Gresham Technologies to Exit Legacy Sub-Contracting Business with ANZ

By Ian Walker

Gresham Technologies saw a 13% drop in its shares in early trade as the company announced its decision to exit the lower-margin legacy sub-contracting business with Australia and New Zealand Banking Group (ANZ), resulting in a reduction in revenue next year.

Share Performance

Shares of Gresham Technologies were down 18.50 pence at 119.0 pence at 1046 GMT.

Revenue Impact

The software and services company revealed on Friday that it expects to generate £8.5 million ($10.6 million) in revenue from the lower-margin legacy non-Clareti agreements this year, which have fixed margins of 13%. However, these agreements will be discontinued starting from January.

Negotiations with ANZ

Gresham Technologies stated that it is currently finalizing negotiations with ANZ, its largest customer in terms of revenue, for the renewal of existing business through to the following year.

Solid Financial Outlook

The company reassured investors that its revenue and earnings for the current year are expected to align with market forecasts. It highlighted that as of the end of October, 98% of the anticipated revenue had already been recognized or was under contract.

Furthermore, Gresham Technologies emphasized its strong pipeline of opportunities, both from new and existing customers. It expressed optimism about closing more Clareti subscription businesses before the year's end, which will contribute to annualized recurring revenue and its fiscal 2024 planned revenue.

Full-Year Forecasts

Currently, the company has not released any full-year forecasts. However, based on a forecast from one analyst obtained from FactSet, revenue for the year is expected to reach £50.2 million, compared to £48.7 million in 2022.

Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) - a preferred metric by the company that excludes exceptional and other one-off items - are projected to be £11.0 million, up from £10.3 million.