Data integrity and banking integration software provider Gresham Technologies (LON: GHT) is reaching the point where the operational gearing of the additional revenues from Clareti software will begin to show through.
Clareti can provide accurate data and information to banks and financial businesses to enable them to make better decisions. This is important for efficiency and compliance.
The fully listed company’s revenues grew from £37m to £48.7m in 2022. That was helped by currency movements and a full year contribution from post-trade processing software supplier Electra, but there was still strong organic growth. The fastest growth was in the US, but this is an international business that is growing in all regions. Pre-tax profit improved from £4m to £6.9m.
Clareti
Clareti revenues will continue to become more important. Last year, was the first time that Clareti made a profit with the other lower margin businesses previously more than covering its loss. Combining Clareti with Electra will provide additional opportunities.
Annualised recurring revenues have reached £28.1m. Management has set a target of 20% growth in Clareti revenues. It estimates that 40% of this will drop through to EBITDA.
There are more than £42m of contracted revenues for this year. Singers forecasts a 2023 pre-tax profit of £7.4m with flat earnings due the corporation tax rate rise. After that profitability is likely to accelerate with £9.6m forecast for 2024 and £12.2m in 2025.
The dividend is likely to be maintained at 0.75p a share, which would be more than ten times covered by 2023 earnings. This means that the cash pile will build up and could reach nearly £20m by the end of 2025.
At 165.5p, the shares are trading on 22 times prospective 2023 earnings, although that could fall to 14 by 2025.
