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Gresham Technologies plc
Annual Financial Report 2020
Vision and values
Our vision is to bring
digital integrity, agility
and confidence to
financial markets
Modern business is digital, our world is hyper-connected,
we’re data driven, and we need everything to happen fast.
Gresham helps global businesses connect, reconcile and control
their data, systems and processes. And in doing so, we deliver
something that is vital to modern business. Data confidence.
Our team is a combination of experienced minds with deep
industry skills, and some of the brightest young talent in
technology today. And I believe the way we do things at
Gresham is really rather special.
Our culture is open, engaging and freethinking, but framed by
a clear vision, a proven global operating model, and a genuine
focus on success for our customers. We’re not a well-intentioned
start-up trying to find its way, nor a tired industry veteran
resting on past accomplishments.
Here at Gresham we embrace difference, we create together
and we champion success. I’m confident you’ll like working
with our people.
At our Innovation Labs we’re fanatical about challenging
perceived wisdom and entrenched ways with game-changing
ideas that marry sophisticated thinking with simple
implementation. The Clareti platform was born from this
mind-set. A new generation of real-time intelligent automation
technology optimised to solve the complex connectivity and
data quality challenges of a fast-paced digital world.
Now proven at over one hundred organisations worldwide,
including many of the world’s largest banks, asset managers
and corporates, the Clareti platform is becoming the new
gold standard that firms and regulators can trust.
At Gresham it’s all about making things easier for you
and making your business more agile and competitive.
In a real-time digital world we want to be the first company
you turn to when you need to be connected and in control.
Ian Manocha
Chief Executive Officer
In a real-time digital world we
want to be the first company
you turn to when you need to
be connected and in control.
Gresham Technologies plc Annual Financial Report 2020
Strategic Report Our values
We Embrace Difference
We value different backgrounds, experience, expertise
and ways of thinking. We encourage curiosity and
respect every individual, recognising that everyone
has the capability to bring something extraordinary
to the table. We each apply our unique talents with
passion and integrity and we are all committed to
making Gresham an exceptional place to work.
We Create Together
Working together with our colleagues, customers and
partners, we create energy and a dynamic approach
to challenge the norm and find innovative ways to
solve problems. Through open discussion and
feedback, healthy debate and continuous learning,
we combine the virtues of experience and fresh
thinking. We operate at pace, taking the lead where
appropriate, ensuring that we work together to
seamlessly deliver outstanding products and services.
We Champion Success
We are passionate about delivering successful
outcomes for our customers, employees, partners
and shareholders. Our nimble approach means that
we can adapt to our customers’ individual ways of
working, taking ownership for delivering the wow
factor, delighting customers and enabling our
business and our people to grow and flourish.
Environmental, social and governance
Page 26
Contents
Strategic Report
02 Highlights
04 At a glance
06 Chairman’s statement
08 CEO’s statement
13
Innovation
14 Business model
16 Strategy
18 Key performance indicators
20 Principal risks and uncertainties
22 Financial review
26 Environmental, social and governance
Corporate Governance
33 Chairman’s introduction to governance
34 Board of Directors
36 Statement of corporate governance
39 Audit committee report
42 Nomination committee report
43 Annual statement from the chair of
the remuneration committee
44 Remuneration report
52 Directors’ report
55 Statement of Directors’ responsibilities
Financial Statements
56 Independent auditor’s report to the
members of Gresham Technologies plc
62 Consolidated income statement
63 Consolidated statement of
comprehensive income
64 Consolidated statement of financial position
65 Consolidated statement of changes in equity
66 Consolidated statement of cash flow
67 Notes to the financial statements
98 Company balance sheet
99 Company statement of changes in equity
100 Notes to the Company financial statements
104 Corporate information
Stay up to date at
greshamtech.com
Gresham Technologies plc Annual Financial Report 2020
Gresham Technologies plc Annual Financial Report 2020
01
STRATEGIC REPORT Highlights
Continued Clareti-led
transformation
Group revenues
Clareti revenues
Clareti annualised recurring revenues
£24.8m -1%
£15.5m +0%
£12.3m +29%
2020
2019
2018
24.8
25.0
19.3
2020
2019
2018
15.5
15.5
11.8
2020
2019
2018
12.3
9.5
7.4
Group adjusted EBITDA
Group adjusted diluted EPS
Net cash
£4.5m +10%
4.0p +100%
£8.9m -7%
2020
2019
2018 0.9
4.5
4.1
2020
4.0
2019
2.0
(1.5)
2018
2020
2019
2018
5.6
8.9
9.6
Innovative technology
Our Clareti platform is best-in-class and
sits at the heart of customer workflows.
Significant opportunity
Our addressable market is expanding
as systemic data challenges increase.
50bn+
transactions processed
in 2020
Innovation
Page 13
$1bn
market opportunity
in data quality in 2017
CEO's statement
Page 8
02
Gresham Technologies plc Annual Financial Report 2020
Strategic Report Financial
▪ Group revenues down 1% to £24.8m (2019: £25.0m), including
Operational
▪ New Tier 1 bank wins in Europe and the US.
£0.6m from Inforalgo.
▪ Clareti revenues stable at £15.5m (2019: £15.5m), including
£0.6m from Inforalgo.
▪ Clareti recurring software revenues up 11% to £11.5m
(2019: £10.4m), including £0.5m from Inforalgo.
▪ Clareti annualised recurring revenues (“ARR”) as at
31 December 2020 up 29% to £12.3m (2019: £9.5m),
including £1.2m from Inforalgo; transition to full
subscription licensing model complete.
▪ Continued growth within existing global key accounts.
▪ Go-lives of first cash and securities deployments in global banks.
▪ Acquisition of Inforalgo in July 2020 to accelerate Clareti sales
into regulatory use cases; acquisition fully integrated.
▪ Cash management partnership with Australia and New Zealand
Banking Group delivering to plan.
▪ Excellent levels of client retention throughout COVID-19 pandemic.
▪ Management confident about the prospects for the Group.
▪ Other (non-Clareti) revenues down 2% to £9.3m (2019: £9.5m),
(1) Adjusted EBITDA refers to earnings before interest, tax, depreciation,
in line with strategy.
▪ Adjusted EBITDA(1) up 10% to £4.5m (2019: £4.1m), including
£0.1m from Inforalgo.
▪ Cash adjusted EBITDA(2) stable at £0.3m (2019: £0.3m),
including £0.1m from Inforalgo.
▪ Profit before tax(3) as reported at £0.3m (2019: £0.3m).
▪ Adjusted diluted earnings per share(4) up 100% at 4.0 pence
(2019: 2.0 pence).
▪ Cash at 31 December 2020 of £8.9m and no debt
(2019: £9.6m and no debt)(5) after an outflow of £2.3m
for Inforalgo initial consideration.
▪ Final dividend proposed at 0.75 pence per share (2019: 0.75 pence).
impairment and amortisation, adjusted for one-off exceptional charges and
share-based payments. Discontinued operations are not included in either
year (see note 4 of the Group financial statements).
(2) Adjusted EBITDA less capitalised development spend and any IFRS 16
lease-related cash payments.
(3) Profit before tax for both years stated above excludes discontinued
operations. There were no discontinued operations in 2020; in 2019
discontinued operations generated a profit before tax of £2.0m.
(4) Diluted earnings per share, adjusted to add back share-based payment
charges, exceptional items, amortisation from acquired intangible assets
and impairment of development costs.
(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.
Strategy
Page 16
Key performance indicators
Page 18
Talented people
We have an exceptional pool of talent
and we are committed to excellence.
Strong growth
Our high-margin Clareti solutions
are delivering profitable growth.
150+
total employees as at
31 December 2020
29%growth in Clareti
ARR in 2020
Environmental, social and governance
Page 26
Financial review
Page 22
Gresham Technologies plc Annual Financial Report 2020
03
STRATEGIC REPORT At a glance
Data confidence delivered
Fixing data and process integrity problems is one of the biggest challenges
in the world’s financial markets. So we developed our technology to
deliver data confidence in core areas of our customers’ business.
We have a global client base, served locally from offices
in the UK, Europe, North America and Asia Pacific.
Luxembourg
London
Solihull
Bristol
Southampton
New York
Business model
Business model
Page 14
Page 14
Innovation
Innovation
Page 13
Page 13
Kuala Lumpur
Singapore
Sydney
Group revenue by stream
Clareti revenue by solution
Clareti revenue by geography
4646+
▪ 16% Clareti services
▪ 46% Clareti software
▪ 23% Other services 5959+
▪ 15% Other software
▪ 13% Regulatory
▪ 59% Reconciliation
reporting
and post-trade
automation
and payments 3838+
management
▪ 28% Cash
▪ 38% UK
▪ 17% EMEA
▪ 21% Americas
▪ 24% Asia Pacific
04
Gresham Technologies plc Annual Financial Report 2020
Strategic Report+
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What we do
Reconciliation and
post‑trade automation
Simplify the complexity in reconciliations
with end-to-end automation,
intelligent matching capabilities,
and accelerated onboarding.
Regulatory reporting
Deliver accurate, on time submissions
with connectivity to multiple trading
and reporting venues, real time
matching, and consolidation across
multiple regulatory regimes.
Cash management
and payments
Get easy, fast visibility of your payments
activity with data agnostic connectivity
solutions and real-time visibility of
intraday positions.
What we deliver
Efficiency
A demanding environment
means that scarce resources
need to be deployed to where
they can most add value.
Compliance
Regulatory expectations
are higher than ever, the
consequences of
failure harsher.
Visibility
When data is scattered across
an organisation it’s impossible
to truly understand where risks
and opportunities lie.
Connectivity
Business operates in a web of
complex ecosystems with high
degrees of interconnectivity.
Automation
With data volumes soaring,
the time for manual
processes, hacks, and
shortcuts has passed.
Agility
Businesses need to be able
to make confident decisions
based on timely and
accurate data.
Dependability
When data determines a
company’s relationships
with its stakeholders, they
need 100% certainty.
Gresham Technologies plc Annual Financial Report 2020
05
STRATEGIC REPORT Chairman’s statement
Significant progress against
our major strategic goals
So, whilst Clareti new licence revenues were lower than originally
anticipated, we were pleased to add several new clients, including
substantial long-term agreements with two global Tier 1 banks.
2020 also saw significant expansion by way of new projects from
existing clients and the strategic acquisition of Inforalgo in July
2020 to supplement our regulatory credentials and US footprint.
Clareti forward-looking ARR, a key performance indicator for the
business, grew by 29% on the prior year at £12.3m, including
£1.2m from the Inforalgo acquisition.
Overall, our revenue for the year was largely flat at £24.8m versus
£25.0m last year, but adjusted EBITDA, stated after exceptional
costs of £0.4m (2019: £nil), finished 10% up at £4.5m versus
£4.1m last year thanks in part to effective management of
operating expenses in the year.
In a period of global uncertainty, cash is obviously front of mind
and I am pleased to report that the Company ended the year
with a cash balance of £8.9m versus £9.6m at the prior year end
after an outflow of £2.3m for the initial consideration for the
Inforalgo acquisition.
Based on the overall financial performance and the cash within
the business the Board is recommending a final dividend of
0.75 pence per share, the same as the prior year, for approval at
the Company’s Annual General Meeting.
Delivery against our strategic vision
Despite the global challenges, 2020 saw significant progress
against the major strategic goals identified by the Board.
Of particular note:
▪ all new business in 2020 was signed on “subscription” terms;
“2020 saw significant expansion by way
of new projects from existing clients and
the strategic acquisition of Inforalgo in
July 2020 to supplement our regulatory
credentials and US footprint.”
Dear shareholder,
I am pleased to present this Annual Financial Report, my first as
Chairman of Gresham.
As forewarned in last year’s report, Ken Archer retired as Chairman
after ten years in the role. I would like to thank Ken for his
excellent stewardship of the business which has seen its evolution
into a global leader in the field of enterprise financial software.
▪ the Inforalgo acquisition brings additional sticky ARR and
widens our addressable market;
▪ subscription model provides high level of visibility and
increased certainty for future years' revenue;
Overview
Obviously, the major world event in 2020 was the COVID-19
pandemic. I am pleased to report that the Company has remained
fully operational despite this period of unprecedented disruption.
Thanks to strong leadership, resilient systems and a highly
committed team of employees globally, the business was able
to switch rapidly to 100% home working with no discernible
disruption to levels of customer service, project delivery and
income levels from existing clients.
However, as customers and prospects inevitably experienced
their own internal operational challenges, new projects and
initiatives were “parked” in many organisations for a good part
of the year. As we moved through the year, we saw signs that
clients and prospects appear to have adapted to the new normal
and pre-sales momentum started to return to previous levels during
the second half of the year, giving us confidence for the future.
▪ Clareti moved further towards stand-alone cash profitability;
and
▪ underlying business systems and processes are increasingly
scalable and global.
People and culture
2020 was a challenging year across the world and it is a testament
to the leadership qualities of the executive team that the business
continued to perform strongly. The annual employee engagement
survey in December showed the highest ever scores across the
business with significant improvements in areas highlighted in
past years. On behalf of the Board, I would like to take this
opportunity to thank all members of the Gresham family for
their dedication, commitment and achievements in what will
have been for many people a personally challenging time.
06
Gresham Technologies plc Annual Financial Report 2020
Strategic Report During my induction in the summer, I was particularly impressed
with the passion, shared values and competence of the people in
the business. I greatly look forward to a time when I can get to
meet more of the staff and management face to face.
One of my first tasks on joining the Board in the summer was
to work with the nomination committee to identify a suitable
successor to Imogen Joss for the role of NED and chair of the
remuneration committee.
The recruitment process identified two strong candidates with
extremely valuable sector experience as well as excellent
business experience gained in successful careers in financial
services. As a result, the nomination committee took the decision
that the Board would be strengthened and enhanced by
appointing both candidates and I was delighted to welcome
Jenny Knott and Dr Ruth Wandhöfer to the Board in October.
Jenny and Ruth joined Andy Balchin, who has been a NED with
Gresham since 2017. Jenny has been appointed chair of the
remuneration committee and Andy has taken the role of Senior
Independent Director. I have been particularly pleased at the
speed with which the new Board has formed into a strong team
despite the challenges of inductions and Board meetings being
“virtual” meetings during the pandemic.
As well as taking the opportunity to consider the Group’s
business strategy, as noted below, the new Board is increasing its
focus on environmental, social and governance (“ESG”) matters
and will provide details on how the Group is addressing these
important issues in future reports and presentations.
Looking ahead
The new Board held a strategic workshop in December, where
we engaged in constructively challenging conversations about
which of the many opportunities available to the business would
create maximum long-term shareholder value. As in many
organisations with a subscription revenue model, there are
trade-offs between maximising short-term profits and investing
for future growth and value. The broad strategic direction approved
by the Board focuses the Company on the following priorities:
▪ continue to build a global footprint and resilient
international operations;
▪ increase investment in sales and marketing;
▪ make scalability and repeatability key themes within product
development and professional services to enhance operating
leverage and accelerate speed of implementations;
▪ increase investment in AI to support our vision of self-learning
and self-optimising solutions;
▪ identify options to monetise the IP arising from the ANZ
strategic partnership in the wider market; and
▪ seek further earnings-enhancing acquisitions which add
adjacent technology capabilities, scale, and expand global reach.
We enter 2021 with the world still impacted by COVID-19 but,
importantly, with a strong pipeline and a product suite that is
increasingly relevant in an era when our clients and prospects
are investing in solutions to accelerate digital transformation,
remove manual processes, reduce costs and enhance the quality
of regulatory reporting.
I am confident that the team has the vision, drive and capabilities
to continue to deliver growth in the business and growth in
shareholder value.
Peter Simmonds
Non-Executive Chairman
8 March 2021
Our culture
We seek excellence in everything we do and we
create a culture to foster and support this.
▪ Customers and colleagues must feel that
working with Gresham is awesome.
▪ We deliver a high quality customer centric
experience that delights.
▪ We seek to hire and develop brilliant people.
▪ Our products, processes and services will
be the best in the industry.
▪ Our office environment is flexible, open plan,
collaborative and fun.
▪ Our organisation is flat which empowers
people to be agile and flexible.
▪ We work on a range of cutting edge
technologies and methodologies.
▪ We share a passion for new technology
and are inspired to explore new ideas.
Environmental, social and governance
Page 26
Gresham Technologies plc Annual Financial Report 2020
07
STRATEGIC REPORT CEO’s statement
We are positive about
the opportunities ahead
Dear shareholder,
Strategic overview
It was nearly a decade ago, in September 2011, that Gresham
announced the launch of Clareti Transaction Control 1.0. The Clareti
business was born and the Group started its transformation
from a UK-centric provider of ageing data-centre software and
IT services into an IP-rich enterprise software company.
In recent years, divestments, restructuring, management and
operational platform improvements have sharpened the focus of
the Group, and our ongoing investment into product development,
customer success and distribution has enabled the Clareti
business to push through early-stage growth challenges and
move confidently into the scale-up phase. A successful track
record of new business wins and bolt-on acquisitions has
enabled the Group to secure a base of over 120 customers in
20 countries around the world and establish itself as a respected
and increasingly important player in the financial services vertical
for risk and regulatory software.
As the business has grown, we have also refined our operating
model and ensured all systems, processes and functions are
global and scalable. In recent years, we have moved our core
software to the cloud and introduced subscription services for
connectivity and reconciliation solutions. Two years ago, we took
the decision to move our on-premise software sales from a
less predictable upfront licence model to a recurring revenue
model, and, during 2020, all new business wins were signed on
subscription terms. The Group now benefits from much improved
quality of earnings underpinned by high-quality recurring Clareti
licence revenues. Despite the challenging conditions in the year,
we have progressed our strategy to further reduce the Group’s
historical reliance on its portfolio of legacy businesses and
continued our progress towards making Clareti stand-alone cash
profitable. The Clareti business now provides Gresham with a
platform for sustained, profitable, organic and in-organic growth.
Vision
Over the last ten years, the shift to digital has driven dramatic
change in society and business, with entire industries being
reimagined and transformed by data and inter-connected real-time
processes. In financial services, these technology advances and
competitive pressures are compounded by increasing regulatory,
risk and compliance demands. Firms are striving to achieve full
front-to-back and end-to-end control and digitisation of their
businesses. They are replacing archaic, inflexible systems and
manual processes and investing in automation to improve the
speed, accuracy and efficiency of their data processing. Promising
technologies such as artificial intelligence are making it onto the
board agenda as executives think beyond digital transformation
towards self-learning and self-optimising organisations. Executives
need to have complete confidence in their data and processes to
make good decisions, ensure optimal outcomes and protect their
reputations. This is our vision – to bring digital integrity, agility and
confidence to the world’s financial institutions.
“Despite the challenging conditions
in the year, we have progressed our
strategy to further reduce the Group’s
historical reliance on its portfolio of
legacy businesses and continued our
progress towards making Clareti
stand-alone cash profitable. The Clareti
business now provides Gresham with
a platform for sustained, profitable,
organic and in-organic growth.”
08
Gresham Technologies plc Annual Financial Report 2020
Strategic Report Markets
Clareti software helps our customers connect, reconcile and
control the many disparate sources of transaction, finance, risk
and regulatory data that exist in modern trading ecosystems.
According to Geert Raeves of Adox Research (2020), “The market
for reconciliation in capital markets and asset management will
grow by 5.2% per annum, to reach a size of USD 400m (excluding
internal IT spend) by 2025”. The market for reconciliation software
in finance and post-trade operations remains an important
opportunity for Gresham. Clareti enables firms to handle both core
(cash and securities) and non-core (other use cases) reconciliations
and data controls across the enterprise – simplifying the complex
and scaling up to meet demand. Having initially established a
strong position in non-core enterprise controls, our objective is
to secure leadership in the core reconciliation space and
increase our market share to more than 30%.
Connectivity, reconciliation and control are also fundamental
capabilities needed by firms to confidently meet their obligations
in the area of regulatory reporting. In 2019, the global market for
regulatory reporting solutions was estimated at USD 330m and it
is expected to reach USD 1,160m by the end of 2026, with a CAGR
of 19.5% during 2021–2026. Over the last four years, we have
secured a pleasing number of sales in the regulatory area and
our acquisition of Inforalgo has further strengthened our position.
“The overall size of the addressable
market for Clareti software, and the
competitiveness of our offerings,
provides an opportunity for us to build
out a global financial technology
company of substantial scale.”
We aim to win a meaningful share of the global market for
reconciliations and regulatory reporting control software in
financial services before turning our attention to other industries
and use cases. Clareti has been successfully adopted in banking,
investment management, insurance, wealth management,
energy and commodities, where there are nearly 2,000 firms
in Gresham’s global target market. We are already regarded as
an innovative partner to many of the world’s largest financial
institutions and we aim to deepen those key account relationships
as well as win new names through direct sales teams in key
geographies, as well as through OEM agreements and other
alliances. I believe that the overall size of the addressable market
for Clareti software, and the competitiveness of our offerings,
provides an opportunity for us to build out a global financial
technology company of substantial scale.
COVID-19 response
and impact
I am pleased to confirm that your Company has
continued to remain fully operational around the
world throughout the current pandemic, and we are
taking great care to protect our colleagues, partners
and suppliers, customers and local communities.
Our Board, major incident team and our wider
management team moved proactively to protect
the business as the crisis emerged and continue to
stay abreast of global developments. Thanks to our
strong team, good contingency planning, modern
resilient business systems, established collaboration
models and flexible working practices, we were able
to move all global employees seamlessly to 100%
home working during the week of 9 March 2020. At
that time, the Company benefited from record levels
of recurring revenue, a strong book of contracted
services engagements and good cash reserves;
nevertheless, with the expectation that the crisis
would have an inevitable impact on progress of new
sales, management took swift actions during April
to preserve cash and protect earnings in a way that
would not compromise our excellent long-term
prospects. I am pleased to report that we did not
need to furlough any staff, or take any loans or
business relief, in any of our global businesses.
From March until July 2020, many of our customers
and prospects were focused on their own market
and operational challenges and unable to devote
time to new projects and initiatives. After the
summer, pre-sales engagement levels picked up
and we were able to requalify our pipeline and move
projects forward. Whilst new Clareti licence revenues
were lower than originally planned due to customer
inertia for a large part of the year, we were pleased
with the Clareti sales progress as set out below.
Unfortunately, the virus is a long way from being
defeated and the global economy remains fragile.
Nevertheless, we are confident in the underlying
resilience of the financial services market and the
demand for intelligent automation offerings is strong
as firms seek to accelerate their digital transformation
efforts. We have seen a positive uptick in our pipeline
in recent months which we are confident will
translate into sales of Clareti solutions.
Gresham Technologies plc Annual Financial Report 2020
09
STRATEGIC REPORT CEO’s statement continued
Clareti sales progress
During 2020, we were pleased to secure initial projects at two
new Tier 1 global banks adding over £800k to Clareti ARR. Winning
and growing large “key account” customers is an important
aspect of our strategy. We look to secure several new name key
accounts each year and expect to see steady ARR growth in
these accounts over time coming from new projects, new
instances or volume upgrades, and product cross-sells. To prove
the point, in 2020, three existing key accounts committed to
significant licence upgrades including a Tier 1 bank customer
which selected Clareti to control its regulatory reporting
processes across its global business and now has a framework
contract for future growth. Several smaller new name wins and
installed base upgrades were also added. In line with our
strategy, all new agreements signed during the year were
subscription based. Organic growth in forward-looking Clareti
ARR was 17%.
We took the opportunity to refresh and strengthen our sales
team during the year. We made key management appointments
in Europe and the US and bolstered the team with several new
sales and pre-sales hires. Our entrepreneurial direct sales team
is now maturing into an organisation that can not only win new
name business, but also manage global and key accounts, build
out channels and alliances, open up new geographies and sell
the broader range of product offerings now available to it. We enter
2021 with a strong team with better market coverage particularly
in the UK, Europe and Asia. We will continue to expand our US
sales team given the overall size of the market opportunity, as
well as building out an inside sales function to support lead
generation and account management.
Clareti services revenues were lower in 2020 than 2019 in large
part due to investments we made in order to take our Tier 1 bank
early adopters live and referenceable. Creating great customer
references in the market remains key to sustainable growth.
Our software becomes a mission critical part of our clients’
trading operations and the Clareti platform has matured in
recent years – indeed, its power and robustness were proven
during an extraordinary year of market volatility with many clients
processing record volumes. Our customer success team is
responsible for ensuring successful implementation, adoption
and value creation for the customer. During 2020, despite
working remotely, our consulting team successfully ran more
than 80 projects of varying size and scope, and our support team
resolved 97% of tickets within our demanding service level
agreements. We were delighted to win the bobsguide Ranking
2020 for Best Customer Support in Financial Technology.
Products and solutions for customers
Clareti technology has been applied to solve a wide variety of
problems, such as data integration, data quality, automation and
control issues in middle and back office operations as well as
in front office, straight-through processing ("STP"), regulatory
reporting and cash management and payments.
We deliver these capabilities with a flexible enterprise-grade
platform and the full power of our software can be accessed in
the cloud, on-premise or deployed into hybrid environments.
Our products or cloud services are now available in two
primary offerings:
Clareti Control products
▪ The only modern enterprise-grade business self-service
platform for the reconciliation and control of "any and all"
transaction data in financial markets.
▪ Disrupting markets dominated by legacy vendors whose
inflexible technology fails to achieve more granular and
real-time data control, or replacing in-house systems and
manual processes.
▪ Sold as applications for specific use cases including Clareti
Transaction Control, Clareti Cash Control, Clareti Securities
Control and Clareti Regulatory Control.
Clareti Connect products
▪ A unique service that enables customers to participate in the
complex inter-connected global financial system without
having to worry about integration risk, cost and time to market.
▪ Enables institutions to seamlessly connect their banking,
payments, trading, accounting and regulatory systems and
external partners with intelligent straight-through processing
in a way that is reliable and cost effective.
▪ Sold primarily as a cloud service bringing together tools and
software libraries built or acquired by Gresham into a rich menu
of industry connectivity and data transformation services.
Data integrity and control – One of our long-standing
competitive USPs in reconciliations is the ability to ingest and
match any type of non-standard data, which provided us with
repeat wins in areas such as derivatives and other alternatives,
intersystem controls, insurance broking and regulatory reporting
controls. In June 2020, we signed a large global bank to deploy
controls across its substantial UK retail and commercial business
covering a myriad of non-standard data types such as ATMs, and
payments. This contract further widens our addressable market
as we look to target US and European regional banks in 2021
alongside our thrust into capital markets. In December, we
signed a new global investment bank to implement controls
within its US markets business.
I am pleased to report that our two Tier 1 bank "early adopter"
customers that signed in 2019 for global implementations of
Clareti for post-trade reconciliation of cash and securities both
went live with initial capabilities during the year. The core product
development work for Clareti Cash Control and Clareti Securities
Control is now complete and we are assisting these customers
with finishing their global roll-outs. We continue to attack the legacy
vendor duopoly in this part of market and new opportunities are
emerging as firms firm up their projects for 2021.
10
Gresham Technologies plc Annual Financial Report 2020
Strategic Report Acquisition
of Inforalgo
Inforalgo, based in Solihull, UK, are specialists in
connectivity and intelligent automation solutions
for financial services institutions enabling
straight-through processing and real-time
regulatory reporting. Inforalgo’s in-house developed
integrated toolkit, provided as a hosted managed
cloud service or on-premise solution, includes
over 80 adaptors enabling rapid integration to
market venues, traders and exchanges.
“This exciting deal will enable us
to extend our portfolio to include
further trading and regulatory
reporting venues alongside
our bank, ERP and financial
messaging connectivity services.
It strengthens our capability
to offer end-to-end control of
regulatory reporting for our
customers, enhances our US
footprint and creates cross
and upselling opportunities.”
Stay up to date on our website
greshamtech.com
Regulatory reporting – The ability to match multiple feeds of
non-standardised data and check for integrity against complex rules
in order ensure accuracy and completeness is a key requirement
of market participants struggling to meet ever-increasing
challenging regulatory reporting demands. Firms also need the
ability to resolve exceptions identified in the end-to-end process.
In 2020, we went live with the implementation of a Consolidated
Audit Trail solution for a global investment bank, representing our
largest regulatory implementation to date. We have now
completed regulatory projects for customers in the UK, Europe,
the US, Canada, Asia and Australia and gained substantial
experience. In July 2020, we were able to strengthen our position
in this market through the acquisition of Inforalgo.
The acquisition of Inforalgo, a niche provider of straight-through
processing ("STP") software for financial markets, was completed
for an initial consideration of £2.3m and contingent consideration
of up to £1.3m dependent on recurring revenue retention at the
12-month and 18-month anniversaries of completion. The acquisition
added over £1.2m of annualised recurring revenues (“ARR”) from
approximately 30 new customers, consisting mainly of global
banks, asset managers and market infrastructure providers.
Nearly 90% of the acquired ARR comes from North American
customers, a key market for Gresham. The financial performance
in the second half of 2020 was as planned and business
integration is now complete. We have been pleased with the
quality of the team, the technology and the customer base.
In recent years, the Inforalgo team had started to apply its rich
heritage in STP connectivity and valuable know-how towards
real-time management of regulatory submissions to external
reporting venues. When this intelligent connectivity capability is
combined with our reconciliation and exception management
software, we are able to deliver end-to-end solutions to our
customers. The Inforalgo leadership team has now taken on
enhanced roles within Gresham and is driving our product plans
and sales efforts in this area.
Cash management and payments – Gresham has a long
heritage working in corporate cash management through our VBT
reseller agreement, systems integration projects and, in recent
years, the application of Clareti technology to data integration or
matching problems. Having signed a strategic agreement with
ANZ in 2019 to develop a next generation offering named Clareti
Cash Management, development work progressed well during
2020 with key milestones achieved driving incremental licence
revenues. The solution is on track for go-live in the middle of
2021 when further ARR licence increases are expected.
In parallel with this strategic investment, we continue to sell
our reconciliation and control capabilities and our multi-bank
connectivity cloud service, acquired from B2 Group, into payments
and cash management use cases. Several multi-bank clients went
live in 2020 providing good references. In January 2021, one of
the world’s leading providers of money processing services
signed for a new multi-bank connectivity project to integrate
with its CTC system. It is this combination of “control” and
“connectivity” functionality that is essential in creating end-to-end
digital solutions for our cash management customers in much
the same way that I have described for regulatory reporting.
Gresham Technologies plc Annual Financial Report 2020
11
STRATEGIC REPORT CEO’s statement continued
Other (non‑Clareti) business
Our other, non-Clareti software businesses continued to run
off as expected during 2020. Our EDT tape storage software
licensing now contributes less than £0.5m per annum in
revenues and is expected to decline further in 2021. This was
offset by a longer than expected tail of residual usage-based
fees from the sole remaining UK customer of our historical
reseller arrangement for Cashfac’s VBT software, which finally
ended in December 2020.
The Group’s fixed-margin IT services contracting business with
ANZ slowed as a result of the COVID-19 pandemic in Australia,
finishing 11% lower than 2019. Monthly billings have already
recovered to pre-pandemic levels and steady growth is
expected in the short term.
People and culture
The Gresham team has performed well in an exceptional year
and that is a testament to the quality of our people and the strong
culture of collaboration that we have developed. In 2020, many
of the injustices that exist in society and prejudices that can be
found in the workplace were highlighted on the global stage.
During the lockdown in the first half of 2020, we took the
opportunity to engage in an extremely constructive process
with our global employees to revisit our values, and we also
rolled out diversity and inclusion training to our people managers.
In December, we were pleased to receive our strongest ever
set of scores from our annual employee engagement survey.
In 2021, we will be investing in further leadership development
programmes as well as our ongoing focus on developing talent
and driving performance.
Outlook
We enter 2021 with an installed base of over 120 Clareti customers
generating annualised recurring revenue of £12.3m, which is
£2.8m and 29% higher than at the beginning of 2020. We also
have good visibility of our legacy non-Clareti businesses. As a
result, the Company is now much more resilient than it has
been for many years. Whilst COVID-19 is expected to cast its
dark shadow for at least the rest of the year, we are positive
about the opportunity that lies ahead for Gresham. Our pipeline
has strengthened considerably in the last six months and our
financial services clients are investing into intelligent automation
solutions to remove manual processes and save costs. We also
expect to see ongoing spend on regulatory reporting infrastructure.
We will focus our sales efforts on these growth areas where we
also believe our technology has significant benefits over legacy
vendors and newer competitors. We will also continue to look
for earnings-enhancing acquisitions in these same core markets.
FY2021 has started positively with several new subscriptions
already signed. Subject to sustaining our new business win rate,
incremental investment in sales and distribution is planned for the
second half of the year in order to further strengthen our pipeline
into 2022 and capitalise on the significant market opportunities.
Thank you for your ongoing support.
Ian Manocha
Chief Executive
8 March 2021
12
Gresham Technologies plc Annual Financial Report 2020
Strategic Report Innovation
Innovative
solutions
Development philosophy
We adopt an agile development strategy and operate a
continuous programme of enhancements to delight our
customers and maintain competitive differentiation, delivered
from our Innovation Labs in Bristol and Innovation Hubs
in Solihull and Luxembourg.
Whilst Java remains the dominant development language for the
platform and solutions, we seek to take advantage of new languages
and capabilities in the wider technology industry. We have adopted
the Clojure language for some elements of the portfolio to deliver
both productivity and quality improvements. We are also using
Kubernetes, originally from Google, to deliver high availability
and scalability, as well as Kafka, originally from LinkedIn, for
high-performance data streaming and a set of technologies
from Netflix for micro-services. We make effective use of
open-source software for commodity components, preserving
our own development bandwidth for our own innovations.
Product development platform
We operate a global product development platform using the
same systems and processes for all of our products. This allows
us to spend more of our time and resources on productive
development activities and innovation, and also ensures we can
integrate new technologies or solutions quickly and consistently.
We deliver innovative solutions from three main sites, all with
their unique capabilities and attributes.
Innovation Labs
Bristol, UK
Bristol is our main development centre
and a showcase for our investment in and approach
to innovation. Led by Neil Vernon, our widely
renowned Chief Technology Officer, this location
is home to almost 50 developers and associated
roles, and (in normal times) plays host to regular
customer and industry events. From this nerve
centre of innovation, our talented team collaborates
primarily on Clareti Control and banking products as
well as providing architectural oversight and quality
control on all other Gresham products.
▪ Roadmap, standards
▪ Architecture
▪ Control products
▪ Banking products
Innovation Hub
Solihull, UK
Our Solihull site is our newest, having acquired it
with the Inforalgo acquisition in July 2020. It includes
around 20 technical employees who collectively have
around 100 years of experience in delivering real-time
straight through-processing ("STP") and regulatory
services to the financial services industry. The
team now leads our Clareti Connect development.
▪ Connect products
▪ Regulatory and STP services
Innovation Hub
Luxembourg, Europe
Luxembourg is an epicentre of financial services
within the European Union and our office there
originates from our acquisition of B2 Group in July
2018. Our Luxembourg team of around 15 people
is focused on payment services for European and
UK customers, as part of our wider range of
Clareti Connect services. This hub also serves as
our innovation lead for cloud services across all
our offerings.
▪ Cloud platforms
▪ Connect products
▪ Payment services
Gresham Technologies plc Annual Financial Report 2020
13
STRATEGIC REPORT Business model
Building
recurring
revenues
Our business model is to earn
high-margin, recurring revenues by
providing innovative software solutions
for reconciliations and post-trade
automation, regulatory reporting and
cash management and payments.
Our
strengths
Growing, global market
There is a significant addressable market
made up of financial institutions and
large corporates which are grappling with
increasingly complex data and financial
control requirements. Structural trends
are delivering substantial tailwinds.
CEO's statement
Page 8
Disruptive technology
Our Clareti platform is best-in-class,
versatile and 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.
Innovation
Page 13
People and culture
We have an exceptional pool of talent that
incorporates a vital and diverse blend of
skills and experience. We are committed
to a culture of integrity and excellence
and we challenge ourselves to be an
awesome place to work.
Environmental, social and governance
Page 26
14
Gresham Technologies plc Annual Financial Report 2020
Strategic Report Our
business
Distribution channels
Our global team of sales professionals sells
directly to customers in our chosen markets,
principally in the UK, Europe and North America.
In addition, our bank and technology partners
provide indirect sales channels. We are developing
a global alliances network with like-minded
firms to build distribution capacity. Our sales
activities are supported by a global marketing
team based primarily in London, UK.
Charging model
Our Clareti applications are sold on a
subscription basis, which combines licensing
with support and maintenance. This model
generates higher levels of recurring revenue
for the Group, which enhances long-term
profitable growth and provides a platform for
sound investment decisions. Software licences
are limited by scope of use and volume
limitations, providing opportunity for additional
fees for higher usage or new use cases.
Deployment
Customer deployments are conducted and
supported by our customer success team,
which is made up of experienced professional
services consultants and specialist support
technicians. Professional services are typically
charged on a time and materials basis or at
a fixed fee for a fixed scope of works. Our
solutions are available on-premise or in the
cloud for which we charge additional hosting
fees. Bank-grade 24/7 support is provided
from our global hubs in the UK, Luxembourg,
North America and Australia.
Operations
We manage our business functions on a
global basis from our London headquarters.
This includes sales, marketing, professional
services, customer support, cyber and
information security, IT systems, finance,
HR and legal. Our business processes are
implemented through centralised systems,
which are designed to support fast-paced,
entrepreneurial decision making within an
appropriate control framework.
Creating
value
For investors
Our model builds capital value based
on high levels of recurring revenues and
sustained growth. A progressive dividend
policy has been in place since 2018,
providing further shareholder returns.
Total shareholder return
over five years*
40%
* Measured by the share price as at 31 December
2020 plus dividends paid since 1 January 2016,
divided by the share price at the start of the
five-year period.
For customers
Our solutions give customers confidence
in their data in an increasingly complex
and regulated environment. Our model
enables us to continually invest in
innovation and maintain the value
proposition of our solutions.
Total Clareti customers
120+
For employees
Our employees have the opportunity to
be part of a fast-paced, entrepreneurial
business, where individuals are valued
and career aspirations can be fulfilled.
Corporate success is shared through
an all-staff share scheme.
Total employees
150+
Gresham Technologies plc Annual Financial Report 2020
15
STRATEGIC REPORT Strategy
Our route to
long-term success
Our strategic plan
is designed to drive
profitable growth
and create long-term
shareholder value.
1
2
Build a high-margin,
recurring revenue stream
based on Clareti software
and cloud services.
Create a valuable
financial technology
business through
Clareti-led growth
and complementary
acquisitions.
Key achievements in 2020
We increased Clareti annualised
recurring revenues by 29% (see KPIs,
page 18) despite the challenging
prevailing conditions. We completed
our transition to subscription-based
licensing.
Key achievements in 2020
We added several key accounts and
delivered important customer
implementations. We acquired
Inforalgo in July 2020, which adds
valuable, connectivity technology
to our Clareti portfolio.
Key performance indicators
Page 18
Innovation
Page 13
Key priorities for 2021
We will continue to invest in sales
capacity and supporting processes
in all our key locations to deliver
our growth targets. We will enhance
our cloud-based offerings and will
optimise our global operations.
Key priorities for 2021
Our priority is to deliver organic Clareti
growth in all of our core regions,
achieve success for our customers
and foster long-term relationships. We
will continue to pursue appropriate
acquisition opportunities.
16
Gresham Technologies plc Annual Financial Report 2020
Strategic Report 3
Establish Clareti as
the enterprise data
integrity platform
“category leader”.
4
Focus our product
investment on
innovative Clareti
solutions for our
chosen markets.
5
Retain strategic
non-Clareti revenues
to support Clareti-
led growth.
Key achievements in 2020
We ran several successful marketing
campaigns to promote our brand and
offerings to our target market. Gresham
won the WatersTechnology Award for
Best Buy-Side Reconciliation Platform
in 2020.
Key achievements in 2020
We delivered new, market-differentiating
features and capabilities for our
solutions to solve known market
problems. We have adopted new
technologies to increase reusability of
IP assets across solutions.
Key achievements in 2020
We managed our non-Clareti business
effectively, with revenues ahead of
our original expectations. We have
successfully eliminated support risks
from certain legacy assets.
Key priorities for 2021
We are seeking high levels of
customer engagement and
referenceability. We will build brand
awareness in our core regions,
particularly the US.
Key priorities for 2021
We will enhance our reconciliation
and regulatory reporting capabilities to
address known market requirements.
We will implement artificial intelligence
within our offerings to improve
automation and efficiencies for
our customers.
Key priorities for 2021
We will continue to monitor the
viability and business risks of the
individual non-Clareti lines of business
and ensure contracts can be serviced
effectively and profitably.
Gresham Technologies plc Annual Financial Report 2020
17
STRATEGIC REPORT Key performance indicators
Measuring
our progress
The following key performance
indicators (“KPIs”) have been
selected as the most
appropriate measures of
strategy execution for the
Group. Performance of these
KPIs has been discussed
within the Chairman’s
Statement, CEO’s Statement
and Financial Review.
Financial KPIs
Group revenues
Clareti revenue
Clareti annualised
recurring revenues (“ARR”)
£24.8m -1%
£15.5m no change
£12.3m +29%
2020
2019
2018
2017
24.8
25.0
19.3
21.7
2020
2019
2018
2017
11.8
11.1
2016
17.2
2016 7.5
15.5
15.5
2020
2019
12.3
9.5
2018
7.4
2017 5.7
2016
4.6
Links to strategy
11
22
33 44 55
Links to strategy
11
22
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Links to strategy
11
22
33 44 55
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.
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 given as at 31 December 2020.
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.
Non-financial KPIs
The Group monitors a range of non-financial performance indicators, including sales pipeline velocity,
product development velocity, effective billing rates for professional services, customer upsell and
retention rates, customer health scores and people engagement scores. These indicators are tracked
operationally but are not considered to be individually appropriate as a measure of overall strategy
execution success.
18
Gresham Technologies plc Annual Financial Report 2020
Strategic Report Links to strategy
1 Build a high-margin, recurring revenue stream based on Clareti software and cloud services.
2 Create a valuable financial technology business through Clareti-led growth and complementary acquisitions.
3 Establish Clareti as the enterprise data integrity platform “category leader”.
4 Focus our product investment on innovative Clareti solutions for our chosen markets.
5 Retain strategic non-Clareti revenues to support Clareti-led growth.
Adjusted EBITDA1
Cash adjusted EBITDA1
Adjusted diluted
earnings per share1
Net cash
£4.5m +10%
£0.3m no change
4.0p +100%
£8.9m -7%
2020
2019
2018 0.9
2017
2016
4.5
4.1
2020
0.3
2019
0.3
2020
2019
4.0
2.0
2020
2019
8.9
9.6
2018
(2.1)
(1.5)
2018
2018
5.6
5.1
2017
2.0
2017
6.51
3.8
2016 0.1
2016 4.67
2017
2016
8.5
7.2
Links to strategy
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Links to strategy
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22
33 44 55
Links to strategy
11
22
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Links to strategy
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22
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Description
Group earnings before
interest, tax, depreciation and
amortisation, adjusted for
share-based payment charges,
impairment of development
costs and exceptional items.
Discontinued operations are
not included in either year.
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.
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.
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, 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.
Description
Aggregate net cash balance
(including bank deposits/
restricted cash) as at
31 December 2020 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.
All KPI data excludes discontinued operations, except for profit before tax
which includes discontinued operations and exceptional items.
Values stated for 2020 include the impact of the acquisition of Inforalgo.
See note 23 for details.
(1) 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 4).
Gresham Technologies plc Annual Financial Report 2020
19
STRATEGIC REPORT Principal risks and uncertainties
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
on page 39.
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 table below 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.
Failure to win new Clareti business in line with plan
Links to strategy
11
22
33 44 55
Description
Winning new Clareti business is central to our strategic growth
plan. Failure to do so would directly impact our achievement of
overall objectives or lengthen the period taken to achieve them.
Specifically, failure to win new Clareti contracts early enough in
the year reduces the revenue recognisable from new contracts in
the year, and would potentially jeopardise our ability to deliver the
implementations and recognise the associated revenues in the year.
Commentary
We continue to see strong market demand for Clareti solutions
but sales cycles have become even more unpredictable as
a result of the ongoing COVID-19 pandemic. This presents
unquantifiable risks to achieving our short-term growth
aspirations and business plan. Nevertheless, we are pleased
with the Group’s resilience in 2020 and the notable sales
successes achieved, despite the challenging market conditions.
Misdirected product, operational or strategic investments
Links to strategy
11
22
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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 2020, we have invested significantly to
deliver market-differentiating enhancements to key customers,
which we believe will provide significant sales opportunities in
the wider market. The acquisition of Inforalgo in July 2020 has
been fully integrated and is expected to deliver a strong return
on investment in 2021 and beyond.
Product and service delivery failures
Links to strategy
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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
We successfully completed several projects in the year. Often,
our enterprise customers have complex data requirements,
which can render implementation projects particularly
challenging. We operate a clear methodology to align
expectations from the outset, manage projects effectively and
minimise issues or delays, but this is not always possible.
Where necessary, we invest time and resource to rectify errors
and minimise contractual, commercial and reputational risks.
Links to strategy
1 Build a high-margin, recurring revenue stream based on Clareti software and cloud services.
2 Create a valuable financial technology business through Clareti-led growth and complementary acquisitions.
3 Establish Clareti as the enterprise data integrity platform “category leader”.
4 Focus our product investment on innovative Clareti solutions for our chosen markets.
5 Retain strategic non-Clareti revenues to support Clareti-led growth.
20
Gresham Technologies plc Annual Financial Report 2020
Strategic Report Accelerated decline in non-Clareti revenues
Links to strategy
11
22
33
44
55
Description
Non-Clareti revenues provide a strong contribution to revenues,
earnings and cash flow 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 this
year and we expect this to remain the case in 2021. We
regularly review individual portfolio risks and will consider
strategic options such as discontinuations or disposals in
mitigation where risk reaches unacceptable levels.
Economic, international trade and market conditions
Links to strategy
11
22
33
44
55
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
In response to the COVID-19 pandemic, we activated our
incident response plans in March 2020 and we successfully
continued to operate without interruption and at full capacity.
However, the Group’s ability to win new business was adversely
affected in 2020 due to the impact on our customer base,
and we expect 2021 to carry similar challenges and risks.
Aside from that, international trade conditions are gradually
improving with the confirmation of the UK-EU Brexit deal at
the end of 2020 and the new US administration in early 2021.
People risks
Links to strategy
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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
People risks were stable in the year and this is expected to
continue. Staff retention was high in the year and the results
of our annual staff survey confirm that staff are highly engaged.
We have refreshed our corporate values and are reviewing our
policies and processes to ensure our staff remain highly
engaged and productive and to minimise people-related risks.
IP, data and cyber risks
Links to strategy
11
22
33
44
55
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 but there were no material incidents in the
year. We appointed a Head of Information Security in 2020
and we have also enhanced our security-related systems and
processes, which we will continue to do as we work towards
achieving internationally recognised security accreditations.
Gresham Technologies plc Annual Financial Report 2020
21
STRATEGIC REPORT Financial review
A successful year
for the Group
Revenues
Our income is analysed between revenues from Clareti Solutions
and from Other Solutions, as shown in the table on the next page.
Clareti Solutions
Despite the tough trading conditions created by the COVID-19
pandemic, the strategically important high-margin Clareti recurring
revenues recognised in the year grew by 11%, up £1.1m to £11.5m.
More importantly, the forward-looking Clareti annualised recurring
revenues experienced growth of 29%, up £2.8m to £12.3m,
providing further predictability going forward. The acquisition of
Inforalgo on 29 July 2020, contributed £0.6m and £1.2m of this
growth respectively. In line with the Group’s strategy to focus on
the aforementioned high-quality recurring revenues, there were
no non-recurring licence fees generated in 2020, a reduction of
£0.7m on the prior year.
Clareti services revenues were down 9% to £4.0m from £4.4m.
This reduction was due to a combination of investment time to
successfully deliver the ongoing implementation projects arising
from the large strategic Clareti software licences sold to customers
during 2019, and a period of lower generation of new services
business due to COVID-19.
Other Solutions
Revenues from Other Solutions decreased 2% to £9.3m, which
significantly exceeded expectations.
Other software revenues from partners were up 19% to £3.1m
as a result of one of our legacy partner relationships increasing
its usage of the already installed software, which is offset by
reductions from another customer which has finally migrated
away from the software after notifying us of its intent to do so
during 2017. The ongoing arrangements have an approximate net
margin of 50%.
Other software revenues from our remaining legacy products
continued to decrease as planned as customers moved off from
ageing platforms to newer technologies. Attrition is expected to
persist as these technology shifts continue, although the longevity
of these very old legacy products continues to surpass our
expectations and still attracts a net margin exceeding 90%.
Contracting services are provided to ANZ, a strategically important
Australian banking customer, which generate a contractually
fixed net contribution to the Group of 13%. Contracts are typically
signed for twelve months, giving strong visibility of the expected
near-term revenues, although these do fluctuate as resource
requirements change. Whilst 9% down on the prior year, our
original expectations were significantly exceeded due to
additional resource requests being made during the year.
“Despite the tough trading conditions
created by the COVID-19 pandemic,
the strategically important high-margin
Clareti recurring revenues recognised in
the year grew by 11%, up £1.1m to £11.5m.
More importantly, the forward-looking
Clareti annualised recurring revenues
experienced growth of 29%, up £2.8m
to £12.3m, providing further predictability
going forward.”
22
22
Gresham Technologies plc Annual Financial Report 2020
Strategic Report Clareti Solutions
Other Solutions
Total from continuing
operations – note 3
Discontinued
Total revenue
Annualised recurring revenue
as at 31 December 2020
Recurring
Non-recurring
Software
Services
Total
Software – Partners
Software – Own solutions
Services
Contracting services
Total
Software – Own solutions
Clareti
Other
Total
Earnings (continuing operations only)
Group
Gross margin
Gross margin
Adjusted EBITDA
Adjusted EBITDA
Cash adjusted EBITDA
Cash adjusted EBITDA
Statutory profit/(loss) after tax
Adjusted diluted EPS
£m
£m
£m
£m
£m
£m
£m
£m
£m
£m
£m
£m
£m
£m
£m
£m
£m
%
£m
%
£m
%
£m
KPI
KPI
KPI
KPI
KPI
KPI
KPI
KPI
KPI
KPI
pence
2020
11.5
—
11.5
4.0
15.5
3.1
0.6
0.7
4.9
9.3
24.8
—
24.8
12.3
3.5
15.8
2020
20.9
84%
4.5
22%
0.3
1%
1.3
3.96
2019
10.4
0.7
11.1
4.4
15.5
2.6
0.8
0.7
5.4
9.5
25.0
0.1
25.1
9.5
2.8
12.3
2019
21.0
84%
4.1
20%
0.3
1%
(0.1)
1.99
Variance
%
1.1
(0.7)
0.4
(0.4)
—
0.5
(0.2)
—
(0.5)
(0.2)
(0.2)
(0.1)
(0.3)
2.8
0.7
3.5
Variance
(0.1)
—
0.4
2%
—
—
1.4
1.97
11%
(100%)
4%
(9%)
—
19%
(25%)
—
(9%)
(2%)
(1%)
(100%)
(1%)
29%
25%
28%
%
—
10%
—
n/a
99%
Across all business segments, the majority of our cost of sales is
made up of: (i) the customer-specific third party costs incurred
in providing our hosted cloud solutions; and (ii) third party
contractor costs incurred by our contracting services business
(individuals we bring on our payroll as fixed-term employees to
provide this service are recorded in administration costs).
Operating performance is analysed excluding exceptional items,
share-based payment charges, amortisation from acquired
intangible assets and impairment of development costs, which is
consistent with the way in which the Board reviews the financial
results of the Group. This is also consistent with the manner in
which similar small-cap LSE (or AIM) listed companies present
their results and how we understand the investment community
assesses performance, with this particularly being the case for
growth shares in which the recurring cash performance is
considered important.
There has been an increase in statutory profit after tax from a
loss of £0.1m to a profit of £1.3m; refer to the taxation section
below for details of this variance.
Included below are tables and commentary for each of our key
business segments which describe the underlying trends in gross
margin, adjusted EBITDA and cash adjusted EBITDA. Cash adjusted
EBITDA, which adjusts EBITDA for capitalised development
spend and any IFRS 16 lease-related cash expenses classified
as depreciation and interest, has also improved since the prior
year. Adjusted EBITDA and cash adjusted EBITDA are not IFRS
measures nor are they considered to be a substitute for, or
superior to, any IFRS measures. They are not directly comparable
to other companies.
Clareti Solutions
Gross margin
Gross margin
Adjusted EBITDA
Adjusted EBITDA
Cash adjusted EBITDA
Cash adjusted EBITDA
£m
%
£m
%
£m
%
2020
14.5
94%
1.2
8%
(2.9)
(19%)
2019
14.4
93%
0.6
4%
(3.1)
(20%)
Variance
0.1
1%
0.6
4%
0.2
1%
%
1%
100%
5%
KPI
KPI
KPI
KPI
Gresham Technologies plc Annual Financial Report 2020
23
STRATEGIC REPORT
Financial review continued
Earnings (continuing operations only) continued
Despite the challenging global environment, our key growth business, Clareti, has seen an improvement since 2019 across all margin
metrics. Our original 2020 plans for Clareti anticipated that Clareti would be close to a break-even cash adjusted EBITDA position and
we are pleased to be reporting a continued trend in this direction. This outcome is as a result of careful management of costs during
the COVID-19 related uncertainty of Q2 and Q3. As our confidence in generating new Clareti business increased during Q3, we increased
investment, particularly focused on the distribution of Clareti during Q4 to support organic growth in 2021. Our product development
team spent more time on new future revenue-generating Clareti features and functions than the prior year; hence, there was an
increase in the proportion of development spend being capitalisable, which improved adjusted EBITDA but does not affect cash
adjusted EBITDA.
Other Solutions (software)
Gross margin
Gross margin
Adjusted EBITDA
Adjusted EBITDA
Cash adjusted EBITDA
Cash adjusted EBITDA
£m
%
£m
%
£m
%
2020
2.8
63%
2.6
60%
2.6
60%
2019
2.9
71%
2.8
67%
2.8
67%
Variance
(0.1)
(8%)
(0.2)
(7%)
(0.2)
(7%)
%
(3%)
(7%)
(7%)
KPI
KPI
KPI
KPI
As noted above, our Other Solutions business saw the expected reduction in our high-margin own solutions business, offset by an
increase in usage fees generated from a legacy partner arrangement. Costs of sales in this business segment are fixed-margin reseller
fees, with operating expenses being equivalent to 1.5 full-time equivalent employees to service these portfolios. This business segment
is not core to Gresham’s strategy and our primary objective is to operate it as profitably as possible and at minimal risk.
Other Solutions (contracting services)
Gross margin
Gross margin
Adjusted EBITDA
Adjusted EBITDA
Cash adjusted EBITDA
Cash adjusted EBITDA
£m
%
£m
%
£m
%
2020
3.7
75%
0.6
13%
0.6
13%
2019
3.7
69%
0.7
13%
0.7
13%
Variance
—
6%
(0.1)
—
(0.1)
—
%
—
(14%)
(14%)
KPI
KPI
KPI
KPI
As noted above, we provide contracting services to ANZ, at a
fixed net margin of 13%. Fees are paid six monthly in advance,
providing a helpful contribution to working capital, but otherwise
this business segment is not strategically important and will
continue to be managed with negligible administrative overheads.
Exceptional items
During the year, the Group recognised exceptional costs of
£0.4m, of which: (i) £0.2m were acquisition costs in relation to
the acquisition of Inforalgo on 29 July 2020; and (ii) £0.2m
related to a restructuring in July 2020 upon the expiry of the
earn-out period relating to the acquisition of the B2 Group in
July 2018. There were no material exceptional costs during 2019.
There was no material exceptional income during 2020. During 2019,
the Group recognised exceptional income of £2.0m arising from
the sale of the VME software business to Fujitsu in January 2019.
“We continue to invest in the
Clareti business, namely in
distribution, product and
customer success, in order to
ensure that we are best placed
to take advantage of the
significant market opportunities.”
Taxation
For the year ended 31 December 2020, the Group has recorded
a net tax credit of £1.0m (2019: charge of £0.4m). The material
drivers for the variance from the prior year being: additional
taxation of £0.4m being generated in 2019 upon the sale of the
VME business; 2020 accounting for the benefit of two years’
worth of credit in relation to research and development activities;
2020 benefiting from a £0.2m release of 2019 overseas tax
provisions; and £0.3m of deferred tax assets being generated
upon grants of matching shares during the year and increase in
share price throughout the year.
Cash flow
The Group’s financial position remained very strong throughout
2020, despite the outflow of £2.3m for the initial consideration
to acquire Inforalgo, ending the year with cash of £8.9m and no
debt (2019: £9.6m and no debt).
Operating cash flow excluding working capital has decreased
by £0.1m to £4.1m in the year.
The reduction in the movement in working capital of £1.7m
is largely explained by the fact that 2019 included an initial
three-year prepayment of £3.0m from the £1.0m per annum
subscription licence that became non-contingent in March 2019.
The Group received tax receipts of £1.3m in the year during 2020 as
a result of research and development activities performed during
2018 and 2019 where enhanced relief is available (2019: received
£1.4m in relation to 2016 and 2017). Tax payments were made in the
year of £0.5m (2019: £0.1m), the increase on the prior year largely as
a result of increased profitability in the US and Australia and full
utilisation of historical Australian tax losses having occurred.
24
Gresham Technologies plc Annual Financial Report 2020
Strategic Report
The capitalised development expenditure of £3.5m has increased
by £0.2m from the prior year. This is due to an increased portion
of product development effort being spent on new product or
new product features in comparison to the prior year.
During 2019, the Group received a net amount of £1.7m through
the sale of its legacy VME business. No equivalent business sale
occurred during 2020.
During 2019, the Group purchased a total of £1.0m of its own
shares in the period, £0.1m being in respect of employee bonuses
for FY2018 and £0.9m to pre-fund employee and executive
bonus and long-term incentive schemes in future years. No such
share purchase occurred during 2020.
The Group received £0.5m upon the exercise of share options
during the year (2019: £0.1m).
As was the case in the prior year, with increasing Clareti sales
from the growing annuity base and new customer wins, coupled
with tight cost control on planned investments, we expect the
cash-generation capacity of the business to continue and are
looking at opportunities to best utilise the 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.
Operating cash flow excluding working capital
Movement in working capital
Net tax receipts
Capital expenditure – development costs
Capital expenditure – other
Principal paid on lease liabilities
Acquisition (net of cash acquired)
Sale of discontinued operation
Purchase of own shares in employee benefit trust
Shares issued upon option exercises
Dividend
Other
Net increase/(decrease) in cash and financial assets
Cash
£m
£m
£m
£m
£m
£m
£m
£m
£m
£m
£m
£m
£m
£m
Consolidated statement of financial position
Intangible fixed assets have increased from £25.6m to £31.1m,
largely as a result of the Inforalgo acquisition on 29 July 2020.
Trade receivables have reduced from £3.3m to £2.5m. This
reduction is largely as a result of an unusually high receivables
balance from an Australian customer in December 2019 related to
our fixed-margin contracting services business, for which there was
a corresponding payable at the time. This is also the reason
behind the decrease in trade payables from £1.6m to £0.9m.
Non-current contract liabilities have reduced from £1.3m to £0.1m,
as our standard model with customers has been to collect
payments annually in advance as opposed to collecting multiple
years in advance as was the case with a large three-year subscription
licence signed in 2018. Non-current contingent consideration of
£0.3m and current contingent consideration of £0.9m has been
recognised in relation to the acquisition of Inforalgo.
Current contract liabilities have increased from £8.8m to £11.0m,
due to the deferred revenue acquired from the Inforalgo acquisition
and also the increase in Clareti ARR which is typically invoiced
annually in advance.
Financial outlook
In light of the COVID-19 challenges of 2020, the Group is very
pleased with the financial outcome of the year – particularly
achieving a 17% organic growth rate in Clareti ARR, bolstered to
29% with the successful Inforalgo acquisition. Whilst this level of
organic growth was lower than we had originally planned, we
expect to be able to return closer to pre-COVID-19 Clareti organic
growth rates in 2021. In prior year reports, I commented on our
strategy to deliver consistent Clareti growth and drive more
predictability into the business through a focus on generating
higher levels of Clareti recurring revenues rather than initial
licence fees – it is now satisfying and to the benefit of the
2020
4.1
0.6
0.8
(3.5)
(0.1)
(0.6)
(1.9)
—
—
0.5
(0.5)
(0.1)
(0.7)
8.9
2019
4.2
2.1
1.3
(3.3)
(0.2)
(0.4)
—
1.7
(1.0)
0.1
(0.3)
0.1
4.3
9.6
Variance
(0.1)
(1.5)
(0.5)
(0.2)
0.1
(0.2)
(1.9)
(1.7)
1.0
0.4
(0.2)
(0.2)
(5.0)
(0.7)
%
(2%)
(71%)
(38%)
(6%)
50%
(50%)
n/a
(100%)
100%
400%
(67%)
(200%)
(116%)
(7%)
business to confirm that we have completed this transition.
The other (non-Clareti) software portfolio continues to surpass
expectations, with customers requiring extensions to contracts as
they struggle to migrate to newer or alternative platforms. Whilst
such extensions can generate short-term revenue spikes, these
portfolios remain in long-term decline, as demonstrated by the
previously significant non-Clareti UK banking customer that finally
completed its migration after declaring its intent to do so in 2017.
We continue to plan for these portfolios to decline. We expect
our contracting services business to remain stable in 2021.
Overall, we have further increased levels of revenue predictability
throughout the Group. This predictability comes from the
significantly increased Clareti recurring revenue base, which has
been complemented by the Inforalgo acquisition, high levels of
contracted backlog of Clareti services for ongoing implementations
and innovation services and a high portion of the non-Clareti
portfolio already being under contract for 2021. This was the case
as we entered 2020 and is the case to an even greater degree as
we enter 2021. With this in mind, we continue to invest in the
Clareti business, namely in distribution, product and customer
success, in order to ensure that we are best placed to take
advantage of the significant market opportunities.
Tom Mullan
Chief Financial Officer
8 March 2021
Gresham Technologies plc Annual Financial Report 2020
25
STRATEGIC REPORT Environmental, social and governance
Valued, engaging,
responsible employer
People and culture
Our aim is to be a highly valued, engaging
and responsible employer across the
Group, where our people uphold our core
values and are encouraged to excel. We
challenge ourselves to be an inclusive
and collaborative place to be successful.
We know that our people are key to our collective expertise and
growth plans. Our business model is to attract, retain and
develop talented individuals to help us deliver our long-term
objective of becoming one of the world’s leading providers of
enterprise financial technology solutions. We seek to foster a
culture of innovation and empowerment where talent, enterprise
and collaboration are recognised and rewarded.
26
Gresham Technologies plc Annual Financial Report 2020
Strategic Report Attracting, retaining and developing our talent
We implement Group-wide strategies designed to attract, retain
and develop our people that reflect the local geographic and
industry economic climate. These strategies include competitive
terms and conditions, a defined contribution pension scheme,
consideration of family and personal needs, training and career
development coaching, and a wide range of other flexible
benefits designed to reflect the Group’s culture and values. Our
performance-related pay structures include an Annual Bonus
Scheme, which is linked to personal objectives and wider team
and Group objectives. The Annual Bonus Scheme is complemented
by our employee share scheme, which is designed to align employee
incentives with shareholder interests through the award of shares.
Our hiring model is based on creating an agile, highly motivated
and collaborative international teams. Our strength comes from
collaboration between seasoned professionals with deep client
industry experience and some of the brightest technology talent
on the market.
We also “hire for attitude”, placing great importance on our
values, effective team working and customer success.
We operate our own bespoke leadership development programme.
This programme is designed to equip all of our people leaders
with the fundamental tools, techniques and resources to coach
and mentor their teams to deliver a winning performance.
Alongside this we support personal and professional growth
encouraging our people to develop their technical competency as
well as interpersonal skills and those related to our values-based
behaviours. We create space to do this by encouraging our
people to spend 5% of their time on professional development.
Engaging with our people
We listen to our people. We have an “always on” approach to
employee engagement and communications including regular
meetings within individual teams throughout the Group,
regular Group-wide communications and confidential feedback
mechanisms and engagement surveys. Performance appraisals
happen formally at mid and full year, but we encourage ongoing
dialogue and continuous performance management coaching
conversations throughout the year to ensure that our people are
getting support and feedback in order to be successful in their
roles and to continuing growing at Gresham.
Trust is vital in order to support and promote the exceptional
levels of employee engagement we enjoy and helps to ensure that
the working environment balances wellbeing, provides motivating
opportunities for growth and operates with compassion.
Early career programme
Our early career entry programme is one of the ways that we
attract promising new colleagues to the business. Our graduate
and apprenticeship paths within our professional services,
development and IT teams have been running for several years
with minimal attrition. We are expanding this programme in 2021
following its success.
Community
As a company that uses the power of technology to improve the way
organisations operate, we are committed to supporting, developing
and helping to educate the future workforce about this sector.
We are proud to be Business Class members of and advisers to
The Prince’s Responsible Business Network, through our partnership
with Business in the Community (“BITC”). BITC’s vision is to make
the UK the world leader at responsible business, through inspiring,
engaging and challenging businesses to tackle some of global
society’s biggest issues.
Charity
We work with charities to responsibly recycle our old, used IT
equipment. One of these charities is Learning Partnership West,
a charity that works to ensure no child or young person is left
without help and that children and young people are supported
to build their own resilience and capability. It builds on the
strengths, abilities and talents of children and young people
to encourage and inspire future aspiration.
Each quarter, we donate £1 for each support call made to our
customer support centres to three local charities. These three
charities are chosen by ballot by our global teams and often
have a personal connection with employees.
In 2020, instead of a Christmas Party, each of our offices chose
local charities and donated the money that would have been
spent to support those in need due to the pandemic. Different
charities were chosen ranging from those redistributing surplus
food to local community projects, assisting families in need,
helping the homeless and supporting mental health. One such
charity was Digilocal, a Bristol charity helping young people
particularly from disadvantaged groups learn tech and distributing
laptops to families to enable children to access remote learning.
Our core values
We Embrace Difference
We value different backgrounds, experience, expertise
and ways of thinking. We encourage curiosity and
respect every individual, recognising that everyone
has the potential to bring something extraordinary
to the table. We each apply our unique talents with
passion and integrity and we are all committed to
making Gresham an exceptional place to work.
We Create Together
Working together with our colleagues, customers and
partners, we create energy and a dynamic approach
to challenge the norm and find innovative ways to
solve problems. Through open discussion and
feedback, healthy debate and continuous learning,
we combine the virtues of experience and fresh
thinking. We operate at pace, taking the lead where
appropriate, ensuring that we work together to
seamlessly deliver outstanding products and services.
We Champion Success
We are passionate about delivering successful
outcomes for our customers and employees, as well
as our industry and our community. Our nimble
approach means that we can adapt to our customers’
individual ways of working, taking ownership for
delivering the wow factor, delighting customers
and enabling our business and our people to grow
and flourish.
Gresham Technologies plc Annual Financial Report 2020
27
STRATEGIC REPORT Environmental, social and governance continued
Ethical business practices
We are committed to corporate sustainability and to an ethical
and principled approach of doing business.
Human rights
This includes recognising and supporting the protection of human
rights around the world. Gresham is guided by internationally
proclaimed fundamental principles such as those set out in the
United Nations Universal Declaration of Human Rights. Gresham’s
key principles in relation to human rights are guided by the Ten
Principles of the UN Global Compact.
Modern slavery
Modern slavery is a crime and a violation of fundamental human
rights. We have a zero-tolerance approach to modern slavery and
we are committed to acting ethically and with integrity in all our
business dealings and relationships and to implementing and
enforcing effective systems and controls to ensure modern
slavery is not taking place anywhere in our own business or in
any of our supply chains.
We are also committed to ensuring there is transparency in our
own business and in our approach to tackling modern slavery
throughout our supply chains, consistent with our disclosure
obligations under the Modern Slavery Act 2015. We expect the
same high standards from all of our contractors, suppliers and
other business partners and, wherever possible as part of our
contracting processes, we include specific prohibitions against
the use of forced, compulsory or trafficked labour, or anyone
held in slavery or servitude, whether adults or children, and we
expect that our suppliers will hold their own suppliers to the
same high standards.
Anti‑corruption and bribery
The Company is committed to applying the highest standards of
ethical conduct and integrity to its business activities in the UK
and overseas. The Company does not tolerate any form of bribery,
whether direct or indirect, by, or of, its employees, officers,
agents or consultants or any persons or companies acting for
it or on its behalf. The Directors and senior management are
committed to implementing and enforcing effective systems
throughout the Company to prevent, monitor and eliminate
bribery, in accordance with its obligations under the Bribery Act
2010 and equivalent legislation overseas.
Equal opportunity
The Company is an equal opportunity employer; we celebrate
diversity and are dedicated to creating an inclusive environment for
all employees. We are committed to ensuring that our workplaces
are free from unlawful or unfair discrimination in accordance with
applicable legislation and our values. We are determined to ensure
that no applicant or employee receives less favourable treatment
on the grounds of gender, age, disability, religion, belief, sexual
orientation, marital status, or race, or is disadvantaged by
conditions or requirements which cannot be shown to be
justifiable. This includes upholding the following principles:
▪ recruitment and employment decisions are made on the basis
of fair and objective criteria;
▪ person and job specifications are limited to those
requirements which are necessary for the effective
performance of the job;
▪ interviews are conducted on an objective basis; personal or
home commitments will not form the basis of employment
decisions except where necessary and relevant; and
▪ all employees have a right to equality of opportunity. Our
policies and practices aim to promote an environment that is
free from all forms of unlawful or unfair discrimination and
values the diversity of all people. We seek to treat all
applicants and employees fairly and with dignity and respect.
Gender analysis
At 31 December 2020, the Group had the following split of gender
of staff:
Executive Directors
Senior managers
Staff
Non-Executive Directors
Female
Male
Total
—
2
26
28
2
2
6
118
126
2
2
8
144
154
4
28
Gresham Technologies plc Annual Financial Report 2020
Strategic Report For the purposes of global greenhouse gas emissions data for the
year ended 31 December 2020, the following disclosure is made:
Emissions from
Electricity, heat,
steam and cooling
purchased for own
use – tonnes of
CO₂e
Group’s chosen
intensity
measurement
Emissions reported
above normalised
to tonnes of CO₂e
per total
£1,000,000 revenue
UK
Group
31 December
2020
31 December
2019
31 December
2020
31 December
2019
24
35
37
62
2.3
3.1
1.5
3.1
The Group’s total energy consumption for the year ended
31 December 2020 was 158,000 kWh.
Emissions data has been reported for Gresham’s operations in
the UK, Luxembourg and Australia, with locations in Malaysia,
North America and Singapore considered not 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.
Environment
Policy statement
Whilst the nature of our activities is such that the Group does
not have a significant impact on the environment relative to
other industries, we recognise that we have a duty to manage
our business affairs and operations in a sustainable and
responsible manner. This includes minimising the impact of our
activities on the environment and supporting environmental
initiatives relevant to our industry. To achieve this, Gresham’s
environmental strategy consists of the following:
▪ minimising waste;
▪ minimising toxic emissions;
▪ actively promoting recycling in all of its locations;
▪ meeting or exceeding all applicable environmental legislation
that relates to Gresham;
▪ supporting, adopting and/or promoting industry initiatives
designed to address environmental issues specific to
Gresham’s sector;
▪ where practical, seeking to purchase products that uphold
industry-leading environmental standards rather than ones
that do not; and
▪ encouraging the adoption of similar principles by its suppliers.
Climate change
The Group does not consider that there are any risks associated
with climate change impacting the Gresham Group.
Carbon emissions
This section includes Gresham’s mandatory reporting of greenhouse
gas emissions pursuant to the Companies Act 2006 (Strategic
Report and Directors’ Report) Regulations 2013 (the “Regulations”).
Gresham’s reporting year is the same as its fiscal year, being the
year ended 31 December 2020. This greenhouse gas reporting year
has been established to align with our financial reporting year.
Gresham reports emissions data using an operational control
approach to define organisational boundary, which meets the
definitional requirements of the Regulations in respect of those
emissions for which it is responsible. Gresham has reported on
all material emission sources which it deems itself to be responsible
for. These sources align with Gresham’s operational control and
financial control boundaries. Gresham does not have responsibility
for any emission sources that are beyond the boundary of
Gresham’s operational control. For example, business travel other
than by car (including, for example, commercial flights or railways)
and fully managed offices are not within Gresham’s operational
control and, therefore, are not considered to be its responsibility.
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.
Gresham Technologies plc Annual Financial Report 2020
29
STRATEGIC REPORT Section 172(1) statement
Section 172(1) of the Companies Act 2006 provides that a
director of a company must act in the way he considers,
in good faith, would be most likely to promote the success
of the company for the benefit of its members as a whole,
and in doing so have regard (amongst other matters) to:
a) the likely consequences of any decision in the long term;
b) the interests of the company’s employees;
c) the need to foster the company’s business relationships
with suppliers, customers and others;
d) the impact of the company’s operations on the community
and the environment;
e) the desirability of the company maintaining a reputation
for high standards of business conduct; and
f) the need to act fairly as between members of the company.
This section describes how the Directors have had regard to the
matters set out in section 172(1)(a)–(f) of the Companies Act 2016
and forms the Directors’ statement required under section
414CZA of that Act. In making this statement, the Directors
have focused on matters of strategic importance to the
Group, having regard to the size and complexity of its business.
Stakeholder group
Investors
Statement of Corporate Governance
Page 36
Workforce
Environmental, social and governance
Page 26
Share schemes
Page 93
Customers
CEO's statement
Page 8
Innovation
Page 13
Suppliers
To ensure that we operate our business
We nominate senior business contacts to
We did not make any strategic decisions
effectively and without disruption.
manage our key supplier relationships. They
in the year affecting suppliers.
30
Gresham Technologies plc Annual Financial Report 2020
Why engagement is important
How management and/or Directors engage
Strategic decisions in the year
To communicate our long-term strategic
Use of the AGM, analyst presentations,
We acquired Inforalgo in July 2020 which
objectives effectively and promote
investor presentations, a bi-annual capital
enhanced the Company’s value proposition
long-term holdings.
markets day.
and provides further growth opportunities.
To secure investor support for our
Individual investor meetings with the CEO,
We adopted a new performance share
strategic objectives and ensure access to
CFO, Chairman and/or committee chairs.
plan, designed to align interests of key
capital to deliver on our execution plans.
employees with shareholders. We
consulted with investors in advance and
made adjustments based on feedback.
To deliver our long-term strategic objectives.
Use of transparent, anonymous workforce
We reviewed our corporate values and
To maintain competitive advantage
and deliver market-leading solutions
engagement surveys, with commitments
sought extensive input from our people
to address areas of concern.
to create new corporate values.
to our customers.
Ad hoc initiatives such as mental health
We managed a transition from office-based
To promote our culture, purpose and values,
foster a healthy working environment for our
social events.
workforce, support their wellbeing and be a
Use of performance reviews, objective
provided our people with the necessary
equipment and systems to facilitate this.
awareness days, charity fundraisers and
working to home-based working and
responsible business.
setting and formal policies and procedures.
We adopted an unlimited holiday leave
To maintain low turnover and high
Board meetings held at each UK office
productivity rates.
policy to help our people cope with
COVID-19 related challenges.
and regular management visits to overseas
offices, although this was not possible
due to COVID-19 related travel restrictions.
To ensure we meet or exceed our
Quarterly customer success meetings,
We invested heavily in developing new
customers’ requirements and maintain
involving management representatives.
features and capabilities for cash and
competitive advantages.
Executive sponsorship programme for
To build a highly referenceable customer
key accounts.
stock reconciliations, directly aligned to
customer requirements.
base with low attrition rates.
Chairing industry roundtables and
To identify and assess new market
customer forums to communicate and
opportunities and collaborate with
consult on product development priorities
customers on high-value projects.
and new features to address emerging
To promote brand loyalty and identify sales
market requirements.
opportunities for other Gresham solutions.
Customer satisfaction surveys on
support incidents.
To act fairly and responsibly with respect
to our suppliers.
to suppliers.
To adhere to our contractual obligations
are supported by operations staff as required
to manage supplier risks and requirements.
We participate in Business in the
Community (“BITC”) which promotes
responsible business.
Strategic Report
Stakeholder group
Investors
Statement of Corporate Governance
Page 36
Workforce
Environmental, social and governance
Page 26
Share schemes
Page 93
Customers
CEO's statement
Page 8
Innovation
Page 13
Suppliers
Why engagement is important
How management and/or Directors engage
Strategic decisions in the year
To communicate our long-term strategic
objectives effectively and promote
long-term holdings.
Use of the AGM, analyst presentations,
investor presentations, a bi-annual capital
markets day.
We acquired Inforalgo in July 2020 which
enhanced the Company’s value proposition
and provides further growth opportunities.
To secure investor support for our
strategic objectives and ensure access to
capital to deliver on our execution plans.
Individual investor meetings with the CEO,
CFO, Chairman and/or committee chairs.
We adopted a new performance share
plan, designed to align interests of key
employees with shareholders. We
consulted with investors in advance and
made adjustments based on feedback.
To deliver our long-term strategic objectives.
To maintain competitive advantage
and deliver market-leading solutions
to our customers.
To promote our culture, purpose and values,
foster a healthy working environment for our
workforce, support their wellbeing and be a
responsible business.
To maintain low turnover and high
productivity rates.
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.
To ensure that we operate our business
effectively and without disruption.
To act fairly and responsibly with respect
to our suppliers.
To adhere to our contractual obligations
to suppliers.
Use of transparent, anonymous workforce
engagement surveys, with commitments
to address areas of concern.
We reviewed our corporate values and
sought extensive input from our people
to create new corporate values.
Ad hoc initiatives such as mental health
awareness days, charity fundraisers and
social events.
Use of performance reviews, objective
setting and formal policies and procedures.
Board meetings held at each UK office
and regular management visits to overseas
offices, although this was not possible
due to COVID-19 related travel restrictions.
Quarterly customer success meetings,
involving management representatives.
Executive sponsorship programme for
key accounts.
Chairing industry roundtables and
customer forums to communicate and
consult on product development priorities
and new features to address emerging
market requirements.
Customer satisfaction surveys on
support incidents.
We nominate senior business contacts to
manage our key supplier relationships. They
are supported by operations staff as required
to manage supplier risks and requirements.
We participate in Business in the
Community (“BITC”) which promotes
responsible business.
We managed a transition from office-based
working to home-based working and
provided our people with the necessary
equipment and systems to facilitate this.
We adopted an unlimited holiday leave
policy to help our people cope with
COVID-19 related challenges.
We invested heavily in developing new
features and capabilities for cash and
stock reconciliations, directly aligned to
customer requirements.
We did not make any strategic decisions
in the year affecting suppliers.
The Strategic Report was approved by the Board of Directors on 8 March 2021.
On behalf of the Board
Ian Manocha
Chief Executive
8 March 2021
Tom Mullan
Chief Financial Officer
8 March 2021
Gresham Technologies plc Annual Financial Report 2020
31
STRATEGIC REPORT
Corporate
governance
Contents
33 Chairman’s introduction to governance
34 Board of Directors
36 Statement of corporate governance
39 Audit committee report
42 Nomination committee report
43 Annual statement from the chair of the
remuneration committee
44 Remuneration report
52 Directors’ report
55 Statement of Directors’ responsibilities
32
Gresham Technologies plc Annual Financial Report 2020
Corporate Governance Chairman’s introduction to governance
The Board is committed to upholding high standards of corporate
governance throughout the Group. As part of that, the Board
acknowledges its role in setting the culture, values and ethics of
the Group, and its collective responsibility in developing a healthy
corporate culture and delivering long-term success to the Group,
as well as leading and overseeing the Group’s wider environmental,
social and governance (“ESG”) agenda.
The Board’s aim is to operate as effectively as possible, in line
with the governing principles of the UK Corporate Governance
Code. The Board has received training in the 2018 UK Corporate
Governance Code and a description of the Group’s application of
the principles set out therein for financial year 2020 is set out in
the Statement of Corporate Governance (see page 36).
Board discussions are conducted openly and transparently,
which creates an environment for sustainable and robust debate.
In the year, the Board has constructively and proactively challenged
management on Group strategies, proposals, operating performance
and key decisions, as part of its ongoing work to assess and
safeguard the position and prospects of the Group.
Key risks and uncertainties affecting the business are regularly
assessed and updated. The Board has completed a full, specific
review of the Group’s key risks and uncertainties (see page 20),
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, particularly with regard to
COVID-19 and Brexit. The Board challenges management to
ensure appropriate risk mitigation measures are in place.
There have been several changes to the Board membership,
as noted in the Chairman’s Statement on page 6. All changes
were overseen and recommended by the nomination committee.
I am pleased with the current balance of skills, experience
and independence on the Board and no further changes are
currently envisaged.
As regards remuneration, a new, discretionary performance
share plan was adopted in December 2020, as a successor
to the discretionary Share Option Plan 2010, which expired on
29 December 2020. This enables the Company to retain, recruit
and incentivise key employees by directly aligning their interests
with those of shareholders. Details are set out in the
Remuneration Report starting page 44.
Finally, the Board continues to engage with shareholders and
welcomes ongoing dialogue throughout the year, although the
formal shareholder events such as the Annual General Meeting
have been severely restricted due to COVID-19. We will continue
to engage with shareholders as effectively as possible, taking
account of the ongoing COVID-19 restrictions, and our current
intention is to enable shareholder participation at the 2021 AGM
via electronic means through the Investor Meet Company platform.
Peter Simmonds
Non-Executive Chairman
8 March 2021
Gresham Technologies plc Annual Financial Report 2020
33
Board tenure
▪ 17% 5+ years
▪ 33% 1–5 years
Board composition
I ▪ 50% <1 year
5050+
I ▪ 33% Executive
4040+
I ▪ 33% Female
2020+
Board gender diversity
▪ 67% Male
▪ 67% Non-Executive
CORPORATE GOVERNANCE+
33
33
+
+
17
17
+
I
+
+
60
60
+
I
+
+
80
80
+
I
+
Board of Directors
Peter Simmonds
Non-Executive Chairman
Ian Manocha
Chief Executive Officer
Tom Mullan
Chief Financial Officer
Appointed
Ian was appointed to the Board in
June 2015.
Experience
Ian has extensive experience in the
business technology sector. He joined
Gresham from SAS where he worked for
nearly 20 years, most recently as vice
president of the EMEA and AP business
units. Ian has worked extensively with
many of the world’s leading financial
institutions and has been successful
in growing companies to significant
scale through securing and delivering
high-value enterprise software deals.
Appointed
Tom joined Gresham on 1 March 2018
and was appointed to the Board on
13 March 2018.
Experience
Tom is a Chartered Accountant having
trained and qualified at Ernst & Young.
Prior to joining Gresham, Tom was most
recently chief financial officer at Fadata,
a PE backed software business, and
before that was divisional finance
director for Guidewire in EMEA.
Appointed
Peter was appointed to the Board as a
Non-Executive Director in August 2020
and became Non-Executive Chairman
in September 2020.
Experience
Peter was previously CEO of dotDigital
Group plc for eight years until his
retirement in 2015; he then remained
on the board as a non-executive
director until 2018. Peter has been
non-executive chairman of D4T4
Solutions plc and Cloudcall plc since
2015. Peter has more than 35 years of
senior management and board-level
experience, principally in software,
banking, insurance, finance and
outsourcing. Peter has also been
a volunteer board member of the
Quoted Companies Alliance since 2016.
Committee membership
RN
34
Gresham Technologies plc Annual Financial Report 2020
Corporate Governance Committee membership
A Audit committee
N Nomination committee
R Remuneration committee
Committee chair
Jenny Knott
Non-Executive Director
Appointed
Jenny was appointed to the Board
in October 2020.
Experience
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.
Jenny is a non-executive director for
Simply Health and the British Business
Bank, and a trustee for Ovarian Cancer
Action. As well as a being a fellow for
Be-The-Business, Jenny is an adviser
to many leaders, Fintechs and other
young businesses.
Committee membership
NA
R
Andy Balchin
Senior Independent
Non-Executive Director
Appointed
Andy was appointed to the Board as
a Non-Executive Director in May 2017
and became Senior Independent
Non-Executive Director in October 2020.
Experience
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.
Committee membership
A
N R
Ruth Wandhöfer
Non-Executive Director
Appointed
Ruth was appointed to the Board
in October 2020.
Experience
Ruth is a Global Fintech 50 Influencer
and is currently chair of the Payment
Systems Regulator and a partner at
Gauss Ventures. Her prior roles have
included spearheading regulatory and
market strategy for treasury and
trade solutions at Citi, advising the
European Banking Federation on
policy making for securities services
and payments and serving as a NED
of the London Stock Exchange.
Committee membership
NA
Gresham Technologies plc Annual Financial Report 2020
35
CORPORATE GOVERNANCE Statement of corporate governance
This statement explains how the Company has applied the main and supporting principles of corporate governance and describes the
Company’s compliance with the provisions of the UK Corporate Governance Code, as published in July 2018 by the Financial Reporting
Council and available at www.frc.org.uk. All references to the Company are in respect of the statutory entity Gresham Technologies plc,
which is the ultimate parent undertaking of the Gresham Group of companies.
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 with the exception that the Company did not fully comply
with Provision 10 (Independence of non-executive directors),
Provision 19 (Chair not to remain in post longer than nine years)
and Provision 34 (Remuneration for non-executive directors should
not include share options) of the Code because Mr K Archer (who
ceased to be a Director on 30 September 2020) had served on
the Board for more than nine years and held share options under
the Group’s Share Option Plan 2010. With regard to Provision 15
(Significant commitments), the nomination committee was notified
of the external commitments of the new Board appointments prior
to their appointment and took account of these other demands on
their time before deciding upon their suitability. Refer to the
Nomination Committee Report for further details.
Board leadership and company purpose
The Board recognises its role in promoting the long-term
sustainable success of the Company, generating value for
shareholders 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 stakeholders and
the matters set out in section 172 of the Companies Act 2006.
Details of these matters are set out in the Strategic Report.
The Group has developed a Clareti-led strategy designed to drive
profitable growth and create long-term shareholder value. The
Board considers and addresses the opportunities and risks to the
success of the business through a combination of monthly reports
from management, operational, strategic and risk reviews, and
key performance indicators. The Group’s established business
model and governance structures ensure that allocation of resources
and investment decisions directly support the strategic objectives.
The Board is committed to maintaining a healthy corporate culture
and recognises 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 (see People and Culture, page 26).
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 year-end results and at the half year.
The Board is kept informed of the views of shareholders at Board
meetings following investor meetings through a report from the
Chief Executive, together with formal feedback on shareholders’
views gathered and supplied by the Company’s advisers. The
views of private and smaller shareholders, typically arising from
the AGM or from direct contact with the Company, are also
communicated to the Board on a regular basis.
Mr A Balchin, the Senior Independent Non-Executive Director,
and Mr P Simmonds, the Non-Executive Chairman, 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 Board normally uses the AGM to communicate with private
and institutional investors and welcomes their participation.
However, due to COVID-19 related restrictions, shareholders were
requested not to attend the 2020 AGM. Subject to COVID-19
restrictions, the Chairman will aim to ensure that all members
of the Board will be available at the forthcoming AGM, which is
currently intended to be operated as a hybrid meeting, allowing
Directors and shareholders to participate via electronic means
using the Investor Meet Company platform.
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 2020.
36
Gresham Technologies plc Annual Financial Report 2020
Corporate Governance Division of responsibilities
Board membership, roles and responsibilities
The Board is currently comprised of the Non-Executive Chairman,
two Executive Directors and three Non-Executive Directors,
details of which are set out pages 34 and 35. All Non-Executive
Directors are considered to be independent.
The roles of Chairman and Chief Executive are distinct, set out in
writing and agreed by the Board. The Chairman is responsible for
the effectiveness of the Board and ensuring communication with
shareholders, and the Chief Executive is accountable for the
management of the Group.
Non-Executive Directors constructively challenge and assist in
the development of strategy. They scrutinise the performance of
management in meeting agreed goals and objectives and monitor
the reporting of performance.
The Senior Independent Non-Executive Director, Mr A Balchin, is
available to shareholders if they have concerns which contact
through the normal channels of Chairman or Chief Executive has
failed to resolve or for which such contact is inappropriate.
The Company Secretary is Mr J Cathie, who was appointed to the
role on 21 March 2014. Mr J Cathie is not a Director of the Company.
The appointment and removal of the Company Secretary is a
matter for the Board as a whole.
Operation of the Board
The Board is responsible to shareholders for the proper
management of the Group.
The Board normally meets once a month and has a formal
schedule of matters specifically reserved to it. Other matters are
delegated to the Executive Directors, supported by policies for
reporting to the Board.
The Company Secretary is responsible to the Board for ensuring
that Board procedures are followed, and that applicable rules
and regulations are complied with and for advising the Board,
through the Chairman, on corporate governance matters. The
Company maintains appropriate insurance cover in respect of
legal action against the Company’s Directors and the Company
Secretary, but no cover exists in the event that the Director is
found to have acted fraudulently or dishonestly.
The Non-Executive Chairman and the Non-Executive Directors
are able to meet without Executives present prior to each Board
meeting. The agenda and relevant briefing papers for each Board
meeting are distributed by the Company Secretary, usually
several days in advance of each Board meeting.
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 Chairman
for circulation to the Board if there are any such concerns.
The Board has formed certain committees, namely an audit
committee, a remuneration committee and a nomination
committee, 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 in the individual committee reports
commencing on page 39.
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
K Archer (resigned 30 September 2020)
I Joss (resigned 31 October 2020)
A Balchin
I Manocha
T Mullan
P Simmonds (appointed 1 August 2020)
J Knott (appointed 12 October 2020)
R Wandhöfer (appointed 12 October 2020)
Board
9/9
8/10
12/12
12/12
12/12
5/5
3/3
2/3
Audit
Remuneration
Nomination
—
2/3
3/3
—
—
—
1/1
1/1
1/1
1/1
2/2
—
—
1/1
1/1
—
3/3
3/3
3/3
—
—
1/1
—
—
Composition, succession and evaluation
Nomination committee
A report from the chair of the nomination committee is set out
on page 42.
Induction and training
New Directors receive a thorough and tailored induction on their
appointment to the Board covering the activities of the Group
and its key business and financial risks, the terms of reference
of the Board and its committees and the latest financial
information about the Group.
The Chairman ensures that Directors update their skills,
knowledge and familiarity with the Group required to fulfil their
roles on the Board and committees. Ongoing training is provided
as necessary and includes updates from the Company Secretary
on relevant legislative or regulatory changes. Directors may
consult with the Company Secretary at any time on matters
related to their role on the Board. All Directors have access to
independent professional advice at the Company’s expense
where they judge it necessary to discharge their duties.
Evaluation of the Board’s performance
The following reviews are normally undertaken annually:
▪ a formal review by the Board encompassing the performance
of the Board as a whole, its committees and each Director;
▪ a formal review by the Chairman of the performance of
Non-Executive Directors; and
▪ a formal review by the Senior Independent Non-Executive
Director of the Chairman.
In light of the changes to the Board membership during 2020,
no formal reviews were carried out.
Gresham Technologies plc Annual Financial Report 2020
37
CORPORATE GOVERNANCE Statement of corporate governance continued
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 page 20 on the Group’s business
model (including, without limitation, the impact of COVID-19,
which is also discussed on page 9), future performance, solvency
or liquidity, taking account of severe but reasonable scenarios
and the effectiveness of any mitigating actions, and have
performed stress test analyses based on likely outcomes.
Control environment
The Group operates within a control framework developed and
strengthened over a number of years and communicated as
appropriate by a series of written procedures. These lay down
accounting policies and financial control procedures, in addition
to controls of a more operational nature. The key procedures that
the Directors have established with a view to providing internal
control are as follows:
▪ the establishment of the organisational structure and the
delegated responsibilities of operational management;
▪ the definition of authorisation limits, including matters
reserved for the Board;
▪ regular site visits by the Executive Directors, with the results
reported to Board meetings;
▪ the establishment of detailed operational plans and financial
budgets for each financial year;
▪ maintenance of a risk register which is reviewed and updated
at every Board meeting;
▪ review of regular, detailed monthly management reporting
provided for every Board meeting which encompasses both a
review of operational activities and entries arising on consolidation;
▪ reporting and monitoring performance against budgets and
rolling forecasts;
▪ the security of physical property and computer information; and
▪ detailed due diligence on all acquisitions.
Remuneration
A report from the chair of the remuneration committee is set out
on page 44.
Composition, succession and evaluation
continued
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 set out on page 39.
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 55.
Management and specialists within the Group’s finance department
are responsible for ensuring the appropriate maintenance of
financial records and processes that ensure all financial information
is relevant, reliable, in accordance with the applicable laws and
regulations, and distributed both internally and externally in a
timely manner. A review of the consolidation and financial
statements is completed by management to ensure that the
financial position and results of the Group are appropriately
reported. All financial information published by the Group is
subject to the approval of the audit committee.
Principal risks
A report on the principal risks and uncertainties affecting the
Company is set out on page 20.
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 on
page 52.
Viability statement
The Directors confirm that they have assessed the prospects of
the Group over a three-year period commencing 1 January 2021
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 projections
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 for Clareti revenues,
with Clareti contracts typically being signed for three-year
minimum contract terms, balanced against the likely attrition
rate of other, non-Clareti, revenues.
38
Gresham Technologies plc Annual Financial Report 2020
Corporate Governance Audit committee report
Audit committee members and attendance
Member
Meetings
Andy Balchin (committee chair)
Jenny Knott
Ruth Wandhöfer
Imogen Joss (resigned 31 Oct 2020)
3/3
1/1
1/1
2/3
Dear shareholder,
As chair of the audit committee, I am pleased to present the
committee’s report for the year ended 31 December 2020.
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 audit committee membership saw some changes this year,
with Ms J Knott and Ms R Wandhöfer joining as committee
members and Ms I Joss stepping down during October 2020.
All committee members are independent Non-Executive
Directors, whose biographical details are available on page 34.
The Board considers that the committee has recent and relevant
financial experience, including competence in accounting, relevant
to the sector in which we operate, as well as operational skills.
I am satisfied that the committee has appropriately discharged
its duties in the year in accordance with its terms of reference,
which are reviewed annually and are available at
www.greshamtech.com/investors.
In the performance of its duties, the committee held three meetings
in the year. 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 and the
Chief Financial Officer attend our meetings by invitation, and other
senior managers (including the Director of Financial Operations
and Control) are invited to attend to provide financial, technical
or business information as necessary. In addition, our meetings
relevant to audit are attended by the lead audit partner from the
external auditor 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 being
present. On a more frequent basis, I meet with the Chief Financial
Officer and other senior management. This ensures any issues or
concerns can be raised at an early stage and allows sufficient
time to be devoted to them at subsequent meetings. There is an
open and constructive communication between the committee,
management and external auditor.
This year, the committee necessarily paid special attention to the
potential impact and risks to the Group arising from the COVID-19
pandemic and Brexit. These matters are discussed in the Strategic
Report on pages 9 and 20. Whilst Brexit-related risks appear to
have reduced, the committee intends to continue monitoring
the risks associated with the COVID-19 situation closely at least
throughout 2021.
As mandated by EU legislation requiring the tendering of a public
interest entity’s audit at least every ten years, the committee
conducted such a tender process during the year. We invited six
firms to bid, including our current auditor, BDO LLP, another top
mid-tier firm and each of the big four. All of the invited firms,
except our current auditor, BDO LLP, withdrew from the process
prior to submitting full proposal documents citing resourcing
challenges as the key factor, mainly brought about by COVID-19
and lockdown. On 26 May 2020, the audit committee proposed,
and the Board of Directors resolved to approve, the reappointment
of BDO LLP, which has, for the last ten years, provided a high-quality
audit and which had in recent years rotated the lead audit
engagement partner, thereby providing continued objectivity
and independence. The Board and the audit committee did
not consider it necessary or appropriate to extend the invite to
tender outside of the original list of invitees as no other UK firm
is considered to have the requisite experience of auditing global
enterprise technology providers with a full listing on the London
Stock Exchange similar to the Company. The Board stated that
it was satisfied with the proposal received from BDO LLP and
resolved to reappoint BDO LLP. Pursuant to section 490A of the
Companies Act 2006, on 1 June 2020 we wrote to Her Majesty’s
Principal Secretary of State for Business, Energy and Industrial
Strategy stating that the audit committee was unable to present
at least two firms to the Board with a justified preference for one
of them in accordance with the requirements of section 489A of
the Companies Act 2006. This letter was acknowledged and
accepted on 24 September 2020.
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, and any formal announcements relating to the
Group’s financial performance, and reviewing significant
financial issues and judgements contained in them;
▪ reviewing and assessing the process which management has
put in place to support the Board when giving its assurance
that the Annual Financial Report 2020, taken as a whole, is fair,
balanced and understandable and provides the information
necessary for shareholders to assess the Company’s position
and performance, business model and strategy;
Gresham Technologies plc Annual Financial Report 2020
39
CORPORATE GOVERNANCE Audit committee report continued
Responsibilities continued
▪ reviewing the Group’s internal financial controls and reviewing
the Group’s internal control and risk management systems;
▪ reviewing the Group’s speak-up (whistle-blowing) 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 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 engagement of the
external auditor to supply non-audit services, taking into
account relevant ethical guidance regarding the provision
of non-audit services by the external audit firm; and
▪ reporting to the Board, identifying any matters for which it
considers that action or improvement is needed and making
recommendations as to the steps to be taken.
Significant judgements in relation to financial statements
Set out below are what the committee considers to be the most significant accounting areas which required the exercise of judgement
or a high degree of estimation during the year, together with details of how these were addressed. These are all considered to be
recurring issues.
Significant issue and explanation
Work undertaken by the committee in forming an opinion
Capitalised development costs
Development costs are accounted for in accordance with IAS 38
“Intangible Assets”, and costs that meet the qualifying criteria are
capitalised and systematically amortised over the useful
economic life of the intangible asset. Determining whether
development costs qualify for capitalisation as intangible assets
requires judgement, including estimates of the technical and
commercial viability of the asset created and its applicable useful
economic life. These estimates are continually reviewed and
updated by management based on past experience and reviews
of competitor products available in the market.
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. Whilst in most cases
performance obligations clearly follow the commercial and
contractual arrangement agreed with the customer, in some
cases the revenue streams are combined within an overall
commercial arrangement. Such bundling requires judgement to
assess performance obligations associated with each revenue
stream and further judgement as to when and how such
performance obligations have been discharged in order to
recognise the associated revenue. The estimation of the stage
of completion, along with the unbundling of multi-element
solution sales, represents a risk of incorrect revenue recognition.
Impairment reviews
The Group is required to perform impairment reviews of goodwill
annually at the reporting date and, in addition, performs
impairment reviews of capitalised development costs to identify
any intangible assets that have a carrying value that is in excess
of their recoverable value. Determining the recoverability of an
intangible asset requires judgement in both the methodology
applied and the key variables within that methodology. Where it is
determined an intangible asset is impaired, its carrying value will
be reduced to its recoverable value with the difference recorded
as an impairment charge in the income statement.
The committee has reviewed reports from management
identifying the development costs capitalised, the technical and
commercial feasibility of the product being produced and
whether further costs continue to fulfil the required IAS 38
criteria. The committee’s review encompasses direct discussion
with executive and operational management, in addition to
reviewing monthly formal reporting to the Board on development
and associated sales and implementation activity. The treatment
of development costs is an area of focus for the external auditor,
which reported its findings to us. We concluded that
management’s key assumptions, judgements, estimates and
disclosures were reasonable and appropriate.
The committee has reviewed management’s descriptions and
status reports on material new deals and on project work-in-
progress through the year, both through direct discussion and
formal month-end reporting to the Board. The committee has
furthermore considered management’s assessments made on
percentage of completion of material work-in-progress, and other
judgements such as bundling or unbundling of revenue streams,
and the resulting impact on revenue and profit recognition.
Revenue recognition is an area of focus for the external auditor,
which reported its findings to us. We considered whether the
accounting treatment for revenue and profit recognition was in
accordance with agreed methodology, the Group’s accounting
policies and IFRS 15 “Revenue from Contracts with Customers”
and concurred with management’s opinion that it was.
The committee has considered management’s assessments
of value in use of cash-generating units of intangible assets
(principally the goodwill and capitalised development costs)
at the reporting date. This included specifically considering and
subsequently approving business plans prepared by management
supporting the future performance expectations used in the
calculation of the value in use. Impairment reviews were also
an area of focus for the external auditor, which reported its
findings to us. We considered whether the accounting treatment
performing impairment reviews was in accordance with agreed
methodology, the Group’s accounting policies and IAS 36
“Impairment of Assets”. We concluded that management’s key
assumptions were reasonable.
40
Gresham Technologies plc Annual Financial Report 2020
Corporate Governance Significant issue and explanation
Work undertaken by the committee in forming an opinion
Acquisition accounting and contingent consideration
In determining the fair value of intangible assets arising on
acquisition, management is required to make judgements
regarding the timing and amount of future cash flows applicable
to the businesses being acquired, discounted using an appropriate
discount rate. Such judgements are based on current budgets
and forecasts, extrapolated for an appropriate period taking into
account growth rates and expected changes to selling prices and
operating costs. Management estimates the appropriate discount
rate using pre-tax rates that reflect current market assessments
of the time value of money and the risks specific to the
businesses being acquired.
The committee has considered management’s assessments of
the fair value of the consideration and values attributed to the
assets and liabilities acquired on acquisition as at the reporting
date. This included specifically considering and subsequently
reviewing and approving the sale and purchase agreement,
assessing the estimate of contingent consideration against
business plans prepared by management supporting the future
performance expectations. Acquisition accounting, contingent
consideration and fair value reviews were also an area of focus
for the external auditor, which reported its findings to us. The
committee has concluded that the fair values attributed to both
the acquisition and contingent consideration are in line with IFRS 3.
Contingent consideration relating to acquisitions is included
based on management’s estimates of the most likely outcome.
Those judgements include the forecasting of a number of
different outcomes against the performance targets and
estimating a probability and risk of each outcome before arriving
at a risk weighted value of contingent consideration.
Risk management and internal control systems
The Board is responsible for maintaining a sound risk management
and internal control system to safeguard shareholders’ investment
and the Company’s assets. The Directors acknowledge their ultimate
responsibility for ensuring that the Group has in place systems of
controls, financial and otherwise, and for managing risk, that are
appropriate to the business environment in which it operates and
the risks to which it is exposed and for monitoring those systems.
The Board and committee have reviewed the effectiveness of the
Group’s risk management and internal control systems during the
year. This review covered all material controls, including financial,
operational and compliance controls, and took into account the
risks and potential impact arising from COVID-19 and Brexit.
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 continues to discuss with management further enhancements
in financial and other controls commensurate with the growth of
the Group. In addition, steps are continuing to be taken to further
embed internal control and risk management processes into the
operations of the business and to deal with areas of improvement
which come to management’s and the Board’s attention.
An embedded ongoing process for identifying, evaluating and
managing the principal risks faced by the Group has been in place
throughout the year and is regularly reviewed by the Board. It remains
in place up to the date of the approval of the financial statements.
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 the external auditor, the
committee discussed and approved the scope of and the fees
for the external audit plan and reviewed the external auditor’s
approach to the external audit, its assessment of the significant
risks in the Group’s financial statements and materiality levels,
and its associated work. In addition, the committee considered
the commercial experience and expertise of the auditor,
particularly in the Group’s industry sector; the fulfilment of the
agreed audit plan and any variations from this plan; and the
robustness of the external auditor in its handling of key
accounting and audit judgements.
In relation to independence, the committee reviews and controls
the manner in which non-audit services are awarded to the
external auditor on at least an annual basis. All significant
non-audit work, and any work of a non-compliance consultancy
nature, commissioned from the external auditor requires audit
committee approval. In the year, there were no non-audit fees
paid to the external auditor, compared to 20% of total fees paid
to the external auditor in the prior year.
The committee is satisfied with the effectiveness and
independence of the external auditor.
Speak-up (whistle-blowing) 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.
Andy Balchin
Chair of the audit committee
8 March 2021
Internal audit function
During the year, the committee considered the need for a
separate internal audit function and its impact on the external
audit and concluded that, based on the size of the Group, a
separate internal audit function is not necessary at this stage of
the Group’s maturity. The need for an internal audit function is
reviewed at least annually.
Gresham Technologies plc Annual Financial Report 2020
41
CORPORATE GOVERNANCE The nomination committee then continued to identify potential
new Non-Executive Directors, taking the composition, skills and
experience of the Board into account, to replace Ms I Joss, who
had also indicated an intention to step down after four years
in post. This resulted in the appointment of Ms J Knott and
Ms R Wandhöfer to the Board in October 2020, with Mr A Balchin
taking on the role of Senior Independent Non-Executive Director.
The Board’s policy is to ensure that all appointments are merit
based and based on objective criteria, giving all due regard to
equality of opportunity, and to promote inclusion and diversity.
The Board notes that achieving diversity in the technology sector
is challenging, having regard to the available pool of individuals
with the right skills, experience and talent. 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 it acknowledges the role of the Board in
promoting diversity, including gender diversity, throughout the
Group. Currently there are two female members of the Board,
representing 33% of Board membership.
In relation to succession planning, the nomination 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 within the Group and on the Board. As regards
Non-Executive Directors, the committee considers, amongst
other factors, their other significant outside commitments prior
to making recommendations, which is designed to ensure that
they have sufficient time to meet what is expected of them.
The committee keeps any changes to these commitments under
review. The committee has not approved any external appointment
where such appointment is considered to be significant.
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 each
Director in the relatively short time that we have operated
together as a Board, it is apparent to me that each Director
brings individual and specific expertise to the Board and makes
a valuable contribution to the Company’s long-term success.
I have no hesitation in recommending them to shareholders.
I am satisfied that the committee has appropriately discharged
its duties in the year in accordance with its terms of reference.
Terms of reference are reviewed annually and are available at
www.greshamtech.com/investors.
Peter Simmonds
Chair of the nomination committee
8 March 2021
Nomination committee report
Nomination committee members
and attendance
Member
Peter Simmonds (committee chair)
Andy Balchin
Jenny Knott
Ruth Wandhöfer
Imogen Joss (resigned 31 Oct 2020)
Ken Archer (resigned 30 Sept 2020)
Meetings
1/1
3/3
n/a
n/a
3/3
3/3
Dear shareholder,
I am pleased to present the report of the nomination committee
for the year ended 31 December 2020.
As Chairman of the Board, I also chair the nomination committee,
having taken over from my predecessor Ken Archer in September
2020. All of the other Non-Executive Directors are also members
of the committee.
The nomination committee’s key activity in the year was to identify
and appoint a new Chairman to take over from Mr K Archer, who
had indicated his intention to step down from the Board after
almost ten years in the role. This involved a comprehensive
process using an external search consultancy (The DirectorBank
Group Ltd), overseen by Ms I Joss who, at that time, was the Senior
Independent Non-Executive Director. This process resulted in my
appointment. In reaching its decision on my appointment, the
committee was notified of all my existing external appointments
(specifically, in relation to my two existing non-executive chairman
roles at D4T4 Solutions plc and Cloudcall plc) and the time
commitments involved. These matters were duly considered
by the committee at the time and, considering that I have no other
business interests with demands on my time, it was determined
that they would not have a material impact on my ability to fully
discharge my duties to Gresham.
42
Gresham Technologies plc Annual Financial Report 2020
Corporate Governance Annual statement from the chair of the
remuneration committee
The committee took the following key decisions in relation to the
year reported:
▪ assessed that Chief Executive and Chief Financial Officer basic
pay should increase by 3%;
▪ determined the performance measures and targets for variable
pay awards under the Annual Bonus Scheme in respect of 2020;
▪ determined the performance measures and targets for
calculation of matching awards under the LTIP in respect of the
three financial years 2020–2022;
▪ assessed the performance of Executive Directors for 2020
against the determined targets under the Annual Bonus Scheme.
In doing so, the committee has carefully considered the impact
of the COVID-19 pandemic on the Company and taken certain
factors into account in making final determinations, including
the exercise of discretion, to ensure that final awards remain
fair and appropriate. Details of performance-related pay
awards in respect of 2020 and how they were calculated
are set out in the following pages; and
▪ introduced a new ten-year Performance Share Plan (“PSP”) in
December 2020 to replace the expiring 2010 discretionary
Share Option Plan 2010. This PSP will run in conjunction with
the LTIP. It is intended to be used on a discretionary basis to
retain, recruit and incentivise key employees, and is anticipated
to be first used during the course of 2021. Further details
of the PSP can be found in the Company’s circular dated
11 December 2020. Alongside this, a new remuneration policy
was proposed and adopted by shareholders in general meeting
on 30 December 2020.
As regards 2021, the committee has assessed that Chief Executive
and Chief Financial Officer basic pay should increase by 1.25%.
In addition, the committee has determined performance measures
and targets for variable pay awards under the Annual Bonus
Scheme for 2021 and under the LTIP in respect of the three
financial years 2021 – 2023, details of which will be set out in
future reports as appropriate.
We remain committed to ensuring that executive reward
incentivises positive outcomes for shareholders by reflecting
strong linkage with strategy and a fair, open and collaborative
corporate culture.
I am satisfied that the committee has appropriately discharged
its duties in the year in accordance with its terms of reference.
Terms of reference are reviewed annually and are available at
www.greshamtech.com/investors.
I encourage you to read the Directors’ Remuneration Report
on the following pages.
Jenny Knott
Chair of the remuneration committee
8 March 2021
Remuneration committee members
and attendance
Member
Jenny Knott (committee chair)
Andy Balchin
Peter Simmonds
Imogen Joss (resigned 31 Oct 2020)
Ken Archer (resigned 30 Sept 2020)
Meetings
1/1
2/2
1/1
1/1
1/1
Dear shareholder,
I am pleased to introduce the Directors’ Remuneration Report
for the year ended 31 December 2020.
I took over as chair for the committee from Ms I Joss in October
2020 and wish to take this opportunity to acknowledge her
outstanding service to Gresham and all its stakeholders. The
committee now consists of me, as chair, and Mr P Simmonds
and Mr A Balchin as members. The committee formally met two
times in the year. Each of these meetings was attended, at the
committee’s invitation, by the Executive Directors, except that
they were not present in any discussions affecting their own
remuneration.
For 2020, the committee has continued to operate a remuneration
structure made up of basic salary, performance-related bonuses,
share options, benefits and pensions, in accordance with the
remuneration policy adopted at the AGM held in 2019. This
included the full implementation of the Annual Bonus Scheme
and Long-Term Share Incentive Plan (“LTIP”), following a
transitional year in 2019 during which they were operated at 50%
level. As in previous years, a significant proportion of executive
remuneration is based on performance, designed to align
executive pay with shareholder interests.
Gresham Technologies plc Annual Financial Report 2020
43
CORPORATE GOVERNANCE Remuneration report
This report complies with the requirements of the Large and Medium-sized Companies and Groups (Accounts and Reports)
Regulations 2008 as amended in 2013, the provisions of the UK Corporate Governance Code (April 2016) and the Listing Rules.
The report is in two sections:
▪ the Directors’ remuneration policy, as approved at the general meeting held in December 2020, which sets out the Company’s
current policy on remuneration for Executive and Non-Executive Directors; and
▪ the Directors’ Remuneration Report, which sets out details of how the remuneration policy was implemented for the year ended
31 December 2020 and how the Company intends for the remuneration policy to apply for the year ended 31 December 2021.
The Directors’ Remuneration Report will be put to an advisory shareholder vote at the forthcoming AGM.
General principles
The policy for the Directors is based on the following principles, and takes into account prevailing best practice, shareholder
expectations, and the remuneration of the wider employee population:
▪ ensure remuneration arrangements support the Group’s business strategy;
▪ align interests of Directors with those of the shareholders;
▪ determine remuneration by reference to individual performance, experience and prevailing market conditions, with a view to
providing a package appropriate to the responsibilities involved;
▪ encourage behaviours which will enhance the performance of the Group and reward achievement of the Group’s strategic and
financial goals; and
▪ ensure that an appropriate proportion of the overall remuneration package is incentive pay, which is earned for the delivery of
stretching performance conditions.
Remuneration policy table
The table below sets out the Directors’ remuneration policy as approved by shareholders at the general meeting held on 30 December 2020.
No changes to the policy are being proposed at the 2021 AGM.
Link to strategy
Framework
Operation
Base salary
Supports the recruitment and retention
of Executive Directors of the calibre
required to deliver the Group’s strategy.
Base salary is paid monthly and
reviewed annually, with any
increases applying from 1 April.
Pension
Supports the recruitment and retention
of Executive Directors of the calibre
required to deliver the Group’s strategy.
Pension contributions are made
by the Company to a defined
contribution scheme operated
by a third party provider.
Benefits
Supports the recruitment and retention
of Executive Directors of the calibre
required to deliver the Group’s strategy.
Benefits principally comprise
private healthcare and death
in service insurance.
Base salary and reviews are assessed 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.
Pension contributions are matched by the Company
up to a maximum of 5% of base salary, in line with
other employees in the Group. In exceptional
circumstances, such as recruitment of new Directors,
the committee has discretion to authorise higher
Company contributions up to a maximum of 10%
of base salary in total.
Premiums are paid by the Company to an external
broker to arrange cover, in line with other Group
employees. These benefits are standard for all Group
employees and are not assessed against performance.
Annual Bonus Scheme
Rewards and incentivises the
Executive Directors for achievement
of strategic objectives as measured
by short-term KPIs.
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 determines the relevant
performance targets at the start of each financial
year. The committee also determines the annual
bonus split between cash and shares, which by
default is 50:50.
Targets are set predominantly (at least 75%) in
relation to financial measures, with the balance
based on non-financial objectives.
44
Gresham Technologies plc Annual Financial Report 2020
Corporate Governance Link to strategy
Operation
Framework
Annual Bonus Scheme continued
The cash element of the bonus is paid
at or around the time of release of the
final results. The shares are deferred
for two years and then released.
This scheme is operated pursuant
to the rules of the Deferred Share
Bonus Plan 2017.
Long-Term Share Incentive Plan
Rewards and incentivises the Executive
Directors for achievement of sustained
long-term financial growth and returns.
Matching shares are earned on the
deferred shares awarded under the
Annual Bonus Scheme, depending
on long-term financial performance
against predetermined targets over
the three years following the end of
the relevant financial year.
This plan is operated pursuant to
the rules of the Deferred Share
Bonus Plan 2017.
Performance Share Plan 2020
Directly aligns financial incentives with
returns to shareholders. Financial reward
is created through the creation of
shareholder value.
The committee has discretion to
make nil-cost awards to Executive
Directors, subject to the plan rules,
and to determine appropriate
performance conditions.
Chairman and Non-Executive
Director fees
Supports the recruitment and retention
of individuals of the calibre required
to constitute an effective Board
and contribute to the Company’s
long-term success.
Fees for Non-Executive Directors
are set by the Board (excluding
Non-Executive Directors).
Fees are paid monthly.
The annual bonus for performance significantly
ahead of target is up to 100% of base salary.
On-target performance will result in an annual
bonus of 50% of base salary. Performance below
a threshold set by the committee will result in
no bonus being paid.
The committee has final discretion in determining
the value of the bonus payment (and, where the
committee deems it appropriate in the circumstances,
to adjust the mix between cash and deferred shares),
based on its assessment of performance against
the set targets and as a whole.
Payments and awards are subject to malus
and clawback.
The maximum annual bonus payable in respect
of a year is 100% of base salary.
The committee determines the threshold, on-target
and stretch targets on growth and return measures
over the three subsequent financial years.
The matching award is a multiple of the deferred
shares awarded under the Annual Bonus Scheme.
The multiple applied is determined according to
a reference matrix of multiples based on actual
performance against growth and return measures
over that three-year period. The matrix of matching
rates is determined in advance by the committee.
The committee has final discretion in determining
the matching rates and the final award based on its
assessment of performance against the set targets
and as a whole after the end of the three-year period.
Matching awards are subject to continuous
employment and to malus and clawback.
The maximum matching award multiple is 4x
the number of deferred shares.
The plan is subject to rules approved by shareholders
in general meeting. Awards will vest following the later
of (i) a three-year period from the date of grant and (ii)
the date on which the committee determines that the
specified performance conditions have been satisfied.
No award or any part thereof will vest unless the
Company’s share price has increased by at least
20% relative to the share price at the date of grant.
A material proportion of an award will be linked to
performance conditions directly aligned to
shareholder value growth.
Awards are subject to continuous employment,
post-vesting holding and malus and clawback.
The maximum award for an individual in respect
of a year is 100% of base salary or up to 200%
in exceptional circumstances.
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,
responsibilities and committee position(s).
Supplementary fees are paid for any additional duties
at fixed day rates. 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.
Gresham Technologies plc Annual Financial Report 2020
45
CORPORATE GOVERNANCE Remuneration report continued
Remuneration policy considerations
Selection of performance measures
The performance measures under the Annual Bonus Scheme
and Long-Term Share Incentive Plan are selected to reflect the
main KPIs and strategic priorities for the Group. The performance
measures 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
The committee has discretion to operate the Company’s share
plans in accordance with their terms, including the ability to
settle awards in cash and to adjust the terms of awards in the
event of any variation of the Company’s share capital or any
demerger, delisting, special dividend or other relevant event.
Policy on Director shareholdings
Prior to the year commencing 1 January 2019, the Company
had no policy on Director shareholdings.
For the year commencing 1 January 2019 and thereafter, the
Company expects Directors, when acquiring shares under the
Annual Bonus Scheme or Long-Term Share Incentive Plan, not
to dispose of more than 50% of the shares acquired until the day
on which his or her holding has a market value equal to that of his
or her basic salary. Shares acquired by Directors pursuant to the
Performance Share Plan are subject to a two-year post-vesting
holding period during which acquired shares may not be disposed
of. 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 Directors not to dispose
of more than 50% of any shares held as a result of being acquired
under the Annual Bonus Scheme, Long-Term Share Incentive Plan
or Performance Share Plan for a period of six months following
termination of employment. Any shares disposed of during this
period shall be done in co-ordination with the Company and its
brokers in order to ensure an orderly market is maintained.
Malus and clawback
No malus or clawback provisions apply for payments or awards
made in respect of financial year 2018 or earlier.
For up to two years following the payment of a bonus under the
Annual Bonus Scheme, the committee may require repayment of
some or all of any bonus payment (including by way of reduction
in the number of deferred shares released) in circumstances
which the committee considers appropriate, including a material
misstatement of accounts, an error in assessing performance
conditions, or misconduct on the part of the participant.
For up to two years after the vesting of an award under the
Long-Term Share Incentive Plan and Performance Share Plan,
the committee may cancel an award or require the participant
to make a payment to the Company in respect of an award in
the event of gross misconduct, fraud, malpractice, a material
misstatement of results, a material breach of risk management
or other circumstances that, in the opinion of the committee,
have a sufficiently significant impact on the reputation of any
Group business.
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
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.
Loss of office payments
There are no predetermined special provisions for Directors
with regard to compensation in the event of loss of office.
The remuneration committee considers the circumstances of
individual cases of early termination and only in exceptional
circumstances would the committee recommend compensation
payments in excess of the Company’s contractual obligations.
Wider staff employment conditions
The remuneration committee considers pay and employment
conditions of other staff members of the Group when designing
and setting executive remuneration. Underpinning all pay is an
intention to be fair to all staff of the Group, taking into account
the individual’s seniority and local market practices.
Consultation with shareholders
The remuneration 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.
Consultation with employees
The Board and the remuneration committee did not consult with
employees when formulating and implementing the policy.
Service contracts and 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.
46
Gresham Technologies plc Annual Financial Report 2020
Corporate Governance Remuneration scenarios
The following graphs set out an illustration of Executive Director
pay for 2021. The potential reward opportunities for 2021 are
based on the remuneration policy described herein. Projected
values exclude the impact of share price movement 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.
Three different remuneration scenarios for 2021 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 “maximum” scenario includes fixed remuneration, plus a
maximum bonus of 100% of base salary under the Annual
Bonus Scheme (50% cash and 50% shares) and an assumption
that the Executive Directors will be awarded matching shares
three years later under the Long-Term Share Incentive Plan
based on a 4x multiple of the shares awarded under the
Annual Bonus Scheme.
Executive proposed 2021 remuneration
Tom Mullan
Minimum
100%
178,000
On-target
52% 24% 24%
346,000
▪ the “on-target” scenario includes fixed remuneration, plus an
Maximum
26%
25%
49%
676,000
on-target bonus of 50% of base salary under the Annual Bonus
Scheme (50% cash and 50% shares) and an assumption that
the Executive Directors will be awarded matching shares three
years later under the Long-Term Share Incentive Plan based on
a 2x multiple of the shares awarded under the Annual Bonus
Scheme; and
Ian Manocha
Minimum
100%
287,000
On-target
52%
24% 24%
559,000
Maximum
26%
25%
49%
1,103,000
▪ Salary, pension
and benefits
▪ Annual Bonus
Scheme
▪ Long-Term Share
Incentive Plan
Total
Remuneration
Directors’ remuneration report
Role of the remuneration committee
The remuneration 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 motivate Senior Executives and other key employees of the quality required
to run the Company successfully and support its strategy and its long-term success, without paying more than is necessary;
▪ approving the total individual remuneration package of each Executive Director;
▪ reviewing and setting performance targets for incentive plans including annual bonus and long-term share plans;
▪ determining remuneration outcomes in relation to performance-related pay; and
▪ reviewing and approving equity awards under the Performance Share Plan.
Details of the committee’s operation, roles and responsibilities are set out in terms of reference, which are available on the
Company’s website.
Salary increases in 2020
Mr I Manocha and Mr T Mullan received a base salary increase of 3% in 2020. The average increase across Group employees in 2020
was 3.1%. There is no link between base salary and the Company’s share price.
Variable pay in 2020
The variable element of Director pay comprises a performance-based bonus under the Annual Bonus Scheme and an equity award
under the Long-Term Share Incentive Plan. In addition, Directors holding share options under the now-expired Share Option Plan 2010
(see page 49 for details) are included in this section as they are considered to constitute variable pay until such time as the options
are exercised (subject to vesting).
Performance-based annual bonus
The annual bonus awards in respect of 2020 for Executive Directors are set out in the table on page 48. These awards have been
initially assessed by the committee by reference to predetermined annual performance targets linked to Group objectives and
individual performance objectives.
In light of the exceptional circumstances in the year, the remuneration committee considered that it was appropriate to review
attainment of the original targets for 2020 against prior year and revised market expectations. Attainment in the latter scenarios was
significantly higher (over 250% and over 60% of the original 2020 targets respectively). Therefore, the remuneration committee
concluded it was reasonable and fair to override the formulaic outcome. In reaching this determination, the remuneration committee
exercised independent judgement and considered a number of factors, including: the Group’s overall performance; the overall impact
of COVID-19; the self-sustenance of the business throughout the pandemic (no job losses, pay cuts, furlough or other government
assistance in any location globally); the acquisition of Inforalgo; the growth against many 2019 baseline measures; and the individual
contribution of the individual Directors. Having considered these factors, the committee determined to increase the award for each of
the Executive Directors using a number of adjustments which, in aggregate, equate to 15% of base salary.
Gresham Technologies plc Annual Financial Report 2020
47
CORPORATE GOVERNANCE Remuneration report continued
Directors’ remuneration report continued
Variable pay in 2020 continued
Performance-based annual bonus continued
Measure
Clareti ARR
Group revenue
Clareti revenue
Clareti cash EBITDA
Group adjusted EBITDA
Personal objectives
Formulaic bonus outcome (% of base)
Discretionary adjustment(2)
Final bonus outcome payable (% of base)
Weighting
Attainment
(CEO)
Attainment
(CFO)
15%
15%
15%
15%
15%
25%
81%
90%
79%
62%
110%
90%
26.5%(1)
15%
41.5%
81%
90%
79%
62%
110%
90%
26.5%(1)
15%
41.5%
(1) As previously reported, the Annual Bonus Scheme was operated at 50% level during 2019 for transitional purposes, and at full level (i.e. 100%) in 2020, in line
with commitments made to shareholders when the scheme and the Long-Term Share Incentive Plan were adopted. As such, variable pay awards for 2020 are
comparatively higher as they take account of the increased bonus potential in 2020.
(2) Refer to commentary in the paragraph above for an explanation on the use of discretion.
Equity awards under the Long-Term Share Incentive Plan
The first awards under the Long-Term Share Incentive Plan were made in 2020 in respect of performance in financial year 2019.
The award under the Long-Term Share Incentive Plan is calculated as a multiple of the number of deferred shares awarded under
the Annual Bonus Scheme. The award will vest after three years and only if and to the extent that the Company’s financial performance
over financial years 2020, 2021 and 2022 achieve the predetermined targets specified by the committee. In this regard, the committee
determined that the growth measure should be Group revenues and the return measure should be total shareholder return. The
maximum potential matching share award, for achievement of stretch performance on both growth and return measures, is four
times the number of deferred shares. See below for details.
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 2020 and 2019:
31 December 2020
Executive Directors
I Manocha
T Mullan
Base
salary/fees
£
Benefits
in kind
£
Performance-
related bonus ⁽1⁾
£
267,114
163,850
2,327
2,840
111,797
68,452
Non-Executive Directors
K Archer (resigned 30 Sept 2020)
I Joss (resigned 31 Oct 2020)
A Balchin
P Simmonds (appointed 1 Aug 2020)
J Knott (appointed 12 Oct 2020)
R Wandhöfer (appointed 12 Oct 2020)
60,000
33,333
41,102
33,333
10,096
8,974
—
—
—
—
—
—
—
—
—
—
—
—
IFRS 2
share-based
payment
charge
£
Total
2020
£
25,789
42,506
420,377
285,828
—
—
—
—
—
—
60,000
33,333
41,102
33,333
10,096
8,974
Pension
£
13,350
8,180
—
—
—
—
—
—
(1) Bonus plan fully implemented in 2020 after being operated at 50% level during 2019 for transitional purposes. Paid 50% in cash bonus and 50% in shares.
617,802
5,167
180,249 ⁽1⁾
21,530
68,295
893,043
31 December 2019
Executive Directors
I Manocha
T Mullan
Non-Executive Directors
K Archer
I Joss
A Balchin
Base
salary/fees
£
261,245
160,000
80,000
40,000
40,000
Benefits
in kind
£
Performance-
related bonus (1)
£
Pension
£
IFRS 2
share-based
payment
charge
£
Total
2019
£
2,223
3,087
59,806
38,833
33,056 (2)
8,000
—
38,352
356,330
248,272
—
—
—
—
—
—
—
—
—
—
—
—
80,000
40,000
40,000
581,245
5,310
98,639
41,056
38,352
764,602
(1) Bonus plan implemented at 50% level during 2019 for transitional purposes. Paid 50% in cash bonus and 50% in shares.
(2) Includes a one-off payment in lieu of pension contributions of £20,000 to satisfy an outstanding contractual obligation.
48
Gresham Technologies plc Annual Financial Report 2020
Corporate Governance IFRS 2 share-based payment charges referred to in the table above are accounting charges that are calculated in accordance with
applicable accounting rules as set out in note 22 of the Group financial statements. These charges do not represent cash payments.
Benefits in kind include provision of private healthcare and death in service insurance.
Interests in options (audited information)
The Group operated the Share Option Plan 2010 and Long-Term Share Incentive Plan (as shown in the remuneration policy) during the
year, under which Directors are able to subscribe for ordinary shares in the Company. 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 22
to the Group financial statements.
Share Option Plan 2010
Executive Directors
I Manocha(1) (2)
T Mullan(1) (3)
T Mullan(1) (3)
Non-Executive
Directors
K Archer
(resigned
30 Sept 2020)
I Joss
(resigned
31 Oct 2020)
A Balchin
P Simmonds
(appointed
1 Aug 2020)
J Knott
(appointed
12 Oct 2020)
R Wandhöfer
(appointed
12 Oct 2020)
Options at
1 January
2020
1,500,000
200,000
100,000
700,000
—
—
—
—
—
2,500,000
Granted
Cancelled
Exercised
Options at
31 December
2020
Date of
grant
Exercise
price
Date first
exercisable Expiry date
—
—
—
—
—
—
—
—
—
—
—
—
—
— 1,500,000
—
200,000
—
100,000
01.06.15
14.03.18
28.03.19
111p 01.06.18 01.06.25
14.03.21 14.03.28
227p
28.03.22 28.03.29
97p
— 700,000
—
31.12.10
28p 31.12.13 31.12.20
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
— 700,000 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.
(3) Yet to vest.
Long-Term Share Incentive Plan
The following table sets out the maximum potential awards. Vesting is subject to performance and retention conditions in accordance
with the rules of the Deferred Share Bonus Plan 2017. No awards were made to Non-Executive Directors.
Awards at
1 January
2020
Granted
Cancelled
Exercised
Awards at
31 December
2020
Date of
grant
Exercise
price
Date first
exercisable Expiry date
Executive Directors
I Manocha(1) (2)
T Mullan(1) (2)
—
—
—
104,008
67,532
171,540
—
—
—
—
—
—
104,008
67,532
171,540
20.03.20
20.03.20
nil
nil
20.03.23 20.03.30
20.03.23 20.03.30
(1) Options over which the Director has agreed to pay any employer’s National Insurance arising from the exercise of the options.
(2) All options for both are yet to vest.
Payments for loss of office (audited information)
No payments for loss of office were made during the year ended 31 December 2020 (2019: £nil).
Gresham Technologies plc Annual Financial Report 2020
49
CORPORATE GOVERNANCE
Remuneration report continued
Directors’ remuneration report continued
Percentage change in CEO remuneration
The table below sets out the increase in the total remuneration of the CEO and our staff (excluding promotions where relevant) in 2020.
The comparative is all staff (around 150 people) because this group is considered to be the most relevant, due to the structure of
total remuneration.
CEO (I Manocha)
All staff
Change in base
salary (effective
April 2020)
2020
bonus payment
(% of base salary)
3.0%
3.1%
41.5%
8.2%
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 2020. There were no share
buy backs in the year.
Total employee pay compared to profit before tax (£’000)
Total CEO pay (£’000)
,
9
3
4
6
14,000
12,000
10,000
8,000
6,000
4,000
2,000
0
-2000
1
1
,
9
5
3
,
1
0
4
3
3
,
2
4
8
1
6
1
8
3
,
1
4
7
8
2
3
1
3
,
1
0
4
,
1
3
4
9
9
(
1
,
2
2
7
)
7
1
8
7
6
5
3
6
6
7
0
8
8
9
3
600
500
400
300
200
100
0
2016
2017
2018
2019
2020
2015
2016
2017
2018
2019
2020
▪ Employee pay
▪ Directors’ remuneration
▪ Profit/(loss) before tax (excluding exceptionals)
Total
Fixed pay
Total CEO pay excluding SBP and loss of office
Variable pay
Change in CEO pay
The graph above shows the single total figure of remuneration for the role of CEO for the current and previous seven years.
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 2010 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 (£)
800
700
600
500
400
300
200
100
0
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Gresham Technologies plc
▪ FTSE TechMark All-Share Index
This graph shows the value, by the end of 2020, of £100 invested in Gresham Technologies plc on 31 December 2010 compared with
the value of £100 invested in the FTSE TechMark All-Share Index. The other points are values at intervening financial year ends.
50
Gresham Technologies plc Annual Financial Report 2020
Corporate Governance
Change in CEO pay continued
The graph on page 50 is derived from the data in the following table:
2016
2015
2017
2018
2019
2020
I Manocha (CEO from 1 June 2015)
Base salary
Benefits in kind
Bonus
Pension
IFRS 2 share-based payment charges
C Errington (CEO until 1 June 2015)
Base salary
Benefits in kind
Bonus
Pension
IFRS 2 share-based payment charges
145,833 (1)
544 (1)
—
7,292 (1)
35,889 (1)
189,558 (1)
62,500 (2)
545 (2)
—
3,125 (2)
—
66,170 (2)
250,000
1,983
—
12,500
75,441
339,924
254,000
1,491
20,400
12,765
220,233
508,889
259,840
2,882
—
12,980
73,744
349,445
261,245
2,223
59,806
33,056
—
356,330
267,114
2,327
111,797
13,350
25,789
420,377
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
Total
255,728
339,924
508,889
349,445
356,330
420,377
(1) Relates to the seven-month period 1 June 2015 to 31 December 2015.
(2) Relates to the five-month period 1 January 2015 to 30 June 2015.
Service contracts
Mr I Manocha has a service agreement dated 15 February 2015,
which is terminable by twelve months’ rolling notice from either
side. Mr T Mullan’s service agreement is dated 5 February 2018
and is terminable by six months’ rolling notice from either side.
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.
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.
Remuneration resolutions at the last AGM
At the last AGM, held on 14 May 2020, the following resolution
was moved:
Resolution
Against
For (1)
Withheld
Remuneration Report
99.99%
0.01%
0.01%
(1) Includes votes giving the Chairman discretion.
External advisers
The committee seeks professional advice where it considers it
appropriate to do so. In the year the Group appointed Grant Thornton
to advise on the implementation of the new Performance Share
Plan 2020 with total fees paid in the year of £24,000. The Group
did not engage any professional remuneration advisers in 2019.
Jenny Knott
Chair of the remuneration committee
8 March 2021
Gresham Technologies plc Annual Financial Report 2020
51
CORPORATE GOVERNANCE Directors’ report
Registered number 01072032
The Directors present their report and the Group financial
statements for the year ended 31 December 2020.
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 20 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 Statement of Corporate Governance beginning
on page 36 forms part of the Directors’ Report.
Directors and officers
The Directors who served on the Board during the year are set
out on pages 34 and 35. In addition, Mr K Archer and Ms I Joss
served on the Board until 30 September 2020 and 31 October
2020 respectively. Mr J Cathie served as Company Secretary
throughout the year.
Results and dividends
The Group profit for the year, after taxation, attributable to equity
shareholders amounted to £1,261,000 (2019: profit of £1,898,000).
A final dividend of 0.75 pence per ordinary share (2019: 0.75 pence)
has been recommended by the Directors. There has been no
interim dividend (2019: £nil).
If approved by the passing of a resolution at the forthcoming
Annual General Meeting, it is intended to pay the final dividend
on 20 May 2021 to all shareholders on the register at close of
business on 15 April 2021. The ex-dividend date will be 15 April 2021.
The profit for the year has been transferred to reserves.
Going concern and viability statement
The Group has sufficient financial resources together with good
relationships with a number of customers and suppliers across
different geographic areas and industries. The Group has access
to a strong underlying cash flow arising from long-established
maintenance businesses with long-standing blue-chip customers
and strong growth prospects being realised with its flagship
solution, CTC, and its other Clareti solutions.
After making enquiries, the Directors have a reasonable
expectation that the Company and the Group have adequate
resources to continue in operational existence for a period of at
least twelve months from the date of approval of the financial
statements. For this reason, they continue to adopt the going
concern basis in preparing the Annual Financial Report 2020.
Refer to page 38 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 2020, 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 2020. In the opinion of the
Directors, the Group does not have any other individually
significant relationships.
Fostering relationships with stakeholders
Refer to pages 30 and 31 for details of the Company’s
engagement with stakeholders.
Directors and their interests
The Directors at 31 December 2020 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 December 2020
1 January 2020
P Simmonds
A Balchin
J Knott
R Wandhöfer
I Manocha
T Mullan
30,000
8,233
—
13,403
88,685
19,826
—
8,233
—
—
75,000
10,940
There have been no further changes in the Directors’ interests
disclosed above from 31 December 2020 to 28 February 2021.
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.
52
Gresham Technologies plc Annual Financial Report 2020
Corporate Governance Major interests in shares
The Company has been notified, either directly or in response
to a section 793 request made on its behalf, of the following
interests representing 3% or more of the issued ordinary share
capital of the Company as at 26 February 2021:
Additional information for shareholders
At 31 December 2020, the Company’s issued share capital comprised:
Number
Nominal
value
£
% of total
share capital
Ordinary shares
of 5 pence each
Percentage
held
Ordinary shares
of 5 pence each
70,156,458
3,507,823
100%
Kestrel Investment Partners
Schroder Investment Management
Tellworth Investments
Jupiter Asset Management
JO Hambro Capital Management
Herald Investment Management
Mrs M A Green
Hargreaves Lansdown
Asset Management
Rimmer Worldwide Limited
Canaccord Genuity
Wealth Management
12,730,028
8,838,194
7,222,664
4,216,000
3,797,420
3,158,774
3,073,290
2,327,818
2,178,091
2,150,000
18.15%
12.60%
10.30%
6.01%
5.41%
4.50%
4.38%
3.32%
3.10%
3.06%
Political donations
No donations were made in 2020 or 2019.
Social and community
No social or community review has been performed for 2020
or 2019.
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 authorities given to the Directors to
allot and grant rights over the unissued share capital up to a
maximum nominal amount of £1,169,274 representing one-third
of the issued ordinary share capital as at 28 February 2021 and
to allot and grant rights over shares for cash up to a maximum
nominal amount of £175,391 representing 5% of the issued
ordinary share capital as at 28 February 2021, without first
making a pro rata offer to all existing shareholders;
▪ 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 7,015,646 ordinary shares which represents
10% of the issued ordinary share capital of the Company as at
28 February 2021; 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.
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 2020, certain share options
granted under the Share Option Plan 2010 were exercised and as
a result the Group issued 1,900,000 ordinary shares
(2019: 167,021), such shares ranking pari passu with ordinary
shares then in issue. 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 52. Major interests (being those
greater than 3%) of which the Company has been notified are
shown on the top of this page.
Gresham Technologies plc Annual Financial Report 2020
53
CORPORATE GOVERNANCE Directors’ report continued
Registered number 1072032
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 22
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.
Information to be included in the Annual Financial Report 2020
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 2020:
LR 9.8.4 R
Location
Topic
(1)
(2)
(4)
(5)
(6)
(7)
(8)
(9)
(10)
(11)
(12)
(13)
(14)
Interest capitalised
Publication of unaudited financial information
Details of long-term incentive schemes
Waiver of emoluments by a director
Waiver of future emoluments by a director
Non-pre-emptive issues of equity for cash
Item (7) in relation to major subsidiary undertakings
Parent participation in a placing by a listed subsidiary
Contracts of significance
Provision of services by a controlling shareholder
Shareholder waivers of dividends
Shareholder waivers of future dividends
Agreements with controlling shareholders
Not applicable
Not applicable
Not applicable
Not applicable
Not applicable
Page 93
Not applicable
Not applicable
Page 52
Not applicable
Not applicable
Not applicable
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 34 and 35. 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
8 March 2021
54
Gresham Technologies plc Annual Financial Report 2020
Corporate Governance Statement of Directors’ responsibilities
Website publication
The Directors are responsible for ensuring the Annual Financial
Report 2020 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 IFRSs adopted by the European Union and
Article 4 of the IAS Regulation and give a true and fair view of
the assets, liabilities, financial position and profit and loss of
the Group; and
▪ the Annual Financial Report 2020 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
8 March 2021
Directors’ responsibilities
The Directors are responsible for preparing the Annual Financial
Report 2020 in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial
statements for each financial year. Under that law, the Directors are
required to prepare the Group financial statements in accordance
with international accounting standards in conformity with the
requirements of the Companies Act 2006 and in accordance with
international financial reporting standards adopted pursuant to
Regulation (EC) No 1606/2002 as it applies in the European Union
and have elected to prepare the Company financial statements
in accordance with Financial Reporting Standard 100 “Application
of Financial Reporting Requirements” and Financial Reporting
Standard 101 “Reduced Disclosure Framework” and applicable law.
Under company law, the Directors must not approve the financial
statements unless they are satisfied that they give a true and fair
view of the state of affairs of the Group and Company and of the
profit or loss of the Group for that period.
In preparing these financial statements, the Directors are
required to:
▪ select suitable accounting policies and then apply
them consistently;
▪ make judgements and accounting estimates that are
reasonable and prudent;
▪ state whether they have been prepared in accordance with
IFRSs as adopted by the European Union, subject to any
material departures disclosed and explained in the financial
statements; and
▪ prepare a Strategic Report, Directors’ Report and Directors’
Remuneration Report which comply with the requirements
of the Companies Act 2006.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Company’s
transactions and disclose with reasonable accuracy at any time
the financial position of the Company and enable them to ensure
that the financial statements comply with the Companies Act
2006 and, as regards the Group financial statements, Article 4 of
the International Accounting Standards (“IAS”) Regulation. They
are also responsible for safeguarding the assets of the Company
and hence for taking reasonable steps for the prevention and
detection of fraud and other irregularities.
The Directors are responsible for ensuring that the Annual
Financial Report 2020, taken as a whole, is fair, balanced and
understandable and provides the information necessary for
shareholders to assess the Group’s position and performance,
business model and strategy.
Gresham Technologies plc Annual Financial Report 2020
55
CORPORATE GOVERNANCE Independent auditor’s report
to the members of Gresham Technologies plc
Independence
Following the recommendation of the audit committee as a
consequence of the tender process as described on page 41, we
were reappointed by the Directors on 11 November 2020 to audit the
financial statements for the year ending 31 December 2020 and
subsequent financial periods. The period of total uninterrupted
engagement including retenders and reappointments is eleven years,
covering the years ending 31 December 2010 to 31 December 2020.
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 following:
▪ the Directors’ method including the relevance and reliability of
underlying data used to make the assessment, and whether
assumptions and changes to assumptions from prior years are
appropriate and consistent with each other.
▪ the Directors’ plans for future actions in relation to the going
concern assessment including whether such plans are feasible
in the circumstances.
▪ the Directors’ stress-testing of the forecasts to the extent of
reasonable worst-case scenarios.
▪ the adequacy and appropriateness of disclosures in the financial
statements regarding the going concern assessment and any
material uncertainties that may exist.
We carried out the above procedures through using our
understanding of the business model, objectives, strategies and
related business risk, the measurement and review of the entity’s
financial performance including forecasting and budgeting processes
and the entity’s risk assessment process.
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 entity’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.
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
2020 and of the Group’s profit for the year then ended;
▪ the Group financial statements have been properly prepared in
accordance with international accounting standards in conformity
with the requirements of the Companies Act 2006;
▪ the Group financial statements have been properly prepared in
accordance with international financial reporting standards
adopted pursuant to Regulation (EC) No 1606/2002 as it applies in
the European Union;
▪ the Parent Company financial statements have been properly
prepared in accordance with international accounting standards in
conformity with the requirements of the Companies Act 2006 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; and, as regards the
Group financial statements, Article 4 of the IAS Regulation.
We have audited the financial statements of Gresham
Technologies Plc (the ‘Parent Company’) and its subsidiaries
(the ‘Group’) for the year ended 31 December 2020 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 Cash Flow, notes to the
Consolidated financial statements, the Company Balance Sheet,
the Company Statement of Changes in Equity and notes to the
Company financial statements, including a summary of significant
accounting policies. The financial reporting framework that has
been applied in their preparation is applicable law and international
accounting standards in conformity with the requirements of the
Companies Act 2006 and international financial reporting standards
adopted pursuant to Regulation (EC) No 1606/2002 as it applies
in the European Union, and as regards the Parent Company
financial statements, as applied in accordance with the
provisions of the Companies Act 2006.
Separate opinion in relation to IFRSs as
issued by the IASB
As explained in note 2 to the Group financial statements, the Group
in addition to complying with its legal obligation to apply international
accounting standards in conformity with the requirements of the
Companies Act 2006, has also applied IFRSs as issued by the
International Accounting Standards Board (IASB).
In our opinion the Group financial statements give a true and fair
view of the consolidated financial position of the Group as at
31 December 2020 and of its consolidated financial performance
and its consolidated cash flows for the year then ended in
accordance with IFRSs as issued by the IASB.
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.
56
Gresham Technologies plc Annual Financial Report 2020
Financial Statements Overview
Direct coverage
by the Group
engagement
team
Key audit
matters
55% (2019: 53%) of Group revenue
84% (2019: 84%) of Group total assets
2020
2019
Development costs
Goodwill and intangible asset
impairment risk
Revenue and profit recognition
Acquisition of Inforalgo
Information Technology Limited
Materiality
Group financial statements as a whole
£180,000 (2019: £110,000) based on 0.75%
of revenue (2019: 5% of the result before tax)
An overview of the scope of our audit
Our Group audit was scoped by obtaining an understanding of the
Group and its environment, including the Group’s system of internal
control, and assessing the risks of material misstatement in the
financial statements. We also addressed the risk of management
override of internal controls, including assessing whether there was
evidence of bias by the Directors that may have represented a risk of
material misstatement.
The Group audit team, based in the UK, performed full scope audits
of the significant components in the UK, comprising 34% of Group
revenue and 84% of Group total assets. The audit of the Asia Pacific
region significant component was performed by our component
auditors, BDO Sydney. The full scope audit of this component
comprised 45% of Group revenue and 16% of Group total assets.
In respect of insignificant components, the Group audit team, based
in the UK carried out targeted procedures in respect of revenue and
profit recognition as noted in the key audit matters section of this
report. In doing so the Group audit team tested 21% of Group
revenue applicable to insignificant components.
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 detailed instructions that included prescriptive
procedures to be performed on the significant risks of material
misstatement;
▪ further involvement in directing the audit strategy through a review
of the component auditor’s work plans and meetings with BDO
Sydney at the audit planning stage;
▪ supervision of the audit process that included regular communication
with the component auditor and a review of their audit files; and
▪ attending an audit close meeting at the conclusion of the
component audit.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of
the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) that we identified,
including those which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit, and directing the efforts of
the engagement team. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our
opinion thereon, and we do not provide a separate opinion on these matters.
Key audit matter
How the scope of our audit addressed the key audit matter
Development costs
As detailed in the accounting policies on page 67, and
significant estimates and judgements on page 67.
We evaluated the Group’s accounting policy in this area to ensure that their
recognition and measurement principles were in accordance with
International Accounting Standard 38.
Development costs are recognised as an intangible asset if
specific criteria have been met.
During the year, developments costs of £3,561,000
(2019: £3,259,000) have been capitalised.
There are a number of judgements involved in accounting
for development expenditure, including whether the
activities are appropriate for capitalisation in accordance
with the criteria of the standard, the allocation of the
development costs to a particular Clareti product.
The risk also encompasses the possibility that the
development activities may be maintenance by nature or
supersede costs previously capitalised. Due to the level of
judgement, there is considered to be an inherent risk of
management override of controls.
We agreed a sample of capitalised costs to underlying supporting
documentation. This included obtaining time records to corroborate the
allocation of cost between products and inspecting employee contracts to
check that their stated job roles support their involvement in development
activities. We also recalculated the on-costs and overheads capitalised with
reference to source data and checked that the five criteria for capitalisation,
as required by the standard, had been met.
The testing included gaining an understanding of the projects from the
development team, as well as obtaining evidence of future economic benefits
such as customer contracts and pipeline opportunities. We also critically
assessed assumptions such as the level of non-productive time inherent in
the development of each product based on factors including the product’s
stage of maturity.
Furthermore, we specifically reviewed the nature of costs capitalised as
enhancements to software available for sale; ensured that the enhancements
did not supersede existing development costs; and determined whether such
enhancements met each of the five criteria for capitalisation under the standard.
In respect of enhancements to established software, we assessed the nature
of the new releases – and resultant sales opportunities – to assess whether
there was evidence of superseding previous development effort.
Key observations
Based on the audit work performed we consider that development costs
have been capitalised appropriately and in accordance with the Group’s
accounting policy.
Gresham Technologies plc Annual Financial Report 2020
57
FINANCIAL STATEMENTS Independent auditor’s report continued
Key audit matters continued
Key audit matter
Goodwill and intangible asset impairment risk
As detailed in the accounting policies on page 67, and
significant estimates and judgements on page 67.
Goodwill and capitalised development costs during
development are tested for impairment at least annually
through comparing the recoverable amount of the
cash-generating unit, based on a value-in-use calculation,
to the carrying value. Furthermore, once available for use,
capitalised development costs are tested for impairment
where an indicator of impairment arises. This risk is
considered significant due to the level of judgement
involved and the opportunity for management bias within
the impairment model assumptions. There is also a
significant risk that impairment indicators for particular
intangible assets might not be identified.
Revenue and profit recognition
As detailed in the accounting policies on page 67.
The Group earns revenue from the sale of software
licenses, rendering of services, subscriptions and
maintenance and solution sales. Management exercises
judgement in their assessment of the stage of completion
of service contracts and the unbundling of multi-element
solution sales, with reference to the estimated standalone
selling prices of the deemed performance obligations, both
of which determine the recognition of revenue and profit
and so present a revenue recognition risk. In line with the
requirements of International Financial Reporting Standard 15,
management continue to exercise judgement in determining
whether performance obligations, 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. Revenue and profit recognition is considered a
significant risk due to the manual adjustments required in
order to appropriately recognise the distinct performance
obligations within revenue contracts, which can involve
management judgement.
Acquisition of Inforalgo Information Technology
Limited
As detailed note 23 to the financial statements on page 96,
and significant estimates and judgements on page 68.
As detailed in the judgements and key sources of
estimation uncertainty within the accounting policies, the
Group undertook an acquisition during the financial year.
The acquisition resulted in the recognition of intangible
assets at fair value of £2,078,000 and goodwill of
£2,439,000. Management have recognised on acquisition
separately identifiable intangible assets in respect of
software and customer relationships, exercising judgement
in estimating the fair value for each. A third party specialist
was commissioned by management to assist with the
valuations. The provision for contingent consideration is
based upon estimates, at the date of acquisition, of future
performance of the acquired entity. This matter is
considered to be a significant risk as management had
to exercise judgement in determining the fair value of
the consideration, which contained a contingent element,
and the assets and liabilities acquired.
How the scope of our audit addressed the key audit matter
We performed a review of the Group’s goodwill and intangible assets and
examined for indicators of impairment. We also assessed the impairment
reviews prepared by management, specifically reviewing the integrity of
management’s value-in-use model and, with the assistance of our valuation
experts, we challenged the key inputs, being forecast growth rates, operating
cash flows and the discount rate. Our audit procedures for the review of
operating cash flows and forecast growth rates included, amongst others,
comparing the forecast to recent financial performance and budgets
approved by the Board. We used market data to independently calculate a
discount rate for comparison and also performed our own sensitivity analysis
upon the key valuation inputs.
Key observations
Based on the procedures performed, we did not identify any material
impairments nor any evidence of impairment indicators for particular
intangible assets that has not been identified.
We reviewed in detail the revenue recognition principles applied to the
significant new contracts written and performed during the year and ensured
that the revenue recognition policies were in accordance with the accounting
standards and the accounting policy. In particular, we checked a sample of
solution sales and assessed the appropriateness of unbundling contract
revenue into separate performance obligations along with any judgements in
the allocation of the consideration across the performance obligations based
on estimated standalone selling prices. We assessed this judgement through
benchmarking with reference to historic contracts executed by the Group and
external sources in relation to the sector. For the licence element of new
contracts executed in close proximity to the year end, we obtained evidence
that the software had been delivered to the customer prior to the end of the
financial year. We agreed a sample of sales and, where relevant, underlying
time costs to supporting contracts and other documentation, including user
acceptance evidence, statements of works and time records.
Key observations
Based on the work performed, we consider that revenue has been recognised
appropriately and is in accordance with IFRS 15 and the Group’s revenue
recognition accounting policy.
In respect of the fair value of the consideration, we reviewed management’s
calculation with reference to the sale and purchase agreement. We also
assessed the estimate of contingent consideration against forecasts and
current performance and verified the initial cash consideration to
documentation such as the sale and purchase agreement and completion
statement. We ensured that the acquisition accounting exercise had been
carried out in accordance with International Financial Reporting Standard 3,
Business Combinations, and reviewed management’s estimates in respect of
the fair value of the assets and liabilities acquired. In particular, we assessed
the valuation of the intangible assets that were considered separately
identifiable on acquisition, testing the key inputs and assumptions in the
valuation model and, with the assistance of our valuations specialists,
reviewed the methodology deployed. We also assessed the competence,
capability and objectivity of the Group’s experts who prepared the IFRS 3
purchase price allocation exercise. We also considered the completeness
of the separately identifiable intangible assets with reference to our
understanding of the business and key motivations of the transaction.
Key observations
Based on the audit work performed, we consider that the acquisition of
Inforalgo, including the separately identifiable intangible assets and contingent
consideration has been recognised appropriately in the financial statements.
58
Gresham Technologies plc Annual Financial Report 2020
Financial Statements 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
Materiality
Basis for determining
materiality
Rationale for the
benchmark applied
2020
£’000
180
2019
£’000
110
2020
£’000
105
2019
£’000
60
0.75% of revenue
5% of profit before
taxation
We considered 5% of profit
before tax to be a key
performance benchmark
for the Group and its
members in assessing
financial performance.
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
revenues being an
increasing basis of business
valuation in the sector.
1% of total assets
(capped based on
Group materiality)
1% of total assets
(capped based on
Group materiality)
We considered total assets
to be the most appropriate
measure for the basis of
materiality as the Parent
Company is primarily an
investment holding
company.
We considered total assets
to be the most appropriate
measure for the basis of
materiality as the Parent
Company is primarily an
investment holding
company.
Performance materiality
117
77
68
42
Basis for determining
performance materiality
On the basis of our risk
assessment, together with
our assessment of the
Company’s control
environment, our
judgement is that
performance materiality
for the financial statements
should be 65%.
On the basis of our risk
assessment, together with
our assessment of the
Company’s control
environment, our
judgement is that
performance materiality
for the financial statements
should be 70%.
On the basis of our risk
assessment, together with
our assessment of the
Company’s control
environment, our
judgement is that
performance materiality
for the financial statements
should be 65%.
On the basis of our risk
assessment, together with
our assessment of the
Company’s control
environment, our
judgement is that
performance materiality
for the financial statements
should be 70%.
Component materiality
We set materiality for each component of the Group based on a
percentage of between 17% and 75% of Group materiality dependent
on the size and our assessment of the risk of material misstatement
of that component. Component materiality ranged from £30,000 to
£135,000. In the audit of each component, we further applied
performance materiality levels of 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 £3,600 (2019: £2,200).
We also agreed to report differences below this threshold that, in our
view, warranted reporting on qualitative grounds.
Gresham Technologies plc Annual Financial Report 2020
59
FINANCIAL STATEMENTS Independent auditor’s report continued
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
Statement 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 the
appropriateness of adopting the going concern
basis of accounting and any material
uncertainties identified as set out on page 52;
and
▪ The Directors’ explanation as to its assessment
of the entity’s prospects, the period this
assessment covers and why the period is
appropriate as set out on page 52.
Other Code
provisions
▪ Directors’ statement on fair, balanced and
understandable as set out on page 55;
▪ Board’s confirmation that it has carried out a
robust assessment of the emerging and principal
risks as set out on page 55;
▪ The section of the Annual Report that describes
the review of effectiveness of risk management
and internal control systems as set out on page
41; and
▪ The section describing the work of the audit
committee as set out on page 40.
60
Gresham Technologies plc Annual Financial Report 2020
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.
Corporate
Governance
Statement
Matters on
which we are
required to
report by
exception
In our opinion, based on the work undertaken in the
course of the audit the information about internal
control and risk management systems in relation to
financial reporting processes and about share capital
structures, given in compliance with rules 7.2.5 and
7.2.6 in the Disclosure Guidance and Transparency
Rules sourcebook made by the Financial Conduct
Authority (the FCA Rules), is consistent with the
financial statements and has been prepared in
accordance with applicable legal requirements.
In the light of the knowledge and understanding of the
Group and the Parent Company and its environment
obtained in the course of the audit, we have not
identified material misstatements in this information.
In our opinion, based on the work undertaken in the
course of the audit information about the Company’s
corporate governance code and practices and about
its administrative, management and supervisory bodies
and their committees complies with rules 7.2.2, 7.2.3
and 7.2.7 of the FCA Rules.
We have nothing to report arising from our
responsibility to report if a corporate governance
statement has not been prepared by the Parent
Company.
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.
Financial Statements Our audit procedures were designed to respond to risks of
material misstatement in the financial statements, recognising
that the risk of not detecting a material misstatement due to
fraud is higher than the risk of not detecting one resulting from
error, as fraud may involve deliberate concealment by, for
example, forgery, misrepresentations or through collusion. There
are inherent limitations in the audit procedures performed and
the further removed non-compliance with laws and regulations
is from the events and transactions reflected in the financial
statements, the less likely we are to become aware of it.
A further description of our responsibilities is available on the Financial
Reporting Council’s website at: www.frc.org.uk/auditorsresponsibilities.
This description forms part of our Auditor’s Report.
Use of our report
This report is made solely to the Parent Company’s members, as
a body, in accordance with Chapter 3 of Part 16 of the Companies
Act 2006. Our audit work has been undertaken so that we might
state to the Parent Company’s members those matters we are
required to state to them in an auditor’s report and for no other
purpose. To the fullest extent permitted by law, we do not accept
or assume responsibility to anyone other than the Parent
Company and the Parent Company’s members as a body, for our
audit work, for this report, or for the opinions we have formed.
Malcolm Thixton (Senior Statutory Auditor)
For and on behalf of BDO LLP, Statutory Auditor
Southampton
United Kingdom
8 March 2021
BDO LLP is a limited liability partnership registered in England and
Wales (with registered number OC305127).
Responsibilities of Directors
As explained more fully in the Statement of Directors’ Responsibilities,
the Directors are responsible for the preparation of the financial
statements and for being satisfied that they give a true and fair view,
and for such internal control as the Directors determine is necessary
to enable the preparation of financial statements that are free from
material misstatement, whether due to fraud or error.
In preparing the financial statements, the Directors are responsible
for assessing the Group’s and the Parent Company’s ability to
continue as a going concern, disclosing, as applicable, matters
related to going concern and using the going concern basis of
accounting unless the Directors either intend to liquidate the Group
or the Parent Company or to cease operations, or have no realistic
alternative but to do so.
Auditor’s responsibilities for the audit of the
financial statements
Our objectives are to obtain reasonable assurance about whether
the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an
auditor’s report that includes our opinion. Reasonable assurance
is a high level of assurance, but is not a guarantee that an audit
conducted in accordance with ISAs (UK) will always detect a
material misstatement when it exists. Misstatements can arise
from fraud or error and are considered material if, individually or
in the aggregate, they could reasonably be expected to influence
the economic decisions of users taken on the basis of these
financial statements.
Extent to which the audit was capable of detecting
irregularities, including fraud
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.
Procedures performed by the Group audit team included:
▪ evaluation of management incentives and opportunities for
fraudulent manipulation of the financial statements including
management override;
▪ this evaluation involved a particular focus on the judgements
and estimates inherent in the key audit matters and exercising
professional scepticism in considering the impact of those
estimates and judgements on the reported results and key
performance measures such as annually recurring revenues
and cash EBITDA;
▪ the evaluation also involved gaining an understanding of
Management remuneration schemes and the extent to which
remuneration is influenced by reported results;
▪ discussions with management and the Audit Committee
regarding known or suspected instances of non-compliance
with laws and regulations;
▪ evaluation of controls designed to prevent and detect
irregularities;
▪ review of Board minutes for any evidence of fraud or
non-compliance with laws and regulations; and
▪ assessment of journal entries to accounts that are considered
to carry a greater risk of fraud as part of our planned audit
approach.
Gresham Technologies plc Annual Financial Report 2020
61
FINANCIAL STATEMENTS Consolidated income statement
Revenue
Cost of sales
Gross profit
Adjusted administrative expenses
Adjusted operating profit
Adjusting administrative items:
Exceptional items
Impairment of development costs
Amortisation on acquired intangibles
Share-based payments
Total administrative expenses
Operating profit from continuing operations
Share of post-tax profit from joint venture
Finance revenue
Finance costs
Profit before taxation from continuing operations
Taxation
Profit/(loss) after taxation from continuing operations
Net gain on sale of discontinued operations
Profit after taxation from discontinuing operations
Profit attributable to the equity holders of the Parent
Earnings per share
Statutory
Basic earnings per share
Diluted earnings per share
Adjusted
Basic earnings per share
Diluted earnings per share
Earnings per share – continuing operations
Statutory
Basic earnings per share
Diluted earnings per share
Adjusted
Basic earnings per share
Diluted earnings per share
Year ended
31 December
2020
£’000
Year ended
31 December
2019
£’000
24,752
(3,860)
20,892
24,961
(3,933)
21,028
(19,054)
(19,302)
1,838
1,726
(400)
—
(893)
(220)
(1,513)
(20,567)
325
—
37
(54)
308
953
1,261
—
—
1,261
pence
1.84
1.80
4.04
3.96
1.84
1.80
4.04
3.96
(10)
(647)
(794)
(77)
(1,528)
(20,830)
198
66
104
(65)
303
(443)
(140)
1,985
53
1,898
pence
2.78
2.72
2.11
2.07
(0.21)
(0.21)
2.04
1.99
Notes
3,4
4
13
13
22
4,5
3,8
8
9
10
10
10
10
10
10
10
10
62
Gresham Technologies plc Annual Financial Report 2020
Financial Statements Consolidated statement of comprehensive income
Profit 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
Total other comprehensive expenses
Total comprehensive income for the year
Year ended
31 December
2020
£’000
Year ended
31 December
2019
£’000
1,261
1,898
(113)
(113)
1,148
(3)
(3)
1,895
Gresham Technologies plc Annual Financial Report 2020
63
FINANCIAL STATEMENTS Consolidated statement of financial position
Assets
Non-current assets
Property, plant and equipment
Right-of-use assets
Intangible assets
Deferred tax assets
Current assets
Trade and other receivables
Contract assets
Income tax receivable
Cash and cash equivalents
Total assets
Equity and liabilities
Equity attributable to owners of the Parent
Called up equity share capital
Share premium account
Own share reserve
Other reserves
Foreign currency translation reserve
Retained earnings
Total equity attributable to owners of the Parent
Non-current liabilities
Contract liabilities
Lease liabilities
Deferred tax liability
Provisions
Contingent consideration
Current liabilities
Trade and other payables
Lease liabilities
Income tax payable
Contingent consideration
Total liabilities
Total equity and liabilities
At
31 December
2020
£’000
At
31 December
2019
£’000
Notes
12
15
13
9
17
17
17
18
21
24
21
24
24
24
19
15
9
19
19
19
15
19
19
243
1,646
31,108
552
33,549
3,497
923
—
8,876
13,296
46,845
3,508
4,341
(778)
536
(194)
19,453
26,866
66
1,004
1,289
146
349
2,854
15,303
535
378
909
17,125
19,979
46,845
387
1,292
25,575
489
27,743
4,367
611
43
9,605
14,626
42,369
3,413
3,903
(945)
536
(81)
18,478
25,304
1,329
788
952
144
—
3,213
12,976
457
419
—
13,852
17,065
42,369
The financial statements were approved by the Board of Directors and authorised for issue on 8 March 2021.
On behalf of the Board
Ian Manocha
Chief Executive
8 March 2021
Tom Mullan
Chief Financial Officer
8 March 2021
64
Gresham Technologies plc Annual Financial Report 2020
Financial Statements
Consolidated statement of changes in equity
At 1 January 2019
Attributable profit for the period
Other comprehensive expenses
Total comprehensive (expense)/income
Exercise of share options
Purchase of own shares
Sale of own shares held by
Employee Share Ownership Trust
Share-based payments
Dividend paid
At 31 December 2019
Attributable profit for the period
Other comprehensive expense
Total comprehensive (expense)/income
Exercise of share options
Sale of own shares held by
Employee Share Ownership Trust
Share-based payments
Dividend paid
Notes
21
21
21
22
21
21
22
11
Share
capital
£’000
3,404
—
—
—
9
—
—
—
—
Share
premium
account
£’000
3,830
—
—
—
73
—
—
—
—
Own
share
reserve
£’000
—
—
—
—
—
(995)
50
—
—
Foreign
currency
translation
reserve
£’000
(78)
—
(3)
(3)
—
—
—
—
—
Other
reserves
£’000
536
—
—
—
—
—
—
—
—
Retained
earnings
£’000
16,842
1,898
—
1,898
—
—
—
77
(339)
Total
£’000
24,534
1,898
(3)
1,895
82
(995)
50
77
(339)
3,413
3,903
(945)
536
(81)
18,478
25,304
—
—
—
95
—
—
—
—
—
—
438
—
—
—
—
—
—
—
167
—
—
—
—
—
—
—
—
—
—
(113)
(113)
—
—
—
—
1,261
—
1,261
—
—
220
(506)
1,261
(113)
1,148
533
167
220
(506)
At 31 December 2020
3,508
4,341
(778)
536
(194)
19,453
26,866
Gresham Technologies plc Annual Financial Report 2020
65
FINANCIAL STATEMENTS Consolidated statement of cash flow
Cash flows from operating activities
Profit after taxation
Depreciation of property, plant and equipment
Amortisation of intangible assets
Impairment of intangible assets
Amortisation of right-of-use assets
Share-based payments
Net gain on sale of discontinued operations
Share of post-tax profit from joint venture
Decrease/(increase) in trade and other receivables
Increase in contract assets
Increase in trade and other payables
(Increase)/decrease in contract liabilities
Taxation
Movement in provisions
Net finance costs
Cash inflow from operations
Income taxes received
Income taxes paid
Net cash inflow from operating activities
Cash flows from investing activities
Interest received
Decrease in other financial assets – bank deposits/restricted cash
Purchase of property, plant and equipment
Proceeds from sale of property, plant and equipment
Payments to acquire subsidiary undertaking (net of cash)
Proceeds from sale of discontinued operations
Payments to acquire intangible fixed assets
Net cash used in investing activities
Cash flows from financing activities
Interest paid
Principal paid on lease liabilities
Dividend paid
Purchase of own shares by Employee Share Ownership Trust
Sale of own shares held by Employee Share Ownership Trust
Share issue proceeds
Net cash used in financing activities
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Exchange adjustments
Cash and cash equivalents at end of year
Year ended
31 December
2020
£’000
Year ended
31 December
2019
£’000
Notes
12
13
13
15
22
9
8
8
12
23
13
8
15
11
21
21
21
18
1,261
245
2,810
—
496
220
—
—
1,060
(312)
1,111
(1,263)
(953)
—
17
4,692
1,307
(510)
5,489
37
—
(87)
—
(1,900)
—
(3,565)
(5,515)
(16)
(576)
(506)
—
—
533
(565)
(591)
9,605
(138)
8,876
1,898
266
2,364
647
461
77
(1,985)
(66)
(210)
(33)
639
1,600
546
59
39
6,302
1,356
(75)
7,583
37
278
(178)
3
—
1,675
(3,266)
(1,451)
(17)
(511)
(339)
(995)
50
82
(1,730)
4,402
5,323
(120)
9,605
66
Gresham Technologies plc Annual Financial Report 2020
Financial Statements
Notes to the financial statements
1. Authorisation of financial statements and
statement of compliance with International
Financial Reporting Standards
Gresham Technologies plc is a public limited company incorporated
and domiciled in England and Wales. The Company’s ordinary
shares are traded as a premium listing on the London
Stock Exchange.
The financial statements of Gresham Technologies plc and its
subsidiaries (the “Group”) for the year ended 31 December 2020
were authorised for issue by the Board of Directors on 8 March
2021 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 adopted International Financial Reporting
Standards (“IFRSs”) as they apply to the financial statements
of the Group for the year ended 31 December 2020.
The principal accounting policies adopted by the Group are set
out below.
2. Accounting policies
Basis of preparation
The Group’s financial statements have been prepared in accordance
with international accounting standards in conformity with the
requirements of the Companies Act 2006 and in accordance with
international financial reporting standards adopted pursuant to
Regulation (EC) No 1606/2002 as it applies to the European Union.
The accounting policies which follow set out those policies which
apply in preparing the financial statements for the year ended
31 December 2020.
The Group’s financial statements have been prepared on a
historical cost basis.
The Group financial statements are presented in Sterling and
all values are rounded to the nearest thousand pounds (£’000)
except when otherwise indicated.
Basis of consolidation
The Group financial statements consolidate the financial
statements of Gresham Technologies plc and the entities it
controls (its subsidiaries) drawn up to 31 December each year.
The consolidated financial statements incorporate the financial
statements of the Company and its subsidiaries made up to the
reporting date. Investees are classified as subsidiaries where the
Company has control, which is achieved where the Company has
the power to govern the financial and operating policies of an
investee entity, exposure to variable returns from the investee
and the ability to use its power to affect those variable returns.
All intra-group transactions, balances, income and expenses are
eliminated on consolidation.
The consolidated financial statements incorporate the results
of business combinations using the acquisition method. In the
statement of financial position, the acquiree’s identifiable assets
and liabilities are initially recognised at their fair values at
acquisition date. The results of acquired entities are included in
the Consolidated Statement of Comprehensive Income from the
date at which control is obtained and are deconsolidated from
the date control ceases.
Going concern
The Group’s business activities, together with the factors likely
to affect its future development, performance and position, are
set out in the Strategic Report on pages 6 to 32. The financial
position of the Group and the principal risks and uncertainties
are also described in the Strategic Report.
The Group has sufficient financial resources together with good
relationships with a number of customers and suppliers across
different geographic areas and industries. The Group has access
to a strong underlying cash flow arising from long-established
maintenance businesses with long-standing blue-chip customers
and strong growth prospects being realised with its flagship
solution, CTC, and its other Clareti solutions. In assessing the future
financial performance of the Group, the Directors considered the
current uncertain economic outlook with regards to COVID-19.
After making enquiries, the Directors have a reasonable
expectation that the Company and the Group have adequate
resources to continue in operational existence for a period of at
least twelve months from the date of approval of the financial
statements. For this reason, they continue to adopt the going
concern basis in preparing the Annual Financial Report 2020.
Judgements and key sources 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.
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.
Capitalised development costs
The Group invests in the development of new and enhanced
features to its products. Development costs are accounted for
in accordance with IAS 38 “Intangible Assets” and costs that
meet the qualifying criteria are capitalised and systematically
amortised over the useful economic life of the intangible asset.
Determining whether development costs qualify for capitalisation
as intangible assets requires judgement as to the technical and
commercial viability of each asset created. These judgements are
applied consistently year to year with the Group evaluating whether
there are future economic benefits beyond the current period,
the stage at which technical feasibility has been achieved,
management’s intention to use or sell the product, the likelihood
of success of completion, the availability of technical resources
to complete the development and the ability to measure reliably
the expenditure attributed to each product.
Estimates are made to the applicable useful economic life of
each asset created. These estimates are continually reviewed
and updated based on past experience and reviews of competitor
products available in the market. The impact of reducing the
useful economic life by one year would increase the amortisation
charge for the year by £472,000; if the useful economic life was
increased by one year the amortisation charge is reduced
by £236,000.
The capitalised development cost is disclosed in note 13.
Gresham Technologies plc Annual Financial Report 2020
67
FINANCIAL STATEMENTS 2. Accounting policies continued
Estimates and assumptions continued
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 14.
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 14.
Revenue and profit recognition
Revenue and the associated profit are recognised from sale
of software licences, rendering of services, subscriptions and
maintenance and solution sales. When software licences are sold,
we must exercise judgement as to when the appropriate point
in time has passed at which all performance obligations for that
software licence have been performed, at which point revenue in
relation to the stand-alone sales price of the software licence is
recognised. Whilst in most cases performance obligations clearly
follow the commercial and contractual arrangement we have
agreed with the customer, in some cases the revenue streams
are combined as within an overall commercial arrangement.
Such combined circumstances require judgement to assess
performance obligations associated with each revenue stream
and further judgement as to when and how such performance
obligations have been discharged in order to recognise the
associated revenue. The estimation of the stage of completion,
along with the distinct performance obligations of multi-element
solution sales, represents a risk of incorrect revenue recognition.
Where licences are delivered to customers on commencement
of the contract, the licence fee is recognised upon completion of
performance obligations and the remaining revenue for support and
maintenance is subsequently recognised over the contract term.
In considering the distinct performance obligations of multi-element
solutions, instances may arise whereby the substance of the
performance obligations differs from the legal form of the contract.
In such circumstances, judgement is required to assess the
estimated stand-alone selling price of the constituent elements
and recognise revenue accordingly. In such instances we must
first determine whether:
1. the satisfaction of a performance obligation with a stand-alone
selling price is operationally, technically and functionally
separate, and deliverable separately, from other deliverables
to the customer; or
2. the satisfaction of a performance obligation with a stand-alone
selling price is not operationally, technically, functionally and
deliverable separate from other deliverables to the customer.
If the agreement is determined to be under category 1 above,
then the stand-alone sales price of each element of a typical
software, support and maintenance is determined, unbundled
and recognised appropriately for each element. If the agreement
is determined to be under category 2 above then the bundled fee
is recognised as the bundled services are delivered over the term
of the contract.
Judgement is exercised in setting the stand-alone selling prices
of each element of our bundled contracts. It was concluded that
the annual stand-alone sales price of standard support and
maintenance offerings will be equal to 20% of the five-year
software licence fee, or of the total combined five-year licence,
support and maintenance fees, the stand-alone sales price of the
licence will be 50% and the support and maintenance 50%. This
ratio is aligned to the proportion of development costs capitalised
in proportion to our annual support and maintenance costs.
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.
Valuation of intangible assets on business combinations
In determining the fair value of intangible assets arising on acquisition,
management is required to make judgements regarding the timing
and amount of future cash flows applicable to the businesses
being acquired, discounted using an appropriate discount rate.
Such judgements are based on current budgets and forecasts,
extrapolated for an appropriate period taking into account growth
rates and expected changes to selling prices and operating costs.
Management estimates the appropriate discount rate using pre-tax
rates that reflect current market assessments of the time value
of money and the risks specific to the businesses being acquired.
See note 13 and note 23 for further details.
Contingent consideration
Contingent consideration relating to acquisitions is included based
on management estimates of the most likely outcome. Those
judgements include the forecasting of a number of different
outcomes against the performance targets and estimating a
probability and risk of each outcome before arriving at a risk
weighted value of contingent consideration.
Further details are disclosed in note 23 to the financial statements.
Foreign currency translation
Transactions in foreign currencies are initially recorded in the
functional currency by applying an approximation of the spot
exchange rate ruling at the date of the transaction. Monetary
assets and liabilities denominated in foreign currencies are
retranslated at the functional currency rate of exchange ruling at
the statement of financial position date. All differences are taken
to the income statement; in the instance where the differences
on monetary assets and liabilities form part of the Group’s net
investment in foreign operations, they are moved to the statement
of other comprehensive income on consolidation and held in
a separate component of equity until the disposal of the net
investment, at which time they are recognised in profit or loss.
The assets and liabilities of foreign operations are translated
into Sterling at the rate of exchange ruling at the statement
of financial position date. Income and expenses are translated
at weighted average exchange rates for the year. The resulting
exchange differences are taken to the statement of other
comprehensive income and recognised directly to a separate
component of equity. On disposal of a foreign entity, the deferred
cumulative amount recognised in equity relating to that particular
foreign operation is recognised in the income statement.
Non-monetary items that are measured in terms of historical cost
in a foreign currency are translated using the exchange rates as at
the dates of the initial transactions, on consolidation; all assets
and liabilities of overseas subsidiaries which report in a different
functional currency are retranslated using the closing rate.
68
Gresham Technologies plc Annual Financial Report 2020
Notes to the financial statements continuedFinancial Statements 2. Accounting policies continued
Goodwill
Goodwill represents the excess of the cost of acquisition over
the fair value of the identifiable assets, liabilities and contingent
liabilities of the acquired entity at the date of acquisition. At the
date of acquisition, goodwill is allocated to cash-generating units
for the purpose of impairment testing. Goodwill is recognised as
an asset and assessed for impairment annually. Any impairment
is recognised immediately in the Group Statement of Comprehensive
Income. Once recognised, an impairment of goodwill is not reversed.
Intangible assets
Acquired intangibles
Intangible assets acquired separately are measured on initial
recognition at cost. The cost of intangible assets acquired in a
business combination is fair value as at the date of acquisition.
Following initial recognition, intangible assets are carried at cost
less any accumulated amortisation and any accumulated
impairment losses. Internally generated intangible assets are
subject to the same recognition tests as development costs,
and if met, they are capitalised.
Intangible assets with finite lives are amortised over their useful
economic lives and assessed for impairment whenever there is
an indication that they may be impaired. The amortisation period
and the amortisation method for an intangible asset with a finite
useful life is reviewed at least at each financial year end. Changes
in the expected useful life or the expected pattern of consumption
of future economic benefits embodied in the asset are accounted
for by changing the amortisation period or method, as appropriate,
and are treated as changes in accounting estimates. The amortisation
expense on intangible assets with finite lives is recognised in the
income statement in the expense category consistent with the
function of the intangible asset. The useful economic lives of
separately acquired software is deemed to be ten years and the
useful economic life of customer relations is between six and
eight years; the charge in the income statement is made within
the amortisation for acquired intangibles.
Internally generated intangibles
The Group has capitalised development costs in respect of the
Clareti platform which has been assessed against the required
capitalisation criteria and a remaining useful economic life of
13 years reflecting the maturity and availability of comparable
solutions in our markets. 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. The useful economic lives are assessed to be
between four and fourteen years. 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.
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 ranges between two and ten years
depending on their nature. Amortisation charges in respect
of intangible assets are included in administrative expenses.
Research and development costs
Research costs are expensed as incurred. 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.
Property, plant and equipment
Property, plant and equipment is stated at cost less accumulated
depreciation and accumulated impairment losses. Cost comprises
the aggregate amount paid and the fair value of any other
consideration given to acquire the asset and includes costs directly
attributable to making the asset capable of operating as intended.
Depreciation is provided on all property, plant and equipment on
a straight-line basis over its expected useful life as follows:
▪ Fixtures and fittings – over the term of the underlying
property lease.
▪ Plant and equipment – over lives ranging between one and ten
years to write down the assets to their residual value based on
current prices for an asset of the age the plant and equipment
is expected to be at the end of its useful life.
The carrying values of property, plant and equipment are
reviewed for impairment if events or changes in circumstances
indicate the carrying value may not be recoverable, and are
written down immediately to their recoverable amount. Useful
lives and residual values are reviewed annually and where
adjustments are required these are made prospectively.
An item of property, plant and equipment is derecognised upon
disposal or when no future economic benefits are expected to
arise from the continued use of the asset. Any gain or loss
arising on derecognition of the asset is included in the income
statement in the period of derecognition.
Leases
All leases are accounted for by recognising a right-of-use asset
and a lease liability except for leases of low value assets and
leases with a duration of twelve months or less.
Lease liabilities are measured at the present value of the contractual
payments due to the lessor over the lease term, with the discount
rate determined by reference to the rate inherent in the lease unless
(as is typically the case) this is not readily determinable, in which
case the Group’s incremental borrowing rate on commencement
of the lease is used. Variable lease payments are only included
in the measurement of the lease liability if they depend on an
index or rate. In such cases, the initial measurement of the lease
liability assumes the variable element will remain unchanged
throughout the lease term. Other variable lease payments are
expensed in the period to which they relate.
Gresham Technologies plc Annual Financial Report 2020
69
FINANCIAL STATEMENTS 2. 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 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 provided by the supplier as part of the contract.
Impairment of non-financial assets
The Group assesses at each reporting date whether there is an
indication that any non-financial assets may be impaired. If any
such indication exists, or when annual impairment testing for an
asset is required, the Group makes an estimate of the asset’s
recoverable amount. An asset’s recoverable amount is the higher
of an asset’s or cash-generating unit’s fair value less costs to sell
and its value in use and is determined for an individual asset,
unless the asset does not generate cash inflows that are largely
independent of those from other assets or groups of assets.
Where the carrying amount of an asset exceeds its recoverable
amount, the asset is considered impaired and is written down to
its recoverable amount. In assessing value in use, the estimated
future cash flows are discounted to their present value using a
pre-tax discount rate that reflects current market assessments
of the time value of money and the risks specific to the asset. In
determining fair value less costs to sell, an appropriate valuation
model is used incorporating industry standard valuation multiples
or other available fair value indicators. Impairment losses on
continuing operations are recognised in the income statement
in those expense categories consistent with the function of the
impaired asset.
An assessment is made at each reporting date as to whether there
is any indication that previously recognised impairment losses
may no longer exist or may have decreased. If such indication
exists, the recoverable amount is estimated. A previously
recognised impairment loss is reversed only if there has been
a change in the estimates used to determine the asset’s
recoverable amount since the last impairment loss was
recognised. If that is the case the carrying amount of the asset
is increased to its recoverable amount. Impairment charges
on goodwill are considered permanent and cannot be reversed.
That increased amount cannot exceed the carrying amount
that would have been determined, net of depreciation, had no
impairment loss been recognised for the asset in prior years.
Such reversal is recognised in profit or loss. After such a reversal
the depreciation charge is adjusted in future periods to allocate
the asset’s revised carrying amount, less any residual value, on a
systematic basis over its remaining useful life.
The Group assesses at each reporting date whether there is an
indication that contract assets may be impaired by applying the
IFRS 9 simplified approach to measuring expected credit losses
using a lifetime expected credit loss provision.
Provisions
A provision is recognised when the Group has a legal or constructive
obligation as a result of a past event, it is probable that an outflow
of economic benefits will be required to settle the obligation, and
a reliable estimate can be made of the amount of the obligation.
If the effect is material, expected future cash flows are discounted
using a current pre-tax rate that reflects, where appropriate, the
risks specific to the liability.
Where the Group expects some or all of a provision to be reimbursed,
for example under an insurance policy, the reimbursement is
recognised as a separate asset but only when recovery is virtually
certain. The expense relating to any provision is presented in the
income statement net of any reimbursement. Where discounting
is used, the increase in the provision due to unwinding the
discount is recognised as a finance cost.
Financial assets
Impairment of financial assets
The Group assesses at each statement of financial position date
whether a financial asset or group of financial assets is impaired.
70
Gresham Technologies plc Annual Financial Report 2020
Notes to the financial statements continuedFinancial Statements 2. Accounting policies continued
Financial assets continued
Financial assets
The Group’s financial assets are all classified within the amortised
cost category. The Group’s accounting policy for this category is
as follows:
Assets carried at amortised cost
These assets arise principally from the provision of sales and
services of software and support and maintenance to customers
(e.g. trade receivables), but also incorporate other types of
financial assets where the objective is to hold these assets in
order to collect contractual cash flows and the contractual cash
flows are solely payments of principal and interest. They are
initially recognised at fair value plus transaction costs that are
directly attributable to their acquisition or issue, and are
subsequently carried at amortised cost using the effective
interest rate method, less provision for impairment.
Impairment provisions for current and non-current trade receivables
are recognised based on the simplified approach within IFRS 9
using a provision matrix in the determination of the lifetime
expected credit losses. During this process the probability of
the non-payment of the trade receivables is assessed. This
probability is then multiplied by the amount of the expected loss
arising from default to determine the lifetime expected credit
loss for the trade receivables. For trade receivables, which
are reported net, such provisions are recorded in a separate
provision account with the loss being recognised within cost of
sales in the Consolidated Statement of Comprehensive Income.
On confirmation that the trade receivable will not be collectable,
the gross carrying value of the asset is written off against the
associated provision.
If, in a subsequent period, the amount of the impairment
loss decreases and the decrease can be related objectively
to an event occurring after the impairment was recognised,
the previously recognised impairment loss is reversed. Any
subsequent reversal of an impairment loss is recognised in the
income statement to the extent that the carrying value of the
asset does not exceed its amortised cost at the reversal date.
Deferred income tax is recognised on all temporary differences
arising between the tax bases of assets and liabilities and their
carrying amounts in the financial statements, with the
following exceptions:
▪ where the temporary difference arises from the initial recognition
of goodwill or of an asset or liability in a transaction that is not
a business combination that at the time of the transaction
affects neither accounting nor taxable profit or loss;
▪ in respect of taxable temporary differences associated with
investments in subsidiaries, associates and joint ventures,
where the timing of the reversal of the temporary differences
can be controlled and it is probable that the temporary
differences will not reverse in the foreseeable future; and
▪ deferred income tax assets are recognised only to the extent
that it is probable that taxable profit will be available against
which the deductible temporary differences, carried forward
tax credits or tax losses can be utilised.
Deferred income tax assets and liabilities are measured at the
tax rates that are expected to apply when the related asset is
realised or liability is settled, based on tax rates and laws
enacted or substantively enacted at the statement of financial
position date.
The carrying amount of deferred income tax assets is reviewed
at each statement of financial position date. Deferred income tax
assets and liabilities are offset only if a legally enforceable right
exists to set off current tax assets against current tax liabilities,
the deferred income taxes relate to the same taxation authority
and that authority permits the Group to make a single net payment.
Income tax is charged or credited to other comprehensive
income or directly to equity if it relates to items that are credited
or charged to other comprehensive income or directly to equity.
Otherwise, income tax is recognised in the income statement.
Purchases and sales of financial assets measured at fair value
through other comprehensive income are recognised on
settlement date with any change in fair value between trade date
and settlement date being recognised in the fair value through
other comprehensive income reserve.
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.
Financial liabilities
The Group classifies its financial liabilities into one of two categories,
depending on the purpose for which the liability was acquired.
Cash and cash equivalents includes 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 Consolidated Statement of Cash Flow – bank overdrafts.
Bank overdrafts are shown within loans and borrowings in current
liabilities on the Consolidated Statement of Financial Position.
Cash and cash equivalents
Cash and short-term deposits in the Consolidated Statement of
Financial Position comprise cash at bank and in hand and short-term
deposits with an original maturity of three months or less.
For the purpose of the Consolidated Statement of Cash Flow,
cash and cash equivalents consist of cash and cash equivalents
as defined above, net of outstanding bank overdrafts.
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.
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
carried at amortised cost using the effective interest method.
Gresham Technologies plc Annual Financial Report 2020
71
FINANCIAL STATEMENTS 2. Accounting policies continued
Derecognition of financial assets and liabilities
A financial asset or liability is generally derecognised when the
contract that gives rise to it is settled, sold, cancelled or expires.
Where an existing financial liability is replaced by another from
the same lender on substantially different terms, or the terms of
an existing liability are substantially modified, such an exchange
or modification is treated as a derecognition of the original
liability and the recognition of a new liability, such that the
difference in the respective carrying amounts together with any
costs or fees incurred are recognised in profit or loss.
Pensions
Contributions to defined contribution schemes are recognised in
the income statement in the period in which they become payable.
Dividends
Dividends are recognised when they become legally payable.
In the case of interim dividends to equity shareholders, this is
when declared by the Directors. In the case of final dividends,
this is when approved by the shareholders at the AGM.
Revenue recognition
Revenue, comprising sales of products and services to third
parties, is recognised to the extent that satisfaction of contractual
performance obligations has occurred and it is probable that the
economic benefits will flow to the Group and the revenue can be
reliably measured. Revenue is measured at the stand-alone
selling price of the performance obligation delivered, excluding
discounts, rebates, VAT and other sales taxes. To note there is no
material impact of variable consideration or financing
components across all revenue streams.
The following criteria must also be met before revenue is recognised:
Software licences
Revenue on software licences is recognised when all of the
following criteria are met:
▪ persuasive evidence of an arrangement exists, such as a
signed contract or purchase order;
▪ satisfaction of the contracted performance obligations has been
met, which in the case of software licences typically means
delivery has occurred and no future elements to be delivered
are essential to the functionality of the delivered element;
▪ a stand-alone selling price of the performance obligation can
be measured; and
▪ collectability is probable.
Provision of services
Revenue and profits from the provision of professional services,
such as implementation, development, training and consultancy,
are delivered under a time and materials type contract and are
therefore recognised over time and based upon number of hours
worked. On occasion fixed price services contracts are entered
into, upon which revenue is recognised on a percentage-of-
completion basis, as costs incurred relate to total costs for the
contract, when the outcome of a contract can be estimated
reliably. Determining whether a contract’s outcome can be
estimated reliably requires management to exercise judgement,
whilst calculation of the contract’s profit requires estimates of
the total contract costs to completion. Cost estimates and
judgements are continually reviewed and updated as determined
by events or circumstances.
Revenue from this revenue stream creates contract assets through
yet to be billed time input and expenses at the reporting date.
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.
Solution sales
Contracts for the delivery of solutions with multiple elements,
typically involving software licences, rendering of services,
support, maintenance and infrastructure are unbundled where
possible and revenue is recognised based on the accounting
policy applicable to each constituent part, for example the
stand-alone selling price of the software licence is recognised at
a point in time, upon satisfaction of the performance obligations
associated to that licence, and the stand-alone selling price of
software maintenance and support is recognised over the period
over which the service is provided. A typical example of such a
scenario is where we sell a subscription licence but are not
contracted to provide the hosted infrastructure to deploy the
software upon – the customer deploys the software on-premise
or on a cloud environment for which we are not responsible.
We have many instances where unbundling is not possible; this
is where a bundled element cannot technically or operationally
be provided without another. The typical example of this is when
the customer contracts our hosted cloud software offerings,
under which the customer cannot gain benefit from the software
without the Group also providing, and continuing to provide, the
hosted infrastructure upon which software is deployed. Where
objective unbundling of a solution is not possible, revenue is
recognised over the period of the contractual service provision.
Interest income
Interest income is recognised as finance revenue as interest
accrues using the effective interest method. The effective
interest rate is the rate that exactly discounts estimated future
cash receipts through the expected life of the financial
instrument to its net carrying amount.
Share-based payments
Equity-settled transactions
The cost of equity-settled transactions with employees is measured
by reference to the fair value at the date at which they are granted
and is recognised as an expense over the vesting period, which
ends on the date on which the relevant employees become fully
entitled to the award.
Fair value of awards with a market condition-based performance
target is determined by an external valuer using a Monte Carlo
simulation pricing model. In valuing equity-settled transactions,
no account is taken of any vesting conditions, other than
conditions linked to the price of the shares of the Company
(market conditions).
Fair value of awards with a financial result-based performance
target is determined by management using the Black Scholes
pricing model.
No expense is recognised for awards that do not ultimately vest,
except for awards where vesting is conditional upon a market
condition, which are treated as vesting irrespective of whether
or not the market condition is satisfied, provided that all other
vesting conditions are satisfied.
72
Gresham Technologies plc Annual Financial Report 2020
Notes to the financial statements continuedFinancial Statements 2. Accounting policies continued
Share-based payments continued
Equity-settled transactions continued
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
and the associated credit entry is made against equity.
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.
3. Revenue
Revenue disclosed in the income statement is analysed as follows:
Provision of software and services
Finance revenue
Revenue from continuing operations
Revenue from discontinued operations
Total revenue
Exceptional items
Exceptional items are disclosed separately in the financial
statements where it is necessary to do so to provide further
understanding of the financial performance of the Group. They are
non-recurring items of income or expense that have been shown
separately due to the significance of their nature or amount.
Changes in accounting policies
New standards, interpretations and amendments effective
from 1 January 2020
A number of new standards, interpretations and amendments
are effective for the year ended 31 December 2020, which have
been listed below; these have had no impact on the Group’s
accounting policies and disclosures in these financial statements.
▪ IAS 1 “Presentation of Financial Statements” and IAS 8
“Accounting Policies, Changes in Accounting Estimates
and Errors”
▪ Amendments to IFRS 3 “Business Combinations” (Definition of
a Business)
▪ Amendments to IFRS 9, IAS 39 and IFRS 7 “Interest Rate
Benchmark Reform”
▪ Amendments to IAS 1 and IAS 8 “Definition of Material”
▪ Amendments to References to the Conceptual Framework in
IFRS Standards
New standards, interpretations and amendments
not yet effective
Accounting standards, amendments to standards and
interpretations issued by the IASB that are effective for the
period beginning 1 January 2021 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 2021 which have been adopted in these financial statements.
Note
8
2020
£’000
24,752
37
24,789
—
24,789
The Group has disaggregated revenue into various categories in the following table which is intended to:
▪ depict how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic data; and
▪ enable users to understand the relationship with the revenue segment information provided in note 4.
2020
Non-recurring software revenue (software licences)
Recurring software revenue (annually recurring software licences and
support and maintenance)
Rendering of services
Timing of revenue recognition
Non-annually recurring – at a point in time
Annually recurring – at a point in time
Rateably recognised – over contract period
Clareti
Solutions
£’000
—
11,428
4,025
15,453
£’000
—
2,891
12,562
15,453
Other
Solutions
£’000
—
3,674
721
4,395
£’000
—
—
4,395
4,395
Contracting
Services
£’000
—
—
4,904
4,904
£’000
—
—
4,904
4,904
Gresham Technologies plc Annual Financial Report 2020
73
2019
£’000
24,961
104
25,065
64
25,129
Total
£’000
—
15,102
9,650
24,752
£’000
—
2,891
21,861
24,752
FINANCIAL STATEMENTS 3. Revenue continued
2019
Non-recurring software revenue (software licences)
Recurring software revenue (annually recurring software licences and
support and maintenance)
Rendering of services
Timing of revenue recognition
Non-annually recurring – at a point in time
Annually recurring – at a point in time
Rateably recognised – over contract period
Contract balances
At 1 January
Amounts included in contract liabilities that were recognised
as revenue during the period
Acquisition of Inforalgo
Excess of revenue recognised over cash (or rights to cash)
being recognised during the period
Cash received in advance of performance and not recognised
as revenue during the period
As at December
Clareti Solutions
£’000
Other Solutions
£’000
Contracting
Services
£’000
718
10,362
4,409
15,489
£’000
718
2,386
12,385
15,489
Contract
assets
2020
£’000
3,829
—
93
(491)
—
3,431
300
3,099
679
4,078
£’000
300
—
3,778
4,078
Contract
assets
2019
£’000
3,809
—
—
20
—
3,829
—
—
5,394
5,394
£’000
—
—
5,394
5,394
Contract
liabilities
2020
£’000
(10,156)
9,983
(655)
—
Total
£’000
1,018
13,461
10,482
24,961
£’000
1,018
2,386
21,557
24,961
Contract
liabilities
2019
£’000
(8,556)
8,070
—
—
(10,268)
(11,096)
(9,670)
(10,156)
Contract assets relate to services performed but do not have an unconditional right to payment and are disclosed within the
statement of financial position.
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 each statement of
financial position date which do not necessarily equal to the amount of revenue recognised on the contracts and relate to
performance obligations yet to be satisfied. These are disclosed within trade and other payables.
Amounts due to be recognised in more than one year are £66,000 (2019: £1,329,000). Trade receivables included in the above as at
1 January 2019 were £3,231,000.
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 not provided for any impairment. See note 17 for further details.
4. Segment information
The segmental disclosures reflect the analysis presented on a monthly basis to the chief operating decision maker of the business,
the Chief Executive Officer and the Board of Directors.
In addition, the split of revenues and non-current assets by the UK and overseas have been included as they are specifically required
by IFRS 8 “Operating Segments”.
For management purposes, the Group is organised into the following reportable segments:
▪ Clareti Solutions – supply of solutions predominantly to the finance and banking markets across Asia Pacific, EMEA and North America.
Includes both software and services that can be accessed in the cloud, on-premise or deployed into hybrid environments. These
primary offerings within this segment include:
– Clareti Control products:
• The only modern enterprise-grade business self-service platform for the reconciliation and control of “any and all” transaction
data in financial markets.
• Disrupting markets dominated by legacy vendors whose inflexible technology fails to achieve more granular and real-time data
control, or replacing in-house systems and manual processes.
• Sold as applications for specific use cases including Clareti Transaction Control, Clareti Cash Control, Clareti Securities Control
and Clareti Regulatory Control.
74
Gresham Technologies plc Annual Financial Report 2020
Notes to the financial statements continuedFinancial Statements 4. Segment information continued
– Clareti Connect products:
• A unique service that enables customers to participate in the complex inter-connected global financial system without having
to worry about integration risk, cost and time to market.
• Enables institutions to seamlessly connect their banking, payments, trading, accounting and regulatory systems and external
partners with intelligent straight-through processing in a way that is reliable and cost effective.
• Sold primarily as a cloud service bringing together tools and software libraries built or acquired by Gresham into a rich menu
of industry connectivity and data transformation services.
▪ Other Solutions – supply of a range of well-established solutions to enterprise-level customers in a variety of end markets.
▪ Contracting Services – supply of IT contracting services to one banking customer.
Transfer prices between segments are set on an arm’s length basis in a manner similar to transactions with third parties. Segment revenue,
segment expense and segment result include transfers between business segments. Those transfers are eliminated on consolidation.
Other
Solutions
£’000
Contracting
Services
£’000
Adjustments,
central overheads
and elimination
£’000
Consolidated
£’000
2020
Revenue
Cost of sales
Cost of sales capitalised as intangible asset
Gross profit
Gross profit %
Contracted administrative expenses
Gross profit after contracting fully costed
Gross profit %
Adjusted administrative expenses
Adjusted operating (loss)/profit
Adjusting items:
Exceptional costs
Amortisation of acquired intangibles
Share-based payments
Adjusting administrative expenses
Operating (loss)/profit from continuing operations
Finance revenue
Finance costs
Profit before taxation from continuing operations
Taxation
Profit after taxation from continuing operations
Adjusted operating (loss)/profit
Amortisation of intangibles
Depreciation of property, plant and equipment
Amortisation of right-of-use assets
Bank charges
Adjusted EBITDA – continuing operations
Development costs capitalised
Principal paid on lease liabilities
Adjusted cash EBITDA
Segment assets
Segment liabilities
Notes
3
4
13
22
8
8
9
13
12
15
8
4
13
15
Clareti
Solutions
£’000
15,453
(1,031)
2
14,424
93%
(96)
14,328
93%
(15,753)
(1,425)
—
—
—
—
4,395
(1,605)
—
2,790
63%
—
2,790
63%
(159)
2,631
—
—
—
—
4,904
(1,226)
—
3,678
75%
(3,046)
632
13%
—
632
—
—
—
—
(1,425)
2,631
632
(1,425)
1,917
213
496
(13)
1,188
(3,561)
(576)
(2,949)
2,631
—
—
—
—
—
—
—
2,631
632
—
—
—
—
—
—
—
632
—
—
—
—
—
—
—
—
(400)
(893)
(220)
(1,513)
(1,513)
—
—
—
—
—
—
—
—
—
24,752
(3,862)
2
20,892
84%
(3,142)
17,750
72%
(15,912)
1,838
(400)
(893)
(220)
(1,513)
325
37
(54)
308
953
1,261
1,838
1,917
213
496
(13)
4,451
(3,561)
(576)
314
46,845
(19,979)
Gresham Technologies plc Annual Financial Report 2020
75
FINANCIAL STATEMENTS Other
Solutions
£’000
Contracting
Services
£’000
Adjustments,
central and
eliminations
£’000
Consolidated
£’000
4. Segment information continued
2019
Revenue
Cost of sales
Cost of sales capitalised as intangible asset
Gross profit
Gross profit %
Contracted administrative expenses
Gross profit after contracting fully costed
Gross profit %
Adjusted administrative expenses
Adjusted operating (loss)/profit from continuing operations
Adjusting items:
Exceptional costs
Impairment of development costs
Amortisation of acquired intangibles
Share-based payments
Adjusting administrative expenses
Operating (loss)/profit from continuing operations
Share of post-tax profit from joint venture
Finance revenue
Finance costs
Profit before taxation from continuing operations
Taxation
Loss after taxation from continuing operations
Net gain on sale of discontinued operations
Profit after taxation from discontinuing operations
Profit after taxation
Adjusted operating (loss)/profit
Amortisation of intangibles
Depreciation of property, plant and equipment
Amortisation of right-of-use assets
Share of post-tax profit from joint venture
Bank charges
Adjusted EBITDA – continuing operations
Development costs capitalised
Principal paid on lease liabilities
Adjusted cash EBITDA
Segment assets
Segment liabilities
Notes
3
4
13
13
22
8
8
9
13
12
15
8
4
13
15
Clareti
Solutions
£’000
15,489
(1,089)
10
14,410
93%
—
14,410
93%
(16,097)
(1,687)
—
—
—
—
—
4,078
(1,185)
—
2,893
71%
—
2,893
71%
(143)
2,750
—
—
—
—
—
5,394
(1,669)
—
3,725
69%
(3,062)
663
12%
—
663
—
—
—
—
—
(1,687)
2,750
663
(1,687)
1,570
266
461
—
(13)
597
(3,259)
(511)
(3,173)
2,750
—
—
—
—
—
2,750
—
—
2,750
663
—
—
—
—
—
663
—
—
663
—
—
—
—
—
—
—
—
—
—
(10)
(647)
(794)
(77)
(1,528)
(1,528)
—
—
—
—
66
—
66
—
—
66
24,961
(3,943)
10
21,028
84%
(3,062)
17,966
72%
(16,240)
1,726
(10)
(647)
(794)
(77)
(1,528)
198
66
104
(65)
303
(443)
(140)
1,985
53
1,898
1,726
1,570
266
461
66
(13)
4,076
(3,259)
(511)
306
42,369
(17,065)
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 £11,388,000 (2019: £10,892,000) which includes low-margin
contracting revenue of £5,115,000 (2019: £5,394,000) which falls predominantly within the Contracting Services segment.
76
Gresham Technologies plc Annual Financial Report 2020
Notes to the financial statements continuedFinancial Statements 4. Segment information continued
Adjusting administrative items
Operating performance is analysed excluding exceptional items, share-based payment charges, amortisation from acquired intangibles
and impairments of development costs which is consistent in with the way in which the Board reviews the financial results of the
Group. This is also consistent with the manner in which similar small-cap LSE (or AIM) listed companies present their results and how
we understand the investment community to assess performance, with this particularly being the case for growth shares in which the
recurring cash performance is considered important.
The adjusting administrative items are:
Acquisition and associated integration costs
Advisory fees for new share option scheme
Negative goodwill arising on acquisition of remaining shares in joint venture
Advisory fees for establishment of joint venture and all-staff incentive scheme
Exceptional income
Exceptional items
Impairment of development costs
Amortisation on acquired intangibles
Share-based payments
Total adjusting administrative items
2020
£’000
423
33
—
—
(56)
400
—
893
220
2019
£’000
—
—
(21)
31
—
10
647
794
77
1,513
1,528
During the year the Group incurred £423,000 (2019: £nil) exceptional costs relating to legal, due diligence and professional fees for
acquisitions and associated integration costs.
Exceptional legal and tax advisory costs were incurred in the year of £33,000 (2019: £nil) associated with implementing a new ten-year
share option incentive scheme. These costs are not expected to occur for a further ten years.
£56,000 was received during the year following an initiative by the Australian Government to support businesses during the COVID-19
pandemic. This income has been treated as exceptional as it is non-recurring.
The negative goodwill incurred in the prior year was due to the acquisition of the remaining 50% of the share capital in GMS Loan
Technologies Limited. As the purchase price was lower than the net assets acquired the negative goodwill created is disclosed within
exceptional items as a non-recurring item.
Development costs of £nil (2019: £647,000) were impaired during the year relating to the termination of a joint venture arrangement;
these costs are considered to be significant and non-recurring.
Due to the amount and nature of amortisation of acquired intangibles and share-based payments both costs were treated as an
adjusting administrative item.
Adjusted EBITDA – continuing operations
Adjusted EBITDA – continuing operations 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.
Profit before taxation
Adjusting items:
Amortisation of intangibles
Impairment of development costs
Depreciation of property, plant and equipment
Amortisation of right-of-use assets
Notional interest on lease liabilities
Finance revenue
Interest payable
EBITDA
Exceptional items
Share-based payments
Adjusted EBITDA – continuing operations
Notes
13
13
12
15
8
8
8
4
22
2020
£’000
308
2,810
—
213
496
38
(37)
3
3,831
400
220
4,451
2019
£’000
303
2,364
647
266
461
48
(104)
4
3,989
10
77
4,076
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.
Gresham Technologies plc Annual Financial Report 2020
77
FINANCIAL STATEMENTS
4. Segment information continued
Geographic information
Revenues from external customers (by destination)
UK
EMEA
United States
Americas
Australia
Asia Pacific
2020
£’000
6,719
2,593
3,038
494
11,413
495
24,752
2019
£’000
6,485
3,698
2,005
207
11,117
1,449
24,961
EMEA includes revenue from external customers located primarily in Germany, France, Luxembourg and Switzerland. Asia Pacific
includes revenue from external customers located primarily in Malaysia and Singapore.
Non-current assets
UK
EMEA
North America
Asia Pacific
2020
£’000
32,269
588
9
683
33,549
Non-current assets consist of property, plant and equipment, right-of-use assets, intangible assets and deferred tax assets.
5. Group operating profit
The Group operating profit is stated after charging:
Research and development costs written off
Impairment of development costs
Amortisation of deferred development costs recognised in administration expenses
Total research and development costs
Depreciation of property, plant and equipment
Amortisation of right-of-use assets
Amortisation of intangible assets (excluding development costs)
Total depreciation, impairment and amortisation expense
Employee benefit expenses
Net foreign currency differences (gains)/losses
Notes
13
13
12
15
13
7
2020
£’000
1,049
—
1,863
2,912
245
496
947
1,688
16,641
(7)
2019
£’000
26,366
632
17
728
27,743
2019
£’000
1,127
647
1,502
3,276
266
461
862
1,589
15,929
99
6. Auditor’s remuneration
The Group paid the following amounts to its auditor in respect of the audit of the financial statements and for other services provided
to the Group.
Audit fees
Audit of the Group financial statements and associated company
Other fees to the auditor
– Auditing the accounts of subsidiaries
– Audit of acquisition
Non-audit fees
Subsidiary company fees
78
Gresham Technologies plc Annual Financial Report 2020
2020
£’000
2019
£’000
27
84
10
121
—
—
24
73
—
97
19
19
Notes to the financial statements continuedFinancial Statements 7. Staff costs and Directors’ emoluments
The following disclosures in respect of the consolidated income statement items are presented in respect of continuing operations
only, with comparatives restated where appropriate to exclude discontinuing operations from these disclosures.
Staff and Director costs
31 December 2020
Wages and salaries
Social security costs
Other pension costs
31 December 2019
Wages and salaries
Social security costs
Other pension costs
Income
statement
£’000
9,129
724
434
10,287
Capitalised
development
costs
£’000
2,836
299
77
3,212
Total excluding
contracting
£’000
Contracting
costs expensed
£’000
Discontinued
operations
£’000
11,965
1,023
511
13,499
2,703
182
257
3,142
—
—
—
—
Income
statement
£’000
Capitalised
development
£’000
Total excluding
contracting
£’000
Contracting
costs expensed
£’000
Discontinued
operations
£’000
9,189
741
501
10,431
2,360
232
81
2,673
11,549
973
582
13,104
2,422
166
230
2,818
6
1
—
7
Included in wages and salaries is a total expense of share-based payments of £220,000 (2019: £77,000) 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:
Management
Sales and administration
Technical
Total
Contracting services
Directors’ emoluments
Remuneration
Social security costs
Bonuses
Pension
Share-based payments
Number of Directors accruing benefits under defined contribution schemes
2020
11
32
107
150
20
2020
£’000
618
100
180
22
68
988
2
Share-based payments in respect of Directors include the cumulative effect of updates to the assumptions used within the
Black Scholes model that calculates the share-based payment charge recorded.
8. Finance revenue and costs
Finance revenue
Bank interest receivable
Release of contingent consideration
Total finance revenue
Finance costs
Notional interest on lease liabilities
Other interest payable
Other bank charges
Total finance costs
2020
£’000
37
—
37
38
3
13
54
Total
£’000
14,668
1,205
768
16,641
Total
£’000
13,977
1,140
812
15,929
2019
9
27
103
139
13
2019
£’000
581
87
99
41
38
846
2
2019
£’000
37
67
104
48
4
13
65
Gresham Technologies plc Annual Financial Report 2020
79
FINANCIAL STATEMENTS 9. Taxation
The following disclosures in respect of the consolidated income statement items are presented in respect of continuing operations
only, with comparatives restated where appropriate to exclude discontinuing operations from these disclosures.
There is a no tax charge in respect of discontinuing operations for the year ended 31 December 2020 (2019: £nil).
Tax on profit on ordinary activities
Tax charge in the income statement
Current income tax
Overseas tax charge – adjustment to previous years
Overseas tax charge – current year
UK corporation tax credit – adjustment to previous years
Total current income tax
Deferred income tax
Movement in net deferred tax asset
Tax rate change adjustments
Total deferred income tax
Total (credit)/charge in the income statement
2020
£’000
(124)
599
(1,307)
(832)
(202)
81
(121)
(953)
2019
£’000
186
279
(568)
(103)
546
—
546
443
Reconciliation of the total tax charge
The tax charge in the income statement for the year is lower (2019: lower) than the standard rate of corporation tax in the UK of 19.0%
(2019: 19.0%). The differences are reconciled below:
Profit before taxation
Profit before taxation multiplied by the UK standard rate of corporation tax of 19.0% (2019: 19.0%)
Expenses not deductible for tax purposes
Differences in tax rates
Overseas tax (credit)/charge – adjustment to previous years
Research and development credit – previous year
Research and development enhanced relief
Movement in unrecognised losses carried forward
Movement in unrecognised temporary differences
Movement in unrecognised fixed asset temporary differences
Temporary difference on share-based payments
Temporary movement on acquired intangibles
Tax rate change adjustments
Total tax (credit)/charge reported in the income statement
2020
£’000
308
59
137
168
(124)
(1,307)
(1,424)
1,359
211
(16)
73
(170)
81
(953)
2019
£’000
2,341
445
101
160
121
(568)
(1,262)
1,339
227
242
(231)
(131)
—
443
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 £21,000
(2019: £1,000).
Temporary differences associated with Group investments
At 31 December 2020, there was no recognised deferred tax liability (2019: £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.
80
Gresham Technologies plc Annual Financial Report 2020
Notes to the financial statements continuedFinancial Statements 9. Taxation continued
Deferred tax
Deferred tax assets/(liabilities)
2020
1 January
Movement in the period:
– Tax losses
– Employee share award schemes
– Qualifying research and development expenditure
– Fixed asset timing differences
– Acquired intangibles
Acquisition of intangibles in subsidiaries
Impact of change in tax rate
31 December
2019
1 January
Movement in the period:
– Tax losses
– Employee share award schemes
– Qualifying research and development expenditure
– Fixed asset timing differences
– Acquired intangibles
31 December
Comprising:
Tax losses
Employee share award schemes
Qualifying research and development expenditure
Acquired intangibles
Fixed asset timing differences
31 December
Asset
£’000
489
411
(219)
(513)
353
—
—
31
552
Asset
£’000
1,166
(886)
228
(157)
138
—
489
Liability
£’000
(952)
—
—
—
—
170
(395)
(112)
(1,289)
Liability
£’000
(1,083)
—
—
—
—
131
(952)
2020
£’000
2,784
145
(3,079)
(1,289)
702
(737)
Net
£’000
(463)
154
(262)
(211)
351
170
(395)
(81)
(737)
Net
£’000
83
(886)
228
(157)
138
131
(463)
2019
£’000
2,353
364
(2,566)
(952)
338
(463)
A deferred tax asset of £1,326,000 (2019: £546,000) has been recognised in the year in respect of tax losses and capital allowances in
excess of depreciation and other temporary differences.
Unrecognised potential deferred tax assets
The deferred tax not recognised in the Consolidated Statement of Financial Position is as follows:
Temporary differences
Tax losses
Unrecognised deferred tax asset
Gross temporary differences unrecognised
Gross tax losses unrecognised
Gross temporary timing differences unrecognised
2020
£’000
—
1,458
1,458
—
6,459
6,459
2019
£’000
5
603
608
31
2,811
2,842
Future tax rates
The expected reduction in the main UK corporation tax rate to 17% from 1 April 2020 enacted by the Finance Act 2016 was reversed
in the Finance Act 2020. Therefore, the UK statutory tax rate remains at 19% and the rate used to calculate deferred tax balances at
31 December 2020 has increased from 17% to 19%.
The Group’s recognised and unrecognised deferred tax assets in the UK, Luxembourg, Australian and US subsidiaries have been shown
at the rates in the following table, being the substantively enacted rates in these countries.
UK
Luxembourg
Australia
US
2020
%
19
25
30
27
2019
%
17/19
25
30
27
Gresham Technologies plc Annual Financial Report 2020
81
FINANCIAL STATEMENTS 10. Earnings
Earnings per share
Basic earnings per share amounts are calculated by dividing net 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 the net 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:
Basic weighted average number of shares
Employee share options – weighted (note 22)
Diluted weighted average number of shares
2020
2019
68,697,828
1,414,549
68,168,602
1,499,805
70,112,377
69,668,407
Including discontinued operations
Adjusted earnings attributable to owners of the Parent – including discontinued operations
Adjusting items:
Exceptional items
Amortisation of acquired intangibles
Impairment of development costs
Net gain on sale of discontinued operations
Share-based payments
Statutory earnings attributable to owners of the Parent
Earnings per share – including discontinued operations
Statutory
Basic earnings per share
Diluted earnings per share
Adjusted
Basic earnings per share
Diluted earnings per share
Continuing operations
Adjusted earnings attributable to owners of the Parent
Adjusting items:
Exceptional items
Amortisation of acquired intangibles
Impairment of development costs
Share-based payments
Statutory earnings attributable to owners of the Parent
Earnings per share – continuing operations
Statutory
Basic earnings per share
Diluted earnings per share
Adjusted
Basic earnings per share
Diluted earnings per share
Notes
4
13
13
22
Notes
4
13
13
22
2020
£’000
2,774
(400)
(893)
—
—
(220)
1,261
Pence
1.84
1.80
4.04
3.96
2020
£’000
2,774
(400)
(893)
—
(220)
1,261
Pence
1.84
1.80
4.04
3.96
2019
£’000
1,441
(10)
(794)
(647)
1,985
(77)
1,898
Pence
2.78
2.72
2.11
2.07
2019
£’000
1,388
(10)
(794)
(647)
(77)
(140)
Pence
(0.21)
(0.21)
2.04
1.99
During the year ended 31 December 2020, share options granted under the 2010 Share Option Plans were exercised and the Group issued
1,900,000 (2019: 167,024) ordinary shares accordingly (ranking pari passu with existing shares in issue). See note 21 for further details.
There have been no other transactions involving ordinary shares or potential ordinary shares between the reporting date and the date
of completion of this Annual Financial Report 2020.
11. Dividends paid and proposed
The final dividend for the year ended 31 December 2019 was approved at the Company Annual General Meeting on 10 May 2020 and
paid on 21 May 2020 of 0.75 pence per share, equating to a total of £506,000. The Company will be proposing a final dividend for
approval at the AGM for the year ended 31 December 2020 of 0.75 pence per share.
82
Gresham Technologies plc Annual Financial Report 2020
Notes to the financial statements continuedFinancial Statements 12. Property, plant and equipment
2020
Cost
At 1 January
Additions
Additions acquired as part of a business combination
Disposals
Exchange adjustment
At 31 December
Depreciation and impairment
At 1 January
Charge for year
Disposals
Exchange adjustment
At 31 December
Net carrying amount
At 31 December
At 1 January
2019
Cost
At 1 January
Additions
Disposals
Exchange adjustment
At 31 December
Depreciation and impairment
At 1 January
Charge for year
Disposals
Exchange adjustment
At 31 December
Net carrying amount
At 31 December
At 1 January
Fixtures and
fittings
£’000
Property,
plant and
equipment
£’000
733
5
7
—
11
756
(609)
(71)
—
(11)
(691)
65
124
1,076
82
7
(156)
—
1,009
(813)
(174)
156
—
(831)
178
263
Fixtures and
fittings
£’000
Property,
plant and
equipment
£’000
752
21
(31)
(9)
733
(580)
(69)
31
9
(609)
124
172
1,243
157
(311)
(13)
1,076
(935)
(197)
308
11
(813)
263
308
Total
£’000
1,809
87
14
(156)
11
1,765
(1,422)
(245)
156
(11)
(1,522)
243
387
Total
£’000
1,995
178
(342)
(22)
1,809
(1,515)
(266)
339
20
(1,422)
387
480
Gresham Technologies plc Annual Financial Report 2020
83
FINANCIAL STATEMENTS
13. Intangible assets
2020
Cost
At 1 January
Additions
Disposals
Exchange adjustment
At 31 December
Amortisation and impairment
At 1 January
Charge for year
Eliminated on disposal
Exchange adjustment
At 31 December
Net carrying amount
At 31 December
At 1 January
2019
Cost
At 1 January
Additions
Disposals
Exchange adjustment
At 31 December
Amortisation and impairment
At 1 January
Charge for year
Impairment
Eliminated on disposal
At 31 December
Net carrying amount
At 31 December
At 1 January
Separately identified intangibles
on acquisition
Development
costs
£’000
Patents and
licences
£’000
Software
£’000
Customer
relationships
£’000
Goodwill
£’000
Total
£’000
23,345
3,561
—
90
26,996
(6,182)
(1,863)
—
(72)
(8,117)
18,879
17,163
872
4
(44)
—
832
(729)
(54)
44
—
(739)
93
143
6,275
886
—
—
7,161
(1,477)
(664)
—
—
(2,141)
5,020
4,798
1,218
1,192
—
—
2,410
(440)
(229)
—
—
(669)
1,741
778
2,943
2,656
—
26
5,625
(250)
—
—
—
(250)
34,653
8,299
(44)
116
43,024
(9,078)
(2,810)
44
(72)
(11,916)
5,375
2,693
31,108
25,575
Separately identified intangibles
on acquisition
Development
costs
£’000
Patents and
licences
£’000
Software
£’000
Customer
relationships
£’000
Goodwill
£’000
20,086
3,259
—
—
23,345
(4,033)
(1,502)
(647)
—
(6,182)
17,163
16,053
881
7
(15)
(1)
872
(676)
(68)
—
15
(729)
143
205
6,275
—
—
—
6,275
(850)
(627)
—
—
(1,477)
4,798
5,425
1,218
—
—
—
1,218
(273)
(167)
—
—
(440)
778
945
Total
£’000
31,422
3,266
(15)
(20)
34,653
(6,082)
(2,364)
(647)
15
(9,078)
2,962
—
—
(19)
2,943
(250)
—
—
—
(250)
2,693
2,712
25,575
25,340
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 twelve years. These assets are tested for impairment
where an indicator of impairment arises and annually prior to them being made available for use.
For the years ended 31 December 2020 and 31 December 2019 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 twelve 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 twelve 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.
84
Gresham Technologies plc Annual Financial Report 2020
Notes to the financial statements continuedFinancial Statements 13. Intangible assets continued
Separately identified acquired intangibles
Separately identified intangibles acquired through business combinations represent software and customer relationships which arose
through the acquisitions of C24 Technologies Limited in October 2016, B2 Group in July 2018 and Inforalgo in July 2020.
Software is amortised over its useful economic life, which is deemed to be ten years.
Customer relationships acquired in the year are amortised over their useful economic life, which is deemed to be eight years for the
Inforalgo and C24 Technologies Limited acquisitions and six years for B2 Group.
Goodwill
Goodwill arose on the acquisition of our Asia Pacific real-time financial solutions business, C24 Technologies Limited, B2 Group and
Inforalgo. It is assessed as having an indefinite life and is assessed for impairment at least annually.
14. Impairment of goodwill and intangibles
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
Clareti Solutions CGU
2020
£’000
5,375
2019
£’000
2,693
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:
Clareti Solutions CGU
2020
£’000
2019
£’000
18,879
17,163
Clareti Solutions cash-generating unit
The recoverable amount of this CGU has been determined based on a value-in-use calculation. The cash flow projections are based
on the 2021 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 impact of COVID-19 on financial budgets and projections has been considered by the Board
with any appropriate adjustments reflected.
The discount rate applied to cash flow projections is 15% (2019: 15%) and cash flows beyond the five-year period are extrapolated using
a 2% growth rate (2019: 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 cash flows, based on financial budgets for 2021 approved by the Board;
▪ growth rates, based on internally estimated growth rates for the market and business offerings; and
▪ the discount rate, based on the pre-tax weighted average cost of capital of the Group.
Sensitivity to changes in assumptions
A change in our key assumption in respect of operating cash flows could cause the carrying value of the goodwill or development
costs to exceed the recoverable amount, resulting in an impairment charge.
If any one of the following changes were made to the above key assumptions, the carrying amount and recoverable amount would
be equal.
Pre-tax discount rate
Increase from 15% to 22%
Growth rate beyond year 5
Reduction from 2% to -5%
Revenue growth
Reduction from 19% average over five years to 9% average
We are confident the assumptions in respect of operating cash flows remain appropriate. Where the operating cash flows incorporate
products or solutions that will be sold in an existing known market, past experience is used as a guide to the level of sales achievable,
growth rates and associated margins. Where the operating cash flows relate to products or solutions that will be sold into a new or
emerging market, past experience with similar products or solutions is combined with relevant information from external market
sources, such as competitor pricing and discussions with potential customers, in arriving at the level of sales achievable, growth rates
and associated margins.
Gresham Technologies plc Annual Financial Report 2020
85
FINANCIAL STATEMENTS 15. Leases
All leases are accounted for by recognising a right-of-use asset and a lease liability except for leases of low value assets or leases
with a duration of twelve months or less. The expense relating to short-term leases of twelve months or less was £nil (2019: £236,000).
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, 3.1%. 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 Group also leases motor
vehicles where payments can be increased if actual mileage is higher than the contracted rates.
Land and
buildings
£’000
Motor
vehicles
£’000
2,283
659
193
—
48
3,183
(1,075)
(466)
—
(29)
(1,570)
1,613
1,208
146
5
—
(60)
8
99
(62)
(30)
30
(4)
(66)
33
84
Land and
buildings
£’000
Motor
vehicles
£’000
2,324
(41)
2,283
(666)
(427)
18
(1,075)
1,208
1,658
155
(9)
146
(34)
(34)
6
(62)
84
121
Total
£’000
2,429
664
193
(60)
56
3,282
(1,137)
(496)
30
(33)
(1,636)
1,646
1,292
Total
£’000
2,479
(50)
2,429
(700)
(461)
24
(1,137)
1,292
1,779
Right-of-use assets
2020
Cost
At 1 January
Additions
Acquisition
Disposals
Exchange adjustment
At 31 December
Amortisation
At 1 January
Charge for year
Disposals
Exchange adjustment
At 31 December
Net carrying amount
At 31 December
At 1 January
2019
Cost
At 1 January
Exchange adjustment
At 31 December
Amortisation
At 1 January
Charge for year
Exchange adjustment
At 31 December
Net carrying amount
At 31 December
At 1 January
86
Gresham Technologies plc Annual Financial Report 2020
Notes to the financial statements continuedFinancial Statements 15. Leases continued
Lease liabilities
At 1 January 2019
Cash items:
Lease payments
Non-cash items:
Interest expense
Foreign exchange movements
At 31 December 2019
At 1 January 2020
Cash items:
Lease payments
Non-cash items:
Additions
Acquisitions
Interest expense
Foreign exchange movements
At 31 December 2020
Due between 0 and 3 months
Due between 3 and 12 months
Due less than one year
Due more than one year
Lease liabilities
Land and
buildings
£’000
1,615
(474)
44
(24)
1,161
1,161
(516)
623
193
36
13
1,510
Motor
vehicles
£’000
123
(37)
3
(5)
84
84
(60)
—
—
2
3
29
2020
£’000
133
402
535
1,004
1,539
Total
£’000
1,738
(511)
47
(29)
1,245
1,245
(576)
623
193
38
16
1,539
2019
£’000
123
334
457
788
1,245
16. Investments
Details of Group undertakings
Details of the investments in which the Group holds 20% or more of the nominal value of any class of share capital are as follows:
Name of subsidiary company
Registered address
Gresham Technologies (UK) Limited
Gresham Technologies (Solutions) Limited
C24 Technologies Limited(4)
Gresham Technologies (Australia) Pty Limited(3) Level 6, 1 Pacific Highway,
Aldermary House, London, England
Aldermary House, London, England
Aldermary House, London, England
Gresham Technologies (TDI) Limited(1)
Gresham Technologies (Malaysia) SDN BHD(1)
North Sydney, Australia
Aldermary House, London, England
Level 7, Menara Milenium,
Jalan Damanlela, Malaysia
Holding
(shares)
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Proportion of
voting rights
and shares held
Nature of business
100% Software solutions
100% Software solutions
100% Software solutions
100% Software solutions
100% Software solutions
100% Software solutions
Gresham Technologies (Singapore) Pte. Limited 138 Cecil Street, Cecil Court,
Ordinary
100% Software solutions
Gresham Technologies (US) Inc(1) (3)
Gresham Enterprise Storage Inc(3)
Gresham Technologies (Holdings) SARL
Gresham Technologies (Luxembourg) S.A.(1)
GMS Loan Technologies Limited
Inforalgo Information Technology Limited
Gresham Consultancy Services Limited(2)
Gresham Tech Limited(2)
Gresham Telecomputing Limited(2)
Circa Business Systems Limited(2)
Cheerkeep Limited(2)
Ordinary
Ordinary
Ordinary
Singapore
100 Church Street, New York, USA
100 Church Street, New York, USA
6E route de Treves, L-2633,
Luxembourg
6E route de Treves, L-2633, Luxembourg Ordinary
Ordinary
Aldermary House, London, England
Ordinary
Aldermary House, London, England
Ordinary
Aldermary House, London, England
Ordinary
Aldermary House, London, England
Ordinary
Aldermary House, London, England
Ordinary
Aldermary House, London, England
Ordinary
Aldermary House, London, England
100% Software solutions
100% Software solutions
Holding company
100%
100% Software solutions
100% Software solutions
100% Software solutions
Dormant
100%
Dormant
100%
Dormant
100%
Dormant
100%
Dormant
100%
(1) Held by a subsidiary undertaking.
(2) Subsidiary exempt from UK audit under section 480a of the Companies Act 2006.
(3) Subsidiary has no requirement for a local statutory audit.
(4) Subsidiary exempt from UK audit under section 479a of the Companies Act 2006.
Gresham Technologies plc Annual Financial Report 2020
87
FINANCIAL STATEMENTS 17. Current assets
Trade receivables
Prepayments
Other receivables
Trade and other receivables
Accrued income
Prepaid commission
Contract assets
Income tax receivable
Trade receivables are denominated in the following currencies:
Sterling
Euro
US Dollar
Singapore Dollar
Canadian Dollar
South African Rand
Australian Dollar
Malaysian Ringgit
Total trade receivables
2020
£’000
2,508
796
193
3,497
447
476
923
—
2020
£’000
473
287
1,036
85
—
—
393
234
2,508
2019
£’000
3,344
856
167
4,367
166
445
611
43
2019
£’000
1,165
347
345
106
41
26
1,310
4
3,344
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:
2020
2019
Total
£’000
2,508
3,344
Due not
impaired
£’000
1,462
1,479
Past due but not impaired
<30 days
£’000
601
1,430
30–60 days
£’000
60–90 days
£’000
90–120 days
£’000
>120 days
£’000
—
167
445
40
—
3
—
225
The Group’s customers primarily comprise national and international banks, Government bodies and substantial private and public
companies. As a result, the credit quality of trade receivables that are neither past due nor impaired has been assessed by the
Directors to be relatively high, taking account of a low historical experience of bad debts and relatively good ageing profiles.
The Group applies the IFRS 9 simplified approach to measuring expected credit losses using a lifetime expected credit loss provision
for trade receivables and contract assets. To measure expected credit losses on a collective basis, trade receivables and contract
assets are grouped based on similar credit risk and ageing. The contract assets have similar risk characteristics to the trade
receivables for similar types of contracts.
The expected loss rates are based on the Group’s historical credit losses experienced over the three-year period prior to the period
end. The historical loss rates are then adjusted for current and forward-looking information on macroeconomic factors affecting the
Group’s customers; such factors include but are not limited to gross domestic product (“GDP”), unemployment rate and inflation rates.
The Group does not anticipate any expected losses and therefore has not provided for any impairment.
18. Cash and cash equivalents
Cash at bank and in hand
2020
£’000
8,876
2019
£’000
9,605
Cash at bank earns interest at both fixed-term rates and floating rates based on daily bank deposit rates. Short-term deposits are
made for varying periods of between one day and three months depending on the immediate cash requirements of the Group, and
earn interest at the respective short-term deposit rates. The fair value of cash and cash equivalents is the same as stated above.
For the purpose of the Consolidated Statement of Cash Flow, cash and cash equivalents comprises cash at bank and in hand and
short-term deposits.
88
Gresham Technologies plc Annual Financial Report 2020
Notes to the financial statements continuedFinancial Statements 19. Trade, other payables, provisions and financial liabilities
Trade and other payables
Trade payables, other payables and contract liabilities are non-interest bearing.
Current
Trade payables
Other payables
Contract liabilities
Income tax payable
Non-current
Contract liabilities
Provisions
At 1 January
– Current
– Non-current
Amounts provided during the year
Amounts utilised in the year
At 31 December
– Current
– Non-current
2020
£’000
934
3,339
11,030
15,303
2020
£’000
378
2020
£’000
66
2019
£’000
1,591
2,558
8,827
12,976
2019
£’000
419
2019
£’000
1,329
Property provisions
2020
£’000
—
144
144
—
2
—
146
146
2019
£’000
26
59
85
59
—
—
144
144
The provisions relate to the Group’s property portfolio and the resulting lease liabilities, comprising end-of-lease dilapidation costs and
empty property costs.
Contingent consideration
At 1 January
– Current
– Non-current
Contingent consideration released during the year
Arising on the acquisition of Inforalgo
At 31 December
– Current
– Non-current
2020
£’000
—
—
—
—
1,258
909
349
1,258
2019
£’000
—
67
67
(67)
—
—
—
—
Gresham Technologies plc Annual Financial Report 2020
89
FINANCIAL STATEMENTS 20. Financial instruments
The Group is exposed through its operations to credit risk, interest rate risk, capital risk, liquidity risk and currency risk.
The Group is exposed to risks that arise from its use of financial instruments. This note describes the Group’s objectives, policies and
processes for managing those risks and the methods used to measure them. Further quantitative information in respect of these risks
is presented throughout these financial statements. There have been no substantive changes in the Group’s exposure to financial
instrument risks, its objectives, policies and processes for managing those risks or the methods used to measure them from previous
periods unless otherwise stated in this note.
Categories of financial assets and liabilities
Set out below is an analysis by category of the Group’s financial assets and liabilities that are carried in the financial statements
(there is no material difference between the carrying amounts and fair values):
2020
Financial assets
Trade receivables
Contract assets
Cash and cash equivalents
Financial liabilities
Trade payables
Other payables
2019
Financial assets
Trade receivables
Contract assets
Cash and cash equivalents
Financial liabilities
Trade payables
Other payables
Fair value
through
profit and loss
£’000
—
—
—
—
—
—
—
Fair value
through
profit and loss
£’000
—
—
—
—
—
—
—
Amortised
cost
£’000
2,508
923
8,876
Total
carrying
amount
£’000
2,508
923
8,876
12,307
12,307
934
3,339
4,273
Amortised
cost
£’000
3,344
1,033
9,605
934
3,308
4,242
Total
carrying
amount
£’000
3,344
1,033
9,605
13,982
13,982
1,591
2,558
4,149
1,591
2,558
4,149
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 2020 and 31 December 2019 the Group held no foreign exchange instruments.
Objectives, policies and strategies
The Group’s objective is to finance the business through management of existing liquidity, focusing on working capital acceleration to
cash and converting illiquid assets to liquid assets and, ultimately, cash. Investments in non-current assets have been made with the
benefit of research and development tax credits taken as cash.
The Group’s policy towards using financial instruments is to manage credit, liquidity and currency exposure risk without exposing the
Group to undue risk or speculation. The policy is kept under review by the Directors according to the Group’s foreign exchange and
treasury policy.
Risk management
The risks arising from the Group’s operations and financial instruments are explained below.
Credit management
The Group monitors exposure to credit risk on an ongoing basis. The risk of financial loss due to a counterparty failure to honour its
obligations arises principally in relation to transactions where the Group provides solutions and services on deferred terms and where
it invests or deposits surplus cash.
90
Gresham Technologies plc Annual Financial Report 2020
Notes to the financial statements continuedFinancial Statements
20. Financial instruments continued
Credit management continued
Group policies are aimed at minimising such losses, and require that deferred terms are granted only to customers who demonstrate
an appropriate payment history and satisfy creditworthiness procedures. Individual exposures are monitored with customers subject
to credit limits to ensure that the Group’s exposure to provisions for bad debts is not significant. Solutions and services may be sold
on a cash-with-order basis to mitigate credit risk. Bad debt provision insurance is not carried.
Performance of individual businesses is monitored at both operating unit and Group level allowing the early identification of major
risks and reducing the likelihood of an unmanaged concentration of credit risk.
Cash investments are only allowed in liquid securities with major financial institutions that satisfy specific criteria. The maximum
credit risk exposure at the statement of financial position date is represented by the carrying value of financial assets. There are no
significant concentrations of credit risk.
Interest rate risk
The Group has limited exposure to interest rate risk since it has no bank borrowings and interest receivable on cash deposits does not
form a material part of Group income.
Capital risk
The Group defines its capital as the Group’s total equity and manages capital based on the level of net cash held. Its objective when managing
capital is to safeguard the Group’s ability to continue as a going concern in order to provide returns for shareholders, to provide an adequate
return to investors based upon the level of risk undertaken, to have available the necessary financial resources to allow the Group to invest
in areas that may deliver future benefit to investors and to maintain sufficient financial resources to mitigate risks and unforeseen events.
In order to maintain or adjust the capital structure, the Group may issue new shares or sell assets to provide additional capital.
Liquidity risk
The Group’s liquidity risk falls within the following main categories:
▪ Trade receivables – a significant element of the Group’s liquidity is tied up in working capital, which primarily comprises trade
receivables. The settlement risk associated with these assets comprises both credit risk (the risk that the counterparty will not
settle at all) and liquidity risk (the risk that the counterparty will not settle on time).
▪ Non-current assets – a significant element of the Group’s liquidity is tied up in 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:
2020
Trade payables
Other payables
Lease liabilities
2019
Trade payables
Other payables
Lease liabilities
Between
0 and
3 months
£’000
934
2,715
133
3,782
Between
0 and
3 months
£’000
1,591
1,447
114
3,182
Between
3 and
12 months
£’000
—
—
402
402
Between
3 and
12 months
£’000
—
—
343
343
Between
1 and 2
years
£’000
—
—
506
506
Between
1 and 2
years
£’000
—
—
410
410
Between
2 and 5
years
£’000
—
—
498
498
Between
2 and 5
years
£’000
—
—
378
378
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.
Liquidity risk is not considered as a significant risk to the Group.
Gresham Technologies plc Annual Financial Report 2020
91
FINANCIAL STATEMENTS 20. Financial instruments continued
Currency risk
The Group has exposures to the following currencies: US Dollar, Australian Dollar, Euro, Malaysian Ringgit, Singapore Dollar, Canadian
Dollar and South African Rand.
Currency exposure arises through intra-group loans and trading balances throughout all Group locations. Natural hedging is employed,
to the extent possible, to minimise net exposures; however, where significant exposures arise outside of intra-group trading, it is Group
policy to enter into formal hedging arrangements where these can be shown to be effective.
At 31 December 2020, the Group had no foreign currency forward contracts (2019: 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 17.
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 2020 and 2019 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.
2020
Euro
Australian Dollar
US Dollar
Canadian Dollar
Malaysian Ringgit
Singapore Dollar
South African Rand
2019
Euro
Australian Dollar
US Dollar
Canadian Dollar
Malaysian Ringgit
Singapore Dollar
South African Rand
Net foreign currency
financial assets
£’000
Increase/decrease
in exchange rates
Effect on profit
before tax
£’000
397
4,168
3,716
13
310
112
26
+20%
-20%
+20%
-20%
+20%
-20%
+20%
-20%
+20%
-20%
+20%
-20%
+20%
-20%
(66)
99
(695)
1,042
(619)
929
(2)
3
(52)
77
(19)
28
(4)
7
Net foreign currency
financial assets
£’000
Increase/decrease
in exchange rates
Effect on profit
before tax
£’000
616
4,646
1,618
50
223
112
26
+20%
-20%
+20%
-20%
+20%
-20%
+20%
-20%
+20%
-20%
+20%
-20%
+20%
-20%
(103)
154
(774)
1,162
(270)
404
(8)
13
(37)
56
(19)
28
(4)
6
The Group has no material exposure to interest rate sensitivities; however, in addition to the year-end risk quantified we remain
susceptible to the changes on foreign exchange rates on our future currency cash inflows and outflows which, although are notable,
are mitigated through the use of forward exchange contracts from time to time and are not anticipated to materially affect the
earnings in the future periods.
92
Gresham Technologies plc Annual Financial Report 2020
Notes to the financial statements continuedFinancial Statements 21. Issued share capital
Ordinary shares allotted, called up and fully paid
At 1 January 2019
Exercise of share options (note 22)
At 31 December 2019
Exercise of share options (note 22)
At 31 December 2020
Number
68,089,437
167,021
68,256,458
1,900,000
70,156,458
Nominal value
£’000
3,404
9
3,413
95
3,508
The Company’s ordinary share capital consists of individual shares having a nominal value of 5 pence each.
During the year ended 31 December 2020, share options granted under the 2010 Share Option Plans were exercised at a price of
28.05 pence and the Group issued 1,900,000 (2019: 167,021) ordinary shares accordingly (ranking pari passu with existing shares in
issue). Share premium of £438,000 was recognised as a result.
At 31 December 2020 and 2019 there were outstanding options granted to acquire ordinary shares in the Company. See note 22 for
further details.
There are no preference shares in issue (2019: 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 20.
Shares held by Employee Share Ownership Trust (“ESOT”)
At 1 January 2019
Purchase of own shares
Issue of shares
At 31 December 2019
Issue of shares
At 31 December 2020
£’000
—
995
(50)
945
(167)
778
Number
—
1,029,202
(52,606)
976,596
(144,996)
831,600
The shares held by the ESOT are expected to be issued under share option contracts. The shares are held at the average purchase price.
22. Share-based payments
The following disclosures are in respect of both the Company and the Group.
The grant of all options and awards is made by the remuneration committee and such grants involve equity settlement. In granting
executive share options the remuneration committee has regard to both the participant’s level of responsibility within the Group and
to individual and Group performance.
Share Option Schemes 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 schemes consist of:
▪ the Gresham Technologies plc Enterprise Management (“EMI”) Incentive Plan 2010;
▪ the Gresham Technologies plc Unapproved Share Option Plan 2010; and
▪ the Gresham Technologies plc Non-Employee Share Option Plan 2010.
As its name implies, the EMI Plan operates as an enterprise management incentive scheme complying with the EMI Code and
accordingly being entitled to certain beneficial tax treatment.
The Unapproved Plan enables the remuneration committee to grant share options in excess of the limits applicable under the
EMI Code and/or to employees of the Group who do not qualify for EMI treatment.
The Non-Employee Plan enables the remuneration committee to grant share options to persons whose services are made available
to the Group without an employment relationship.
The remuneration committee is responsible for administering the Share Option Schemes 2010, and may grant options to acquire
ordinary shares to any employees and Directors of the Group, and retains discretion to impose exercise performance conditions
as appropriate. Options are granted free of charge and are non-transferable.
The exercise price per ordinary share is determined by the remuneration committee but will not be less than 110% of the middle
market price for the dealing day immediately preceding the date of grant of the relevant option.
Options may normally be exercised only on or after the third anniversary of the date of grant subject to completion of any relevant
performance criteria, save to the extent that the remuneration committee in its discretion declares any other period for exercise and
will lapse on cessation of such employment, save again to the extent the remuneration committee in its discretion allows it to remain
exercisable for such period following the cessation as it may determine.
Gresham Technologies plc Annual Financial Report 2020
93
FINANCIAL STATEMENTS 22. Share-based payments continued
Share Option Schemes 2010 continued
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 2020, 19 participants held awards under this scheme (2019: 22).
Outstanding options to subscribe for ordinary shares of 5 pence at 31 December 2020, including those noted in the Directors’
Remuneration Report, are as follows:
Share Option Schemes 2010
Outstanding at 1 January
Granted during the year
Forfeited during the year
Exercised during the year
Outstanding at 31 December
Exercisable at 31 December
Weighted average remaining contractual life (years)
2020
Number
WAEP
(pence)
2019
Number
WAEP
(pence)
4,498,000
75,000
(85,000)
(1,900,000)
2,588,000
2,138,000
4.90
81
152
61
28
123
114
4,740,021
175,000
(250,000)
(167,021)
4,498,000
3,938,000
3.68
86
108
(206)
(49)
81
68
During the year 1,900,000 options were exercised during the period when the Company share price was between 109 pence and 130 pence.
No price is payable on award of share options.
Outstanding options and awards to subscribe for ordinary shares of 5 pence at 31 December 2020, including those noted in the Directors’
Remuneration Report showing the range of exercise prices and dates, are as follows:
Share Option Schemes 2010
Number
of share
options
38,000
45,000
270,000
50,000
1,500,000
50,000
140,000
45,000
200,000
100,000
75,000
75,000
2,588,000
Date of
grant
05-Aug-11
15-Aug-12
01-Aug-13
07-Oct-13
01-Jun-15
21-Jun-16
20-Mar-17
28-Nov-17
14-Mar-18
28-Mar-19
25-Oct-19
24-Dec-20
Exercise
price
£
0.5803
0.6850
0.9630
1.3230
1.1057
1.0945
1.7352
2.1505
2.2715
0.9720
1.2210
1.5180
Date first
exercisable
05-Aug-14
15-Aug-15
01-Aug-16
07-Oct-16
01-Jun-18
21-Jun-19
20-Mar-20
28-Nov-20
14-Mar-21
28-Mar-22
25-Oct-22
24-Dec-23
Expiry
date
05-Aug-21
15-Aug-22
01-Aug-23
07-Oct-23
01-Jun-25
21-Jun-26
20-Mar-27
28-Nov-27
14-Mar-28
28-Mar-29
25-Oct-29
24-Dec-30
Cash
receivable
if exercised
£
22,051
30,825
260,010
66,150
1,658,550
54,725
242,928
96,773
454,300
97,200
91,575
113,850
3,188,937
Outstanding options to subscribe for ordinary shares of 5 pence at 31 December 2019, including those noted in the Directors’
Remuneration Report showing the range of exercise prices and dates, are as follows:
Share Option Schemes 2010
Number
of share
options
1,900,000
38,000
85,000
45,000
270,000
50,000
1,500,000
50,000
140,000
45,000
200,000
100,000
75,000
4,498,000
Date of
grant
31-Dec-10
05-Aug-11
23-May-12
15-Aug-12
01-Aug-13
07-Oct-13
01-Jun-15
21-Jun-16
20-Mar-17
28-Nov-17
14-Mar-18
28-Mar-19
25-Oct-19
Exercise
price
£
0.2805
0.5803
0.6105
0.6850
0.9630
1.3230
1.1057
1.0945
1.7352
2.1505
2.2715
0.9720
1.2210
Date first
exercisable
31-Dec-13
05-Aug-14
23-May-15
15-Aug-15
01-Aug-16
07-Oct-16
01-Jun-18
21-Jun-19
20-Mar-20
28-Nov-20
14-Mar-21
28-Mar-22
25-Oct-22
Expiry
date
31-Dec-20
05-Aug-21
23-May-22
15-Aug-22
01-Aug-23
07-Oct-23
01-Jun-25
21-Jun-26
20-Mar-27
28-Nov-27
14-Mar-28
28-Mar-29
25-Oct-29
Cash
receivable
if exercised
£
532,950
22,051
51,893
30,825
260,010
66,150
1,658,550
54,725
242,928
96,773
454,300
97,200
91,575
3,659,930
94
Gresham Technologies plc Annual Financial Report 2020
Notes to the financial statements continuedFinancial Statements
22. Share-based payments continued
Share Option Schemes 2010 continued
The fair value of equity-settled share options granted by the Share Option Schemes 2010 is estimated as at the date of grant using a
Black Scholes model, taking into account the terms and conditions upon which the options were granted. In all cases, the exercise
price is at least 110% of the market price on the day prior to the date of grant.
The following table lists the range of inputs to the model used for the grants made during the year:
Vesting date
Expiry date (number of years after grant)
Exercise price
Share price at valuation
Vested options’ expected life
Volatility
Dividend yield
Risk free rate
Impact of continued employment conditions
24-Mar-23
10
£1.518
£1.38
5.8 years
30%
0%
1.0%
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.
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.
Deferred Share Bonus Plan 2017
The Deferred Share Bonus Plan operates in conjunction with the annual cash bonus scheme; a percentage of each participating
employee’s net annual bonus entitlement will continue to be paid in cash with the remaining amount of the bonus being paid to the
trustee of a newly established employee benefit trust which will have 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.
Due to the establishment of the employee benefit trust, which will acquire existing issued ordinary shares, the Deferred Share Bonus
Plan will be non-dilutive to existing shareholders above the levels permitted by the Investment Association’s remuneration guidelines.
On 20 March 2020 150,288 share options were granted at nil cost with two-year and three-year vesting periods; the options expire
March 2030.
Share Option Scheme 2020
A new long-term incentive performance share plan was approved by shareholders in December 2020. The plan enables the remuneration
committee to grant share options to key employees following the expiry of the Share Option Plan 2010 on 29 December 2020. Any conditional
share award will be 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.
No share options have been awarded in the year to 31 December 2020 under this share option scheme.
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:
Expense recognised in respect of share-based payments
2020
£’000
220
2019
£’000
77
Gresham Technologies plc Annual Financial Report 2020
95
FINANCIAL STATEMENTS 23. Business combinations during the period
On 28 July 2020 Gresham Technologies plc acquired the entire ordinary share capital in Inforalgo Information Technology Limited, a
specialist in connectivity and intelligent automation solutions for financial services institutions enabling straight-through processing
and real-time regulatory reporting.
The initial consideration was £2.3m with contingent consideration dependent upon performance of up to £1.3m payable over an
18-month period post acquisition; therefore the maximum potential consideration is £3.6m.
The amounts recognised in respect of identifiable assets and liabilities assumed are set out in the table below:
Book value
£’000
Adjustments
£’000
Fair value
£’000
Intangible assets
Customer relationships
Software
Property, plant and equipment
Right-of-use assets
Trade and other receivables
Cash and cash equivalents
Trade and other liabilities
Lease liabilities
Deferred tax liability
Total net (liabilities)/assets
Satisfied as follows:
Cash
Contingent consideration
Total consideration
Goodwill (note 13)
Analysis of cash flows on acquisition:
Net cash acquired
Cash paid
Net cash flow
Fair value of consideration paid:
Cash
Contingent consideration due less than one year
Contingent consideration due more than one year
Total consideration
—
—
14
193
189
142
(1,384)
(193)
—
(1,039)
1,192
886
—
—
—
—
—
—
(395)
1,683
1,192
886
14
193
189
142
(1,384)
(193)
(395)
644
2,042
1,258
3,300
2,656
(142)
2,042
1,900
2,042
909
349
3,300
The goodwill recognised above is attributable to intangible assets that cannot be individually separately and reliably measured from
Inforalgo due to their nature. These items include the expected value of synergies and assembled workforce.
Intangible assets were identified on acquisition relating to customer contracts and relationships and software. To determine the fair
value of the intangible assets a valuation was performed by an independent external expert.
The customer-related assets were valued using an excess earnings method to assess the present value of expected cash received
over the life of customer relationships adjusted by an annual attrition rate calculated based on historical revenue data. The software
assets relating to internally developed technology were valued using a replacement cost methodology to estimate the total cost
of redeveloping the software.
Acquisition costs of £131,000 were incurred during the year ended 31 December 2020 as a result of the acquisition and integration
of Inforalgo. These costs have been recognised within as costs within the income statement.
From the date of acquisition, Inforalgo has contributed revenue of £565,000 to the Group and operating profit of £80,000. If the
acquisition had occurred on 1 January 2020, Group revenue would have been £25,549,000 and Group operating profit £479,000.
Contingent consideration
As part of the sale and purchase agreement, contingent consideration is payable up to £1,293,000 with the maximum amount payable
if the annual recurring revenues are £1,230,000 18 months after acquisition. The consideration is payable on a straight-line basis with
no lower threshold with 72% payable in July 2021 and the balance payable in January 2022. Due to the nature of these payments a fair
value calculation has been performed by management to estimate the expected amount of consideration to be paid. As result, contingent
consideration of £1,258,000 has been recognised in the statement of financial position, with £909,000 due in less than one year and
£349,000 due in more than one year.
96
Gresham Technologies plc Annual Financial Report 2020
Notes to the financial statements continuedFinancial Statements
24. Reserves
Share capital
The balance classified as share capital represents the nominal value arising from the issue of the Company’s equity share capital,
comprising 5 pence ordinary shares.
During the year ended 31 December 2020, share options granted under the 2010 Share Option Plans were exercised and the Group issued
1,900,000 (2019: 167,021) ordinary shares accordingly (ranking pari passu with existing shares in issue). See note 22 for further details.
Share premium account
The balance classified as share premium represents the premium arising from the issue of the Company’s equity share capital,
comprising 5 pence ordinary shares, net of share issue expenses. There are restrictions on the use of the share premium account.
It can only be used for bonus issues, to provide for the premium payable on redemption of debentures, or to write off preliminary
expenses, or expenses of, or commissions paid on, or discounts allowed on, the same issues of shares or debentures of the Company.
Own share reserve
Weighted average cost of own shares held in trust by the ESOT.
Other reserves
The balance classified as other reserves comprises a special reserve of £313,000. The special reserve arose on the cancellation of
deferred ordinary shares in June 1992. In 2018, 134,440 shares were issued as part consideration for the acquisition of B2 Group at
a placing price of £1.71. The excess over the nominal value of the shares issued has been credited to other reserves (merger reserve)
in compliance with s612 and s613 of the Companies Act 2006.
Foreign currency translation reserve
The currency translation reserve is used to record exchange differences arising from the translation of the financial statements
of foreign subsidiaries.
Retained earnings
All other net gains and losses and transactions with owners (e.g. dividends) that are not recognised elsewhere.
25. Capital commitments
There were no capital commitments at 31 December 2020 (2019: none).
26. Related party transactions
Key management compensation (including Directors)
Directors’ emoluments
Remuneration
Social security costs
Bonuses
Pension
Share-based payments
2020
£’000
618
100
180
22
68
988
2019
£’000
581
87
99
41
38
846
Details of Directors’ compensation are included in the Directors’ Remuneration Report.
There is no single party known that the Directors consider to be a controlling shareholder or ultimate parent undertaking. Refer to
page 53 for details of all significant shareholders that the Company has been notified of.
During the year the Group received services from Grant Thornton LLP of £226,000 (2019: £218,000) which are related parties by virtue
of Ms I Joss holding a position as an independent non-executive on the Grant Thornton partner oversight board and a Director of the
Company until resignation on 31 October 2020. At 31 December 2020 the amount owed to Grant Thornton LLP was £77,000 (2019: £59,000).
27. Events after the reporting date
A dividend of 0.75 pence per share has been approved by the Board to propose to shareholders at the Annual General Meeting.
Gresham Technologies plc Annual Financial Report 2020
97
FINANCIAL STATEMENTS Company balance sheet
Fixed assets
Property, plant and equipment
Lease receivable
Deferred tax asset
Investments
Current assets
Debtors
Cash at bank and in hand
Creditors: amounts falling due within one year
Net current assets
Total assets less current liabilities
Contingent consideration due more than one year
Creditors: amounts falling due more than one year
Total assets less liabilities
Capital and reserves
Called up share capital
Share premium
Own share reserve
Special reserve
Merger reserve
Profit and loss account
Shareholders’ funds – equity interests
Notes
5
9
10
6
7
8
8
8
11
12
11
12
12
12
At
31 December
2020
£’000
At
31 December
2019
£’000
—
1,134
18
20,466
21,618
34,756
2,996
37,752
—
794
211
16,946
17,951
33,547
4,467
38,014
(36,798)
(32,056)
954
22,572
(349)
(705)
5,958
23,909
—
(424)
21,518
23,485
3,508
4,341
(778)
313
1,583
12,551
21,518
3,413
3,903
(945)
313
1,583
15,218
23,485
The Company made a retained loss in the year of £2,381,000 (2019: £378,000).
The financial statements were approved by the Board of Directors and authorised for issue on 8 March 2021.
On behalf of the Board
Ian Manocha
Chief Executive
8 March 2021
Tom Mullan
Chief Financial Officer
8 March 2021
98
Gresham Technologies plc Annual Financial Report 2020
Financial Statements
Company statement of changes in equity
At 1 January 2019
Exercise of share options
Share-based payments
Purchase of own shares
Sale of own shares held by
Employee Share Ownership Trust
Dividend paid
Retained loss for the year
At 31 December 2019
Exercise of share options
Share-based payments
Sale of own shares held by
Employee Share Ownership Trust
Dividend paid
Retained loss for the year
Notes
11
15
11
11
4
11
15
11
4
Share
capital
£’000
3,404
9
—
—
—
—
—
Share
premium
£’000
3,830
73
—
—
—
—
—
Own
shares
£’000
—
—
—
(995)
50
—
—
Special
reserve
£’000
Merger
reserve
£’000
Profit and
loss account
£’000
313
—
—
—
—
—
—
1,583
—
—
—
—
—
—
15,858
—
77
—
—
(339)
(378)
Total
£’000
24,988
82
77
(995)
50
(339)
(378)
3,413
3,903
(945)
313
1,583
15,218
23,485
95
—
—
—
—
438
—
—
—
—
—
—
167
—
—
—
—
—
—
—
—
—
—
—
—
—
220
—
(506)
(2,381)
533
220
167
(506)
(2,381)
At 31 December 2020
3,508
4,341
(778)
313
1,583
12,551
21,518
Gresham Technologies plc Annual Financial Report 2020
99
FINANCIAL STATEMENTS Notes to the Company financial statements
1. Accounting policies
Basis of preparation
The Company financial statements of Gresham Technologies plc
(the “Company”) have been prepared in accordance with
Financial Reporting Standard 100 “Application of Financial
Reporting Requirements” and Financial Reporting Standard 101
“Reduced Disclosure Framework” and as required by the
Companies Act 2006.
The financial statements are prepared under the historical cost
convention as modified for financial instruments that are measured
at fair value and were approved for issue on 8 March 2021.
No income statement is presented by the Company as permitted
by section 408 of the Companies Act 2006. For the year ended
31 December 2020, the Company recorded a retained loss of
£2,381,000 (2019: loss £378,000).
The balance sheet heading relating to the Company’s
investments in subsidiaries has been amended to “Fixed assets”
from “Non-current assets” to be consistent with the Company’s
presentation of its balance sheet in accordance with the balance
sheet formats of the Companies Act 2006. Assets are classified
in accordance with the definitions of fixed and current assets in
the Companies Act instead of the presentation requirements of
IAS 1 “Presentation of Financial Statements”.
Going concern
The Group and the Company’s business activities, together with
the factors likely to affect its future development, performance
and position are set out in the Strategic Report on pages 6 to 31.
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 2020.
Disclosure exemptions adopted
In preparing these financial statements the Company has taken
advantage of all disclosure exemptions conferred by FRS 101.
Therefore these financial statements do not include:
▪ certain comparative information as otherwise required by
adopted IFRSs;
▪ certain disclosures regarding the Company’s capital;
▪ a statement of cash flows;
▪ the effect of future accounting standards not yet adopted;
▪ the disclosure of the remuneration of key management
personnel; and
▪ disclosure of related party transactions with other wholly
owned members of the Gresham Technologies plc Group.
In addition, and in accordance with FRS 101, further disclosure
exemptions have been adopted because equivalent disclosures are
included in the consolidated financial statements. These financial
statements do not include certain disclosures in respect of:
▪ share-based payments;
▪ business combinations;
▪ assets held for sale and discontinued operations; and
▪ impairment of assets.
Investments
Investments are recorded at cost less provision for impairment.
Financial assets
Impairment of financial assets
The Company assesses at each balance sheet date whether
a financial asset or group of financial assets is impaired.
Assets carried at amortised cost
These assets arise principally from the provision of services to
the Company’s subsidiary, but also incorporate other types of
financial assets where the objective is to hold these assets in
order to collect contractual cash flows and the contractual cash
flows are solely payments of principal and interest. They are
initially recognised at fair value plus transaction costs that are
directly attributable to their acquisition or issue, and are
subsequently carried at amortised cost using the effective
interest rate method, less provision for impairment.
Impairment provisions from related parties and loans to related
parties are recognised based on a forward-looking expected
credit loss model. The methodology used to determine the
amount of the provision is based on whether there has been a
significant increase in credit risk since initial recognition of the
financial asset. For those where the credit risk has not increased
significantly since initial recognition of the financial asset,
twelve-month expected credit losses along with gross interest
income are recognised. For those for which credit risk has
increased significantly, lifetime expected credit losses along with
the gross interest income are recognised. For those that are
determined to be credit impaired, lifetime expected credit losses
along with interest income on a net basis are recognised.
The Company’s financial assets measured at amortised cost
comprise intercompany receivables and cash and cash
equivalents in the Consolidated Statement of Financial Position.
Cash and cash equivalents include cash in hand for the purpose
of the Consolidated Statement of Cash Flow – bank overdrafts.
Bank overdrafts are shown within loans and borrowings in current
liabilities on the Consolidated Statement of Financial Position.
Taxation
Income taxes
Current tax assets and liabilities are measured at the amount
expected to be recovered from or paid to the taxation authorities,
based on tax rates and laws that are enacted or substantively
enacted by the statement of financial position date.
Research and development tax credits are recognised on an
accruals basis and recorded as a credit in the taxation line of
the income statement.
Deferred income tax is recognised on all temporary differences
arising between the tax bases of assets and liabilities and their
carrying amounts in the financial statements, with the following
exceptions:
▪ where the temporary difference arises from the initial recognition
of goodwill or of an asset or liability in a transaction that is not
a business combination that at the time of the transaction
affects neither accounting nor taxable profit or loss;
▪ in respect of taxable temporary differences associated with
investments in subsidiaries, associates and joint ventures,
where the timing of the reversal of the temporary differences
can be controlled and it is probable that the temporary
differences will not reverse in the foreseeable future; and
▪ deferred income tax assets are recognised only to the extent
that it is probable that taxable profit will be available against
which the deductible temporary differences, carried forward
tax credits or tax losses can be utilised.
100
Gresham Technologies plc Annual Financial Report 2020
Financial Statements 1. Accounting policies continued
Taxation continued
Income taxes continued
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.
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 44 and in note 7 to the Group financial
statements. 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 2019 was
approved at the Company Annual General Meeting on 10 May 2020
and paid on 21 May 2020 of 0.75 pence per share, equating to a
total of £506,000. The Company will be proposing a final dividend
for approval at the AGM for the year ended 31 December 2020 of
0.75 pence per share.
5. Property, plant and equipment
Cost
At 1 January and 31 December
Depreciation and impairment
At 1 January and 31 December
Net carrying amount
At 1 January and 31 December
31 December
2020
Total
£’000
31 December
2019
Total
£’000
31
(31)
—
31
(31)
—
All fixed assets relate to fixtures and fittings.
Gresham Technologies plc Annual Financial Report 2020
101
FINANCIAL STATEMENTS 9. 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, 3.1%. 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:
Less than 3 months
3 to 12 months
1 to 2 years
2 to 5 years
Total
Lease liabilities
At 1 January 2019
Cash items:
Lease payments
Non-cash items:
Interest expense
At 31 December 2019
Cash items:
Lease payments
Non-cash items:
Additions
Interest expense
At 31 December 2020
Due between 0 and 3 months
Due between 3 and 12 months
Due less than one year
Due more than one year
Lease liabilities
2020
£’000
77
238
309
510
1,134
2020
£’000
80
240
320
705
1,025
2019
£’000
77
233
309
175
794
Total
£’000
1,034
(317)
29
746
(332)
586
25
1,025
2019
£’000
80
242
322
424
746
6. Investments
Cost
At 1 January
Acquisitions
Capital contribution – share-based
payments
At 31 December
Impairment provisions
At 1 January
At 31 December
Net book value
At 31 December
Subsidiaries
2020
£’000
Subsidiaries
2019
£’000
30,538
3,300
220
34,058
13,592
13,592
30,461
—
77
30,538
13,592
13,592
20,466
16,946
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 16 to the Group financial statements.
7. Debtors
Amounts owed by subsidiary
undertakings
Other receivables
Prepayments and accrued income
2020
£’000
34,635
114
7
34,756
2019
£’000
33,455
82
10
33,547
All amounts that fall due for repayment within one year 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.
8. Creditors
Amounts falling due within one year
Amounts owed to
subsidiary undertakings
Lease liabilities
Trade creditors
Contingent consideration
Other creditors and accruals
2020
£’000
35,320
320
245
909
4
36,798
Amounts falling due more than one year
Lease liabilities
Contingent consideration
2020
£’000
705
2020
£’000
349
2019
£’000
31,309
322
422
—
3
32,056
2019
£’000
424
2019
£’000
—
102
Gresham Technologies plc Annual Financial Report 2020
Notes to the Company financial statements continuedFinancial Statements
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.
13. Capital commitments
There were no capital commitments at 31 December 2020
(2019: none).
14. 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.
15. Share-based payments
Share-based payments in respect of both the Company
and the Group are disclosed in note 22 of the consolidated
financial statements.
16. 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.
10. Deferred tax
The Company has a recognised deferred tax asset as follows:
As at 1 January
Movement in the period within the
income statement
As at 31 December
Comprising:
Employee share award schemes
Tax losses
2020
£’000
211
(193)
18
—
18
18
2019
£’000
129
82
211
195
16
211
11. Issued share capital
Ordinary shares allotted, called up and fully paid
At 1 January 2019
Exercise of share options
At 31 December 2019
Exercise of share options
At 31 December 2020
Number
68,089,437
167,021
68,256,458
1,900,000
70,156,458
Nominal value
£’000
3,404
9
3,413
95
3,508
The Company’s ordinary share capital consists of individual
shares having a nominal value of 5 pence each.
During the year ended 31 December 2020, share options granted
under the 2010 Share Option Plans were exercised and the Group
issued 1,900,000 (2019: 167,021) 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 2020 and 2019 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 (2019: none).
Shares held by Employee Share Ownership Trust (“ESOT”)
Number
£’000
At 1 January 2019
Purchase of own shares
Issue of shares
At 31 December 2019
Issue of shares
At 31 December 2020
—
995
(50)
945
(167)
778
—
1,029,202
(52,606)
976,596
(144,996)
831,600
The shares held by the ESOT are expected to be issued under
share option contracts. The shares are held at the average
purchase price.
12. 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 2020, share options granted
under the 2010 Share Option Plans were exercised and the Group
issued 1,900,000 (2019: 167,021) ordinary shares accordingly
(ranking pari passu with existing shares in issue). See note 22
of the Group financial statements for further details.
Gresham Technologies plc Annual Financial Report 2020
103
FINANCIAL STATEMENTS
Corporate information
Registered office
Aldermary House
10–15 Queen Street
London
EC4N 1TX
Auditor
BDO LLP
Arcadia House
Maritime Walk
Ocean Village
Southampton
SO14 3TL
Solicitors
Blake Morgan LLP
Tollgate
Chandler’s Ford
Eastleigh
SO53 3LG
Broker and financial adviser
N+1 Singer Capital Markets Limited
One Bartholomew Lane
London
EC2N 2AX
Registrars
Equiniti Limited
Aspect House
Spencer Road
Lancing
West Sussex
BN99 6DA
Bankers
HSBC Bank plc
55 Above Bar Street
Southampton
SO14 7DZ
Annual General Meeting
10 May 2021
Aldermary House
10–15 Queen Street
London
EC4N 1TX
104
Gresham Technologies plc Annual Financial Report 2020
Financial Statements Gresham Technologies plc’s commitment to environmental
issues is reflected in this Annual Report, which has been
printed on Creator 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.
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Gresham Technologies plc
Aldermary House
10–15 Queen Street
London
EC4N 1TX
investorrelations@greshamtech.com
greshamtech.com
@greshamtech