
rolling forecasts;
▪
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 57.
Governance
50
Gresham Technologies plc
Annual Financial Report 2023
In addition to the 2023 Committee meetings, there have been
Board-level discussions involving all members of the Audit
Committee as well as informal discussions between Committee
members covering topics on the FRC’s review of BDO’s audit
of the Group’s 2022 accounts, R&D tax credits, and the Bank of
Ireland RCF.
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;
▪
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.
*
Ruth Wandhöfer stepped down from the Board and Committee on
25 July 2023.
** The November 2023 Audit Committee meeting was postponed
until 18 January 2024 due to BDO’s FRC review.
DEAR SHAREHOLDER
As Chair of the Audit Committee, I am pleased to present the
Committee’s report for the year ended 31 December 2023.
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 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
Chief Financial Officer attend Committee 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 are 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.
AUDIT COMMITTEE MEMBERS AND ATTENDANCE
Members throughout 2023
Committee
member since
Meeting
attendance
Andy Balchin (Committee Chair)
May 2017
3/3**
Jenny Knott
October 2020
3/3**
Ruth Wandhöfer*
October 2020
2/2
AUDIT COMMITTEE REPORT
Gresham Technologies plc
Annual Financial Report 2023
51
FINANCIAL STATEMENTS
STRATEGIC REPORT
GOVERNANCE
COMMITTEE EFFECTIVENESS
The Committee’s performance and effectiveness was reviewed
as part of the Board performance review undertaken during
the year (see page 49). I am pleased to report that Committee
continues to be seen to operate effectively and fulfilling its
duties delegated to it by the Board of Directors.
AUDIT COMMITTEE ACTIVITY
Set out below are some of the key matters addressed by the
Committee in the year.
FINANCIAL REPORTING
▪
Reviewed the integrity of financial announcements with input
from the CFO, Company Secretariat, financial PR advisers and
BDO, as appropriate.
▪
Reviewed the Group’s integrated report and financial
statements for tone and consistency, agreed the application
of accounting policies and key judgements, and considered
whether the report (as a whole) was fair, balanced and
understandable.
▪
Reviewed and discussed BDO’s reports to the Committee.
▪
Reviewed the going concern basis of accounting and the
longer-term viability statement.
EXTERNAL AUDIT MATTERS
▪
Reviewed the external audit plan, taking account of the scope,
timetable and fees.
▪
Reviewed the independence, objectivity and effectiveness of BDO.
▪
Recommended to the Board the reappointment of BDO as
the Group’s external auditors, to be put to shareholders at the
Annual General Meeting.
▪
Held a meeting with BDO without management present.
▪
Reviewed the FRC’s review of BDO’s audit of the Group’s 2022
financial statements.
▪
Considered the need for an audit tender process to be
concluded before the end of financial year 2024.
RISK MANAGEMENT AND INTERNAL CONTROLS
▪
Paid attention to potential impact and risks to the Group
arising from global economic, international trade and market
conditions, and changes in FX.
▪
Reviewed the Group’s risk management framework, processes
and internal reporting structure.
▪
Reviewed internal and BDO reported fraud, financial control
and audit risks; as well as material risks to the Group.
▪
Reviewed the size, capabilities and controls of the Finance team.
GOVERNANCE AND OTHER
▪
Reviewed the Group’s whistleblowing policy.
▪
Reviewed the Committee’s terms of reference.
▪
Considered the need for an internal audit function.
▪
Reviewed expenditure and matters of non-audit fees from
external providers.
▪
Reviewed the Audit Committee section of the Annual Report
and Accounts.
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.
AUDIT COMMITTEE REPORT
CONTINUED
Governance
52
Gresham Technologies plc
Annual Financial Report 2023
INTERACTION WITH THE FINANCIAL REPORTING
COUNCIL (“FRC”)
An inspection of the audit of the Group for the year ended
31 December 2022 was undertaken by the FRC’s Audit Quality
Review team, as part of a sample of BDO LLP’s external audits.
As part of the external audit plan, the Committee and CFO have
reviewed and considered the findings of the FRC’s Audit Quality
Review inspection of BDO’s audit for the year ended 31 December
2022, including actions taken by BDO to address the points
raised, in particular BDO’s quality control procedures and how
these have been incorporated into the audit approach for the
year ended 31 December 2023.
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;
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
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, who reported findings to us.
We concluded that management’s key assumptions, judgements,
estimates and disclosures were reasonable and appropriate.
REVENUE AND PROFIT RECOGNITION
Revenue and 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 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 and challenged management’s
papers re-assessing application of revenue recognition policies;
and resulting conclusions, changes and prior year restatement of
such. The Committee concurred with management’s conclusions
surrounding this.
The Committee also challenged 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,
who 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 intangible
assets that have a carrying value 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, who 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.
Gresham Technologies plc
Annual Financial Report 2023
53
FINANCIAL STATEMENTS
STRATEGIC REPORT
GOVERNANCE
FAIR, BALANCED AND UNDERSTANDABLE
CONTINUED
▪
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 Company 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.
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 of Directors and Risk Review Board 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, Share Dealing, and Anti-Bribery.
Any breach of these policies is a disciplinary matter and dealt
with accordingly.
INTERNAL AUDIT FUNCTION
During the year, the Committee considered the need for a
separate internal audit function and its impact on the external
audit; concluding 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
continues to be 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 discuss
and approve the scope of and fees for the external audit plan
and review 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 consider 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 was satisfied
that during the year the audit team demonstrated the necessary
commitment and ability, had provided constructive challenge
to management, with appropriate focus on primary areas of
the audit.
A full tender for external audit services was last concluded in
2010, with a further tender process in 2020 curtailed due to
all invited firms (bar BDO) withdrawing from the process due
to resourcing challenges mainly brought about by COVID-19
lockdowns. A new full tender process will now be conducted and
concluded before the end of the current financial year.
NON-AUDIT SERVICES
The Committee reviews and controls the manner in which non-
audit services are awarded, especially to the external auditor, as
per its Audit and Non-Audit Services policy. All non-audit work
requires Audit Committee approval facilitated through the Chief
Financial Officer; and will only be approved by the Committee if:
▪
there are no conflicts of interests between the external audit
firm and the Group;
▪
services do not result in the external audit firm functioning in
the role of management;
▪
services do not result in a fee which is material relative to the
annual audit fee (70% of average audit fees over prior three
financial years);
▪
services do not place the external audit firm in the position of
auditing their own work; and/or
▪
services do not place the external audit firm in the position of
being an advocate for the Group.
In the year, there were £3,000 of non-audit fees paid to the
external auditor (2022: £3,000); in relation to the auditor sign-
off of compliance certificates required under the terms of the
Group’s revolving credit facility.
ANDY BALCHIN
CHAIR OF THE AUDIT COMMITTEE
29 APRIL 2024
AUDIT COMMITTEE REPORT
CONTINUED
Governance
54
Gresham Technologies plc
Annual Financial Report 2023
NOMINATION COMMITTEE REPORT
DEAR SHAREHOLDER
I am pleased to present the report of the Nomination Committee
for the year ended 31 December 2023.
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 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.
Achieving diversity in the technology sector is especially
challenging due to the available pool of individuals with the
right skills, experience and talent. During the year the Board
failed to meet board diversity targets; 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.
BOARD COMPOSITION
On 25 July 2023, Peter Simmonds, Independent Non-Executive Chair,
and Ruth Wandhöfer, Non-Executive Director, resigned from the
Board. The Committee approved the interim appointment of Andy
Balchin as Interim Chair of the Board and Nomination Committee,
who lead the search for a new Chair. Directorbank Executive
Search were appointed to source a candidate with extensive and
up-to-date fintech, Enterprise Software or SaaS experience; with
commercial and marketing skills, and strategic insight in one or more
of Gresham’s key international markets. After a full and transparent
process, the Committee proposed Richard Last to the Board, who
was subsequently appointed on 17 October 2023.
NOMINATION COMMITTEE ACTIVITY
Set out below are some of the key matters addressed by the
Committee in the year.
BOARD AND COMMITTEE COMPOSITION
▪
Completed the search for a new Independent Non-Executive Chair.
▪
Considered the diversity of the Board and Non-Executive
Directors including in respect of gender and ethnicity.
▪
Performed a Director skills assessment to understand the
Board’s collective skills and experience related to the markets
and sector the Group operates in.
▪
Reviewed the independence of each Non-Executive Director,
their term in office, any conflicts of interest, and time
commitments to the Group.
BOARD PERFORMANCE REVIEW
▪
Considered and agreed the process for the internal 2023
performance review of Directors, the Company Secretary, the
Board and Committees.
CORPORATE GOVERNANCE AND OTHER
▪
Approved the updated induction programme for new Non-
Executive Directors.
▪
Considered and recommended to the Board the election of
Richard Last and Oliver Scott, and the re-election of all other
Directors at the AGM.
▪
Reviewed the Committee’s terms of reference.
▪
Reviewed the Group’s statement of Equality, Diversity
and Inclusion.
NOMINATION COMMITTEE MEMBERS
AND ATTENDANCE
Members throughout 2023
Committee
member since
Meeting
attendance
Richard Last** (Committee Chair)
October 2023
1/1
Andy Balchin
May 2017
5/5
Jenny Knott
October 2020
5/5
Peter Simmonds*
August 2020
1/1
Ruth Wandhöfer*
October 2020
1/1
*
Peter Simmonds and Ruth Wandhöfer stepped down from the Board and
Committee on 25 July 2023.
** Richard Last was appointed to the Board on 17 October 2023.
Gresham Technologies plc
Annual Financial Report 2023
55
FINANCIAL STATEMENTS
STRATEGIC REPORT
GOVERNANCE
To comply with Listing Rule 9.8.6(9), as at 31 December 2023 (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
80%
4
6
75%
Women
1
20%
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%
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.
RICHARD LAST
CHAIR OF THE NOMINATION COMMITTEE
29 APRIL 2024
NOMINATION COMMITTEE REPORT
CONTINUED
Governance
56
Gresham Technologies plc
Annual Financial Report 2023
INTRODUCTION TO THE REMUNERATION REPORT
DEAR SHAREHOLDER
I am pleased to introduce the Directors’ Remuneration Report for
the year ended 31 December 2023.
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.
REMUNERATION COMMITTEE ACTIVITY
Set out below are some of the key matters addressed by the
Committee in the year.
EXECUTIVE DIRECTOR REMUNERATION
▪
Determined the increases to basic pay for the year
commencing 1 April 2023 in accordance with the Company’s
established methodology (6.5%).
NON-EXECUTIVE DIRECTOR FEES
▪
Determined the increases to basic pay for the year
commencing 1 April 2023 in accordance with the Company’s
established methodology (5%).
▪
Amended contractual notice and pay in lieu of notice in the
event of a corporate event in letters of appointment.
▪
Approved the base salary for new Independent
Non-Executive Chair.
▪
Approved a premia for the role of Senior Independent Director.
REMUNERATION COMMITTEE MEMBERS
AND ATTENDANCE
Members throughout 2023
Committee
member since
Meeting
attendance
Jenny Knott (Committee Chair)
October 2020
8/8
Andy Balchin
May 2017
8/8
Richard Last**
October 2023
1/1
Peter Simmonds*
August 2020
5/5
*
Peter Simmonds stepped down from the Board and Committee on 25 July 2023.
** Richard Last was appointed to the Board on 17 October 2023.
ANNUAL BONUS SCHEME
▪
Set performance measures and targets for variable pay awards
under the annual bonus scheme in respect of 2022.
▪
Assessed the performance of the Group and Executive
Directors against pre-determined targets for 2023.
▪
Determined outcomes for the year under the annual
bonus scheme.
SHARE AND INCENTIVE PLANS
▪
Set performance measures and targets for matching share
awards under the LTIP in respect of financial years 2023 to 2025.
▪
Reviewed the grant of awards to certain individuals under the
performance share plan.
WIDER WORKFORCE
▪
Confirmed the methodology for annual pay reviews; returning
to those historically used prior to 2022 (cost-of-living).
▪
Approved all-employee bonus percentages (scale: 0% to 10%).
▪
Approved extended management and leadership team bonus
pots and pools; retaining existing methodology, but with
Executive discretion.
▪
Approved for Executive Directors to consider individual pay rise
and/or bonus amounts for individuals with in-year market-levelling.
▪
Discussed the implementation of an Employee Benefit Trust
quarterly mark-purchase mandate.
GOVERNANCE AND OTHER
▪
Reviewed the Committee’s terms of reference.
▪
Agreed the Remuneration Policy did not require updating for
shareholder vote at the 2024 AGM.
▪
Approved the Chief Technology Officer transitional
arrangements and remuneration package.
Looking ahead to 2024, the Committee remains mindful of the
inflationary environments in its operating territories, noting
the steady decreases throughout 2023 which appear to be
plateauing across the globe. The Committee is therefore carefully
considering its application of the Company’s established
methodology for determining pay increases across the Group.
As a result, the average pay rise across the global population is
approximately 2.8%; with base pay increases for Chief Executive
and Chief Financial Officer set at 2.8%.
Other information on how the Directors’ Remuneration Policy
is expected to be applied in 2024, including in relation to the
Annual Bonus Scheme and LTIP, is set out in the following pages.
JENNY KNOTT
CHAIR OF THE REMUNERATION COMMITTEE
29 APRIL 2024
Gresham Technologies plc
Annual Financial Report 2023
57
FINANCIAL STATEMENTS
STRATEGIC REPORT
GOVERNANCE
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 was approved by
shareholders at the 2023 Annual General Meeting, taking effect
from 1 January 2023 and lasting 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 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 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 of culture at the
management level that can cascade down the Company. The
Board sets the framework of KPIs against which we monitor
the performance of the Company, and the Committee links the
performance metrics of our incentive arrangements to those
KPIs. We are also keen to foster a culture of share ownership,
and operate all-employee share arrangements in pursuit of
this objective.
REMUNERATION REPORT
Governance
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Annual Financial Report 2023
REMUNERATION POLICY TABLE
The table below sets out the Directors’ Remuneration Policy for each element of pay.
Element of remuneration and link to strategy
BASE SALARY
Supports the recruitment,
motivation and retention
of Directors of the calibre
required to deliver the
Group’s strategy.
Operation
Base salary is set on appointment, paid monthly and typically reviewed annually, with increases
normally applying from 1 April.
Framework
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.
Maximum opportunity
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.
Operation
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.
Framework
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.
Maximum opportunity
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.
BENEFITS
Supports the recruitment,
motivation and retention
of Directors of the calibre
required to deliver the
Group’s strategy.
Operation
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.
Framework
Directors are eligible to subscribe for benefits by selecting their preferred benefits options via the
Company’s approved benefits provider from time to time.
Maximum opportunity
The value of benefits may vary from year to year depending on the cost of the Company from third
party providers.
Gresham Technologies plc
Annual Financial Report 2023
59
FINANCIAL STATEMENTS
STRATEGIC REPORT
GOVERNANCE
Element of remuneration and link to strategy
ANNUAL BONUS
Rewards and incentivises the
Executive Directors to deliver
annual strategic, financial and
operational goals.
Operation
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.
Framework
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.
Maximum opportunity
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.
Operation
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.
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.
Framework
The Committee determines the relevant targets for growth and returns measures.
The performance is assessed over three years.
Maximum opportunity
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.
REMUNERATION REPORT
CONTINUED
REMUNERATION POLICY TABLE
CONTINUED
Governance
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Annual Financial Report 2023
Element of remuneration and link to strategy
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.
Operation
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.
Framework
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.
Maximum opportunity
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.
Operation
Fees for Non-Executive Directors are set by the Board (excluding Non-Executive Directors) and
paid monthly.
Framework
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.
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.
Maximum opportunity
Fees for the Chair and Non-Executive Directors are reviewed annually. Current fees are set out in
the Directors’ Remuneration Report.
Gresham Technologies plc
Annual Financial Report 2023
61
FINANCIAL STATEMENTS
STRATEGIC REPORT
GOVERNANCE
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
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.
REMUNERATION REPORT
CONTINUED
Governance
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Annual Financial Report 2023
In addition, the Committee may offer additional cash and/or
share-based buy-out 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 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.
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 engagement surveys. 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.
Gresham Technologies plc
Annual Financial Report 2023
63
FINANCIAL STATEMENTS
STRATEGIC REPORT
GOVERNANCE
REMUNERATION REPORT
CONTINUED
Illustration of the application of the Policy
On-target
Maximum
£1,507,000
Minimum
IAN MANOCHA
50%
100%
34%
£911,000
£314,000
▪
Total Fixed Remuneration
▪
Annual Bonus
▪
Share price growth
▪
Share Matching and PSP
59%
21%
20%
16%
23%
46%
50%
100%
34%
21%
16%
On-target
Maximum
Minimum
TOM MULLAN
£930,000
£563,000
£196,000
59%
20%
15%
16%
Max with
growth
£1,206,000
Max with
growth
£1,955,000
23%
16%
15%
46%
ILLUSTRATION OF REMUNERATION SCENARIOS
The following graphs set out an illustration of Executive Director pay for 2024. The potential reward opportunities for 2024 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 2024 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.
ANNUAL REPORT ON REMUNERATION
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 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 seeks professional advice where it considers it appropriate to do so. In 2022, the Committee engaged FIT
Remuneration Consultants to carry out a review of the Directors’ Remuneration Policy, which was approved by shareholders at the
2023 AGM. The final invoice of £6,791 was paid in January 2023 (2022: £4,800).
IMPLEMENTATION OF POLICY FOR 2024
▪
Base salary: base salary for the Executive Directors is increased by 2.8% effective 1 April 2024; with the average staff increase of 2.8%.
▪
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 2023 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.
▪
Long-Term Share Incentive Plan: matching shares will be granted in 2024 based on the 2023 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.
Governance
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Gresham Technologies plc
Annual Financial Report 2023
▪
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 2.8% effective 1 April 2024.
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
2023 and 2022:
31 December 2023
Base
salary/fees
£
Benefits
in kind
(3)
£
Annual
bonus
(1)
£
Pension
£
Long-Term
Share
Incentive
plan
(2)
£
Total
fixed
pay
£
Total
variable
pay
(4)
£
Total
2023
£
Executive Directors
I Manocha
287,932
907
84,482
14,384
177,939
303,223
262,421
565,644
T Mullan
177,342
3,698
51,274
8,855
108,948
189,895
160,222
350,117
Non-Executive Directors
P Simmonds
46,645
—
—
—
—
46,645
—
46,645
A Balchin
56,074
—
—
—
—
56,074
—
56,074
J Knott
46,688
—
—
—
—
46,688
—
46,688
R Wandhöfer
23,323
—
—
—
—
23,323
—
23,323
R Last
24,839
—
—
—
—
24,839
—
24,839
662,843
4,605
135,756
23,239
286,887
690,687
422,643
1,113,330
(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 31 March 2021 based on the average share price for the three-
month period ending 31 December 2023 of 129 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 6.5% in 2023. The average increase across Group employees in 2023 was 6.6%.
31 December 2022
Base
salary/fees(4)
£
Benefits
in kind(3)
£
Annual
bonus(1)
£
Pension
£
IFRS 2
share-based
payment
charge(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.
Gresham Technologies plc
Annual Financial Report 2023
65
FINANCIAL STATEMENTS
STRATEGIC REPORT
GOVERNANCE
VARIABLE PAY OUTCOMES FOR 2023
The variable element of Director pay in 2023 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 2023 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%
£30.0m
£32.9m
£30.3m(1)
27%
27%
Group revenue
11.25%
£39.9m
£50.2m
£49.0m
81%
81%
Group cash EBITDA
15%
£3.7m
£4.6m
£4.6m(2)
90%
90%
Group adjusted EBITDA
15%
£8.7m
£11.0m
£10.6m(2)
76%
76%
Personal objectives
25%
—
—
—
59%
56%
Bonus Payment outcome
58%
57%
(1)
For the purposes of calculating bonus award, Clareti ARR constant currency was used, which was £30.3m. This resulted in an increase to the 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.
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.
EQUITY AWARDS UNDER THE LONG-TERM SHARE INCENTIVE PLAN
Awards were made under the Long-Term Share Incentive Plan on 31 March 2021 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 2021, 2022 and 2023.
Weighting
Threshold
Maximum
Actual
performance
% vesting
TSR
50%
112%
140%
86%
0%
Group Revenue(1)
50%
116%
144%
145%
0%
(1) Excluding Electra.
The March 2021 awards lapsed on 31 March 2024 on the basis that the threshold performance requirement for the TSR performance
condition was note achieved. Whilst the Group Revenue performance was above performance levels attaining maximum vest, both
conditions needed to achieve a minimum of threshold performance for any vesting to occur.
REMUNERATION REPORT
CONTINUED
Governance
66
Gresham Technologies plc
Annual Financial Report 2023
EQUITY AWARDS GRANTED DURING 2023
The table below provides details of share awards made to I Manocha and T Mullan on 31 March 2023:
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
LTIP award
Nil cost option
50% of 2022 bonus
4x deferred bonus award
49,296
197,185
£78,234
£312,936
n/a
0%
31 March 2026
31 March 2026
T Mullan
Deferred bonus award
LTIP award
Nil cost option
50% of 2022 bonus
4x deferred bonus award
29,730
118,919
£47,182
£188,728
n/a
0%
31 March 2026
31 March 2026
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 2023
Granted
Cancelled
Exercised
Awards at
31 December
2023
Date of
grant
Exercise
price
Date first
exercisable
Expiry date
Executive Directors
I Manocha(1)
104,008
—
—
—
104,008
20.03.20
nil
20.03.23
20.03.30
I Manocha(1)
(3)
137,937
—
—
—
137,937
31.03.21
nil
31.03.24
31.03.31
I Manocha(1)
(2)
174,944
—
—
—
174,944
31.03.22
nil
31.03.25
31.03.32
I Manocha(1)
(2)
—
197,185
197,185
31.03.23
nil
31.03.26
31.03.33
T Mullan(1)
67,532
—
—
—
67,532
20.03.20
nil
20.03.23
20.03.30
T Mullan(1)
(3)
84,456
—
—
—
84,456
31.03.21
nil
31.03.24
31.03.31
T Mullan(1)
(2)
107,736
—
—
—
107,736
31.03.22
nil
31.03.25
31.03.32
T Mullan(1)
(2)
—
118,919
—
—
118,919
31.03.23
nil
31.03.26
20.03.33
676,613
316,104
—
—
992,717
(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.
(3) Awards lapsed on 31 March 2024 due to a performance condition not being met.
Gresham Technologies plc
Annual Financial Report 2023
67
FINANCIAL STATEMENTS
STRATEGIC REPORT
GOVERNANCE
INTERESTS IN OPTIONS AND CONDITIONAL SHARE AWARDS (AUDITED INFORMATION)
CONTINUED
PERFORMANCE SHARE PLAN 2020
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
2023
Granted
Cancelled
Exercised
Awards at
31 December
2023
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 2023
Granted
Cancelled
Exercised
Options at
31 December
2023
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 2023 were:
No. of shares owned
outright (inc.
connected persons)
Unvested
LTIP awards
Unvested
PSP awards
Vested share
option awards
(subject to exercise)
Shareholding as
a % of salary as at
31 Dec 2023(
1)
Shareholding as
a % of salary as at
31 Dec 2022(
1)
I Manocha
166,640
614,074
203,000
1,500,000
71%
88%
T Mullan
76,054
378,643
75,000
300,000
50%
51%
P Simmonds(2)
—
—
—
—
n/a
n/a
A Balchin
17,608
—
—
—
n/a
n/a
J Knott
31,250
—
—
—
n/a
n/a
R Wandhöfer(2)
—
—
—
—
n/a
n/a
R Last(3)
—
—
—
—
n/a
n/a
(1)
Based solely on number of shares owned outright, by reference to share price as at 31 December.
(2) P Simmonds and R Wandhöfer retired from the Board in July 2023.
(3) R Last joined the Board in October 2023.
PAYMENTS FOR LOSS OF OFFICE (AUDITED INFORMATION)
No payments for loss of office were made during the year ended 31 December 2023 (2022: £nil).
REMUNERATION REPORT
CONTINUED
Governance
68
Gresham Technologies plc
Annual Financial Report 2023
PERCENTAGE CHANGE IN DIRECTORS’ REMUNERATION
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 2023. Prior year changes are shown, which will build
up over time to cover a rolling five-year period.
Salary/fee
Pension and other benefits
Annual bonus
2023
2022
2021
2023
2022
2021
2023
2022
2021
I Manocha
+5%
+1%
+2%
+3%
-4%
-1%
-46%
+16%
+21%
T Mullan
+5%
+1%
+2%
+6%
+3%
+4%
-46%
+13%
+22%
P Simmonds(2)
n/a
0%
n/a
n/a
n/a
n/a
n/a
n/a
n/a
A Balchin
+25%
0%
+9%
n/a
n/a
n/a
n/a
n/a
n/a
J Knott
+4%
0%
n/a
n/a
n/a
n/a
n/a
n/a
n/a
R Wandhöfer(2)
n/a
0%
n/a
n/a
n/a
n/a
n/a
n/a
n/a
R Last(3)
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
All employees(1)
+9%
+5%
+2%
+9%
+3%
+6%
-31%
+9%
+22%
(1)
The comparative is all staff (c.228 people) because this group is considered to be the most relevant, due to the structure of total remuneration.
(2) P Simmonds and R Wandhöfer retired from the Board in July 2023.
(3) R Last was appointed to the Board in October 2023.
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 2023. There were no share
buy backs in the year.
Total employee pay compared to profit before tax (£’000)
30,000
25,000
20,000
15,000
10,000
5,000
0
(5,000)
Employee pay
Profit/(loss) before tax (exc. exceptionals)
Directors’ remuneration
2019
2020
2021
2022
2023
765
893
1,193
977
826
366
708
1,922
3,391
4,049
13,104
13,499
17,920
23,800
24,597
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 2013 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.
Total shareholder return including dividend reinvestment (£)
Gresham Technologies plc
▪
FTSE TechMark All-Share Index
180
160
140
120
100
80
60
40
20
0
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
This graph shows the value, by the end of 2021, of £100 invested in Gresham Technologies plc on 31 December 2012 compared with
the value of £100 invested in the FTSE TechMark All-Share Index. The other points are values at intervening financial year ends.
Gresham Technologies plc
Annual Financial Report 2023
69
FINANCIAL STATEMENTS
STRATEGIC REPORT
GOVERNANCE
CEO REMUNERATION HISTORY
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
CEO
Bonus (% of
maximum)
0%
0%
0%
8%
0%
22.5%
41.5%
49.7%
57%
29%
Pension
7,500
10,417
12,500
12,765
12,980
33,056
13,350
13,574
13,691
14,384
LTIs (% of
maximum)
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
100%
0%
PSP (% of
maximum)
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
Total
£158,834
£255,728
£399,924
£508,889
£349,446
£356,330
£420,377
£617,048
£620,553
£565,644
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
R Last
17 Oct 2023
Due at 2024 AGM
J Knott
12 Oct 2020
10 May 2022
A Balchin
15 May 2017
10 May 2022
P Simmonds*
1 Aug 2020
10 May 2022
R Wandhöfer*
12 Oct 2020
10 May 2022
*
P Simmonds and R Wandhöfer retired from the Board on 25 July 2023.
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.
SHAREHOLDER VOTING ON REMUNERATION
RESOLUTIONS
At the last AGM, held on 23 May 2023, the following resolutions
were approved by shareholders:
Resolution
For(1)
Against
Withheld
Remuneration
55,858,432
4,999,981
3,565
Report
91.78%
8.21%
0.01%
(1)
Includes votes giving the Chairman discretion.
Resolution
For(1)
Against
Withheld
Directors’
60,806,425
51,988
3,000
Remuneration Policy
99.91%
0.09%
0.01%
(1)
Includes votes giving the Chairman discretion.
JENNY KNOTT
CHAIR OF THE REMUNERATION COMMITTEE
29 APRIL 2024
REMUNERATION REPORT
CONTINUED
Governance
70
Gresham Technologies plc
Annual Financial Report 2023
DIRECTORS’ REPORT
Registered number 01072032
The Directors present their report and the Group financial
statements for the year ended 31 December 2023.
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 48 forms part of the Directors’ Report.
DIRECTORS AND OFFICERS
The Directors who served on the Board during the year are set
out on pages 46 and 47 (R Wandhofer and P Simmonds retired
from the Board in July 2023; with R Last joining in October 2023
and O Scott in January 2024). Mr Jonathan 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 £3,076,000 (2022: £1,590,000); and has
been transferred to shares. An interim dividend of 0.75 pence per
ordinary share (2022: £nil) has been declared by the Directors
instead of a final dividend (2022: 0.75 pence).
It is intended to pay the interim dividend on 10 June 2024 to all
shareholders on the register at close of business on 10 May 2024.
The ex-dividend date will be 9 May 2024.
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
businesses with long-standing blue-chip customers. The Group
also benefits from high levels of contracted revenue providing
predictability of future revenues.
The Directors have reviewed the profit and cashflow forecasts for
the period to 30 June 2025 together with the assumptions used
to support these forecasts and the expected impact of economic
conditions on trading. Specific scenario stress testing based on
the Group failing to win any new business in the period from
1 January 2024 have been performed to ensure that the Group
continues to have sufficient resources to continue to operate
within these scenarios.
The Directors have also considered the impact of the
announcement made of 9 April 2024 of a recommended cash
acquisition of Gresham by Alliance Bidco Ltd (“Bidco”), a company
owned indirectly by funds managed or advised by STG Partners,
LLC (“STG”). The Scheme Document in relation to the acquisition
was subsequently published on 18 April 2024. The Directors note
the intentions of Bidco, as set out in the Scheme Document,
and they do not have any reason to believe that Bidco will not
continue to support the Group or would materially change its
activities in the next 12 months. Given this, the Directors consider
that both Bidco’s future intentions for the Group and available
resources enable them to 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 2023.
Refer to page 50 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 2023, 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 2023. In the opinion of the Directors, the Group
does not have any other individually significant relationships.
FOSTERING RELATIONSHIPS WITH
STAKEHOLDERS
Refer to page 22 for details of the Company’s engagement
with stakeholders.
DIRECTORS AND THEIR INTERESTS
The Directors at 31 December 2023 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 2023
1 Jan 2023
P Simmonds(1)
—
92,500
R Last(2)
—
A Balchin
17,608
17,608
J Knott
31,250
31,250
R Wandhöfer(1)
—
19,653
I Manocha
166,640
136,052
T Mullan
76,054
48,238
1
P Simmonds and R Wandhöfer resigned from the Board in July 2023
2
R Last joined the Board in October 2023
There have been no further changes in the Directors’ interests
disclosed above from 31 December 2023 to 24 April 2024.
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 via RIS
disclosures 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 26 April 2024:
Ordinary shares
of 5 pence each
Percentage
held (%)
Kestrel Investment Partners
20,004,573
23.85
Briarwood Chase Management
8,211,279
9.79
Morgan Stanley
7,908,343
9.43
Samson Rock Capital
4,782,500
5.70
Jupiter Asset Management
4,707,648
5.61
Herald Investment Management
4,321,274
5.15
Caisse Fédérale de Crédit Mutuel
3,218,666
3.83
Mrs M A Green
3,073,290
3.66
Tellworth Investments
2,753,768
3.28
Gresham Technologies plc
Annual Financial Report 2023
71
FINANCIAL STATEMENTS
STRATEGIC REPORT
GOVERNANCE
POLITICAL DONATIONS
No donations were made in 2023 or 2022.
SOCIAL AND COMMUNITY
No social or community review has been performed for
2023 or 2022.
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);
▪
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 2023, the Company’s issued share capital comprised:
Number
Nominal
value
£
% of total
share capital
Ordinary shares
of 5 pence each
83,874,458
4,193,722
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 2023, certain share options
granted under the Share Option Scheme 2010 were exercised
and as a result the Company issued 285,000 ordinary shares
(2022: 85,000), such shares ranking pari passu with ordinary
shares then in issue. There were no other issues of shares during
the year ended 31 December 2023 (2022: 0).
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 71. Major interests (being those
greater than 3%) of which the Company has been notified are
shown on page 71.
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.
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.
DIRECTORS’ REPORT
CONTINUED
Registered number 01072032
Governance
72
Gresham Technologies plc
Annual Financial Report 2023
INFORMATION TO BE INCLUDED IN THE ANNUAL FINANCIAL REPORT 2023
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 2023.
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 117
(8)
Paragraph (7) in relation to major subsidiary undertaking
Not applicable
(9)
Parent participation in a placing by a listed subsidiary
Not applicable
(10)
Contracts of significance
Page 71
(11)
Provision of services by a controlling shareholder
Not applicable
(12)
Shareholder waivers of dividends
Page 92
(13)
Shareholder waivers of future dividends
Page 92
(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 pages 46 and 47. 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
29 APRIL 2024
Gresham Technologies plc
Annual Financial Report 2023
73
FINANCIAL STATEMENTS
STRATEGIC REPORT
GOVERNANCE
DIRECTORS’ RESPONSIBILITIES
The Directors are responsible for preparing the Annual Financial
Report 2023 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 UK adopted international financial reporting
standards and Company financial statements in accordance
with United Kingdom Generally Accepted Accounting Practice
(United Kingdom Accounting Standards, comprising FRS 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;
▪
for the group financial statements state whether they have
been prepared in accordance with UK adopted international
financial reporting standards, subject to any material
departures disclosed and explained in the financial statements;
▪
for the company financial statements state whether they
have been prepared in accordance with United Kingdom
Generally Accepted Accounting Practice (United Kingdom
Accounting Standards, comprising FRS 101 ‘Reduced Disclosure
Framework’, 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. 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
report and accounts, taken as a whole, are fair, balanced and
understandable and provides the information necessary for
shareholders to assess the Group’s performance, business model
and strategy.
WEBSITE PUBLICATION
The Directors are responsible for ensuring the Annual Financial
Report 2023 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 UK adopted international accounting standards,
and give a true and fair view of the assets, liabilities, financial
position and profit and loss of the Group; and
▪
the Annual Financial Report 2023 includes a fair review of
the development and performance of the business and the
financial position of the Group and the Parent Company,
together with a description of the principal risks and
uncertainties that they face.
On behalf of the Board.
IAN MANOCHA
CHIEF EXECUTIVE
29 APRIL 2024
STATEMENT OF DIRECTORS’ RESPONSIBILITIES
Governance
74
Gresham Technologies plc
Annual Financial Report 2023
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 2023 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 as applied in accordance with the
provisions of the Companies Act 2006; 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 2023 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 notes to the
financial statements, including a summary of material accounting
policy information.
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 appointed by the Directors on 9 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 14 years,
covering the years ended 31 December 2010 to 31 December 2023.
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:
▪
Evaluating the Directors’ going concern assessment including
challenging 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
results against actual results post year end. 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 and considering 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
and comparing them 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.
▪
Challenging the Directors in respect of the potential impact
of any future sale and plans of new owners if sale is to
be approved.
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.
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF GRESHAM TECHNOLOGIES PLC
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
Gresham Technologies plc
Annual Financial Report 2023
75
Financial statements
OVERVIEW
Coverage
99% (2022: 100%) of Group revenue
98% (2022: 100%) of Group total assets
Key audit
matters
2023
2022
Capitalisation of
development costs
Revenue recognition
Goodwill and intangible
asset impairment
Goodwill and intangible asset impairment is
no longer considered to be a key audit matter
because of the identified market capitalisation of
the Group as at the year end, when considered
against the carrying value of assets held by
the Group.
Materiality
Group financial statements as a whole
£367,000 (2022: £365,000) based on 0.75%
(2022: 0.75%) of revenue.
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
63% of the Group revenue and 90% of Group total assets.
The full scope audit of the Asia Pacific region significant component,
comprising of 36% of Group revenue and 8% of Group total assets,
was performed by a BDO member firm in Australia.
In respect of non-significant components, the Group engagement
team, carried out specified audit procedures in respect of the
revenue 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;
▪
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.
CLIMATE CHANGE
Our work on the assessment of potential impacts on
climate-related risks on the Group’s operations and financial
statements included:
▪
Enquiries and challenge of management to understand
the actions they have taken to identify climate-related risks
and their potential impacts on the financial statements
and adequately disclose climate-related risks within the
annual report;
▪
Our own qualitative risk assessment taking into consideration
the sector in which the Group operates and how climate
change affects this particular sector; and
▪
Review of the minutes of Board and Audit Committee and
other papers related to climate change and performed a risk
assessment as to how the impact of the Group’s commitment
as set out in other information may affect the financial
statements and our audit.
We also assessed the consistency of managements disclosures
included as ‘Other Information’ on page 29 with the financial
statements and with our knowledge obtained from the audit.
Based on our risk assessment procedures, we did not identify
there to be any Key Audit Matters materially impacted by
climate-related risks and related commitments.
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.
INDEPENDENT AUDITOR’S REPORT
CONTINUED
76
Gresham Technologies plc
Annual Financial Report 2023
KEY AUDIT
MATTER
HOW THE SCOPE OF OUR AUDIT ADDRESSED
THE KEY AUDIT MATTER
CAPITALISATION
OF DEVELOPMENT
COSTS
Refer to the
accounting policies
on page 90, and
significant estimates
and judgements
on page 89.
During the year, development costs
of £5,297k (2022: £5,195k) have
been capitalised.
Development costs are recognised
as an intangible asset if the specific
capitalisation criteria, as set out
in the applicable accounting
standards, is met.
Significant management judgement
is required to determine whether
development costs are to be
capitalised and therefore, we
have identified a significant
risk over the capitalisation of
development costs.
For these reasons, the capitalisation
of development costs is considered
to be a key audit matter.
We evaluated the Group’s accounting policy in respect of development
costs capitalised during the period, to check that their recognition and
measurement principles adhere to the applicable accounting standards.
We obtained a detailed understanding of the relevant controls and
processes that management follow in assessing the costs which require
recognition under the applicable accounting standards.
With respect to the development costs capitalised, we obtained the relevant
workings and details of the applicable judgements made and performed the
following:
▪
Tested the arithmetic accuracy of the calculations used by management
to capitalise development costs during the period;
▪
Corroborated a sample of capitalised costs to underlying supporting
documentation which included:
–
obtaining a sample of employee contracts and agreeing their role
description to be directly attributable to development activities;
–
agreeing a sample of non payroll related transactions to
underlying documentation and challenging management as to the
appropriateness of their capitalisation;
–
interviewing a sample of employees to check their involvement in
respect of development projects throughout the year; and
–
challenging the associated amount of time spent on
development activities.
▪
Obtained an understanding of projects undertaken by the development
team, as well as obtaining evidence of future economic benefits expected
through corroborative supporting documentation, by inspecting customer
contracts and pipeline opportunities.
We held 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 have not identified any material
issues relating to development costs which have been capitalised.
REVENUE
RECOGNITION
Refer to the
accounting policies
on page 89, and
significant estimates
and judgements
on page 93.
The Group generates revenue
from the sale of software licenses.
In line with the requirements of
applicable accounting standards
management exercise judgement in
determining whether performance
obligations of solution 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 over time.
As such, a key
audit matter has been identified
in respect of new contracts
entered into during the period
and the appropriate application
of the accounting standard in
respect of the underlying terms of
the contract.
Our audit work included the following procedures on the
revenue recognition:
▪
We challenged management’s determination of whether the revenue
generated is as a result of the satisfaction of a performance obligation
at a point in time or over a contractual term through the consideration
of the contract terms and the requirements of IFRS 15. This included the
assessment of a sample of new or one-off transactions;
▪
For a sample of new contracts entered into during the year, we agreed
revenue recognised to supporting documentation to test:
–
proper identification of deliverables;
–
proper and consistent allocation of the contract price to the
performance obligations;
–
appropriate recognition of revenue either over time or at a point
in time;
–
consistent application of the revenue recognition policy, and
–
appropriate period of revenue recognition with reference to
contractual documents and the satisfaction of the respective
performance obligation.
KEY OBSERVATIONS:
Based on our procedures performed we did not identify any matters to
suggest that in respect of new contracts entered into during the period
and the application of the accounting standard in respect of the underlying
terms of the contract was not appropriate.
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
Gresham Technologies plc
Annual Financial Report 2023
77
Financial statements
INDEPENDENT AUDITOR’S REPORT
CONTINUED
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
2023
£m
2022
£m
2023
£m
2022
£m
Materiality
367
365
105
160
Basis for
determining materiality
0.75% of revenue
28% of Group materiality
44% 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 increasing basis of business
valuation in the sector.
The component materiality used is lower than the
materiality we would otherwise have determined
using a benchmark of 1% of total assets.
Performance materiality
238
237
68
104
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% of financial statement materiality. (2022: 65%)
COMPONENT MATERIALITY
For the purposes of our Group audit opinion, we set materiality for each significant component of the Group, apart from the Parent
Company whose materiality is set out above, based on a percentage of between 28% (2022: 37%) and 75% (2022: 75%) of Group
materiality dependent on the size and our assessment of the risk of material misstatement of that component. Component materiality
ranged from £105,000 (2022: £135,000) to £270,000 (2022: £274,000). In the audit of each component, we further applied performance
materiality levels of 65% (2022: 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 £14,600 (2022: £7,300).
We also agreed to report differences below this threshold that, in our view, warranted reporting on qualitative grounds.
78
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Annual Financial Report 2023
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 set
out on page 72; and
▪
The Directors’ explanation as to their
assessment of the Group’s prospects,
the period this assessment covers and
why the period is appropriate set out
on page 72.
Other Code
provisions
▪
Directors’ statement on fair, balanced
and understandable set out on page 53
▪
Board’s confirmation that it has carried
out a robust assessment of the emerging
and principal risks set out on page 42;
▪
The section of the annual report that
describes the review of effectiveness of
risk management and internal control
systems set out on page 54; and
▪
The section describing the work of the
audit committee set out on page 52.
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.
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
Gresham Technologies plc
Annual Financial Report 2023
79
Financial statements
INDEPENDENT AUDITOR’S REPORT
CONTINUED
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
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:
NON-COMPLIANCE WITH LAWS AND REGULATIONS
Based on:
▪
Our understanding of the Group and the industry in which
it operates;
▪
Discussion with management and those charged with governance
and Audit Committee; and
▪
Obtaining and understanding of the Group’s policies and
procedures regarding compliance with laws and regulations;
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 we considered 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.
Our procedures in respect of the above included:
▪
Review of minutes of meeting of those charged with governance
for any instances of non-compliance with laws and regulations;
▪
Review of correspondence with regulatory and tax authorities for
any instances of non-compliance with laws and regulations;
▪
Review of financial statement disclosures and agreeing to
supporting documentation;
▪
Involvement of tax specialists in the audit; and
▪
Review of legal expenditure accounts to understand the nature of
expenditure incurred.
FRAUD
We assessed the susceptibility of the financial statements to
material misstatement, including fraud. Our risk assessment
procedures included:
▪
Discussion with management and those charged with governance
and Audit Committee regarding any known or suspected instances
of fraud;
▪
Obtaining an understanding of the Group’s policies and procedures
relating to:
–
Detecting and responding to the risks of fraud; and
–
Internal controls established to mitigate risks related
to fraud.
▪
Review of minutes of meeting of those charged with governance
for any known or suspected instances of fraud;
▪
Discussion amongst the engagement team as to how and where
fraud might occur in the financial statements;
▪
Performing analytical procedures to identify any unusual or
unexpected relationships that may indicate risks of material
misstatement due to fraud; and
▪
Considering remuneration incentive schemes and performance
targets and the related financial statement areas impacted
by these.
Based on our risk assessment, we considered the areas most
susceptible to fraud to relate to revenue recognition and
capitalisation of development costs.
Our procedures in respect of the above are included within the
key audit matters outlined within this report.
We also communicated relevant identified laws and regulations
and potential fraud risks to all engagement team members
including component engagement teams who were all deemed
to have appropriate competence and capabilities and remained
alert to any indications of fraud or non-compliance with laws and
regulations throughout the audit. For component engagement
teams, we also reviewed the result of their work performed in
this regard.
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.
DAVID BUTCHER (SENIOR STATUTORY AUDITOR)
FOR AND ON BEHALF OF BDO LLP, STATUTORY AUDITOR
LONDON, UK
29 APRIL 2024
BDO LLP is a limited liability partnership registered in England
and Wales (with registered number OC305127).
80
Gresham Technologies plc
Annual Financial Report 2023
CONSOLIDATED INCOME STATEMENT
Notes
Year ended
31 December
2023
£’000
As restated
Year ended
31 December
2022
£’000
Revenue
4,5
Cost of sales
(12,790 )
(14,774 )
Gross profit
Adjusted administrative expenses
(29,431 )
(27,027 )
Adjusted operating profit
Adjusting administrative items:
Exceptional costs
5
(79 )
(153 )
Exceptional income
5
Foreign exchange differences on retranslation of intercompany balances
5
(860 )
Amortisation of acquired intangibles
14
(2,315 )
(2,315 )
Share-based payments
23
(757 )
(1,027 )
(2,396 )
(4,355 )
Total administrative expenses
(31,827 )
(31,382 )
Operating profit
5,6
Finance revenue
9
Finance costs
9
(307 )
(219 )
Profit before taxation
Taxation
10
(1,013 )
(279 )
Profit after taxation attributable to the equity holders of the Parent
Earnings per share
Statutory
pence
pence
Basic earnings per share
11
Diluted earnings per share
11
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
Gresham Technologies plc
Annual Financial Report 2023
81
Financial statements
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Notes
Year ended
31 December
2023
£’000
As restated
Year ended
31 December
2022
£’000
Profit after taxation attributable to the equity holders of the Parent
Other comprehensive expenses
Items that will or may be re-classified into profit or loss:
Exchange differences on translating foreign operations
24
(421 )
(77 )
Total other comprehensive expenses
(421 )
(77 )
Total comprehensive income for the year
82
Gresham Technologies plc
Annual Financial Report 2023
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Notes
At
31 December
2023
£’000
As restated
At
31 December
2022
£’000
As restated
At
1 January
2022
£’000
Assets
Non-current assets
Property, plant and equipment
13
Right-of-use assets
16
Intangible assets
14
Deferred tax assets
10
Current assets
Trade and other receivables
18
Contract assets
18
Income tax receivable
Cash and cash equivalents
19
Total assets
Equity and liabilities
Equity attributable to owners of the Parent
Called up equity share capital
22
Share premium account
24
Own share reserve
22
(44 )
(296 )
(609 )
Other reserves
24
Retained earnings
24
Total equity attributable to owners of the Parent
Non-current liabilities
Contract liabilities
20
Lease liabilities
16
Deferred tax liability
10
Provisions
20
Contingent consideration
Current liabilities
Trade and other payables
20
Lease liabilities
16
Income tax payable
20
Contingent consideration
20
Total liabilities
Total equity and liabilities
The financial statements were approved by the Board of Directors and authorised for issue on 29 April 2024.
On behalf of the Board
IAN MANOCHA
TOM MULLAN
CHIEF EXECUTIVE
CHIEF FINANCIAL OFFICER
29 APRIL 2024
29 APRIL 2024
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
Gresham Technologies plc
Annual Financial Report 2023
83
Financial statements
Notes
Share
capital
£’000
Share
premium
account
£’000
Own
share
reserve
£’000
Other
reserves
£’000
Retained
earnings
£’000
Total
£’000
At 1 January 2022 - as previously stated
(609 )
Prior year adjustment
3
(1,451 )
(1,451 )
At 1 January 2022 - As restated
(609 )
Attributable profit for the period - As restated
Other comprehensive expenses - As restated
(77 )
(77 )
Total comprehensive income - As restated
Exercise of share options
22
Transfer of own shares held by Employee Share
Ownership Trust to employees
22
Deferred tax movement in respect
of share options
10
Share-based payments
23
Dividend paid
12
(622 )
(622 )
At 31 December 2022 - As restated
(296 )
Attributable profit for the period
Other comprehensive expenses
(421 )
(421 )
Total comprehensive income
Exercise of share options
22
Issue of shares to Employee Share
Ownership Trust
22
(7 )
Transfer of own shares held by Employee Share
Ownership Trust to employees
22
Deferred tax movement in respect
of share options
10
(229 )
(229 )
Share-based payments
23
Dividend paid
12
(626 )
(626 )
At 31 December 2023
(44 )
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
84
Gresham Technologies plc
Annual Financial Report 2023
CONSOLIDATED STATEMENT OF CASHFLOW
Notes
Year ended
31 December
2023
£’000
As restated
Year ended
31 December
2022
£’000
Cashflows from operating activities
Profit after taxation
Depreciation of property, plant and equipment
13
Amortisation of intangible assets
14
Amortisation of right-of-use assets
16
Profit on disposal of fixed assets
(11 )
Share-based payments
23
Increase in trade and other receivables
(790 )
(886 )
Decrease/(increase) in contract assets
(743 )
(Decrease)/increase in trade and other payables
(680 )
Increase in contract liabilities
Decrease in sales tax provision arising on acquisition
(496 )
Taxation
10
Net finance costs
9
Cash inflow from operations
Income taxes received
10
Income taxes paid
(1,833 )
(1,893 )
Net cash inflow from operating activities
Cashflows from investing activities
Interest received
9
Purchase of property, plant and equipment
13
(191 )
(806 )
Payment of contingent consideration on acquisition of Inforalgo
20
(369 )
Payment of contingent consideration on acquisition of Electra
20
(3,987 )
(3,987 )
Payments to acquire intangible fixed assets
14
(5,398 )
(5,195 )
Net cash used in investing activities
(9,575 )
(10,351 )
Cashflows from financing activities
Interest paid
9
(209 )
(138 )
Principal paid on lease liabilities
16
(676 )
(645 )
Dividends paid
12
(626 )
(622 )
Drawdown on RCF loan facility
21
Repayment of RCF loan facility
21
(3,278 )
Share issue proceeds (net of costs)
22
Net cash used in financing activities
(1,269 )
(1,336 )
Net decrease in cash and cash equivalents
(765 )
(2,657 )
Cash and cash equivalents at beginning of year
Effect of foreign exchange rate changes
(741 )
(202 )
Cash and cash equivalents at end of year
19
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
Gresham Technologies plc
Annual Financial Report 2023
85
Financial statements
NOTES TO FINANCIAL STATEMENTS
86
Gresham Technologies plc
Annual Financial Report 2023
STATEMENTS AND STATEMENT OF
COMPLIANCE WITH INTERNATIONAL
FINANCIAL REPORTING STANDARDS
incorporated and domiciled in England and Wales
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 2023
were authorised for issue by the Board of Directors on 29 April
2024 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
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 to determine:
a)
For software sold as part of a multi-element solution -
whether the licence is a distinct performance obligation
b)
For software that is determined to be a distinct performance
obligation – 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.
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 (including the software
licence) are delivered over the term of the contract.
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.
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
£25,912,000 (2022: £23,556,000).
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.
2. ACCOUNTING JUDGEMENTS AND ESTIMATION
UNCERTAINTY
CONTINUED
JUDGEMENTS
CONTINUED
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
Gresham Technologies plc
Annual Financial Report 2023
87
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 2023 was £2,934,000 (2022: £2,360,000). The
impact of reducing the useful economic life by one year would
increase the amortisation charge for the year by £370,000, if the
useful economic life was increased by one year the amortisation
charge is reduced by £300,000.
SHARED-BASED PAYMENTS
The fair value of share-based payments arising from the
Performance Share Plan are estimated using a Monte Carlo
option pricing model and is recognised in income from the date
of grant over the vesting period with a corresponding entry to
equity. The model projects and averages results for a range of
potential outcomes for the vesting conditions, using assumptions
on share price volatility.
DEFERRED TAX
The Group recognises deferred tax assets on carried forward tax
losses to the extent that there are sufficient estimated future
taxable profits which the tax losses can be utilised. Management
judgement is required to determine the amount of deferred tax
assets that can be recognised based on the likely timing and the
The Group’s financial statements have been prepared in
accordance with UK adopted international accounting standards
in conformity with the requirements of the Companies Act
2006 and in accordance with international financial reporting
standards and international accounting standards as issued
by the International Accounting Standards Board (“IASB”) and
Interpretations (collectively “IFRSs”). The accounting policies
which follow set out those policies which apply in preparing the
financial statements for the year ended 31 December 2023.
The Group’s financial statements have been prepared on a
historical cost basis except contingent consideration.
The Group financial statements are presented in Sterling,
which is also the Company’s functional currency. All values are
rounded to the nearest thousand pounds (£’000) except when
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 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 1 to 43. 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 cashflow 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.
The Directors have reviewed the profit and cashflow forecasts for
the period to 30 June 2025 together with the assumptions used
to support these forecasts and the expected impact of economic
conditions on trading. Specific scenario stress testing based on
the Group failing to win any new business in the period from
1 January 2024 have been performed to ensure that the Group
continues to have sufficient resources to continue to operate
within these scenarios.
The Directors have also considered the impact of the
announcement made of 9 April 2024 of a recommended cash
acquisition of Gresham by Alliance Bidco Limited (“Bidco”), a
company owned indirectly by funds managed or advised by
STG Partners, LLC (“STG”). The Scheme Document in relation
to the acquisition was subsequently published on 18 April 2024.
The Directors note the intentions of Bidco as set out in the
Scheme Document, and they do not have any reason to believe
that Bidco will not continue to support the Group or would
materially change its activities in the next 12 months.
Given
this, the Directors consider that both Bidco’s future intentions
for the Group and available resources enable them to 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 2023.
The principal accounting policies adopted by the Group are
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.
Financial statements
NOTES TO FINANCIAL STATEMENTS
CONTINUED
3. ACCOUNTING POLICIES
CONTINUED
88
Gresham Technologies plc
Annual Financial Report 2023
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
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. 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
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
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.
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
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
3. ACCOUNTING POLICIES
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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.
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
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 cashflows 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
Financial statements
NOTES TO FINANCIAL STATEMENTS
CONTINUED
3. ACCOUNTING POLICIES
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Annual Financial Report 2023
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
amount of the obligation. If the effect is material, expected
future cashflows 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
The Group assesses at each statement of financial position date
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 cashflows and the contractual
cashflows 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 Cashflows – bank overdrafts. Bank overdrafts
are shown within loans and borrowings in current liabilities on
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 Cashflow, cash
and cash equivalents consist of cash and cash equivalents as
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.
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
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
3. ACCOUNTING POLICIES
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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.
▪
Trade payables and other short-term monetary liabilities,
which are initially recognised at fair value and subsequently
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
Contributions to defined contribution schemes are recognised
in the Income Statement in the period in which they
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
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
Where software licences are considered a distinct performance
obligation, revenue 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.
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.
Financial statements
NOTES TO FINANCIAL STATEMENTS
CONTINUED
3. ACCOUNTING POLICIES
CONTINUED
REVENUE RECOGNITION
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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
as detailed above.
In the majority of our Clareti subscription software agreements
unbundling is not possible, this is where a bundled element
cannot technically or operationally be provided without another.
This is due to the fact the customer cannot gain benefit from
the software without the Group also providing, and continuing to
provide, ongoing support and maintenance of that software and
in instances where a hosted infrastructure is also subscribed to,
also that hosted infrastructure. Where objective unbundling of a
solution is not possible, revenue is recognised over the period of
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.
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
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.
The ESOT has agreed to waive dividends with regards to any
Company shares.
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
Costs of sales include costs incurred to achieve the financial
year’s 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; and
▪
payrolled employees that provide fixed margin
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; and
▪
NEW STANDARDS, INTERPRETATIONS AND AMENDMENTS
EFFECTIVE FROM 1 JANUARY 2023
A number of new standards, interpretations and amendments
are effective for the year ended 31 December 2023, which have
been listed below, these have had no material impact on the
Group’s accounting policies and disclosures in these financial
statements.
▪
IFRS 17 Insurance contracts
▪
Amendments to IAS 1 - Disclosure of Accounting policies
▪
Amendments to IAS 8 - Definition of Accounting Estimates
▪
Amendments to IAS 12 - Deferred Tax related to Assets and
Liabilities
▪
Amendments to IAS 12 - International Tax Reform
3. ACCOUNTING POLICIES
CONTINUED
CHANGES IN ACCOUNTING POLICIES
CONTINUED
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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 2024 – adopted by UKEB:
▪
IFRS 16 - Liability in a Sale and Leaseback
▪
Amendments to IAS 1 - Classification of Liabilities as Current
or Non-Current
▪
Amendments to IAS 1 - Non-current liabilities with Covenants
▪
Amendments to IAS 7 and IFRS 7 - Supplier Finance
Arrangements
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 2024 which have been adopted in
these financial statements.
PRIOR YEAR RESTATEMENT
REVENUE RECOGNITION POLICY
Management changed their assessment as to whether software
licensing, support and maintenance for non-Gresham-hosted
deployments were distinct performance obligations and could
therefore be unbundled. Management now consider that
unbundling is not possible, largely due to changes in customer
expectations, the maturity of subscription software selling, the
pace of innovation in the fin-tech industry and precedents set
over the decade plus life of the Clareti business to date. This
change in assessment has resulted in a change in the accounting
treatment for the recognition of revenue for on-premise license
fees during the year. Previously this revenue was recognised at
the point in time the license was delivered to the customer,
following a review of customer contracts the revenue previously
recognised was corrected to
reflect the fact that performance
obligations for the license fee were on-going through the
contracted period and therefore these licenses should be treated
as a right to access licence under IFRS 15 and not a right of
use licence. Therefore, revenue should be recognised rateably
over the contracted period. Administrative expenses have been
adjusted for the amortisation of contracted sales commissions
which has been recognised in line with revenue recognition in
accordance with IFRS 15.
As result of this change revenue for the year ended
31 December 2022 has been restated, reducing revenue by
£481,000 and increasing administrative expenses by £28,000.
This adjustment has resulted in the restatement of the Group’s
opening reserves at 1 January 2022, its financial position as at
31 December 2022 and the results of the cashflows of the Group
then ended. The impact of this change as at 1 January 2022
was to reduce the net assets by £1,911,000, increasing contract
liabilities (current liabilities) by £1,986,000 and reducing contract
assets by £75,000.
The impact of this adjustment has also reduced the taxation
charge for the year ended 31 December 2022 by £77,000, with
the deferred tax liability reducing by £90,000 and a £13,000
increase in corporation tax creditor. The impact of this change
as at 1 January 2022 is to reduce the deferred tax liability by
£265,000, the corporation creditor by £131,000 and increases
income tax receivable by £64,000, with a corresponding increase
of £460,000 to retained earnings.
FOREIGN EXCHANGE DIFFERENCES ON RETRANSLATION
OF INTERCOMPANY BALANCES
Foreign exchange differences arising on intercompany trading
balances have historically been recognised within Other
Comprehensive Income within the consolidated financial
statements and cumulatively recognised in the foreign currency
translation reserve. In accordance with IAS21, exchange
differences on intragroup balances should be recognised in the
Income statement as they do not form part of Company’s net
investment in foreign operations.
As a result of the identification of this error, the Income
statement has been restated to reflect the foreign exchange
differences, with the impact increasing administrative expenses
by £860,000 in the year ended 31 December 2022, with the
corresponding correction recognised as a reduction within other
comprehensive income. In addition, the previously separately
recognised foreign currency translation reserve has been merged
with the retained earnings reserve. This change has been
applied retrospectively, restating the Group’s opening reserves at
1 January 2022 and its financial position as at 31 December 2022.
The impact of this change as at 1 January 2022 was to reduce
retained earnings by £378,000 and to increase Foreign currency
translation reserve by £378,000.
The combined impact of these changes are detailed below:
CONSOLIDATED INCOME STATEMENT
Year ended 31 December 2022
Change in | Foreign | |||
As previously | revenue | exchange | ||
reported | recognition | differences | As restated | |
Year ended 31 December 2022 | £’000 | £’000 | £’000 | £’000 |
Revenue | 48,719 | (481) | — | 48,238 |
Gross profit | 33,945 | (481) | — | 33,464 |
Administrative expenses | (30,494) | (28) | (860) | (31,382) |
Profit before taxation | 3,238 | (509) | (860) | 1,869 |
Taxation | (356) | 77 | — | (279) |
Profit after taxation | 2,882 | (432) | (860) | 1,590 |
Financial statements
NOTES TO FINANCIAL STATEMENTS
CONTINUED
3. ACCOUNTING POLICIES
CONTINUED
CHANGES IN ACCOUNTING POLICIES
CONTINUED
PRIOR YEAR RESTATEMENT
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CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Change in | Foreign | |||
As previously | revenue | exchange | ||
reported | recognition | differences | As restated | |
At 1 January 2022 | £’000 | £’000 | £’000 | £’000 |
Current assets | ||||
Contract assets | 1,665 | 75 | — | 1,740 |
Income tax receivable | 1,204 | 64 | — | 1,268 |
Total current assets | 17,411 | 139 | — | 17,550 |
Current liabilities | ||||
Contract liabilities | (12,048) | (1,986) | — | (14,034) |
Income tax payable | (131) | 131 | — | — |
Total current liabilities | (24,333) | (1,855) | — | (26,188) |
Non-current liabilities | ||||
Deferred tax liability | (6,831) | 265 | — | (6,566) |
Total liabilities | (35,713) | (1,590) | — | (37,303) |
Equity | ||||
Retained earnings | 18,288 | (1,451) | (378) | 16,459 |
Foreign currency translation reserve | (378) | — | 378 | — |
Total equity | 45,881 | (1,451) | — | 44,430 |
Change in | Foreign | |||
As previously | revenue | exchange | ||
reported | recognition | differences | As restated | |
At 31 December 2022 | £’000 | £’000 | £’000 | £’000 |
Current assets | ||||
Contract assets | 2,558 | 47 | — | 2,605 |
Current liabilities | ||||
Contract liabilities | (11,070) | (2,467) | — | (13,537) |
Income tax payable | (244) | 182 | — | (62) |
Total current liabilities | (24,106) | (2,285) | — | (26,391) |
Non-current liabilities | ||||
Deferred tax liability | (6,067) | 355 | — | (5,712) |
Total liabilities | (31,626) | (1,930) | — | (33,556) |
Equity | ||||
Retained earnings | 21,968 | (1,883) | (1,315) | 18,770 |
Foreign currency translation reserve | (1,315) | — | 1,315 | — |
Total equity | 49,006 | (1,883) | — | 47,123 |
EARNINGS PER SHARE
For the year ended 31 December 2022 the impact has reduced basic and diluted earnings per share from 3.46 pence per share
STRATEGIC REPORT
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FINANCIAL STATEMENTS
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Revenue disclosed in the Income Statement is analysed as follows:
As restated | ||
2023 | 2022 | |
£’000 | £’000 | |
Provision of software | 34,041 | 31,400 |
Rendering of services | 14,971 | 16,838 |
Total revenue | 49,012 | 48,238 |
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 cashflows are affected by economic data; and
▪
enable users to understand the relationship with the revenue segment information provided in note 5.
Clareti | Other | Contracting | ||
Solutions | Solutions | Services | Total | |
2023 | £’000 | £’000 | £’000 | £’000 |
Non-recurring software revenue (software licences) | 31 | 231 | — | 262 |
Recurring software revenue (recurring software licences, support and | ||||
maintenance and managed services) | 29,589 | 4,190 | — | 33,779 |
Rendering of services | 8,162 | 232 | 6,577 | 14,971 |
37,782 | 4,653 | 6,577 | 49,012 |
Timing of revenue recognition | £’000 | £’000 | £’000 | £’000 |
Non-annually recurring - at a point in time | 31 | 231 | — | 262 |
Rateably recognised - over contract period | 37,751 | 4,422 | 6,577 | 48,750 |
37,782 | 4,653 | 6,577 | 49,012 |
Clareti | Other | Contracting | ||
Solutions | Solutions | Services | Total | |
2022 (as restated) | £’000 | £’000 | £’000 | £’000 |
Non-recurring software revenue (software licences) | 154 | — | — | 154 |
Recurring software revenue (recurring software licences, support and | ||||
maintenance and managed services) | 26,903 | 4,343 | — | 31,246 |
Rendering of services | 7,981 | 633 | 8,224 | 16,838 |
35,038 | 4,976 | 8,224 | 48,238 |
Timing of revenue recognition | £’000 | £’000 | £’000 | £’000 |
Non-annually recurring - at a point in time | 154 | — | — | 154 |
Rateably recognised - over contract period | 34,884 | 4,976 | 8,224 | 48,084 |
35,038 | 4,976 | 8,224 | 48,238 |
Financial statements
NOTES TO FINANCIAL STATEMENTS
CONTINUED
4. REVENUE
CONTINUED
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CONTRACT BALANCES
As restated | As restated | |||
Contract | Contract | Contract | Contract | |
assets | assets | liabilities | liabilities | |
2023 | 2022 | 2023 | 2022 | |
£’000 | £’000 | £’000 | £’000 | |
At 1 January | 7,370 | 5,535 | (13,891) | (14,094) |
Amounts included in contract liabilities that were recognised as revenue | ||||
during the period | — | — | 11,074 | 11,567 |
Excess of revenue recognised over cash (or rights to cash) being recognised | ||||
during the period | 176 | 1,835 | — | — |
Cash received in advance of performance and not recognised as revenue | ||||
during the period | — | — | (10,940) | (11,364) |
At 31 December | 7,546 | 7,370 | (13,757) | (13,891) |
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 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.
Contract liabilities to be recognised in more than one year are £796,000 (2022: £354,000). Trade receivables included in the above as at
1 January 2022 were £3,795,000.
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 2023 of £nil (2022: £15,000). See note 18
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:
–
Clareti Control products; and
–
Clareti Connect products.
▪
Other Solutions – supply of a range of well-established solutions to enterprise-level customers in a variety of end markets.
▪
Clareti Contracting Services - supply of IT contracting services to one banking customer. Services provided relate to Clareti products.
▪
Contracting Services – supply of IT contracting services to one banking customer, excluding Clareti Contracting Services.
The Clareti Solutions reportable segment has been analysed separated between Solutions and Contracting Services in the tables below.
The separate analysis is provided following the announcement in November 2023 that the agreement for contracting services business
was being terminated in 2024. This reflects how the business is reported to Management and the Board of Directors and how the
business will be monitored going forward.
5. SEGMENT INFORMATION
CONTINUED
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FINANCIAL STATEMENTS
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97
The prior year segmental analysis has been updated to reflect this change.
Transfer prices between segments are set on an arm’s length basis in a manner similar to transactions with third parties. Segment revenue,
segment expense and segment result include transfers between business segments. Those transfers are eliminated on consolidation.
Adjustments, | |||||||
central | |||||||
Clareti | overheads | ||||||
Clareti | Contracting | Other | Contracting | and | |||
Solutions | Services | Solutions | Services | elimination | Consolidated | ||
2023 | Notes | £’000 | £’000 | £’000 | £’000 | £’000 | £’000 |
Revenue | 4 | 36,281 | 1,501 | 4,653 | 6,577 | 49,012 | |
Cost of sales | (3,415) | (1,301) | (2,320) | (5,754) | (12,790) | ||
Gross profit | 32,866 | 200 | 2,333 | 823 | 36,222 | ||
Gross profit % | 91% | 13% | 50% | 13% | 74% | ||
Adjusted administrative expenses | (29,363) | — | (68) | — | (29,431) | ||
Adjusted operating profit | 3,503 | 200 | 2,265 | 823 | 6,791 | ||
Adjusting administrative items: | |||||||
Exceptional items | 5 | 40 | 40 | ||||
Foreign exchange differences on retranslation | |||||||
of intercompany balances | 6 | 636 | 636 | ||||
Amortisation of acquired intangibles | 14 | (2,315) | (2,315) | ||||
Share-based payments | 23 | (757) | (757) | ||||
Adjusting administrative expenses | (2,396) | (2,396) | |||||
Operating profit | 4,395 | ||||||
Finance revenue | 9 | 1 | |||||
Finance costs | 9 | (307) | |||||
Profit before taxation | 4,089 | ||||||
Taxation | 10 | (1,013) | |||||
Profit after taxation | 3,076 | ||||||
Adjusted operating profit | 6,791 | ||||||
Amortisation of intangibles | 14 | 2,979 | |||||
Depreciation of property, plant and equipment | 13 | 333 | |||||
Amortisation of right-of-use assets | 16 | 556 | |||||
Adjusted EBITDA | 10,659 | ||||||
Development costs capitalised | 14 | (5,297) | |||||
Principal paid on lease liabilities | 16 | (676) | |||||
Cash adjusted EBITDA | 4,686 | ||||||
Segment assets | 79,123 | ||||||
Segment liabilities | (28,655) |
Financial statements
NOTES TO FINANCIAL STATEMENTS
CONTINUED
5. SEGMENT INFORMATION
CONTINUED
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Adjustments, | |||||||
central | |||||||
Clareti | overheads | ||||||
Clareti | Contracting | Other | Contracting | and | |||
Solutions | Services | Solutions | Services | elimination | Consolidated | ||
2022 (as restated) | Notes | £’000 | £’000 | £’000 | £’000 | £’000 | £’000 |
Revenue | 4 | 32,888 | 2,150 | 4,976 | 8,224 | 48,238 | |
Cost of sales | (3,164) | (1,868) | (2,546) | (7,196) | (14,774) | ||
Gross profit | 29,724 | 282 | 2,430 | 1,028 | 33,464 | ||
Gross profit % | 90% | 13% | 49% | 13% | 69% | ||
Adjusted administrative expenses | (26,926) | — | (101) | — | (27,027) | ||
Adjusted operating profit | 2,798 | 282 | 2,329 | 1,028 | 6,437 | ||
Adjusting administrative items: | |||||||
Exceptional costs | 5 | (153) | (153) | ||||
Foreign exchange differences on retranslation of | |||||||
intercompany balances | 6 | (860) | (860) | ||||
Amortisation of acquired intangibles | 14 | (2,315) | (2,315) | ||||
Share-based payments | 23 | (1,027) | (1,027) | ||||
Adjusting administrative expenses | (4,355) | (4,355) | |||||
Operating profit | 2,082 | ||||||
Finance revenue | 9 | 6 | |||||
Finance costs | 9 | (219) | |||||
Profit before taxation | 1,869 | ||||||
Taxation | 10 | (279) | |||||
Profit after taxation | 1,590 | ||||||
Adjusted operating profit | 6,437 | ||||||
Amortisation of intangibles | 14 | 2,408 | |||||
Depreciation of property, plant and equipment | 13 | 191 | |||||
Amortisation of right-of-use assets | 16 | 714 | |||||
Adjusted EBITDA | 9,750 | ||||||
Development costs capitalised | 14 | (5,195) | |||||
Principal paid on lease liabilities | 16 | (645) | |||||
Cash adjusted EBITDA | 3,910 | ||||||
Segment assets | 80,679 | ||||||
Segment liabilities | (33,556) |
The Group has a customer relationship with one banking customer which is considered by the Directors to be individually significant;
revenue from this relationship exceeded 10% of the Group’s revenue, totalling £17,589,000 (2022: £20,604,000) which includes
contracting revenue of £8,078,000 (2022: £10,374,000).
5. SEGMENT INFORMATION
CONTINUED
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FINANCIAL STATEMENTS
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99
ADJUSTING ADMINISTRATIVE ITEMS
Operating performance is analysed excluding exceptional items, share-based payment charges and amortisation from acquired
intangibles which is consistent in with the way in which the Board and most stakeholders review the financial performance of the
Group. These adjusting items are all either non-cash or non-recurring IFRS expenses (or income) that do not reflect the underlying
performance of the business. In the case of share-based payment charges, management acknowledge that these awards are
potentially paid in “lieu” of cash salary or bonuses, however the actual charge represents a non-cash expense. Adjusting for these
items is also consistent with the manner in which a number of similar small and mid-cap LSE (or AIM) listed present their results and
how we understand the investment community to assess performance, where, for growth shares the recurring cash performance
of the business is considered most important. In addition, these adjustments are also aligned with the performance methodology
used by the panel of debt providers that tendered for the revolving credit facility established during the year in order to assess and
continually monitor credit worthiness, risk and upon which covenants are set.
As restated | ||
2023 | 2022 | |
The adjusting administrative items are: | £’000 | £’000 |
Acquisition and associated integration costs | — | 153 |
Professional fees | 79 | — |
Exceptional costs | 79 | 153 |
Exceptional income | (119) | — |
Total exceptional items | (40) | 153 |
Foreign exchange differences on retranslation of intercompany balances | (636) | 860 |
Amortisation on acquired intangibles | 2,315 | 2,315 |
Share-based payments | 757 | 1,027 |
Total adjusting administrative items | 2,396 | 4,355 |
During the year the Group incurred £79,000 exceptional costs relating to termination costs of supplier contracts following the closure
of the EDT business and one-off corporate costs including legal and professional fees.
The exceptional income related to payroll tax relief received from the Australian tax authorities as a result of a post-COVID-19
pandemic scheme.
In 2022 exceptional costs related to legal and professional fees for the integration of prior year acquisitions.
Due to the amount and nature of amortisation of acquired intangibles and share-based payments both costs were treated as an
adjusting administrative item.
ADJUSTED EBITDA
Adjusted EBITDA is disclosed within the financial statements to show the underlying performance of the Group on a consistent basis
and to aid understanding of the financial performance during the year.
As restated | |||
2023 | 2022 | ||
Notes | £’000 | £’000 | |
Profit before taxation | 4,089 | 1,869 | |
Adjusting items: | |||
Amortisation of intangibles | 14 | 5,294 | 4,723 |
Depreciation of property, plant and equipment | 13 | 333 | 191 |
Amortisation of right-to-use assets | 16 | 556 | 714 |
Notional interest on lease liabilities | 9 | 58 | 45 |
Finance revenue | 9 | (1) | (6) |
Interest payable | 9 | 249 | 174 |
EBITDA | 10,578 | 7,710 | |
Net exceptional items | 5 | (40) | 153 |
Foreign exchange differences on retranslation of intercompany balances | 5 | (636) | 860 |
Share-based payments | 23 | 757 | 1,027 |
Adjusted EBITDA | 10,578 | 9,750 |
Adjusted EBITDA is not an IFRS measure or not considered to be a substitute for or superior to any IFRS measures. It is not directly
comparable to other companies.
Financial statements
NOTES TO FINANCIAL STATEMENTS
CONTINUED
5. SEGMENT INFORMATION
CONTINUED
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GEOGRAPHIC INFORMATION
As restated | ||
2023 | 2022 | |
£’000 | £’000 | |
Revenues from external customers (by destination) | ||
UK | 8,114 | 6,832 |
EMEA | 4,635 | 4,128 |
United States | 16,686 | 14,568 |
Americas | 1,146 | 1,307 |
Australia | 17,726 | 20,851 |
Asia Pacific | 705 | 552 |
49,012 | 48,238 |
EMEA includes revenue from external customers located primarily in the Netherlands, Luxembourg, Switzerland, Sweden and South
Africa. Americas includes revenue primarily from Canada. Asia Pacific includes revenue from external customers located primarily in
Malaysia and Singapore.
2023 | 2022 | |
£’000 | £’000 | |
Non-current assets | ||
UK | 62,854 | 63,077 |
EMEA | 454 | 425 |
North America | 1,269 | 740 |
Asia Pacific | 726 | 1,037 |
65,303 | 65,279 |
The Group operating profit is stated after charging:
As restated | |||
2023 | 2022 | ||
Notes | £’000 | £’000 | |
Research costs written off | 3,074 | 2,616 | |
Amortisation of capitalised development costs recognised in administration expenses | 14 | 2,934 | 2,360 |
Total research and development costs | 6,008 | 4,976 | |
Depreciation of property, plant and equipment | 13 | 333 | 191 |
Amortisation of right to use assets | 16 | 556 | 714 |
Amortisation of intangible assets (excluding development costs) | 14 | 2,360 | 2,363 |
Total depreciation, impairment and amortisation expense | 3,249 | 3,268 | |
Employee benefit expenses | 8 | 27,510 | 27,570 |
Net foreign currency differences (gains)/losses | (510) | 860 |
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.
2023 | 2022 | |
£’000 | £’000 | |
Audit fees | ||
Audit of the Group financial statements and associated company | 150 | 32 |
Other fees to the auditor | ||
– auditing the accounts of subsidiaries | 200 | 190 |
350 | 222 | |
Non-audit fees | ||
Audit of bank covenant certificates | 3 | 3 |
3 | 3 |
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
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101
STAFF AND DIRECTOR COSTS
Capitalised | |||||
Income | development | Total excluding | Contracting | ||
Statement | costs | contracting | costs expensed | Total | |
2023 | £’000 | £’000 | £’000 | £’000 | £’000 |
Wages and salaries | 17,841 | 4,208 | 22,049 | 2,451 | 24,500 |
Social security costs | 1,412 | 362 | 1,774 | 202 | 1,976 |
Other pension costs | 626 | 148 | 774 | 260 | 1,034 |
19,879 | 4,718 | 24,597 | 2,913 | 27,510 |
Income | Capitalised | Total excluding | Contracting | ||
Statement | development | contracting | costs expensed | Total | |
2022 | £’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 |
Included in wages and salaries is a total expense of share-based payments of £757,000 (2022: £1,027,000) 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:
2023 | 2022 | |
Management | 12 | 14 |
Sales and administration | 47 | 48 |
Technical | 164 | 160 |
Total | 223 | 222 |
Contracting services | 26 | 37 |
2023 | 2022 | |
£’000 | £’000 | |
Finance revenue | ||
Bank interest receivable | 1 | 6 |
Finance costs | ||
Notional interest on lease liabilities | 58 | 45 |
Bank interest payable | 91 | 19 |
Other interest payable | 7 | 6 |
Other bank charges | 151 | 149 |
Total finance costs | 307 | 219 |
Financial statements
NOTES TO FINANCIAL STATEMENTS
CONTINUED
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TAX ON PROFIT ON ORDINARY ACTIVITIES
TAX CHARGE IN THE INCOME STATEMENT
As restated | ||
2023 | 2022 | |
£’000 | £’000 | |
Current income tax | ||
Overseas tax charge - adjustment to prior years | 41 | 45 |
Overseas tax charge - current year | 1,503 | 1,583 |
UK corporation tax credit - adjustment to prior years | (949) | (1,293) |
Total current income tax | 595 | 335 |
Deferred income tax | ||
Movement in net deferred tax liability | 418 | (56) |
Total deferred income tax | 418 | (56) |
Total charge in the Income Statement | 1,013 | 279 |
The UK corporation tax credit included £1,162,000 (2022: £1,273,000) relating to the surrender of prior year tax losses under the HMRC
R&D tax credit scheme.
RECONCILIATION OF THE TOTAL TAX CHARGE
The tax charge in the Income Statement for the year is higher (2022: lower) than the standard rate of UK corporation tax for the period
of 23.5% (2022: 19.0%). The differences are reconciled below:
As restated | ||
2023 | 2022 | |
£’000 | £’000 | |
Profit before taxation | 4,089 | 1,869 |
Profit before taxation multiplied by the UK standard rate of corporation tax for the period of 23.5% | ||
(2022: 19.0%) | 961 | 355 |
Effects of: | ||
Expenses not deductible for tax purposes | 460 | 573 |
Impact of tax rate change on timing differences | — | 139 |
Difference in overseas tax rates | 194 | 375 |
Movement in unprovided deferred tax losses | 545 | 97 |
Adjustments to prior years in respect of current tax | (908) | (1,248) |
Adjustments to prior years in respect of deferred tax | 2,150 | 2,165 |
Research and development enhanced relief claim | (2,389) | (2,177) |
Total tax charge reported in the Income Statement | 1,013 | 279 |
TAX CREDIT RECOGNISED IN EQUITY
2023 | 2022 | |
£’000 | £’000 | |
Deferred tax (charge)/credit recognised directly in equity | (229) | 301 |
Total tax (charge)/credit recognised directly in equity | (229) | 301 |
DEFERRED TAX LIABILITIES
The movement on the net deferred tax liability is shown below:
As restated | ||
2023 | 2022 | |
£’000 | £’000 | |
At 1 January | (5,712) | (6,334) |
Recognised in income | (418) | 56 |
Recognised in equity | (229) | 301 |
Foreign exchange | 7 | 265 |
At 31 December | (6,352) | (5,712) |
10. TAXATION
CONTINUED
DEFERRED TAX
CONTINUED
DEFERRED TAX LIABILITIES
CONTINUED
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Deferred tax recognised relates to the following:
As restated | ||
2023 | 2022 | |
£’000 | £’000 | |
Tax losses available for offset against future taxable income | 3,550 | 4,334 |
Employee share award schemes | 503 | 766 |
Capitalised development costs | (5,843) | (5,577) |
Accelerated depreciation for tax purposes on fixed assets | 333 | 540 |
Other timing differences | 403 | 379 |
Inter-group sale of intellectual property | (988) | (1,300) |
Acquired intangibles – software and customer relationships | (4,310) | (4,854) |
31 December | (6,352) | (5,712) |
Comprising: | ||
Asset | 137 | — |
Liability | (6,489) | (5,712) |
31 December | (6,352) | (5,712) |
UNRECOGNISED TAX LOSSES
The Group has tax losses that are available indefinitely for offset against future taxable profits of the companies in which the losses
arose as analysed below. Deferred tax assets have not been recognised in respect of these losses as they may not be used to offset
taxable profits elsewhere in the Group and they have arisen in subsidiaries that have been loss making for some time.
The tax effect of exchange differences recorded within the Consolidated Statement of Comprehensive Income is a credit of £99,000
(2022: credit £15,000).
TEMPORARY DIFFERENCES ASSOCIATED WITH GROUP INVESTMENTS
At 31 December 2023, there was no recognised deferred tax liability (2022: £nil) for taxes that would be payable on the unremitted
earnings of certain of the Group’s subsidiaries as the Group has determined that undistributed profits of its subsidiaries will not be
distributed in the foreseeable future.
UNRECOGNISED POTENTIAL DEFERRED TAX ASSETS
The deferred tax not recognised in the Consolidated Statement of Financial Position is as follows:
2023 | 2022 | |
£’000 | £’000 | |
Gresham Technologies (Luxembourg) S.A. | 665 | 793 |
Gresham Technologies (Holdings) SARL | 128 | 109 |
Gresham Technologies (Singapore) Limited | 235 | 137 |
Gresham Technologies (TDI) Limited | 73 | 119 |
Tax losses | 1,101 | 1,158 |
Gross tax losses unrecognised | 4,859 | 5,155 |
FUTURE TAX RATES
The main UK corporation tax rate increased from 19% to 25% from 1 April 2023 as substantively enacted by the Finance Act 2021.
Therefore, the rate used to calculate deferred tax balances at 31 December 2023 is 25%.
The Group’s recognised and unrecognised deferred tax assets in the UK, Luxembourg, Australian, Singapore and US subsidiaries have
been shown at the rates in the following table, being the substantively enacted rates in these countries.
2023 | 2022 | |
% | % | |
UK | 25 | 25 |
Luxembourg | 25 | 25 |
Australia | 30 | 30 |
Singapore | 17 | 17 |
US | 27 | 27 |
Financial statements
NOTES TO FINANCIAL STATEMENTS
CONTINUED
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EARNINGS PER SHARE
Basic earnings per share amounts are calculated by dividing profit or loss for the year attributable to owners of the Parent by the
weighted average number of ordinary shares outstanding during the year.
Diluted earnings per share amounts are calculated by dividing profit or loss attributable to owners of the Parent by the weighted
average number of ordinary shares outstanding during the year plus the weighted average number of ordinary shares that would be
issued on the conversion of all the dilutive potential ordinary shares into ordinary shares except when such dilutive instruments would
reduce the loss per share.
The following reflects the earnings and share data used in the basic and diluted earnings per share computations:
2023 | 2022 | |
Basic weighted average number of shares | 83,669,390 | 83,393,061 |
Employee share options - weighted (note 23) | 2,917,224 | 1,133,957 |
Diluted weighted average number of shares | 86,586,614 | 84,527,018 |
As restated | |||
2023 | 2022 | ||
Notes | £’000 | £’000 | |
Adjusted earnings attributable to owners of the Parent | 5,472 | 5,945 | |
Adjusting items: | |||
Exceptional items | 5 | 40 | (153) |
Foreign exchange differences on retranslation of intercompany balances | 5 | 636 | (860) |
Amortisation of acquired intangibles | 14 | (2,315) | (2,315) |
Share-based payments | 23 | (757) | (1,027) |
Statutory earnings attributable to owners of the Parent | 3,076 | 1,590 |
Earnings per share
As restated | ||
Statutory | Pence | Pence |
Basic earnings per share | 3.68 | 1.91 |
Diluted earnings per share | 3.55 | 1.88 |
Adjusted | ||
Basic earnings per share | 6.54 | 7.13 |
Diluted earnings per share | 6.32 | 7.03 |
During the year ended 31 December 2023, share options granted under share option schemes were exercised and the Group issued
285,000 (2022: 85,000) ordinary shares accordingly (ranking pari passu with existing shares in issue). Shares totalling 140,000 were
issued and transferred to the Employee Share Ownership Trust during the year. See note 22 for further details.
There have been no other transactions involving ordinary shares or potential ordinary shares between the reporting date and the date
The final dividend for the year ended 31 December 2022 was approved at the Company Annual General Meeting on 23 May 2023 and
paid on 26 May 2023 of 0.75 pence per share, equating to a total of £626,000. The Board has declared an interim dividend of 0.75
STRATEGIC REPORT
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FINANCIAL STATEMENTS
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105
Property, | |||
Fixtures and | plant and | ||
fittings | equipment | Total | |
2023 | £’000 | £’000 | £’000 |
Cost | |||
At 1 January | 1,271 | 1,144 | 2,415 |
Additions | 44 | 147 | 191 |
Disposals | (23) | (101) | (124) |
Exchange adjustment | (36) | (5) | (41) |
At 31 December | 1,256 | 1,185 | 2,441 |
Depreciation and impairment | |||
At 1 January | (768) | (748) | (1,516) |
Charge for year | (115) | (218) | (333) |
Disposals | 23 | 101 | 124 |
Exchange adjustment | 15 | — | 15 |
At 31 December | (845) | (865) | (1,710) |
Net carrying amount | |||
At 31 December | 411 | 320 | 731 |
At 1 January | 503 | 396 | 899 |
Property, | |||
Fixtures and | plant and | ||
fittings | 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 |
Financial statements
NOTES TO FINANCIAL STATEMENTS
CONTINUED
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Separately identified intangibles | ||||||
on acquisition | ||||||
Development | Patents and | Customer | ||||
costs | licences | Software | relationships | Goodwill | Total | |
2023 | £’000 | £’000 | £’000 | £’000 | £’000 | £’000 |
Cost | ||||||
At 1 January | 36,301 | 777 | 12,120 | 14,210 | 19,903 | 83,311 |
Additions | 5,297 | 101 | — | — | — | 5,398 |
Disposals | — | (85) | — | — | — | (85) |
Exchange adjustment | (41) | (4) | — | — | (60) | (105) |
At 31 December | 41,557 | 789 | 12,120 | 14,210 | 19,843 | 88,519 |
At 1 January | (12,745) | (730) | (4,317) | (2,481) | (250) | (20,523) |
Charge for year | (2,934) | (45) | (1,212) | (1,103) | — | (5,294) |
Eliminated on disposal | — | 85 | — | — | — | 85 |
Exchange adjustment | 34 | 4 | — | — | 36 | 74 |
At 31 December | (15,645) | (686) | (5,529) | (3,584) | (214) | (25,658) |
Net carrying amount | ||||||
At 31 December | 25,912 | 103 | 6,591 | 10,626 | 19,629 | 62,861 |
At 1 January | 23,556 | 47 | 7,803 | 11,729 | 19,653 | 62,788 |
Separately identified intangibles | ||||||
on acquisition | ||||||
Development | Patents and | Customer | ||||
costs | licences | Software | relationships | Goodwill | Total | |
2022 | £’000 | £’000 | £’000 | £’000 | £’000 | £’000 |
Cost | ||||||
At 1 January | 31,072 | 858 | 12,120 | 14,210 | 19,848 | 78,108 |
Additions | 5,195 | — | — | — | — | 5,195 |
Disposals | — | (91) | — | — | — | (91) |
Exchange adjustment | 34 | 10 | — | — | 55 | 99 |
At 31 December | 36,301 | 777 | 12,120 | 14,210 | 19,903 | 83,311 |
At 1 January | (10,378) | (763) | (3,105) | (1,378) | (217) | (15,841) |
Charge for year | (2,360) | (48) | (1,212) | (1,103) | — | (4,723) |
Eliminated on disposal | — | 91 | — | — | — | 91 |
Exchange adjustment | (7) | (10) | — | — | (33) | (50) |
At 31 December | (12,745) | (730) | (4,317) | (2,481) | (250) | (20,523) |
Net carrying amount | ||||||
At 31 December | 23,556 | 47 | 7,803 | 11,729 | 19,653 | 62,788 |
At 1 January | 20,694 | 95 | 9,015 | 12,832 | 19,631 | 62,267 |
DEVELOPMENT COSTS
Development costs are internally generated and are capitalised at cost. These intangible assets have been assessed as having a finite
life and are amortised on a straight-line basis over their useful lives of two to ten years. These assets are tested for impairment where
an indicator of impairment arises and on an annual basis.
For the years ended 31 December 2023 and 31 December 2022 the Group has capitalised development costs in respect of individual
Clareti applications which have been individually assessed against the required capitalisation criteria and been individually assigned
useful economic lives reflecting the maturity and availability of comparable applications in our markets. These useful economic lives
are assessed to be between two and ten years.
No changes have been made to development costs capitalised in prior years in respect of the Clareti platform, which continue to be
amortised on a systematic basis over the existing useful economic life of ten years.
PATENTS AND LICENCES
Patents and licences are the third party costs incurred in seeking and obtaining protection for certain of the Group’s products and
services. These intangible assets have been assessed as having a finite life and are being amortised evenly over their useful economic
life, to a maximum of ten years. Patents have a remaining life of three years and licences have a remaining life of one to ten years.
14. INTANGIBLE ASSETS
CONTINUED
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FINANCIAL STATEMENTS
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107
SEPARATELY IDENTIFIED ACQUIRED INTANGIBLES
Separately identified intangibles acquired through business combinations represent software and customer relationships which arose
through the acquisitions of C24 Technologies, B2 Group, Inforalgo and Electra Information Systems.
Software is amortised over its useful economic life, which is deemed to be ten years.
Customer relationships are amortised over their useful economic life, which is deemed to be twelve years for the Electra acquisition,
Goodwill arose on the acquisition of our Asia Pacific real-time financial solutions business, C24 Technologies, B2 Group, Inforalgo and
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
2023 | 2022 | |
£’000 | £’000 | |
Clareti Solutions CGU | 19,629 | 19,653 |
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:
2023 | 2022 | |
£’000 | £’000 | |
Software | 6,591 | 7,803 |
Customer relationships | 10,626 | 11,729 |
17,217 | 19,532 |
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:
2023 | 2022 | |
£’000 | £’000 | |
Clareti Solutions CGU | 25,912 | 23,556 |
CLARETI SOLUTIONS CASH-GENERATING UNIT
The recoverable amount of this CGU has been determined based on a value-in-use calculation. The cashflow projections are based
on the 2024 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 cashflow projections is 17.5% (2022: 17.0%) and cashflows beyond the five-year period are extrapolated
using a 2% growth rate (2022: 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.
The calculation of value in use is most sensitive to assumptions around:
▪
operating cashflows, based on financial budgets for 2024 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 cashflows 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 17.5% to 21.5% |
Growth rate beyond year 5 | Reduction from 2% to -25% |
Revenue growth | Reduction from 15% average over five years to 12% average |
Financial statements
NOTES TO FINANCIAL STATEMENTS
CONTINUED
15. IMPAIRMENT OF INTANGIBLE ASSETS
CONTINUED
DEVELOPMENT COSTS (FINITE LIFE)
CONTINUED
SENSITIVITY TO CHANGES IN ASSUMPTIONS
CONTINUED
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We are confident the assumptions in respect of operating cashflows remain appropriate. Where the operating cashflows 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 cashflows 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.
IMPAIRMENT CHARGE
No impairment charge was recognised in the year (2022: £nil).
The Group performed its annual test for impairment as at 31 December 2023. The recoverable amount exceeded the carrying value for
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 (2022: £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 8.0%. 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 3.3 years
(2022: 2.4 years).
During the year, the Group has modified the lease term for two leases, with the original lease term extended by a further period. One
lease was extended for a five year period which resulted in an addition to right-of-use assets of £708,000. In addition, an office lease
that was due to expire during the year was extended by a further 21-month period, resulting in addition of £205,000.
During the year ended 31 December 2022 the Group entered into a rent review for one of its office leases. The rent review was
concluded during 2023; as a result an adjustment of £139,000 was made to reduce the right-of-use asset.
In the year ended 31 December 2022 the Group agreed to extend an office lease for a further five years with the lease commencing
in 2023. In 2023 the Group agreed a lease incentive which resulted in a reduction in the right-of-use asset of £184,000.
There are no other extension or termination options on the lease arrangements.
RIGHT-OF-USE ASSETS
Property | |
2023 | £’000 |
Cost | |
At 1 January | 3,305 |
Additions | 913 |
Disposals | (482) |
Adjustments | (323) |
Exchange adjustment | (56) |
At 31 December | 3,357 |
Amortisation | |
At 1 January | (1,713) |
Charge for year | (556) |
Disposals | 464 |
Exchange adjustment | 22 |
At 31 December | (1,783) |
Net carrying amount | |
At 31 December | 1,574 |
At 1 January | 1,592 |
16. LEASES
CONTINUED
RIGHT-OF-USE ASSETS
CONTINUED
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109
Motor | |||
Property | vehicles | Total | |
2022 | £’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 | 33 | 1,466 |
Property | |
£’000 | |
At 1 January 2023 | 1,662 |
Cash items: | |
Lease payments | (676) |
Non-cash items: | |
Additions | 874 |
Adjustments | (323) |
Disposals | (29) |
Interest expense | 58 |
Foreign exchange movements | (38) |
At 31 December 2023 | 1,528 |
Land and | Motor | ||
buildings | 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 |
2023 | 2022 | |
£’000 | £’000 | |
Due between 0-3 months | 165 | 194 |
Due between 3-12 months | 496 | 515 |
Due less than one year | 661 | 709 |
Due more than one year | 867 | 953 |
Lease liabilities | 1,528 | 1,662 |
Financial statements
NOTES TO FINANCIAL STATEMENTS
CONTINUED
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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:
Proportion of | ||||
Holding | voting rights | |||
Name of subsidiary company | Registered address | (shares) | 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 | Ordinary | 100% | Software solutions |
Sydney, Australia | ||||
Gresham Technologies (TDI) Limited (1,4) | Aldermary House, London, England | Ordinary | 100% | Software solutions |
Gresham Technologies (Canada) Inc (3) | 400 Granville Street, Vancouver, BC, | Ordinary | 100% | Software solutions |
Canada | ||||
Gresham Technologies (Malaysia) SDN BHD (1) | Level 7, Menara Milenium, Jalan | Ordinary | 100% | Software solutions |
Damanlela, Malaysia | ||||
Gresham Technologies (Singapore) Pte. Limited | 138 Cecil Street, Cecil Court, | Ordinary | 100% | Software solutions |
Singapore | ||||
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% | Dormant |
Electra Information Systems Limited(1,4) | Aldermary House, London, England | Ordinary | 100% | Dormant |
Floe Technologies Limited(2) | Aldermary House, London, England | Ordinary | 100% | Dormant |
Gresham Technologies (International) Limited (4) | Aldermary House, London, England | Ordinary | 100% | Holding company |
Gresham Technologies (Holdings) SARL (3) | 6E route de Treves, L-2633, | Ordinary | 100% | Holding company |
Luxembourg | ||||
Gresham Technologies (Luxembourg) S.A. (1) | 6E route de Treves, L-2633, | Ordinary | 100% | Software solutions |
Luxembourg | ||||
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 |
Clareti Technologies 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.
As restated | ||
2023 | 2022 | |
£’000 | £’000 | |
Trade receivables | 5,675 | 4,765 |
Prepayments | 1,125 | 1,213 |
Other receivables | 375 | 537 |
Trade and other receivables | 7,175 | 6,515 |
Accrued income | 985 | 1,822 |
Prepaid commission | 886 | 783 |
Contract assets | 1,871 | 2,605 |
18. CURRENT ASSETS
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111
Trade receivables are denominated in the following currencies:
2023 | 2022 | |
£’000 | £’000 | |
Sterling | 1,903 | 1,034 |
Euro | 693 | 718 |
US Dollar | 2,134 | 1,863 |
Canadian Dollar | 15 | 22 |
Australian Dollar | 765 | 1,098 |
Malaysian Ringgit | 5 | 5 |
Singapore Dollar | 160 | — |
South African Rand | — | 25 |
Total trade receivables | 5,675 | 4,765 |
Trade receivables are non-interest bearing and are generally on 30 to 60-day terms and are shown net of a provision for impairment.
At 31 December, the analysis of trade receivables that were past due but not impaired is as follows:
| Past due but not impaired | |||||||
Due not | |||||||
Total | impaired | <30 days | 30–60 days | 60–90 days | 90–120 days | >120 days | |
£’000 | £’000 | £’000 | £’000 | £’000 | £’000 | £’000 | |
2023 | 5,675 | 1,791 | 2,721 | 282 | 532 | 74 | 275 |
2022 | 4,765 | 2,849 | 1,524 | 161 | 75 | — | 156 |
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
2023 | 2022 | |
£’000 | £’000 | |
Cash at bank and in hand | 4,774 | 6,280 |
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 Cashflow, cash and cash equivalents comprises cash at bank and in hand and
TRADE AND OTHER PAYABLES
Trade payables, other payables and contract liabilities are non-interest bearing.
CURRENT
As restated | ||
2023 | 2022 | |
£’000 | £’000 | |
Trade payables | 989 | 1,536 |
Accruals | 3,606 | 4,252 |
Social security and other taxes | 539 | 618 |
Other payables | 1,564 | 1,690 |
Contract liabilities | 12,961 | 13,537 |
19,659 | 21,633 |
Accruals include £1,740,000 (2022: £1,886,000) which are considered to be payable in respect of services received up to the Balance
Sheet date as well as employee related liabilities such as sales commissions and bonuses of £1,866,000 (2022: £2,366,000).
2023 | 2022 | |
£’000 | £’000 | |
Income tax payable | — | 62 |
Financial statements
NOTES TO FINANCIAL STATEMENTS
CONTINUED
20. TRADE, OTHER PAYABLES, PROVISIONS AND FINANCIAL LIABILITIES
CONTINUED
TRADE AND OTHER PAYABLES
CONTINUED
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NON-CURRENT
2023 | 2022 | |
£’000 | £’000 | |
Contract liabilities | 796 | 354 |
Property provisions | ||
2023 | 2022 | |
£’000 | £’000 | |
At 1 January | ||
– Current | — | — |
– Non-current | 146 | 144 |
146 | 144 | |
Foreign exchange movements | — | 2 |
Additions | 37 | — |
At 31 December | ||
– Current | — | — |
– Non-current | 183 | 146 |
183 | 146 | |
The provisions relate to the Group’s property portfolio and the resulting lease liabilities, comprising end-of-lease dilapidation costs and
2023 | 2022 | |
£’000 | £’000 | |
At 1 January | ||
– Current | 3,987 | 3,944 |
– Non-current | — | 3,575 |
3,987 | 7,519 | |
Payments made during the year | (3,987) | (4,356) |
Foreign exchange movements | — | 824 |
At 31 December | — | 3,987 |
– Current | — | 3,987 |
– Non-current | — | — |
— | 3,987 |
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 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.
21. FINANCIAL INSTRUMENTS
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113
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 | Total | ||
through | Amortised | carrying | |
profit and loss | cost | amount | |
2023 | £’000 | £’000 | £’000 |
Financial assets | |||
Trade receivables | — | 5,675 | 5,675 |
Cash and cash equivalents | — | 4,774 | 4,774 |
— | 10,449 | 10,449 | |
Financial liabilities | |||
Trade payables | — | 989 | 989 |
Accruals | — | 3,606 | 3,606 |
Other payables | — | 1,564 | 1,564 |
— | 6,159 | 6,159 |
Fair value | Total | ||
through | Amortised | carrying | |
profit and loss | cost | 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 |
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.
As at 31 December 2023 and 31 December 2022 the Group held no foreign exchange instruments.
Financial statements
NOTES TO FINANCIAL STATEMENTS
CONTINUED
21. FINANCIAL INSTRUMENTS
CONTINUED
CATEGORIES OF FINANCIAL ASSETS AND LIABILITIES
CONTINUED
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Reconciliation of financial liabilities and related cashflows are shown below:
Foreign | |||||||
exchange | At | ||||||
At 1 January | Cashflows | New leases | Adjustments | Interest | movements | 31 December | |
2023 | £’000 | £’000 | £’000 | £’000 | £’000 | £’000 | £’000 |
Bank loans | — | — | — | — | — | — | — |
Lease liabilities | 1,662 | (676) | 874 | (352) | 58 | (38) | 1,528 |
Contingent consideration | 3,987 | (3,987) | — | — | — | — | — |
Total liabilities from financing activities | 5,649 | (4,663) | 874 | (352) | 58 | (38) | 1,528 |
During the year $4.0m was drawn down from the Group’s $10m bank facility with the Bank of Ireland. The amount was repaid in full
during the year.
Foreign | ||||||
exchange | At | |||||
At 1 January | Cashflows | New leases | Interest | movements | 31 December | |
2022 | £’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 |
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
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 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.
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
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.
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.
21. FINANCIAL INSTRUMENTS
CONTINUED
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
Gresham Technologies plc
Annual Financial Report 2023
115
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 | Between | |
0 and | 3 and | 1 and 2 | 2 and 5 | |
3 months | 12 months | years | years | |
2023 | £’000 | £’000 | £’000 | £’000 |
Trade payables | 989 | — | — | — |
Accruals | 3,606 | — | — | — |
Other payables | 1,564 | — | — | — |
Lease liabilities | 165 | 496 | 429 | 438 |
6,324 | 496 | 429 | 438 |
Between | Between | Between | Between | |
0 and | 3 and | 1 and 2 | 2 and 5 | |
3 months | 12 months | years | years | |
2022 | £’000 | £’000 | £’000 | £’000 |
Trade payables | 1,536 | — | — | — |
Accruals | 4,252 | — | — | — |
Other payables | 1,690 | — | — | — |
Contingent consideration | — | 3,987 | — | — |
Lease liabilities | 194 | 515 | 766 | 187 |
7,672 | 4,502 | 766 | 187 |
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 three-year $10m revolving credit facility with the Bank of Ireland. This facility was extended in 2023
for a further two years with the facility now expiring in May 26. There was no outstanding liability as at 31 December 2023.
Financial statements
NOTES TO FINANCIAL STATEMENTS
CONTINUED
21. FINANCIAL INSTRUMENTS
CONTINUED
116
Gresham Technologies plc
Annual Financial Report 2023
CURRENCY RISK
The Group has significant exposures to the following currencies: US Dollar, Australian Dollar, Euro, Malaysian Ringgit, Singapore Dollar,
South African Rand and Canadian Dollar.
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 2023, the Group had no foreign currency forward contracts (2022: 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 2023 and 2022 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 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 | Effect on profit | ||
financial assets | Increase/decrease | before tax | |
2023 | £’000 | in exchange rates | £’000 |
Euro | 1,098 | +20% | (183) |
-20% | 275 | ||
Australian Dollar | 3,197 | +20% | (533) |
-20% | 799 | ||
US Dollar | 2,823 | +20% | (471) |
-20% | 706 | ||
Malaysian Ringgit | 143 | +20% | (24) |
-20% | 36 | ||
Singapore Dollar | 220 | +20% | (37) |
-20% | 55 | ||
Canadian Dollar | 112 | +20% | (19) |
-20% | 28 |
Net foreign currency | Effect on profit | ||
financial assets | Increase/decrease | before tax | |
2022 | £’000 | in exchange rates | £’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 |
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
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
Gresham Technologies plc
Annual Financial Report 2023
117
ORDINARY SHARES ALLOTTED, CALLED UP AND FULLY PAID
Nominal value | ||
Number | £’000 | |
At 1 January 2022 | 83,364,458 | 4,168 |
Exercise of share options (note 23) | 85,000 | 4 |
At 31 December 2022 | 83,449,458 | 4,172 |
Transfer of shares to ESOT | 140,000 | 7 |
Exercise of share options (note 23) | 285,000 | 15 |
At 31 December 2023 | 83,874,458 | 4,194 |
The Company’s ordinary share capital consists of individual shares having a nominal value of 5 pence each.
During the year ended 31 December 2023, share options granted under share option schemes were exercised at a price between 96.3
and 132.3 pence with the Group issuing 285,000 (2022: 85,000) ordinary shares accordingly (ranking pari passu with existing shares in
issue). Share premium of £291,000 (2022: £65,000) was recognised as a result. Shares totalling 140,000 were issued and transferred to
the Employee Share Ownership Trust during the year.
At 31 December 2023 and 2022 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 (2022: 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 2022 | 609 | 629,308 |
Issue of shares | (313) | (323,761) |
At 31 December 2022 | 296 | 305,547 |
Issue of shares | (259) | (393,758) |
Subscription of new shares | 7 | 140,000 |
At 31 December 2023 | 44 | 51,789 |
The shares held by the ESOT are expected to be issued under share option contracts. 140,000 shares at nominal value of 5 pence were
issued by the Company and transferred to the Employee Share Ownership Trust during the year. The shares are held at the average
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.
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 in 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.
124,000 (2022: 332,750) share options have been awarded in the year to 31 December 2023 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.
Financial statements
NOTES TO FINANCIAL STATEMENTS
CONTINUED
23. SHARE-BASED PAYMENTS
CONTINUED
SHARE OPTION SCHEMES
CONTINUED
118
Gresham Technologies plc
Annual Financial Report 2023
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 an 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 four-times the bonus shares awarded.
These awards are subject to a three-year vesting period and are subject to performance criteria in each year of the vesting period.
In March 2023 1,036,465 share options were granted at nil cost with two-year and three-year vesting periods; the options expire
March 2033.
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 2023, 194 participants held awards under the share option schemes (2022: 166).
Outstanding options to subscribe for ordinary shares of 5 pence at 31 December 2023, including those noted in the Directors’
Remuneration Report, are as follows:
2023 | WAEP | 2022 | WAEP | |
Number | pence | Number | pence | |
Outstanding at 1 January | 5,210,432 | 61 | 3,455,500 | 92 |
Deferred bonus shares awarded in prior years | — | — | 815,336 | 5 |
Granted during the year | 1,160,465 | — | 1,077,798 | 5 |
Forfeited during the year | (126,332) | — | (53,202) | 5 |
Exercised during the year: | ||||
– Share option scheme 2010 | (285,000) | (102) | (85,000) | (77) |
– Deferred share bonus plan | (80,778) | — | — | — |
Outstanding at 31 December | 5,878,787 | 47 | 5,210,432 | 61 |
Exercisable at 31 December | 2,495,034 | 110 | 2,438,309 | 121 |
Weighted average remaining contractual life (years) | 6.0 | 6.5 |
During the year 285,000 options were exercised under during the period when the Company share price was between 138.5 pence and
155.0 pence and 80,778 shares were exercised during the year in the Deferred Share Bonus Plan using the Employee Benefit Trust.
No price is payable on award of share options.
23. SHARE-BASED PAYMENTS
CONTINUED
SHARE OPTION SCHEMES
CONTINUED
DEFERRED SHARE BONUS PLAN 2017
CONTINUED
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
Gresham Technologies plc
Annual Financial Report 2023
119
Outstanding options and awards to subscribe for ordinary shares of 5 pence at 31 December 2023, including those noted in the
Directors’ Remuneration Report showing the range of exercise prices and dates, are as follows:
Cash | ||||||
Number | Exercise | receivable | ||||
of share | Date of | price | Date first | Expiry | if exercised | |
options | grant | £ | exercisable | date | £ | |
Share Option Schemes 2010 | ||||||
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 | |
25,000 | 25-Oct-19 | 1.2210 | 25-Oct-22 | 25-Oct-29 | 30,525 | |
75,000 | 24-Dec-20 | 1.5180 | 24-Dec-23 | 24-Dec-30 | 113,850 | |
Performance Share Plan 2020 | ||||||
908,000 | 21-Oct-21 | 0.0500 | 21-Oct-24 | 21-Oct-31 | 45,400 | |
289,750 | 08-Nov-22 | 0.0500 | 08-Nov-25 | 08-Nov-32 | 14,488 | |
124,000 | 30-Sep-23 | 0.0500 | 30-Sep-26 | 30-Sep-33 | 6,200 | |
Deferred Share Bonus Plan | ||||||
29,317 | 27-Mar-19 | — | 27-Mar-21 | 27-Mar-29 | — | |
34,089 | 18-Mar-20 | — | 18-Mar-22 | 18-Mar-30 | — | |
262,622 | 18-Mar-20 | — | 18-Mar-23 | 18-Mar-30 | — | |
34,006 | 31-Mar-21 | — | 31-Mar-23 | 31-Mar-31 | — | |
371,468 | 31-Mar-21 | — | 31-Mar-24 | 31-Mar-31 | — | |
152,753 | 31-Mar-22 | — | 31-Mar-24 | 31-Mar-32 | — | |
530,204 | 31-Mar-22 | — | 31-Mar-25 | 31-Mar-32 | — | |
197,838 | 31-Mar-23 | — | 31-Mar-25 | 31-Mar-33 | — | |
809,740 | 31-Mar-23 | — | 31-Mar-26 | 31-Mar-33 | — | |
5,878,787 | 2,814,939 |
Financial statements
NOTES TO FINANCIAL STATEMENTS
CONTINUED
23. SHARE-BASED PAYMENTS
CONTINUED
SHARE OPTION SCHEMES
CONTINUED
DEFERRED SHARE BONUS PLAN 2017
CONTINUED
120
Gresham Technologies plc
Annual Financial Report 2023
Outstanding options 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:
Cash | ||||||
Number | Exercise | receivable | ||||
of share | Date of | price | Date first | Expiry | if exercised | |
options | grant | £ | exercisable | date | £ | |
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 |
The fair value of equity-settled share options granted by the Share Option Schemes are estimated as at the date of grant. The share
options granted under the Performance Share Plan 2020 are valued using a Monte Carlo simulation model, taking into account the
terms and conditions upon which the options were granted. The share options granted under the Deferred Bonus scheme were valued
using a Black Scholes model.
The following table lists the range of inputs to the model used for the grants made during the year:
Performance | |||
Share Plan | |||
Deferred Share Bonus scheme | 2020 | ||
Vesting date | 31-Mar-25 | 31-Mar-26 | 30-Sep-26 |
Expiry date (number of years after grant) | 10 | 10 | 10 |
Vested options expected life | 5.8 years | 5.8 years | 2.9 years |
Exercise price | nil | nil | nil |
Share price at valuation | £1.55 | £1.55 | £1.415 |
Volatility | 22% | 22% | 22% |
Dividend yield | 0% | 0% | 0.53% |
Risk free rate | 4.4% | 4.4% | 4.4% |
Impact of continued employment conditions | 0% | 0% | 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.
23. SHARE-BASED PAYMENTS
CONTINUED
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
Gresham Technologies plc
Annual Financial Report 2023
121
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:
2023 | 2022 | |
£’000 | £’000 | |
Expense recognised in respect of share-based payments | 757 | 1,027 |
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 2023, share options granted under the 2010 Share Option Plans were exercised and the Group
issued 285,000 (2022: 85,000) ordinary shares accordingly (ranking pari passu with existing shares in issue). See note 22 for further
details. Shares totalling 140,000 were issued and transferred to the Employee Share Ownership Trust.
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.
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.
RETAINED EARNINGS
2023 | 2022 | |
£’000 | £’000 | |
Directors’ emoluments | ||
Remuneration | 662 | 652 |
Social security costs | 102 | 137 |
Bonuses | 136 | 298 |
Pension | 23 | 22 |
Share-based payments | 175 | 406 |
1,098 | 1,515 |
Details of Directors’ compensation are included in the Directors’ Remuneration Report.
There is no single party known that the Directors consider to be a controlling shareholder or ultimate parent undertaking. Refer to
An interim dividend of 0.75 pence per share has been declared by the Board (2022: £nil) instead of a final dividend (2022: 0.75 pence).
On 9 April 2024, the Boards of Gresham and Bidco announced the recommended acquisition of Gresham by Bidco at a price of 163
pence per Gresham share, plus the interim dividend of 0.75 pence per Gresham share declared today. The transaction is conditional
on, amongst other things, the approval of Gresham Shareholders shareholders by the requisite majorities of resolutions to be proposed
at a Court Meeting and a General Meeting, both convened for 16 May 2024.
The Scheme Document and other documentation in
Financial statements
122
Gresham Technologies plc
Annual Financial Report 2023
As restated | |||
At | At | ||
31 December | 31 December | ||
2023 | 2022 | ||
Notes | £’000 | £’000 | |
Fixed assets | |||
Investments | 5 | 43,422 | 42,665 |
Current assets | |||
Lease receivable | 8 | 579 | 781 |
Debtors | 6 | 41,561 | 38,372 |
Cash at bank and in hand | 208 | 419 | |
42,348 | 39,572 | ||
Creditors: amounts falling due within one year | 7 | (46,459) | (42,823) |
Net current liabilities | (4,111) | (3,251) | |
Total assets less current liabilities | 39,311 | 39,414 | |
Creditors: amounts falling due more than one year | 7 | (210) | (473) |
Total assets less liabilities | 39,101 | 38,941 | |
Capital and reserves | |||
Called up share capital | 9 | 4,194 | 4,172 |
Share premium | 10 | 24,232 | 23,941 |
Own share reserve | 9 | (44) | (296) |
Special reserve | 10 | 313 | 313 |
Merger reserve | 10 | 1,583 | 1,583 |
Profit and loss account | 10 | 8,823 | 9,228 |
Shareholders’ funds - equity interests | 39,101 | 38,941 |
The Company made a retained loss in the year of £713,000 (2022: £1,319,000).
The financial statements were approved by the Board of Directors and authorised for issue on 29 April 2024.
On behalf of the Board.
IAN MANOCHA
TOM MULLAN
CHIEF EXECUTIVE
CHIEF FINANCIAL OFFICER
29 APRIL 2024
29 APRIL 2024
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
Gresham Technologies plc
Annual Financial Report 2023
123
COMPANY STATEMENT OF CHANGES IN EQUITY
Share | Share | Own | Special | Merger | Profit and | |||
capital | premium | shares | reserve | reserve | loss account | Total | ||
Notes | £’000 | £’000 | £’000 | £’000 | £’000 | £’000 | £’000 | |
At 1 January 2022 | 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 | |
Exercise of share options | 9 | 15 | 291 | — | — | — | — | 306 |
Issue of shares to Employee Share | ||||||||
Ownership Trust | 9 | 7 | — | (7) | — | — | — | — |
Share-based payments | 13 | — | — | — | — | — | 757 | 757 |
Transfer of own shares held by | ||||||||
Employee Share Ownership Trust to | ||||||||
employees | 9 | — | — | 259 | — | — | 177 | 436 |
Dividend paid | 4 | — | — | — | — | — | (626) | (626) |
Retained loss for the year | — | — | — | — | — | (713) | (713) | |
At 31 December 2023 | 4,194 | 24,232 | (44) | 313 | 1,583 | 8,823 | 39,101 |
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 and were approved for issue on 29 April 2024.
No Income Statement is presented by the Company as permitted
by section 408 of the Companies Act 2006. For the year ended
31 December 2023, the Company recorded a retained loss of
£713,000 (2022: £1,319,000).
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 1 to 43. 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 cashflow 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.
The Directors have reviewed the profit and cashflow forecasts for
the period to 30 June 2025 together with the assumptions used
to support these forecasts and the expected impact of economic
conditions on trading. Specific scenario stress testing based on
the Group failing to win any new business in the period from 1
January 2024 have been performed to ensure that the Group
continues to have sufficient resources to continue to operate
within these scenarios.
The Directors have also considered the impact of the
announcement made of 9 April 2024 of a recommended cash
acquisition of Gresham by Alliance Bidco Limited (“Bidco”), a
company owned indirectly by funds managed or advised by
STG Partners, LLC. The Scheme Document in relation to the
acquisition was subsequently published on 18 April 2024. The
Directors note the intentions of Bidco, as set out in the Scheme
Document, and they do not have any reason to believe that
Bidco, will not continue to support the Group or would materially
change its activities in the next 12 months.
Given this, the
Directors consider that both STG’s future intentions for the
Group and available resources enable them to 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.
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 2023.
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 Cashflows;
▪
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.
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 cashflows and the contractual
cashflows 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 Cashflows – bank overdrafts. Bank overdrafts
are shown within loans and borrowings in current liabilities on
the Consolidated Statement of Financial Position.
NOTES TO THE COMPANY FINANCIAL STATEMENTS
Financial statements
124
Gresham Technologies plc
Annual Financial Report 2023
124
Gresham Technologies plc
Annual Financial Report 2023
1. ACCOUNTING POLICIES
CONTINUED
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.
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.
The ESOT has agreed to waive dividends with regards to any
Company shares.
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.
Gresham Technologies plc
Annual Financial Report 2023
125
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
1. ACCOUNTING POLICIES
CONTINUED
LEASES
CONTINUED
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.
PRIOR PERIOD RESTATEMENT
During 2023, the Directors identified that the lease receivable,
previously been disclosed as a fixed asset, did not meet the
definition to be classified as such under the requirements of
the Companies Act 2006 Statutory format. Therefore, the lease
receivable which had previously been disclosed within fixed
assets, are now disclosed within current assets. This change in
disclosure has been applied retrospectively restating the Balance
Sheet at 31 December 2022. The impact of this change is to
reduce fixed assets by £781,000 and to increase current assets
by £781,000. There is no impact to the retained loss for the year
ended 31 December 2022, or retained earnings.
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 57. 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 2022 was
approved at the Company Annual General Meeting on 23 May 2023
and paid on 26 May 2023 of 0.75 pence per share, equating to
a total of £626,000. The Board has declared an interim dividend
for approval at the AGM for the year ended 31 December 2023
of 0.75 pence per share (2022: £nil) instead of a final dividend
(2022: 0.75 pence).
5. INVESTMENTS
Investment in subsidiaries
2023
£’000
2022
£’000
Cost
At 1 January
56,257
55,230
Capital contribution – share-based
payments
757
1,027
At 31 December
57,014
56,257
Impairment provisions
At 1 January
13,592
13,592
At 31 December
13,592
13,592
Net book value
At 31 December
43,422
42,665
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.
Financial statements
126
Gresham Technologies plc
Annual Financial Report 2023
NOTES TO THE COMPANY FINANCIAL STATEMENTS
CONTINUED
6. DEBTORS
2023
£’000
2022
£’000
Amounts owed by subsidiary
undertakings
41,413
38,311
Prepayments and accrued income
80
61
Other receivables
68
—
41,561
38,372
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 (2022:
£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 2023 as well as alternative
recovery scenarios.
7. CREDITORS
Amounts falling due within one year
2023
£’000
2022
£’000
Amounts owed to subsidiary
undertakings
46,045
42,425
Lease liabilities
338
338
Trade creditors
34
34
Other creditors and accruals
42
26
46,459
42,823
Amounts falling due more than one year
2023
£’000
2022
£’000
Lease liabilities
210
473
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:
2023
£’000
2022
£’000
Less than 3 months
76
89
3 to 12 months
229
194
1 to 2 years
199
209
2 to 5 years
75
289
Total
579
781
LEASE LIABILITIES
Total
£’000
At 1 January 2022
866
Cash items:
Lease payments
(312)
Non-cash items:
Additions
224
Interest expense
33
At 31 December 2022
811
Cash items:
Lease payments
(340)
Non-cash items:
Additions
60
Interest expense
17
At 31 December 2023
548
2023
£’000
2022
£’000
Due between 0-3 months
85
80
Due between 3-12 months
253
258
Due less than one year
338
338
Due more than one year
210
473
Lease liabilities
548
811
9. ISSUED SHARE CAPITAL
ORDINARY SHARES ALLOTTED, CALLED UP AND FULLY PAID
Number
Nominal value
£’000
At 1 January 2022
83,364,458
4,168
Exercise of share options
85,000
4
At 31 December 2022
83,449,458
4,172
Exercise of share options
285,000
15
Issue of shares to Employee Share
Ownership Trust
140,000
7
At 31 December 2023
83,874,458
4,194
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 the 2010 Share Option Plans were exercised and the
Group issued 255,000 (2022: 85,000) 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 2023 and 2022 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 (2022: none).
Gresham Technologies plc
Annual Financial Report 2023
127
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
9. ISSUED SHARE CAPITAL
CONTINUED
SHARES HELD BY EMPLOYEE SHARE OWNERSHIP TRUST
(“ESOT”)
£’000
Number
At 1 January 2022
609
629,308
Issue of shares
(313)
(323,761)
At 31 December 2022
296
305,547
Issue of shares
(259)
(393,758)
Subscription of new shares
7
140,000
At 31 December 2023
44
51,789
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 2023, share options granted
under the 2010 Share Option Plans were exercised and the
Group issued 285,000 (2022: 85,000) ordinary shares accordingly
(ranking pari passu with existing shares in issue). Shares of
140,000 were issued and transferred to the Employee Share
Ownership Trust. See note 22 of the Group financial statements
for further details.
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 2023
(2022: 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.
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
An interim dividend of 0.75 pence per share has been declared by
the Board (2022: £nil) instead of a final dividend (2022: 0.75 pence).
On 9 April 2024, the boards of Gresham and Bidco announced
the recommended acquisition of Gresham by Bidco at a price
of 163 pence per Gresham share, plus the interim dividend of
0.75 pence per Gresham share declared today. The transaction is
conditional on, amongst other things, the approval of Gresham
shareholders by the requisite majorities of resolutions to be
proposed at a court meeting and a general meeting, both
convened for 16 May 2024. The scheme document and other
documentation in relation to the acquisition were published
on 18 April 2024 and are available on the investor hub on the
Gresham website.
NOTES TO THE COMPANY FINANCIAL STATEMENTS
CONTINUED
Financial statements
128
Gresham Technologies plc
Annual Financial Report 2023
Other information
CORPORATE INFORMATION
REGISTERED OFFICE
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London
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BDO LLP
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SOLICITORS
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SO53 3LG
ANNUAL GENERAL MEETING
18 June 2024
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EC2N 2AX
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EQUINITI LIMITED
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Lancing
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BN99 6DA
BANKERS
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SO14 7DZ
BROKER AND FINANCIAL ADVISER
SINGER CAPITAL MARKETS LIMITED
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London
EC2N 2AX
Gresham Technologies plc’s commitment to environmental
issues is reflected in this Annual Report, which has been printed
on UPM Finesse Silk, an FSC® certified material. This document
was printed by Opal X using its environmental print technology,
which minimises the impact of printing on the environment,
with 99% of dry waste diverted from landfill. Both the printer
and the paper mill are registered to ISO 14001.
GRESHAM TECHNOLOGIES PLC
Aldermary House
10–15 Queen Street
London
EC4N 1TX
investorrelations@greshamtech.com
www.greshamtech.com
GRESHAM TECHNOLOGIES PLC
ANNUAL FINANCIAL REPORT 2023