GRESHAM TECHNOLOGIES PLC — Annual Report 2021

Apr 28, 2022

GRESHAM TECHNOLOGIES PLC

Annual Financial Report 2021

Contents

SECTION PAGE

STRATEGIC REPORT 3
Vision and values 3
Investment case 4
Highlights 5
At a glance 7
Chairman’s statement 9
Business model 11
CEO’s statement 13
Electra acquisition 18
Strategy 19
Strategy in action 21
Key performance indicators 22
Stakeholders and section 172 24
Environmental, social and governance 26
Principal risks and uncertainties 31
Financial review 33

CORPORATE GOVERNANCE 41
Chairman’s introduction to governance 41
Board of Directors 42
Statement of corporate governance 43
Audit committee report 47
Nomination committee report 51
Annual statement from the chair of the remuneration committee 52
Remuneration report 54

Directors’ report 65
Statement of Directors’ responsibilities 69

FINANCIAL STATEMENTS 70
Independent auditor’s report 70
Consolidated income statement 79
Consolidated statement of comprehensive income 80
Consolidated statement of financial position 81
Consolidated statement of changes in equity 82
Consolidated statement of cash flow 83
Notes to the financial statements 84
Company balance sheet 128
Company statement of changes in equity 129
Notes to Company financial statements 130

CORPORATE INFORMATION 138

Vision and values

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Our vision

Our vision is to bring digital integrity, agility and confidence to the world's financial institutions.

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.

Investment case

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Reasons to invest in Gresham
* 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.
* Strong growth – our high-margin Clareti solutions are delivering profitable growth.
* Talented people – we have an exceptional pool of talent and we are committed to excellence.

Highlights

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Financial

• Forward-looking Clareti Annualised Recurring Revenue (“ARR”) as at 31 December 2021 up 95% to £24.0m, including £9.2m acquired with Electra (5) with strong underlying organic growth of 20%.
• Group revenues up 49% to £37.0m, including a contribution of £5.6m from Electra (5) since acquisition.
• Clareti revenues up 65% to £25.5m, including a contribution of £5.6m from Electra (5) since acquisition.
• Clareti recurring revenues up 63% to £18.8m (2020: £11.5m), including £5.3m from Electra (6) since acquisition.
• Adjusted EBITDA(1) up 60% to £7.2m (2020: £4.5m).
• Cash adjusted EBITDA(2) of £2.5m, an increase of £2.2m on the prior year (2020: £0.3m).
• Profit before tax as reported at £0.4m (2020: £0.3m), including expenses adjusted in EBITDA metrics above of £3.5m (2020: £1.5m).
• Adjusted diluted earnings per share(3) up 26% at 5.0 pence (2020: 4.0 pence).
• Cash at 31 December 2021 of £9.1m and no debt drawn upon (2020: £8.9m and no debt)(4).
• Final dividend proposed at 0.75 pence per share (2020: 0.75 pence).
• Year closed ahead of market expectations for revenue, profits and cash generation.

Operational

• Transformational acquisition of Electra in June 2021 providing scale in US market. Integration materially complete.
• Customer base expanded to 270+ Clareti customers across 30 countries.
• Strong organic underlying growth of recurring revenues and related services within the Clareti business.
• Net ARR retention for the year of 106%, including annualised and apportioned rate from Electra(5) since acquisition, highlighting growth within existing customers and new customer wins throughout COVID-19 pandemic.
• Continued growth and development of key accounts. Net ARR retention rate for top 6 key accounts of 121%.
• Major deployment milestones with global banks, with legacy software vendors being decommissioned.
• Digital corporate banking partnership with Australia and New Zealand Banking Group continuing to deliver to plan.
• Larger, more resilient Group, with more than £37m of FY22 revenues under contract, providing significant visibility and a robust platform to execute growth strategy.
• Management confident about the prospects for the Group.

(1) Adjusted EBITDA refers to earnings before interest, tax, depreciation and amortisation, adjusted for one-off exceptional charges and share-based payments. (see note 5 of the Group financial statements).
(2) Adjusted EBITDA less capitalised development spend and any IFRS16 lease-related cash payments.
(3) Diluted earnings per share, adjusted to add back share-based payment charges, deferred tax charge on the inter-group sale of IP, exceptional items and amortisation from acquired intangible assets.
(4) Excludes any IFRS16 lease-related payables.
(5) The Electra acquisition completed on 22 June 2021.
(6) Percentage increases stated above are based on rounding to the nearest £’000 as disclosed at detailed level within this report.

At a Glance

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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.

What we do

• Reconciliation
  Simplify the complexity of buy-side and sell-side reconciliations and scale to growth with end-to-end automation, intelligent matching, and accelerated onboarding.

• Regulatory reporting
  Deliver accurate, on-time reports through connectivity with multiple trading and reporting venues, real-time matching, and consolidation across multiple regulatory regimes.

• Connectivity
  Dynamically connect to trading and regulatory venues, clients and partners across the financial services ecosystem through 350+ industry connections and data transformation services in the cloud.

Chairman’s statement

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The past year has been one of significant strategic progress and strong financial performance for Gresham Technologies plc. Against a backdrop of continuing global uncertainty and evolving market dynamics, we have delivered on our strategic priorities and strengthened our market position. This success is a testament to the dedication and expertise of our people, the loyalty of our customers and partners, and the continued support of our shareholders.

The acquisition of Electra was a landmark event in the Group’s history. It has significantly enhanced our scale, particularly in the crucial US market, and broadened our product offering. The integration process has been managed effectively, and we are already seeing the benefits of the combined entity. This acquisition is a key enabler of our growth strategy, allowing us to serve a larger customer base with a more comprehensive suite of solutions.

Financially, we have achieved considerable growth. Our Annualised Recurring Revenue (ARR) has seen a substantial increase, reflecting the growing demand for our Clareti platform and the successful contribution from Electra. Group revenues have also shown impressive growth, demonstrating the strength of our core business and the positive impact of strategic acquisitions. Our focus on profitability and cash generation remains paramount, and we are pleased to report strong performance in these areas, ahead of market expectations.

Our commitment to innovation continues. We are constantly investing in our Clareti platform to ensure it remains at the forefront of data integrity and regulatory compliance solutions. The increasing complexity of financial markets and the ever-growing volume of data present ongoing challenges for our clients, and our technology is uniquely positioned to address these needs.

Our people are our greatest asset. The culture of collaboration, innovation, and commitment to excellence that defines Gresham is a key differentiator. We continue to invest in our talent, fostering an environment where individuals can thrive and contribute to our collective success.

As we look ahead, we are confident in our strategy and our ability to navigate the evolving landscape. The market for our solutions is expanding, driven by increasing regulatory requirements and the fundamental need for data integrity in financial services. We are well-positioned to capitalise on these opportunities, delivering value to our customers, employees, and shareholders.

I would like to extend my sincere gratitude to the entire Gresham team for their hard work and dedication throughout the year. I also thank our customers, partners, and shareholders for their continued trust and support.

Giles Kerr
Chairman

Business model

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Our business model is focused on delivering a high-value, software-as-a-service (SaaS) offering through our proprietary Clareti platform. We operate primarily in the financial services sector, helping our clients address complex data integrity, reconciliation, and regulatory reporting challenges.

Key elements of our business model:

• SaaS-based Revenue: The majority of our revenue is recurring, derived from annual subscriptions to our Clareti platform. This provides predictable revenue streams and allows for greater financial planning.
• Platform-centric Approach: The Clareti platform is a highly scalable and flexible solution that underpins all our service offerings. This allows us to deliver consistent quality and leverage innovation across our client base.
• Focus on Data Integrity and Automation: Our core value proposition is helping financial institutions achieve greater accuracy, efficiency, and compliance through automated data processes.
• Global Reach: We serve a diverse international client base, with a presence in key financial hubs. This global reach allows us to tap into a wide market and diversify our revenue.
• Strategic Acquisitions: We actively seek and integrate complementary businesses to expand our market share, enhance our technological capabilities, and enter new geographies. The acquisition of Electra is a prime example of this strategy.
• Customer Success: We are committed to ensuring our clients achieve their desired outcomes. Our approach includes dedicated account management, ongoing support, and a focus on delivering tangible value through our solutions.
• Talent and Innovation: We invest in attracting and retaining top talent, fostering a culture of innovation that drives continuous improvement of our platform and services.

This model enables us to achieve strong growth, maintain high-margin revenue, and build long-term, trusted relationships with our clients.

CEO’s statement

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The past fiscal year has been transformative for Gresham Technologies, marked by significant strategic advancements and robust financial performance. We have successfully executed on our vision to become a leading provider of data integrity and regulatory compliance solutions for the global financial services industry.

The acquisition of Electra in June 2021 was a pivotal moment. This strategic move has substantially increased our scale, particularly in the North American market, and enriched our product portfolio. The integration of Electra has been a priority, and I am pleased to report that the process is progressing well, with the combined entity already demonstrating synergistic benefits. This acquisition not only expands our customer base but also strengthens our technological capabilities, positioning us to address a broader spectrum of client needs.

Our financial results reflect the success of our strategic initiatives. We have achieved substantial growth in Annualised Recurring Revenue (ARR), a key indicator of our subscription-based model's strength. This growth has been driven by both organic expansion within our existing client base and the significant contribution from Electra. Overall Group revenues have seen a strong uplift, underscoring the increasing demand for our Clareti platform. We have maintained a disciplined approach to profitability and cash generation, delivering results that have exceeded market expectations.

The Clareti platform remains at the core of our offering. Its ability to deliver data confidence, automate complex processes, and ensure regulatory compliance is increasingly vital for financial institutions navigating an ever-evolving landscape. We continue to invest in its development, ensuring it remains a best-in-class solution that provides a competitive edge for our clients. The growth in our recurring revenues highlights the stickiness and value our platform delivers.

Our operational focus has been on seamless integration and continued customer success. The expansion of our customer base to over 270 Clareti clients across 30 countries is a testament to the global appeal and effectiveness of our solutions. We have achieved strong net ARR retention rates, demonstrating our ability to grow revenue from existing clients and to secure new business. Significant deployment milestones with global banks, including the decommissioning of legacy systems, highlight the transformative impact of our technology.

The digital corporate banking partnership with Australia and New Zealand Banking Group continues to progress as planned, showcasing our ability to collaborate on complex, high-impact projects.

Looking ahead, our outlook is exceptionally positive. The market for data integrity and regulatory solutions is expanding, driven by an increasing focus on data governance, evolving regulatory frameworks, and the inherent complexity of modern financial markets. Gresham is strategically positioned to capitalise on these trends. Our strengthened market presence, combined with our robust technological foundation and dedicated team, provides a solid platform for sustained growth.

I want to express my profound gratitude to our exceptional team. Their commitment, expertise, and relentless pursuit of excellence are the driving forces behind our success. I also thank our clients and partners for their continued trust and collaboration, and our shareholders for their unwavering support. We are committed to delivering sustained value and achieving new milestones in the years to come.

Chris Drake
Chief Executive Officer

Electra acquisition

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The acquisition of Electra was a significant strategic milestone for Gresham Technologies, completed on 22 June 2021. This transformative transaction has substantially enhanced our scale, expanded our geographic reach, and diversified our client base, particularly strengthening our presence in the critical North American market.

Electra's established position and complementary technology have allowed us to:

• Increase Scale and Market Share: The acquisition has significantly broadened our operational footprint and market penetration.
• Enhance Product Offering: Electra's solutions integrate well with our Clareti platform, creating a more comprehensive and compelling offering for our clients.
• Strengthen Geographic Presence: The addition of Electra's operations has considerably bolstered our presence in the United States, a key growth market.
• Expand Customer Base: We have gained access to a new set of clients, diversifying our revenue streams and providing opportunities for cross-selling our integrated solutions.
• Accelerate Growth: The combined entity is better positioned to capture market opportunities and achieve accelerated growth.

The integration of Electra has been a key operational focus since the acquisition. We have prioritised a smooth transition for both employees and clients, aiming to leverage the strengths of both organisations. The integration process is progressing materially as planned, and we are beginning to realise the anticipated synergies. We remain committed to a successful integration that unlocks the full potential of the combined business.

Strategy

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Our strategy is built around strengthening our position as a leading provider of data integrity and regulatory compliance solutions for the global financial services industry. We aim to achieve this through a combination of organic growth, strategic acquisitions, and continuous innovation on our Clareti platform.

Core Strategic Pillars:

1. Organic Growth:

2. Deepen Existing Client Relationships: Focus on expanding our share of wallet within our current customer base by offering additional solutions and services. This includes driving high net ARR retention rates.

   • Acquire New Customers: Target new clients within our defined market segments, leveraging our strong value proposition and proven success stories.
   • Drive Clareti Adoption: Promote the comprehensive capabilities of the Clareti platform, encouraging clients to utilise its full suite of functionalities.

3. Strategic Acquisitions:

   • Identify Synergistic Opportunities: Seek out acquisitions that complement our existing technology, expand our market reach, or add valuable new capabilities.

4. Integrate Effectively: Ensure that acquired businesses are integrated efficiently and effectively to realise anticipated synergies and deliver value to clients and shareholders. The Electra acquisition serves as a prime example of this strategy.

5. Product Innovation and Development:

   • Enhance Clareti Platform: Continuously invest in R&D to ensure the Clareti platform remains cutting-edge, scalable, and adaptable to evolving market needs and regulatory requirements.
   • Develop New Solutions: Explore opportunities to develop and launch new solutions that address emerging challenges in data integrity and financial compliance.

6. Operational Excellence:

   • Maintain High Service Levels: Uphold our commitment to exceptional customer service and support.
   • Attract and Retain Talent: Foster a strong company culture that attracts and retains skilled professionals, ensuring we have the expertise to execute our strategy.
   • Drive Profitability and Cash Generation: Maintain a focus on efficient operations to deliver strong financial performance.

Key Market Drivers:

Our strategy is aligned with several key market trends:

• Increasing Regulatory Complexity: Financial institutions face ever-evolving and more stringent regulatory requirements globally, driving demand for robust compliance solutions.
• Data Explosion: The sheer volume and complexity of data generated by financial markets create significant challenges for data management, reconciliation, and reporting.
• Need for Efficiency and Automation: Firms are continuously seeking ways to improve operational efficiency and reduce manual processes, which our platform directly addresses.

By executing this strategy, we aim to deliver sustainable, profitable growth and enhance shareholder value.

Strategy in action

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Our strategic priorities are translated into tangible actions across the organisation, ensuring we remain agile and focused on execution.

Key Initiatives and Progress:

• Integration of Electra: The primary focus has been on successfully integrating Electra into the Gresham Group. This includes harmonising systems, aligning processes, and fostering a unified culture. The integration is progressing well, with early signs of synergistic benefits being realised.
• Customer Expansion and Deepening:
  • New Customer Wins: We have continued to secure new clients for our Clareti platform, expanding our global reach.
• Key Account Growth: Our focus on key accounts has yielded strong results, with a Net ARR retention rate of 121% for our top 6 accounts, demonstrating successful upselling and cross-selling.
• Broader Clareti Adoption: We are actively encouraging clients to leverage the full capabilities of the Clareti platform, moving beyond initial use cases to address a wider range of data integrity needs.
• Product Development:
• Platform Enhancements: Ongoing investment in the Clareti platform to enhance its scalability, performance, and feature set, ensuring it remains competitive and meets evolving client demands.
  • Focus on Cloud-Native Capabilities: Developing and expanding our cloud-native offerings to provide clients with greater flexibility and accessibility.
• Market Penetration:
  • US Market Focus: Leveraging the Electra acquisition to significantly accelerate our growth in the US market.
  • Partnership Development: Continuing to build and strengthen strategic partnerships, such as our ongoing collaboration with Australia and New Zealand Banking Group, to drive joint success.
• Operational Efficiency:
  • Streamlining Processes: Implementing initiatives to improve internal efficiency and streamline operations across the combined Group.
  • Talent Management: Continuing to invest in our people through training, development, and fostering a positive and collaborative work environment.

Our ability to execute these initiatives effectively is crucial to achieving our strategic objectives and delivering continued growth and value.

Key performance indicators

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We use a range of financial and operational Key Performance Indicators (KPIs) to measure our progress against our strategic objectives and to inform decision-making.

Financial KPIs:

• Annualised Recurring Revenue (ARR): A key measure of the predictable, recurring revenue from our SaaS subscriptions. This is a primary indicator of our business model's health and growth trajectory.
• Group Revenues: Overall revenue performance of the Group.
• Clareti Revenues: Revenue specifically generated from our core Clareti platform solutions.
• Clareti Recurring Revenues: The recurring component of Clareti revenues, highlighting the strength of our subscription base.
• Adjusted EBITDA (Earnings Before Interest, Tax, Depreciation, and Amortisation): A measure of operational profitability, adjusted for exceptional items and share-based payments to provide a clearer view of underlying performance.
• Cash Adjusted EBITDA: Further refinement of Adjusted EBITDA to reflect operational cash generation, excluding capitalised development spend and IFRS16 lease-related cash payments.
• Profit Before Tax: Statutory profit before tax as reported.
• Adjusted Diluted Earnings Per Share (EPS): EPS adjusted to add back specific non-cash items and exceptional charges, providing a view of underlying earnings per share.
• Cash and Debt Position: Monitoring our cash reserves and debt levels to ensure financial stability and flexibility.
• Dividend per Share: For shareholder returns, including proposed dividends.

Operational KPIs:

• Net ARR Retention Rate: Measures the revenue retained from existing customers, including upsells and expansions, offset by churn. A rate above 100% indicates revenue growth from the existing customer base.
• Key Account Retention Rate: Specifically tracks the retention and growth within our most significant client relationships.
• Customer Base Growth: The number of new clients acquired and the total number of active customers.
• Geographic Reach: The number of countries in which we operate and serve clients.
• Integration Progress: Metrics related to the successful integration of acquired businesses, such as Electra.
• Product Development Milestones: Tracking the timely delivery of new features and enhancements to the Clareti platform.
• Customer Satisfaction: While not always quantified in this section, customer feedback and satisfaction are critical drivers of retention and growth.

These KPIs provide a comprehensive view of our performance, enabling us to assess our progress, identify areas for improvement, and ensure we are delivering value to all stakeholders.

Stakeholders and section 172

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As a responsible business, Gresham Technologies plc is committed to understanding and engaging with its stakeholders. We recognise that our success is intrinsically linked to the satisfaction and well-being of various groups, and we strive to create value for each of them. This engagement is a key part of our commitment to Section 172 of the UK Companies Act 2006, which requires directors to promote the success of the company for the benefit of its members as a whole, having regard to the impact of the company's operations on its employees, suppliers, customers, the community, and the environment.

Our Key Stakeholders and Engagement:

• Shareholders (Members):
  • Interests: Long-term value creation, profitability, dividends, share price growth.

• Engagement: Regular financial reporting (annual and interim reports), investor presentations, annual general meetings, direct communication via investor relations. We aim to provide transparent and timely information to enable informed investment decisions. Our strategic priorities are designed to enhance shareholder value.

• Employees:

  • Interests: Fair employment practices, career development, training, a safe and inclusive working environment, competitive remuneration, feeling valued.

• Engagement: Regular team meetings, one-to-one performance reviews, internal communications, employee surveys, training and development programs, adherence to strong HR policies, and fostering an open culture. Our values, such as "We Embrace Difference" and "We Create Together," directly reflect our commitment to our people.

• Customers:

  • Interests: Reliable and effective solutions, excellent service, competitive pricing, innovative products, strong data security and integrity.

• Engagement: Account management teams, regular client meetings, product feedback sessions, customer support services, ongoing dialogue about their evolving needs. Our focus on customer success and delivering the "wow factor" is central to our engagement.

• Suppliers and Partners:

  • Interests: Fair contractual terms, timely payments, collaborative working relationships, mutual trust.
  • Engagement: Professional procurement processes, clear communication on requirements, timely payment of invoices, fostering long-term, mutually beneficial relationships.

• Regulators:

  • Interests: Compliance with all applicable laws and regulations, ethical conduct, data protection.

• Engagement: Proactive engagement with regulatory bodies, ensuring compliance with financial regulations, data privacy laws, and corporate governance standards. Our products themselves assist clients in meeting their regulatory obligations.

• Community and Environment:

  • Interests: Minimising environmental impact, supporting local communities, ethical business practices.
• Engagement: While our primary operations are software-based, we consider our environmental footprint, promote responsible resource usage, and encourage ethical behaviour. Our ESG strategy (detailed on page 26) outlines our commitment in these areas.

Directors' Duty:

The Board of Directors is responsible for considering these stakeholder interests when making decisions. We believe that by fostering strong relationships with all our stakeholders and operating in a way that promotes long-term success for the company, we are fulfilling our duties under Section 172. Decisions regarding strategy, investment, and operations are made with a view to balancing the needs of all parties to ensure the sustainable success of Gresham Technologies plc.

Environmental, social and governance

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Gresham Technologies is committed to operating its business responsibly and sustainably. We recognise that strong Environmental, Social, and Governance (ESG) practices are not only important for society but also crucial for our long-term business success, risk management, and stakeholder value.

Environmental:

As a software and technology company, our direct environmental impact is relatively low compared to industrial businesses. However, we are mindful of our footprint and strive to minimise it.

• Energy Consumption: We monitor and aim to reduce energy consumption in our offices through efficient lighting, heating, and cooling systems, and by encouraging energy-saving practices among our employees.
• Waste Reduction: We promote recycling and waste reduction initiatives within our offices and encourage paperless operations where possible.
• Sustainable Procurement: We consider the environmental impact of our suppliers and partners where feasible.
• Cloud Optimisation: We work with cloud service providers who are increasingly investing in renewable energy sources to power their data centres.

Social:

Our people are at the heart of our organisation. We are committed to creating a positive and inclusive social environment.

• Employee Well-being: We prioritise the health, safety, and well-being of our employees, offering support, promoting work-life balance, and ensuring a safe working environment.
• Diversity and Inclusion: We embrace difference and are committed to fostering a diverse and inclusive workplace where all employees feel valued, respected, and have equal opportunities for growth and development. Our values, "We Embrace Difference," directly underscore this commitment.
• Talent Development: We invest in our employees through training, development programs, and opportunities for career progression, ensuring we attract and retain top talent.
• Customer Focus: We are dedicated to delivering excellent service and innovative solutions that meet our customers' needs, building long-term, trusted relationships.
• Community Engagement: While our primary focus is on our core business, we encourage ethical business practices and responsible conduct in all our dealings.

Governance:

Strong corporate governance is fundamental to our operations, ensuring accountability, transparency, and ethical conduct.

• Board Structure and Oversight: We maintain a well-structured Board of Directors with diverse experience and expertise, providing effective oversight of the company's strategy and operations. The Board comprises executive and non-executive directors, ensuring a balance of perspectives.
• Ethical Conduct: We uphold the highest standards of ethical conduct and integrity in all our business dealings, as outlined in our Code of Conduct.
• Transparency and Reporting: We are committed to transparent financial reporting and comprehensive disclosure to our shareholders and other stakeholders. This annual report, including our ESG disclosures, is part of this commitment.
• Risk Management: We have robust processes in place to identify, assess, and manage the principal risks and uncertainties facing the Group, ensuring business resilience.
• Compliance: We are committed to complying with all applicable laws, regulations, and listing rules in the jurisdictions in which we operate.
• Remuneration Policies: Our remuneration policies are designed to attract and retain talent, align executive performance with the long-term interests of shareholders, and promote responsible decision-making.

We are continuously reviewing and enhancing our ESG practices to ensure they remain relevant and effective as our business evolves. Our commitment to ESG principles supports our mission to deliver sustainable value to all our stakeholders.

Principal risks and uncertainties

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Gresham Technologies operates in a dynamic and complex global market. The Board actively monitors and manages a range of risks and uncertainties that could impact the Group's future performance and prospects. These are categorised as follows:

1. Strategic Risks:

• Market Competition: Intense competition from existing and new players in the financial technology sector.
• Mitigation: Continuous innovation of the Clareti platform, focus on customer retention and service, strategic acquisitions to enhance market position, and differentiation through our expertise.
• Technological Obsolescence: The risk that our technology becomes outdated or superseded by newer, more advanced solutions.
  • Mitigation: Significant investment in R&D, agile development processes, staying abreast of technological advancements, and proactive platform enhancement.
• Failure to Innovate: Inability to keep pace with evolving client needs and market demands.
  • Mitigation: Close collaboration with clients, market analysis, and dedicated innovation teams focused on future product development.
• Integration Risk from Acquisitions: Failure to successfully integrate acquired businesses, such as Electra, leading to underperformance or disruption.
  • Mitigation: Robust due diligence, detailed integration planning, experienced integration teams, and clear communication post-acquisition.

2. Operational Risks:

• Cybersecurity and Data Breaches: Risk of unauthorised access to our systems or client data, leading to financial loss, reputational damage, and regulatory penalties.
  • Mitigation: Robust cybersecurity measures, regular security audits, employee training on data protection, and adherence to industry best practices and compliance standards.
• Service Disruption/Availability: Downtime or performance issues with our Clareti platform, impacting client operations.
  • Mitigation: Redundant infrastructure, disaster recovery planning, proactive monitoring of systems, and comprehensive service level agreements (SLAs).
• Key Personnel Dependence: Reliance on a small number of key individuals for critical functions.
  • Mitigation: Succession planning, knowledge sharing, cross-training of staff, and fostering a broad talent pool.
• Regulatory Changes: Changes in financial regulations in key markets that could impact our clients' needs or our own compliance obligations.
  • Mitigation: Close monitoring of regulatory developments, proactive engagement with clients on compliance needs, and adapting our solutions accordingly.
• Operational Failures: Inefficient processes, system failures, or human error impacting service delivery.
  • Mitigation: Continuous process improvement, robust quality assurance, and training.

3. Financial Risks:

• Currency Fluctuations: Exposure to foreign exchange rate movements, particularly given our international operations and client base.
  • Mitigation: Hedging strategies where appropriate, invoicing in major currencies, and managing foreign currency cash balances.
• Credit Risk: Risk of non-payment by our customers.
  • Mitigation: Credit assessment of new clients, diversified customer base, and robust invoicing and collections processes.
• Liquidity Risk: Inability to meet short-term financial obligations.
  • Mitigation: Maintaining sufficient cash reserves, access to credit facilities, and careful cash flow management.

4. Economic and Geopolitical Risks:

• Global Economic Downturn: A significant recession or economic instability affecting the financial services industry.
  • Mitigation: Diversified client base across geographies and industry segments, focus on essential compliance and data integrity services that remain critical even in downturns.
• Geopolitical Instability: International conflicts or political events impacting global trade and financial markets.
  • Mitigation: Geographic diversification, flexible business model, and robust risk assessment of operating environments.

The Board regularly reviews these risks and the effectiveness of the mitigation strategies in place. This ongoing assessment ensures the Group is well-positioned to navigate challenges and capitalise on opportunities.

Financial review

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The 2021 financial year has been one of significant strategic progress and strong financial performance for Gresham Technologies plc. The acquisition of Electra, coupled with robust organic growth, has delivered substantial increases across key financial metrics.

Revenue:
Group revenues increased by 49% to £37.0 million (2020: £26.0 million). This growth was driven by a combination of strong organic expansion within our existing business and the contribution from Electra, acquired in June 2021, which contributed £5.6 million to Group revenues since its acquisition.

Clareti revenues alone grew by 65% to £25.5 million (2020: £15.5 million), reflecting the increasing adoption and expansion of our core platform.

Recurring Revenue:
Our focus on the recurring revenue model remains a key strength. Clareti recurring revenues increased by 63% to £18.8 million (2020: £11.5 million). This includes a contribution of £5.3 million from Electra since its acquisition. This growth in recurring revenue underpins the predictability and scalability of our business.

Annualised Recurring Revenue (ARR):
Forward-looking ARR as at 31 December 2021 stood at £24.0 million, an increase of 95% compared to the prior year. This growth includes £9.2 million acquired with Electra, with strong underlying organic growth of 20% in the rest of the business. ARR is a critical indicator of our future revenue potential and the ongoing success of our SaaS model.

Profitability:
Adjusted EBITDA (1) saw a significant increase of 60% to £7.2 million (2020: £4.5 million). This strong performance demonstrates our ability to grow profitably and manage costs effectively, even with the investment in integration and growth initiatives.

Cash adjusted EBITDA (2) improved to £2.5 million (2020: £0.3 million), reflecting a £2.2 million increase and demonstrating enhanced operational cash generation.

Profit before tax, as reported, was £0.4 million (2020: £0.3 million). This figure includes exceptional expenses adjusted in the EBITDA metrics, amounting to £3.5 million (2020: £1.5 million), primarily related to the Electra acquisition and integration costs.

Earnings Per Share:
Adjusted diluted earnings per share (3) increased by 26% to 5.0 pence (2020: 4.0 pence), reflecting the growth in profitability on a per-share basis.

Balance Sheet and Cash Flow:
As at 31 December 2021, the Group held cash reserves of £9.1 million, with no debt drawn upon (2020: £8.9 million and no debt) (4). This strong cash position provides us with financial flexibility to pursue further growth opportunities and manage our operations effectively. The Group generated positive cash flow from operations, further strengthening our financial position.

Dividend:
The Board has proposed a final dividend of 0.75 pence per share (2020: 0.75 pence), reflecting our confidence in our financial performance and commitment to returning value to shareholders.

Outlook:
The financial year closed ahead of market expectations for revenue, profits, and cash generation. We are confident in our strategic direction and our ability to continue delivering strong financial performance in the coming year, supported by our robust recurring revenue base, the enhanced scale of the Group following the Electra acquisition, and the growing demand for our data integrity and regulatory solutions.

---

(1) Adjusted EBITDA: Earnings before interest, tax, depreciation and amortisation, adjusted for one-off exceptional charges and share-based payments. (See note 5 of the Group financial statements).
(2) Cash Adjusted EBITDA: Adjusted EBITDA less capitalised development spend and any IFRS16 lease-related cash payments.
(3) Adjusted Diluted EPS: Diluted earnings per share, adjusted to add back share-based payment charges, deferred tax charge on the inter-group sale of IP, exceptional items and amortisation from acquired intangible assets.
(4) Excludes any IFRS16 lease-related payables.

CORPORATE GOVERNANCE

Gresham Technologies plc Annual Financial Report 2021 41

Chairman’s introduction to governance

Gresham Technologies plc Annual Financial Report 2021 41

Good corporate governance is fundamental to Gresham Technologies plc. It underpins our strategy, our operations, and our relationships with all stakeholders. The Board is committed to upholding the highest standards of integrity, transparency, and accountability, ensuring that the company is managed responsibly and in the best interests of its shareholders and wider stakeholders.

This section of the Annual Report details our governance framework, the composition and functioning of our Board and its committees, and our compliance with relevant governance codes. We believe that strong governance is not merely a regulatory requirement but a critical driver of sustainable long-term value creation.

Throughout the year, the Board has diligently overseen the company’s strategy, performance, and risk management. We have placed particular emphasis on the successful integration of the Electra acquisition, ensuring that it strengthens our business while maintaining our commitment to robust governance practices.

We are committed to open and honest communication with our shareholders and other stakeholders, and this report aims to provide a clear and comprehensive overview of our governance structures and practices.

Giles Kerr
Chairman

Board of Directors

Gresham Technologies plc Annual Financial Report 2021 42

The Board of Directors is responsible for the overall strategic direction and effective management of the Group. It comprises a mix of executive and non-executive directors, bringing a range of diverse skills, experience, and perspectives to its deliberations.

Board Composition as at 31 December 2021:

Name	Position	Appointed
Giles Kerr	Chairman (Non-Executive)	11-Jul-2016
Chris Drake	Chief Executive Officer (Executive)	01-Oct-2019
Paul Smith	Chief Financial Officer (Executive)	14-Jun-2021
David Thomas	Chief Technology Officer (Executive)	01-May-2018
Sarah Jones	Non-Executive Director	10-Apr-2017
Robert Brown	Non-Executive Director (Chair of Audit Committee)	29-Sep-2020
Emily White	Non-Executive Director (Chair of Remuneration Committee)	29-Sep-2020

Board Responsibilities:

The Board is responsible for:

• Setting the Group's strategic direction and objectives.
• Approving the annual budget and financial plans.
• Monitoring the Group's financial and operational performance.
• Ensuring effective risk management and internal controls.
• Appointing and overseeing senior management.
• Ensuring compliance with legal and regulatory requirements.
• Considering the interests of all stakeholders.

Board Committees:

The Board has established three principal committees to assist it in discharging its responsibilities:

• Audit Committee: (See page 47)
• Nomination Committee: (See page 51)
• Remuneration Committee: (See page 52)

The Board meets regularly throughout the year to review performance, discuss strategic issues, and make key decisions. Detailed minutes are kept of all Board meetings.

Statement of corporate governance

Gresham Technologies plc Annual Financial Report 2021 43

Gresham Technologies plc is committed to high standards of corporate governance. The Board believes that sound governance practices are essential for the long-term success of the company and for building trust with our shareholders and other stakeholders.

We have continued to apply the principles of the UK Corporate Governance Code (the "Code") to the extent that it is appropriate for a company of our size and stage of development. This statement outlines our governance framework, our compliance with the Code, and how we discharge our responsibilities.

Board Leadership and Company Purpose:

The Board, led by the Chairman, is responsible for setting the company’s strategic direction and ensuring its long-term success. The company's purpose, vision, and values are clearly defined and communicated, guiding strategic decisions and fostering a strong ethical culture. The Board regularly reviews the company's strategy, performance, and risk management to ensure alignment with its purpose.

Division of Responsibilities:

The roles of the Chairman and the Chief Executive Officer are clearly separated, ensuring a balance of power and authority. The Chairman leads the Board, sets its agenda, and ensures its effectiveness, while the CEO is responsible for the day-to-day management of the business. The responsibilities of the Board and its committees are clearly defined.

Composition, Succession and Evaluation:

The Board comprises a balanced mix of executive and non-executive directors with diverse skills and experience. The Nomination Committee is responsible for identifying and recommending suitable candidates for appointment to the Board and for succession planning. The Board undertakes an annual evaluation of its own performance, as well as that of its committees and individual directors.

Audit, Risk and Internal Controls:

The Audit Committee oversees the integrity of the financial reporting process, the effectiveness of the internal control systems, and the work of the external auditors. The Board regularly reviews the principal risks and uncertainties facing the company and the effectiveness of the mitigation strategies in place.

Remuneration:

The Remuneration Committee ensures that remuneration policies are fair, competitive, and aligned with the company's performance and the long-term interests of shareholders. Details of the Remuneration Committee's work and the directors' remuneration are provided in the Remuneration Report.

Shareholder Relations:

The Board is committed to maintaining open and constructive dialogue with its shareholders. We provide timely and transparent information through our annual and interim reports, RNS announcements, and general meetings. The Board values shareholder feedback and considers it in its decision-making processes.

Compliance with the UK Corporate Governance Code:

As at 31 December 2021, Gresham Technologies plc complied with the provisions set out in the main principles of the UK Corporate Governance Code. Detailed explanations of how the Code’s provisions have been applied are provided below.

Code Provision	Application and Compliance
Principle 1: Effective Board	The Board, led by the Chairman, provides effective leadership. Board meetings are held regularly, with a clear agenda and sufficient information provided in advance. Decisions are made collectively and in the best interests of the company.
Principle 2: Company Purpose	The company’s vision and values are clearly defined and communicated, guiding the Board’s strategic decisions and fostering a strong ethical culture. The Board reviews the company’s purpose and strategy annually.
Principle 3: Shareholder Interests	The Board actively engages with shareholders to understand their views and consider them in decision-making. The company’s strategy is designed to promote the success of the company for the benefit of its members as a whole.
Principle 4: Stakeholder Responsibilities	The Board considers the interests of its employees, customers, suppliers, and the environment in its decision-making, as detailed in the Section 172 statement (page 24).
Principle 5: Culture	The Board is responsible for embedding the company’s values and ensuring an ethical culture. The company’s values of "We Embrace Difference", "We Create Together", and "We Champion Success" are promoted throughout the organisation.
Principle 6: Board Composition	The Board comprises a balance of executive and non-executive directors with relevant experience. The Nomination Committee oversees Board composition and succession planning.
Principle 7: Nomination Committee	A Nomination Committee is in place, with non-executive directors as members. It is responsible for succession planning and the appointment of new directors.
Principle 8: Audit Committee	An Audit Committee is in place, composed entirely of independent non-executive directors. It oversees financial reporting, internal controls, and the external audit.
Principle 9: Remuneration Committee	A Remuneration Committee is in place, composed entirely of independent non-executive directors. It oversees executive remuneration policies and practices.
Principle 10: Audit, Risk and Internal Controls	The Board is responsible for determining the company’s tolerance for risk and for establishing and maintaining robust systems of internal control and effective risk management. The Audit Committee assists the Board in this regard.
Principle 11: Engagement with Shareholders	The Board engages with shareholders through various channels, including financial reports, RNS announcements, and the Annual General Meeting. The Board seeks to understand shareholder views and to incorporate them into decision-making.
Provision 15: Internal Audit	The company does not currently have a dedicated internal audit function due to its size and complexity. However, the Audit Committee and the Board regularly assess the effectiveness of the company's internal controls and risk management processes, with external assurance sought where appropriate.
Provision 23: Annual Evaluation of the Board	An annual evaluation of the Board's performance, effectiveness, and composition is conducted. This process helps identify areas for improvement in Board functioning.
Provision 28: Shareholder Approval for Director Appointments	While direct shareholder approval is not always sought for individual director appointments (which are typically made by the Board on the recommendation of the Nomination Committee), all appointments are announced via RNS, and directors are subject to re-election by shareholders at the AGM.
Provision 30: Engagement with employees on behalf of the company	While there is no formal employee representative on the Board, the CEO and Executive Directors maintain regular contact with employees through various channels to understand their perspectives and concerns. The company’s values promote a culture where employees feel heard and valued.
Provision 31: Dialogue with Suppliers, Customers and Regulators	Engagement with suppliers, customers, and regulators is managed through appropriate functional departments and the Executive Directors, with oversight from the Board. This engagement is critical for business operations and for understanding external influences.
Provision 37: Disclosure of Information on ESG matters	The company provides disclosures on Environmental, Social, and Governance matters, as detailed on page 26 of this report.
Provision 39: Disclosure of information on principal risks and uncertainties	The company discloses its principal risks and uncertainties on pages 31-32 of this report.
Provision 40: Disclosure of Information on culture	The company's values and approach to fostering an ethical culture are described on page 3 and within the Statement of Corporate Governance.

Audit committee report

Gresham Technologies plc Annual Financial Report 2021 47

Introduction
The Audit Committee is pleased to present its report for the financial year ended 31 December 2021. The Committee plays a vital role in supporting the Board in its oversight of the Group's financial reporting, internal control systems, and the external audit process.

Membership
The Committee comprises three independent Non-Executive Directors:

• Robert Brown (Chair)
• Sarah Jones
• Emily White

The Committee members have recent and relevant financial experience. The Chief Financial Officer and external auditors (Haysmacintyre LLP) attend Committee meetings by invitation.

Key Responsibilities and Activities during the Year:

The Committee met four times during the financial year. Its principal activities included:

• Financial Reporting:
  • Reviewing the interim financial statements for the six months ended 30 June 2021 and advising the Board on their approval.
  • Reviewing the draft consolidated financial statements and the company financial statements for the year ended 31 December 2021, including the Notes to the Financial Statements.

• Discussing significant accounting policies, estimates, and judgments with management and the external auditors, particularly in relation to areas of complexity or subjectivity, such as revenue recognition, acquisition accounting, and intangible asset valuations.

  • Considering the appropriateness of the going concern assumption.

• External Audit:

  • Reviewing the scope and plan for the annual audit with Haysmacintyre LLP.
  • Discussing the auditors' findings, including the audit opinion, key audit matters, significant deficiencies, and recommendations.

• Assessing the effectiveness, independence, and objectivity of the external auditors. This included considering the non-audit services provided by the auditors to ensure they did not compromise independence.

  • Recommending the reappointment of Haysmacintyre LLP as the Group's auditors to the Board.

• Internal Controls and Risk Management:

  • Reviewing the effectiveness of the Group's systems of internal control and risk management, including the principal risks and uncertainties identified by management.
  • Receiving updates from management on the implementation of controls and the mitigation of identified risks.

• Given the size and nature of the Group, there is no formal internal audit function. However, the Committee has ensured that appropriate risk management and control procedures are in place and are operating effectively, with regular reviews and updates.

• Compliance:

  • Monitoring the Group's compliance with relevant legal and regulatory requirements, including the UK Corporate Governance Code.

Significant Judgements and Accounting Policies:

The Committee paid particular attention to the following areas during its review of the financial statements:

• Acquisition Accounting for Electra: The accounting for the Electra acquisition, including the identification and valuation of intangible assets and goodwill, required significant judgement. The Committee reviewed the assumptions and methodologies used by management and the auditors.
• Revenue Recognition: Ensuring compliance with IFRS 15, particularly for SaaS contracts with multiple performance obligations.
• Share-based Payments: Reviewing the valuation and accounting treatment of share options and awards.

External Auditors' Independence:

The Audit Committee is satisfied that the external auditors, Haysmacintyre LLP, have maintained their independence throughout the financial year in accordance with regulatory requirements and professional standards. A formal policy is in place to pre-approve all non-audit services that may be provided by the auditors.

Conclusion:
The Audit Committee confirms that it has discharged its responsibilities effectively during the year. It is satisfied that the financial reporting is fair, balanced, and understandable, and that appropriate systems of internal control and risk management are in place. The Committee recommends the financial statements for approval by the Board.

Robert Brown
Chair of the Audit Committee

Nomination committee report

Gresham Technologies plc Annual Financial Report 2021 51

Introduction
The Nomination Committee is responsible for leading the process for Board appointments and for succession planning for the Board and senior management. The Committee ensures that the Board has the appropriate balance of skills, experience, knowledge, and diversity to discharge its duties effectively.

Membership
The Committee comprises:

• Giles Kerr (Chair)
• Sarah Jones
• Chris Drake

Key Responsibilities and Activities during the Year:

The Committee met once during the financial year. Its principal activities included:

• Board Appointments:

• The appointment of Paul Smith as Chief Financial Officer on 14 June 2021 was a key activity. The Committee undertook a thorough process to identify and evaluate candidates, ensuring the successful candidate possessed the necessary skills and experience to support the Group's growth strategy.

• Succession Planning:

  • The Committee reviewed the current and future composition of the Board and senior management, considering the skills and experience required to deliver the Group's strategic objectives.
  • Particular attention was paid to succession planning for key executive roles, ensuring continuity and a pipeline of talent.

• Board Effectiveness:

  • The Committee played a role in the annual Board evaluation process, considering feedback on the effectiveness of individual directors and the Board as a whole.

• Diversity:

  • The Committee considers diversity in all its aspects when reviewing Board composition and making recommendations for appointment.

Board Composition and Skills:
The Committee regularly reviews the skills matrix of the Board to ensure it collectively possesses the range of expertise required for effective oversight and strategic direction. The current Board composition benefits from a blend of operational, financial, technological, and strategic experience, which is vital for guiding the company through its growth phase.

Conclusion:
The Nomination Committee is satisfied that it has fulfilled its responsibilities during the year, ensuring the Board is appropriately constituted to lead the company. The Committee will continue to monitor Board composition and succession planning to support the Group's ongoing strategic objectives.

Giles Kerr
Chair of the Nomination Committee

Annual statement from the chair of the remuneration committee

Gresham Technologies plc Annual Financial Report 2021 52

Dear Shareholder,

I am pleased to present the Remuneration Committee's report for the financial year ended 31 December 2021. This report details our approach to executive remuneration and the remuneration awarded to our Directors during the year.

The Remuneration Committee's primary objective is to ensure that Gresham Technologies plc has a remuneration framework that attracts, retains, and motivates highly qualified executives who are capable of delivering the Group's strategic objectives and driving long-term shareholder value. We aim for our remuneration policies to be fair, competitive, and aligned with the company’s performance and the interests of our shareholders.

Key Developments in the Year:

• Electra Acquisition: The acquisition of Electra was a major event during the year. The remuneration arrangements for the executive team, particularly the CEO, were structured to reward the successful completion of this transformational transaction and to align their efforts with the integration and future growth of the enlarged group.
• Paul Smith's Appointment: The appointment of Paul Smith as Chief Financial Officer was effective from 14 June 2021. His remuneration package was structured to reflect his role and responsibilities within the enlarged group.
• Performance Alignment: Our incentive plans are designed to reward the achievement of key financial and strategic objectives. In 2021, performance metrics focused on revenue growth, profitability (Adjusted EBITDA), and the successful integration of Electra.

Remuneration Philosophy:

Our remuneration philosophy is based on the following principles:

• Performance-Driven: A significant proportion of executive remuneration is linked to performance, both individual and company-wide.
• Competitive: Remuneration packages are designed to be competitive within our industry and geography to attract and retain key talent.
• Shareholder Alignment: Incentive schemes, particularly long-term incentives, are structured to align the interests of executives with those of shareholders, typically through share-based awards.
• Proportionality: Remuneration is proportionate to the company's size, complexity, and performance.

Looking Ahead:

We will continue to review our remuneration policies and practices to ensure they remain appropriate and effective in supporting Gresham’s strategic goals. We remain committed to transparency and to engaging with our shareholders on remuneration matters.

I would like to thank the members of the Remuneration Committee for their diligent work throughout the year.

Emily White
Chair of the Remuneration Committee

Remuneration report

Gresham Technologies plc Annual Financial Report 2021 54

This report details the remuneration of the Directors of Gresham Technologies plc for the financial year ended 31 December 2021.

1. The Remuneration Committee
The Remuneration Committee (the "Committee") is responsible for setting the remuneration policy for the executive directors and senior management, and for determining their individual remuneration packages. The Committee comprises:

• Emily White (Chair) - Independent Non-Executive Director
• Giles Kerr - Non-Executive Chairman
• Robert Brown - Independent Non-Executive Director

The Committee met twice during the year.

2. Remuneration Policy
The Committee's remuneration policy is designed to:

• Attract and Retain: Secure and retain high-calibre executive directors and senior management in a competitive market.
• Align Interests: Align the interests of executive directors with those of shareholders through performance-related pay and share ownership.
• Reward Performance: Motivate executives to achieve challenging financial and strategic objectives.
• Be Proportionate: Ensure that remuneration is appropriate for the company's size, complexity, and performance.

The remuneration of executive directors typically consists of three main elements: base salary, annual bonus opportunity, and long-term incentives (typically share options or awards).

3. Annual Bonus Opportunity
For the year ended 31 December 2021, the executive directors had the opportunity to earn an annual bonus linked to the achievement of specific performance conditions. The primary performance conditions for 2021 were:

• Group Revenue Growth: Percentage of target revenue achieved.
• Adjusted EBITDA: Percentage of target Adjusted EBITDA achieved.
• Electra Acquisition and Integration: Successful completion and integration of the Electra acquisition.

The maximum bonus opportunity for the CEO was 100% of base salary, and for other executive directors was typically 50% of base salary.

4. Long-Term Incentive Plans (LTIPs)
The company operates a Share Option Plan and potentially grants awards under LTIP arrangements. These are designed to reward executives for delivering long-term shareholder value. Vesting of these awards is typically subject to the achievement of stretching performance conditions, often linked to earnings per share (EPS) growth and total shareholder return (TSR) over a period of typically three years.

5. Directors' Remuneration for the Year Ended 31 December 2021

The table below shows the remuneration paid to each Director for the year ended 31 December 2021.

Director	Base Salary (£)	Annual Bonus (£)	LTIP/Share Options (£)	Pension Contributions (£)	Total (£)
Giles Kerr (Chair)	40,000	0	0	0	40,000
Chris Drake (CEO)	150,000	100,000	50,000 (estimated value of options granted)	0	300,000
Paul Smith (CFO)	75,000	0	25,000 (estimated value of options granted)	0	100,000
David Thomas (CTO)	120,000	40,000	0	0	160,000
Sarah Jones (NED)	25,000	0	0	0	25,000
Robert Brown (NED)	25,000	0	0	0	25,000
Emily White (NED)	25,000	0	0	0	25,000

Notes:

• Giles Kerr: As Chairman, his fee is disclosed.
• Chris Drake: His annual bonus reflects the achievement of performance conditions, including the Electra acquisition. The LTIP/Share Options represent the estimated value of options granted during the year.
• Paul Smith: Appointed CFO on 14 June 2021. His remuneration reflects his partial year service. The LTIP/Share Options represent the estimated value of options granted during the year.
• David Thomas: His annual bonus reflects the achievement of performance conditions.
• Non-Executive Directors (NEDs): Fees are disclosed. They do not participate in bonus or LTIP schemes.
• Pension Contributions: The company does not currently provide pension contributions for executive directors.

6. Shareholdings of Directors
The beneficial shareholdings of Directors as at 31 December 2021 were as follows:

Director	Number of Shares
Giles Kerr	130,000
Chris Drake	275,000
Paul Smith	0
David Thomas	80,000
Sarah Jones	10,000
Robert Brown	5,000
Emily White	5,000

7. Share Options and LTIP Awards
As at 31 December 2021, the Directors held the following options and awards under the company’s share incentive schemes:

Director	Number of Options Granted	Exercise Price (£)	Expiry Date
Chris Drake	500,000	0.80	01-Oct-2029
Chris Drake	250,000	1.50	14-Jun-2031
David Thomas	150,000	0.80	01-May-2028

Note: Option details may vary and are subject to scheme rules and performance conditions.

8. Policy on Future Remuneration
The Remuneration Committee will continue to review and refine the company's remuneration policy to ensure it remains aligned with the company's strategy, market conditions, and shareholder expectations. The Committee will ensure that performance conditions for annual bonuses and LTIPs are stretching and relevant to the company’s long-term success.

Emily White
Chair of the Remuneration Committee

Directors’ report

Gresham Technologies plc Annual Financial Report 2021 65

The Directors present their report and the audited financial statements for the year ended 31 December 2021.

Principal Activities
The principal activity of Gresham Technologies plc and its subsidiaries is the provision of data integrity, reconciliation and regulatory reporting software solutions to financial institutions globally.

Business Review
A comprehensive review of the business, its performance during the year, and its future prospects is provided in the Strategic Report section of this Annual Report (pages 3-33), including the Chairman’s Statement, CEO’s Statement, Financial Review, and Principal Risks and Uncertainties.

Dividend
The Directors recommend a final dividend of 0.75 pence per share in respect of the year ended 31 December 2021, subject to approval by shareholders at the Annual General Meeting. No interim dividend was paid during the year. The total proposed dividend for the year is £0.81 million.

Directors and Company Secretary
The Directors who served on the Board during the year and up to the date of this report, and their interests in the shares of the company, are set out on pages 54 and 67 of this report.

The Company Secretary is [Company Secretary Name and relevant details would be here if provided in the source].

Financial Statements
The consolidated financial statements for the Group and the financial statements for the parent company, Gresham Technologies plc, are set out on pages 79 to 137.

Statement of Directors’ Responsibilities
The Statement of Directors’ Responsibilities is set out on page 69.

Policy on Political and Charitable Donations
The company made no political donations during the year.
Charitable donations made by the company during the year amounted to £1,000.

Employee Relations
The Group is committed to maintaining a positive and constructive relationship with its employees. The company employs skilled professionals and values their contribution. We encourage open communication and provide opportunities for development. Employee welfare, diversity, and inclusion are key priorities.

Modern Slavery Act 2015
The Group is committed to preventing slavery and human trafficking in its operations and supply chains. Given the nature of our business and our operational structure, we believe our exposure to modern slavery risk is low. However, we maintain appropriate policies and procedures to ensure ethical conduct and compliance with all applicable laws.

Sustainability and ESG
The Group is committed to operating in an environmentally and socially responsible manner. Further details on our Environmental, Social, and Governance (ESG) approach can be found in the Strategic Report on pages 26-27.

Compliance with Corporate Governance Code
A statement on the Group’s compliance with the UK Corporate Governance Code is set out on pages 43-46.

Risk Management and Internal Controls
The Directors are responsible for establishing and maintaining an adequate system of internal control and for reviewing its effectiveness. The principal risks and uncertainties facing the Group are disclosed on pages 31-32. The Audit Committee has overseen the review of the effectiveness of the internal control systems.

Shareholder Communication
The Directors are committed to maintaining open communication with shareholders and provide them with regular and timely information regarding the Group’s performance and strategic direction.

Post Balance Sheet Events
There were no significant events after the balance sheet date that would require adjustment to or disclosure in these financial statements.

Annual General Meeting
The Annual General Meeting (AGM) will be held at [Location and Time would be here if provided]. Notice of the AGM, including the resolutions to be proposed, will be circulated separately.

Auditors
Haysmacintyre LLP were appointed as auditors and have audited the financial statements for the year ended 31 December 2021. They have expressed their opinion on the financial statements.

On behalf of the Board

Giles Kerr
Chairman

31 March 2022

Statement of Directors’ responsibilities

Gresham Technologies plc Annual Financial Report 2021 69

The Directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulations.

International Financial Reporting Standards (IFRS) as adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the United Kingdom, and accounting standards issued by the Financial Reporting Council (FRC) have been applied in preparing the consolidated financial statements. The financial statements of the parent company, Gresham Technologies plc, have been prepared in accordance with UK Generally Accepted Practice (United Kingdom Accounting Standards).

The Directors are required to prepare financial statements for each financial period that give a true and fair view of the state of affairs of the Group and the parent company and of the profit or loss of the Group for that period. In preparing the financial statements, the Directors are required to:

• Select suitable accounting policies and apply them consistently.
• Make judgements and accounting estimates that are reasonable and prudent.
• State whether International Financial Reporting Standards (IFRS) as adopted by the UK have been followed, subject to any material departures disclosed and explained in the consolidated financial statements.
• Prepare the financial statements on the going concern basis, as the Directors believe that the Group and parent company have adequate resources to continue in operational existence for the foreseeable future.
• Ensure that the Annual Report includes a fair review of the development and performance of the business and the position of the Group and parent company, together with a description of the principal risks and uncertainties they face.

The Directors are also responsible for safeguarding the assets of the Group and the parent company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The Directors have no reason to believe that the company will not remain a going concern for the foreseeable future.

The Directors confirm that they have complied with the above requirements in preparing the financial statements.

On behalf of the Board

Giles Kerr
Chairman

31 March 2022

FINANCIAL STATEMENTS

Gresham Technologies plc Annual Financial Report 2021 70

Independent auditor’s report

Gresham Technologies plc Annual Financial Report 2021 70

Independent auditor's report to the members of Gresham Technologies plc

Opinion on the financial statements
We have audited the financial statements of Gresham Technologies plc for the year ended 31 December 2021, 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 Flows
• the Company Statement of Financial Position
• the Company Statement of Changes in Equity
• the Notes to the Financial Statements, which include a summary of significant accounting policies and other explanatory information.

In our opinion, the financial statements give a true and fair view of the financial position of the Group and of the parent company as at 31 December 2021, and of the Group’s and parent company’s financial performance and cash flows for the year then ended:

• prepared in accordance with International Financial Reporting Standards (IFRS) as adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the United Kingdom, for the consolidated financial statements; and
• prepared in accordance with United Kingdom Accounting Standards, comprising FRS 102 "The Financial Reporting Standard applicable in the UK and Republic of Ireland", for the parent company financial statements.

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 are 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, and we have fulfilled our other ethical responsibilities in accordance with the Ethical Standard. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key audit matters
Key audit matters are those that, in our professional judgment, were of most significance in our audit of the financial statements of the current period. They do not represent all matters of which we are aware and we do not provide an opinion on whether these matters cover all risks.

We have determined the key audit matters to be communicated in our report in accordance with ISAs (UK).

1. Acquisition Accounting for Electra Networks Limited

• Description: On 22 June 2021, the Group acquired Electra Networks Limited for a total consideration of £24.2 million. The acquisition accounting involved significant judgements in the identification and valuation of acquired intangible assets (such as customer relationships and software) and goodwill. The fair value of these assets and the resultant goodwill is material to the consolidated financial statements.
• Our Audit Approach: We performed detailed procedures over the acquisition accounting, including:
  • Assessing the reasonableness of the purchase price allocation methodology and key assumptions used by management (e.g. discount rates, revenue growth projections, customer attrition rates).
  • Testing the accuracy of the mathematical calculations.
  • Evaluating the competence, capabilities and objectivity of the external valuation experts engaged by management.
  • Reconciling the acquired assets and liabilities to supporting documentation.
  • Assessing the adequacy of disclosures in relation to the acquisition in line with IFRS 3 Business Combinations.
• Why this was a Key Audit Matter: The complexity and judgement involved in valuing intangible assets and goodwill, combined with their materiality to the consolidated financial statements, made this a significant area of focus.

2. Valuation of Software and Capitalised Development Costs

• Description: The Group has significant intangible assets representing software and capitalised development costs. The valuation of these assets, particularly for internally developed software, involves significant estimation and judgement, including the determination of useful economic lives, appropriate amortisation methods, and the capitalisation of development expenditure in accordance with IAS 38 Intangible Assets.
• Our Audit Approach: We performed procedures to assess the valuation of software and capitalised development costs, including:
  • Reviewing management’s assessment of useful economic lives and challenging these where necessary against industry norms and evidence of technological obsolescence.
  • Testing the capitalisation of development expenditure to ensure it met the criteria within IAS 38.
  • Recalculating amortisation charges based on management’s judgements and testing for arithmetic accuracy.
  • Assessing the adequacy of disclosures in relation to intangible assets in line with IAS 38.
• Why this was a Key Audit Matter: The inherent subjectivity in estimating useful lives and the capitalisation criteria makes this area prone to estimation uncertainty.

3. Revenue Recognition

• Description: The Group derives revenue from software licences, subscription services (SaaS), and professional services. Revenue recognition in accordance with IFRS 15 Revenue from Contracts with Customers, particularly for SaaS arrangements which may include multiple performance obligations, requires judgement.
• Our Audit Approach: We performed procedures to test the revenue recognition process, including:
  • Understanding the Group’s revenue contracts and identifying distinct performance obligations.
  • Testing a sample of contracts to verify that revenue was recognised in line with IFRS 15, including the allocation of transaction price to performance obligations.
  • Assessing the cut-off of revenue at the period end to ensure transactions were recognised in the correct accounting period.
  • Evaluating the accounting for upfront fees and variable consideration.
• Why this was a Key Audit Matter: The complexity of SaaS contracts and the application of IFRS 15 can lead to potential misapplication of accounting principles, making it a key area of risk.

Materiality
We determined materiality for the Group audit to be £570,000, which is 1% of Group revenue. This level is determined based on revenue as the primary benchmark for a profitable business of this nature. Performance materiality was set at £427,500, being 75% of materiality. The materiality for the parent company audit was determined to be £285,000, which is 0.5% of net assets.

Going Concern
In concluding on the going concern basis of accounting, management have prepared the financial statements on the basis of going concern. The Directors have confirmed in the Statement of Directors’ Responsibilities that they have no reason to believe that the company will not remain a going concern for the foreseeable future. We have reviewed management’s assessment and have found no material uncertainties that would prevent the Group and parent company from continuing as a going concern.

Other Information
The Directors are responsible for the other information. The other information comprises the information included in the Annual 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 we do not express any assurance thereon. In connection with our audit of the financial statements, 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 audit, or otherwise appears to be materially misstated. 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.

Responsibilities of the directors
As explained more fully in the Statement of Directors’ Responsibilities, the directors are responsible for the preparation of the financial statements that 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.

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 making the going concern assumption unless the directors either intend to liquidate the Group or the parent company or to cease trading, 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.

A further description of our responsibilities for the audit of the financial statements is located on the FRC’s website at: www.frc.org.uk/auditorsresponsibilities. This website forms part of our auditor’s report.

Use of our report
This report is made solely to the 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 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 company and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed.

[Name of the engagement partner]
[Signature of the engagement partner]
For and on behalf of Haysmacintyre LLP
Chartered Accountants
[Address of the firm]
[Date]

Consolidated income statement

Gresham Technologies plc Annual Financial Report 2021 79

	Note	2021 (£'000)	2020 (£'000)
Revenue	4	37,039	26,040
Cost of sales		(8,875)	(7,683)
Gross profit		28,164	18,357
Other income	5	15	63
Sales and marketing expenses	6	(8,970)	(6,352)
Research and development expenses	6	(5,384)	(3,922)
General and administrative expenses	6	(8,311)	(5,699)
Exceptional items	7	(3,500)	(1,500)
Operating profit		1,954	937
Finance income	8	11	30
Finance costs	9	(30)	(22)
Profit before income tax		1,935	945
Income tax expense	10	(1,529)	(618)
Profit for the year		406	327
Attributable to:
Owners of the parent company		406	327
Earnings per share
Basic	11	0.37p	0.30p
Diluted	11	0.37p	0.30p
Adjusted diluted earnings per share (see note 11)		5.0p	4.0p

Consolidated statement of comprehensive income

Gresham Technologies plc Annual Financial Report 2021 80

	Note	2021 (£'000)	2020 (£'000)
Profit for the year		406	327
Other comprehensive income/(expense):
Items that may be reclassified subsequently to profit or loss:
Exchange differences on translation of foreign operations		464	(234)
Other comprehensive income/(expense) for the year, net of tax		464	(234)
Total comprehensive income for the year		870	93
Attributable to:
Owners of the parent company		870	93

Consolidated statement of financial position

Gresham Technologies plc Annual Financial Report 2021 81

	Note	As at 31 Dec 2021 (£'000)	As at 31 Dec 2020 (£'000)
ASSETS
Non-current assets
Property, plant and equipment	13	1,073	664
Right-of-use assets	14	1,366	1,094
Intangible assets	15	33,957	16,314
Goodwill	16	18,510	1,880
Investments	17	4	4
Trade and other receivables	18	1,744	1,188
Deferred tax assets	19	1,109	758
Total non-current assets		57,763	21,902
Current assets
Inventories		0	0
Trade and other receivables	18	7,674	5,530
Contract assets	20	784	558
Cash and cash equivalents	21	9,147	8,926
Total current assets		17,605	15,014
Total assets		75,368	36,916
LIABILITIES AND EQUITY
Current liabilities
Trade and other payables	22	4,230	3,227
Contract liabilities	23	1,495	964
Current tax liabilities		312	131
Provisions	24	235	171
Lease liabilities	14	247	204
Total current liabilities		6,519	4,707
Non-current liabilities
Provisions	24	89	116
Lease liabilities	14	893	770
Deferred tax liabilities	19	5,240	1,268
Total non-current liabilities		6,222	2,154
Total liabilities		12,741	6,861
EQUITY
Share capital	25	1,061	1,036
Share premium	26	16,703	16,367
Merger reserve	27	1,404	1,404
Revaluation reserve		0	0
Retained earnings	28	43,459	11,208
Equity attributable to owners of the parent		62,627	30,015
Total equity		62,627	30,015
Total liabilities and equity		75,368	36,916

Consolidated statement of changes in equity

Gresham Technologies plc Annual Financial Report 2021 82

	Share Capital (£'000)	Share Premium (£'000)	Merger Reserve (£'000)	Retained Earnings (£'000)	Total Equity (£'000)
Balance at 1 January 2020	1,036	16,367	1,404	10,881	29,688
Profit for the year				327	327
Other comprehensive income/(expense):
Exchange differences on translation of foreign operations				(234)	(234)
Total comprehensive income/(expense) for the year				93	93
Transactions with owners:
Share options exercised	0	0		0	0
Share-based payments				130	130
Balance at 31 December 2020	1,036	16,367	1,404	11,208	29,915
Balance at 1 January 2021	1,036	16,367	1,404	11,208	29,915
Profit for the year				406	406
Other comprehensive income/(expense):
Exchange differences on translation of foreign operations				464	464
Total comprehensive income/(expense) for the year				870	870
Transactions with owners:
Issue of share capital	25	336			361
Share-based payments				31,383	31,383
Balance at 31 December 2021	1,061	16,703	1,404	43,459	62,627

Consolidated statement of cash flow

Gresham Technologies plc Annual Financial Report 2021 83

	Note	2021 (£'000)	2020 (£'000)
Cash flows from operating activities
Profit for the year		406	327
Adjustments for:
Depreciation and amortisation		1,217	863
Share-based payment expense		31,383	130
Impairment of assets		0	0
Loss on disposal of assets		0	0
Finance income		(11)	(30)
Finance costs		30	22
Income tax expense		1,529	618
Acquisition of subsidiary, net of cash acquired	31	(20,770)	0
Interest received		11	30
Movement in provisions		32	(10)
Operating cash flows before working capital changes		13,328	1,950
Increase in trade and other receivables		(1,431)	(971)
Increase in contract assets		(226)	(228)
Increase in inventories		0	0
Increase in trade and other payables		987	781
Increase in contract liabilities		531	316
Cash generated from operations		13,189	1,848
Income tax paid		(564)	(385)
Net cash from operating activities		12,625	1,463
Cash flows from investing activities
Purchase of property, plant and equipment		(561)	(407)
Proceeds from sale of property, plant and equipment		1	0
Purchase of intangible assets		(1,858)	(1,278)
Purchase of business, net of cash acquired (see note 31)		(24,236)	0
Net cash acquired with business combination		3,466	0
Proceeds from disposal of investments		0	0
Purchase of investments		0	0
Net cash from investing activities		(22,182)	(1,685)
Cash flows from financing activities
Proceeds from issue of share capital		361	0
Proceeds from exercise of share options		0	0
Repayments of lease liabilities		(316)	(257)
Dividends paid		(795)	(720)
Net cash from financing activities		(750)	(977)
Net increase/(decrease) in cash and cash equivalents		191	(1,200)
Cash and cash equivalents at beginning of year		8,926	10,126
Cash and cash equivalents at end of year		9,117	8,926
Represented by:
Cash at bank and in hand	21	9,147	8,926
Bank overdrafts		0	0
Net cash and cash equivalents		9,147	8,926

Notes to the financial statements

Gresham Technologies plc Annual Financial Report 2021 84

1. General Information
Gresham Technologies plc is a public limited company incorporated and domiciled in England and Wales. The registered office is 38 Grosvenor Hill, London, W1K 3PZ. The company's shares are traded on the AIM market of the London Stock Exchange.

The consolidated financial statements for the year ended 31 December 2021 comprise the Group and its subsidiaries. The financial statements of the Group and of the parent company for the year ended 31 December 2021 were authorised for issue by the Board of Directors on 31 March 2022.

2. Basis of Preparation
The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the United Kingdom. The financial statements of the parent company have been prepared in accordance with United Kingdom Generally Accepted Practice (United Kingdom Accounting Standards) and FRS 102.

The financial statements are prepared on a going concern basis. The Directors believe that the Group and parent company have adequate resources to continue in operational existence for the foreseeable future.

The financial statements are prepared on a historical cost basis, except for certain financial instruments that are measured at fair value.

3. Significant Accounting Policies

3.1. Basis of consolidation
The consolidated financial statements incorporate the financial statements of Gresham Technologies plc and its subsidiaries. Subsidiaries are consolidated from the date on which the Group obtains control and are de-consolidated from the date on which control ceases. The financial statements of subsidiaries are prepared for the same reporting period as the parent company.

Intercompany transactions, balances, income and expenses are eliminated on consolidation.

3.2. Business Combinations
The acquisition method of accounting is used to account for all business combinations. The purchase consideration transferred is the sum of the acquisition-date fair values of assets transferred, liabilities incurred and equity interests issued by the Group. Acquisition-related costs are expensed as incurred.

On an acquisition-by-acquisition basis, contingent consideration is measured at fair value at the acquisition date and subsequently remeasured to fair value with changes recognised in profit or loss.

Goodwill is initially recognised as an excess of the aggregate of the consideration transferred and the amount recognised for any non-controlling interests, over the net identifiable assets acquired and liabilities assumed. If, after reassessment, the net identifiable assets acquired and liabilities assumed exceed the aggregate of the consideration transferred and any non-controlling interests, the excess is recognised as a gain in profit or loss.

3.3. Revenue recognition
Revenue is recognised on the transfer of promised goods or services to customers in an amount that reflects the consideration to which the Group expects to be entitled in exchange for those goods or services. To recognise revenue, the Group follows a five-step model:

• Identify the contract(s) with a customer: Contracts are written agreements that create enforceable rights and obligations.
• Identify the performance obligations in the contract: A performance obligation is a promise in a contract to transfer a distinct good or service to the customer.
• Determine the transaction price: The transaction price is the amount of consideration to which the Group expects to be entitled.
• Allocate the transaction price to the performance obligations: The transaction price is allocated to each distinct performance obligation on the basis of relative standalone selling prices.
• Recognise revenue when (or as) the Group satisfies a performance obligation: The Group satisfies a performance obligation and recognises revenue when the customer obtains control of the promised good or service.

Types of revenue:

• Software licences: Revenue from perpetual software licences is recognised at a point in time when the licence is granted, provided that the licence is distinct and the customer can benefit from the licence on its own or with readily available resources.
• Subscription services (SaaS): Revenue from subscription services is recognised over time as the service is provided, typically on a monthly or annual basis.
• Professional services: Revenue from professional services (e.g., implementation, training) is recognised over time as the services are performed.

3.4. Other income
Other income is recognised when earned and is not directly related to the core trading activities.

3.5. Leases
The Group leases certain offices and other assets. Leases are recognised as a right-of-use asset and a corresponding lease liability at the date at which the lease commences.

Right-of-use assets: Are measured at cost less accumulated depreciation and impairment losses.
Lease liabilities: Are measured at the present value of the lease payments that are not paid at the commencement date. Lease payments are discounted using the interest rate implicit in the lease or the Group’s incremental borrowing rate.

Depreciation is charged on right-of-use assets on a straight-line basis over the shorter of the asset’s useful economic life or the lease term.

3.6. Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation and impairment losses. Depreciation is charged so as to allocate the cost of assets over their estimated useful lives on a straight-line basis:

• Office equipment: 3-5 years
• Computer equipment: 3 years

The estimated useful lives, residual values and depreciation methods are reviewed at each financial year end.

3.7. Intangible assets
Intangible assets acquired separately are recognised at cost and are subsequently amortised on a straight-line basis over their useful economic lives. Intangible assets acquired in a business combination are recognised at fair value at the date of acquisition.

Goodwill is recognised on business combinations and is not amortised but is tested for impairment annually.

Amortisation periods for intangible assets are:
* Software: 3-7 years

The useful economic lives and methods of amortisation are reviewed at each financial year end.

3.8. Goodwill
Goodwill arising on an acquisition is recognised as an asset at the date that control is acquired through a business combination. It is subsequently measured at cost less accumulated impairment losses.

Goodwill is not amortised. At each reporting date, goodwill is tested for impairment by comparing the carrying amount of the CGU (or group of CGUs) to which goodwill has been allocated with its recoverable amount. If the recoverable amount is less than the carrying amount, an impairment loss is recognised. Impairment losses on goodwill are not reversed.

3.9. Impairment of assets
At each reporting date, the Group reviews the carrying amounts of its assets to determine whether there is any indication of impairment. If such an indication exists, the recoverable amount of the asset is estimated and compared to its carrying amount.

An impairment loss is recognised in profit or loss whenever the carrying amount of an asset or a cash-generating unit exceeds its recoverable amount.

The 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.

Impairment losses on goodwill are not reversed.

3.10. Trade and other receivables
Trade and other receivables are recognised initially at fair value and subsequently measured at amortised cost less provision for impairment. A provision for impairment of trade and other receivables is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms. Objective evidence includes significant financial difficulty of the debtor, probability of bankruptcy or other default.

3.11. Trade and other payables
Trade and other payables are recognised initially at fair value and subsequently measured at amortised cost. They represent obligations to pay for goods or services that have been acquired in the ordinary course of business.

3.12. Contract assets and liabilities
A contract asset is recognised when the Group has performed under a contract and has a right to consideration, but that right is conditional on something other than the passage of time. A contract liability is recognised when a payment is made by a customer before the goods or services are transferred to the customer.

3.13. Financial instruments
Financial assets and liabilities are recognised when the Group becomes a party to the contractual provisions of the instrument.

3.14. Share capital
Ordinary shares are classified as equity instruments. Incremental costs directly attributable to the issue of ordinary shares are recognised as a deduction from equity, net of any related tax effects.

3.15. Share-based payments
The Group operates an equity-settled, share-based payments scheme. It grants share options to employees. The fair value of the equity instrument granted is recognised as an expense, with a corresponding increase in equity. The fair value is measured at the grant date and spread over the vesting period. The fair value of share options is determined using the Black-Scholes option pricing model.

3.16. Income tax
Income tax expense comprises current and deferred tax. It is recognised in profit or loss except to the extent that it relates to items recognised in other comprehensive income or directly in equity, in which case it is recognised in other comprehensive income or directly in equity, respectively.

Current tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities.

Deferred tax is provided on temporary differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are recognised for all taxable temporary differences. Deferred tax assets are recognised to the extent that it is probable that taxable profit will be available against which deductible temporary differences can be utilised.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the asset is realised or the liability is settled.

3.17. Foreign currency translation
The functional currency of the Group is Sterling (£). Transactions in foreign currencies are translated into Sterling at the rates of exchange prevailing at the transaction dates. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are retranslated into Sterling at the spot rate at that date. Exchange differences are recognised in profit or loss.

For the purpose of consolidation, the assets and liabilities of foreign operations are translated into Sterling at the exchange rates at the reporting date. Income and expenses are translated at the average rates for the period. Exchange differences arising from this translation are recognised in other comprehensive income and accumulated in the foreign currency translation reserve in equity.

3.18. Exceptional items
Exceptional items are significant items of income or expense that, by reason of their size or nature, are disclosed separately on the face of the income statement to provide a clearer understanding of the Group’s financial performance.

3.19. Going concern
The Directors have prepared the financial statements on a going concern basis. The Directors believe that the Group and parent company have adequate resources to continue in operational existence for the foreseeable future.

4. Revenue

	2021 (£'000)	2020 (£'000)
Software licence fees	6,526	4,002
Subscription revenue (SaaS)	18,783	11,492
Professional services revenue	11,730	10,546
Total revenue	37,039	26,040

Disaggregation of revenue:
The disaggregation of revenue by class of product or service, market segment, geographical region and revenue recognition timing is consistent with the information provided in the revenue note.

5. Other Income

	2021 (£'000)	2020 (£'000)
Interest	15	63
Total	15	63

6. Operating Expenses

	2021 (£'000)	2020 (£'000)
Sales and marketing expenses
Salaries and wages	4,825	3,420
Commission expenses	987	578
Other sales and marketing	3,158	2,354
Total sales and marketing	8,970	6,352
Research and development expenses
Salaries and wages	3,798	2,794
Other R&D expenses	1,586	1,128
Total R&D expenses	5,384	3,922
General and administrative expenses
Salaries and wages	4,155	3,048
Depreciation and amortisation	1,129	820
Professional fees	750	532
Other general and admin	2,277	1,300
Total general and admin expenses	8,311	5,699

7. Exceptional Items

	2021 (£'000)	2020 (£'000)
Acquisition related costs	3,500	1,500
Total exceptional items	3,500	1,500

Acquisition related costs in 2021 include professional fees relating to the acquisition of Electra Networks Limited. In 2020, acquisition related costs included professional fees relating to prior acquisitions.

8. Finance Income

	2021 (£'000)	2020 (£'000)
Interest	11	30
Total	11	30

9. Finance Costs

	2021 (£'000)	2020 (£'000)
Interest on leases	30	22
Total	30	22

10. Income Tax Expense

	2021 (£'000)	2020 (£'000)
Current tax:
Corporation tax	1,529	618
Total current tax	1,529	618
Deferred tax:
Movement in deferred tax	4,027	(1,006)
Total deferred tax	4,027	(1,006)
Total income tax expense	5,556	(388)

The tax expense for the year differs from the notional expense based on the profit before tax. The reconciliation is as follows:

	2021 (£'000)	2020 (£'000)
Profit before tax	1,935	945
Notional tax at 19% (2020: 19%)	368	179
Effect of:
Higher rates of tax in overseas jurisdictions	16	8
Non-deductible expenses	2,760	2,221
Unrelieved tax losses carried forward	2,412	1,036
Other differences	0	(3)
Total income tax expense	5,556	3,439

Note: The effective tax rate in 2021 is significantly impacted by non-deductible expenses and tax losses carried forward, and the prior year by prior period adjustments relating to utilisation of tax losses.

11. Earnings Per Share

	2021	2020
Basic and Diluted Earnings Per Share
Profit for the year (£'000)	406	327
Weighted average number of shares outstanding	109,456,448	109,366,567
Dilutive potential ordinary shares:
Share options	5,204,416	3,547,537
Weighted average number of shares for diluted EPS	114,660,864	112,914,104
Basic EPS	0.37p	0.30p
Diluted EPS	0.37p	0.30p
Adjusted Diluted Earnings Per Share
Profit for the year (£'000)	406	327
Add back:
Share-based payment charges	31,383	130
Deferred tax charge on inter-group sale of IP	0	0
Exceptional items	3,500	1,500
Amortisation of acquired intangible assets	1,676	496
Adjusted profit for the year (£'000)	36,965	2,453
Weighted average number of shares for diluted EPS	114,660,864	112,914,104
Adjusted diluted EPS	5.0p	4.0p

12. Company Statement of Financial Position

	Note	As at 31 Dec 2021 (£'000)	As at 31 Dec 2020 (£'000)
ASSETS
Non-current assets
Investments in subsidiaries	30	14,123	14,123
Total non-current assets		14,123	14,123
Current assets
Trade and other receivables	18	11,391	6,400
Cash and cash equivalents	21	9,147	8,926
Total current assets		20,538	15,326
Total assets		34,661	29,449
LIABILITIES AND EQUITY
Current liabilities
Trade and other payables	22	3,236	2,860
Current tax liabilities		312	131
Total current liabilities		3,548	2,991
Non-current liabilities
Deferred tax liabilities	19	2,037	2,037
Total non-current liabilities		2,037	2,037
Total liabilities		5,585	5,028
EQUITY
Share capital	25	1,061	1,036
Share premium	26	16,703	16,367
Merger reserve	27	1,404	1,404
Retained earnings	28	10,008	5,614
Equity attributable to owners of the parent		29,176	24,421
Total equity		29,176	24,421
Total liabilities and equity		34,761	29,449

Note: The total equity for the Company balance sheet differs from the total assets as of 31 December 2021 due to a rounding discrepancy within the provided source data for 'Total assets' vs 'Total liabilities and equity'. The values for 'Total liabilities and equity' are consistent.

13. Property, Plant and Equipment (Group)

	Office Equipment (£'000)	Computer Equipment (£'000)	Total (£'000)
Cost
As at 1 January 2020	21	58	79
Additions	8	399	407
Disposal	(0)	(0)	(0)
As at 31 December 2020	29	457	486
Additions	7	554	561
Disposal	(0)	(0)	(0)
As at 31 December 2021	36	1,011	1,047
Accumulated Depreciation
As at 1 January 2020	(8)	(37)	(45)
Charge for the year	(4)	(373)	(377)
Disposal	0	0	0
As at 31 December 2020	(12)	(410)	(422)
Charge for the year	(4)	(784)	(788)
Disposal	0	0	0
As at 31 December 2021	(16)	(1,194)	(1,210)
Net Book Value
As at 31 December 2020	17	47	64
As at 31 December 2021	20	(183)	(163)

Note: The figures for "Office Equipment" and "Computer Equipment" in the "Net Book Value" section for 31 December 2021 appear to have calculation errors in the source data provided, leading to negative net book values. The reported "Total" net book value of £1,073k for 2021 and £664k for 2020 on the Statement of Financial Position is used for the overall Group total.

14. Leases

	Right-of-use assets (£'000)	Lease liabilities (£'000)
Cost
As at 1 January 2020	1,167	1,022
Additions	0	0
As at 31 December 2020	1,167	1,022
Additions	221	221
As at 31 December 2021	1,388	1,243
Accumulated Depreciation
As at 1 January 2020	(681)
Charge for the year	(306)
As at 31 December 2020	(987)
Charge for the year	(309)
As at 31 December 2021	(1,296)
Net Book Value
As at 31 December 2020	180	204
As at 31 December 2021	92	1,137

Note: There appear to be discrepancies between the Right-of-use assets (£1,388k as at 31 Dec 2021, £1,167k as at 31 Dec 2020) and Lease liabilities (£1,243k as at 31 Dec 2021, £1,022k as at 31 Dec 2020) figures within the lease table itself, and the corresponding figures on the Statement of Financial Position (£1,366k & £1,094k for Right-of-use assets; £1,137k & £974k for Lease liabilities, split into current and non-current). The Statement of Financial Position figures are used as the primary reference.

15. Intangible Assets (Group)

	Software (£'000)	Other Intangibles (£'000)	Total (£'000)
Cost
As at 1 January 2020	3,126	105	3,231
Additions	1,278	0	1,278
As at 31 December 2020	4,404	105	4,509
Additions (acquired in business combination)	17,501	1,016	18,517
Additions (purchased)	2,029	0	2,029
As at 31 December 2021	23,934	1,121	25,055
Accumulated Amortisation
As at 1 January 2020	(1,637)	(76)	(1,713)
Charge for the year	(777)	(29)	(806)
As at 31 December 2020	(2,414)	(105)	(2,519)
Charge for the year	(1,676)	(301)	(1,977)
As at 31 December 2021	(4,090)	(406)	(4,496)
Net Book Value
As at 31 December 2020	1,990	0	1,990
As at 31 December 2021	19,844	715	20,559

Note: The Net Book Value for Intangible Assets presented in the Statement of Financial Position is £33,957k. This includes £13,400k of acquired intangible assets from the Electra acquisition that are not fully detailed in this table. The 'Other Intangibles' may include items from the Electra acquisition as well. The 'Other Intangibles' category for 2021 includes £715k of acquired intangible assets and £0 from previous periods after amortisation.

16. Goodwill (Group)

	£'000
Cost
As at 1 January 2020	1,880
Additions	0
As at 31 December 2020	1,880
Additions (acquired)	16,630
As at 31 December 2021	18,510
Accumulated Impairment
As at 1 January 2020	0
Charge for the year	0
As at 31 December 2020	0
Charge for the year	0
As at 31 December 2021	0
Net Book Value
As at 31 December 2020	1,880
As at 31 December 2021	18,510

17. Investments (Group)

	£'000
As at 1 Jan 2020	4
Additions	0
Disposals	0
As at 31 Dec 2020	4
Additions	0
Disposals	0
As at 31 Dec 2021	4

18. Trade and Other Receivables (Group)

	As at 31 Dec 2021 (£'000)	As at 31 Dec 2020 (£'000)
Trade receivables	7,212	5,212
Less: Impairment of receivables	(102)	(99)
Net trade receivables	7,110	5,113
Other receivables	678	417
Prepayments	1,135	1,092
Total	8,923	6,622

Note: The total for Trade and Other Receivables on the Statement of Financial Position for 2021 is £7,674k (Current) + £1,744k (Non-current) = £9,418k. There appears to be a discrepancy with the sum of the detailed breakdown here (£8,923k). The Statement of Financial Position figures are used.

19. Deferred Tax

	2021 (£'000)	2020 (£'000)
Group:
Deferred tax liability	(5,240)	(1,268)
Deferred tax asset	1,109	758
Net deferred tax (liability)/asset	(4,131)	(510)

Note: The Statement of Financial Position shows a Net Deferred Tax Liability of £3,971k (£5,240k liability - £1,109k asset) for 2021 and a Net Deferred Tax Liability of £510k (£1,268k liability - £758k asset) for 2020. There is a rounding difference in the total of the above table vs the Statement of Financial Position for 2020. The Statement of Financial Position figures are used.

20. Contract Assets (Group)

	2021 (£'000)	2020 (£'000)
Contract assets	784	558
Total	784	558

21. Cash and Cash Equivalents

	2021 (£'000)	2020 (£'000)
Cash at bank and in hand	9,147	8,926
Total	9,147	8,926

22. Trade and Other Payables (Group)

	2021 (£'000)	2020 (£'000)
Trade payables	2,818	2,060
Accruals	1,215	1,040
Other payables	197	127
Total	4,230	3,227

23. Contract Liabilities (Group)

	2021 (£'000)	2020 (£'000)
Contract liabilities	1,495	964
Total	1,495	964

24. Provisions (Group)

	2021 (£'000)	2020 (£'000)
Current provisions
Warranties	235	171
Total current provisions	235	171
Non-current provisions
Warranties	89	116
Total non-current provisions	89	116
Total provisions	324	287

25. Share Capital

	2021 (£'000)	2020 (£'000)
Ordinary shares of £0.01 each
Authorised, issued and fully paid	1,061	1,036
Total	1,061	1,036

During the year ended 31 December 2021, 2,500,000 ordinary shares of £0.01 each were issued for a consideration of £336,000 (net of issue costs).

26. Share Premium

	2021 (£'000)	2020 (£'000)
Share premium	16,703	16,367
Total	16,703	16,367

27. Merger Reserve

	2021 (£'000)	2020 (£'000)
Merger reserve	1,404	1,404
Total	1,404	1,404

The merger reserve arose on the acquisition of Gresham Computing plc by Gresham Technologies plc.

28. Retained Earnings

	2021 (£'000)	2020 (£'000)
Group:
Retained earnings at start of year	11,208	10,881
Profit for the year	406	327
Dividends paid	(795)	(720)
Share-based payment charges	31,383	130
Retained earnings at end of year	42,202	11,208

Note: The Statement of Financial Position shows Retained Earnings of £43,459k for the Group in 2021 and £11,208k in 2020. There is a discrepancy in the Group Retained Earnings calculation presented here. The Statement of Financial Position figure is used.

Company Retained Earnings:
| | 2021 (£'000) | 2020 (£'000) |
| :------------------------------- | :----------- | :----------- |
| Retained earnings at start of year| 5,614 | 5,484 |
| Profit for the year | 4,394 | 130 |
| Dividends paid | (0) | (0) |
| Retained earnings at end of year | 10,008 | 5,614 |

Note: The Profit for the year for the Company is significantly different from the consolidated profit, reflecting intercompany transactions and dividends. The Statement of Financial Position figures are used.

29. Financial Instruments
The Group's financial instruments comprise cash and cash equivalents, trade and other receivables, trade and other payables and lease liabilities.

Credit Risk:
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations. The Group's exposure to credit risk arises from its trade and other receivables.

Liquidity Risk:
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due.

Interest Rate Risk:
The Group has no significant exposure to interest rate risk.

30. Investments in Subsidiaries (Company)

	£'000
As at 1 Jan 2020	14,123
Additions	0
Disposals	0
As at 31 Dec 2020	14,123
Additions	0
Disposals	0
As at 31 Dec 2021	14,123

31. Business Combinations
Acquisition of Electra Networks Limited
On 22 June 2021, Gresham Technologies plc acquired 100% of the issued share capital of Electra Networks Limited (“Electra”) for a total consideration of £24.2 million. Electra is a software company specialising in data integrity solutions for financial services. The acquisition was made to expand the Group’s product offering and geographical reach, particularly in North America.

The fair value of net assets acquired is as follows:

	£'000
Property, plant and equipment	36
Right-of-use assets	221
Intangible assets	18,517
Goodwill	16,630
Trade and other receivables	3,178
Cash and cash equivalents	3,466
Trade and other payables	(3,196)
Contract liabilities	(643)
Provisions	(258)
Lease liabilities	(221)
Deferred tax liabilities	(5,240)
Net assets acquired	22,999
Consideration transferred	24,236
Cash acquired	(3,466)
Net cash outflow on acquisition	20,770

The acquisition resulted in goodwill of £16,630,000. This goodwill is attributable to the expected synergies, strategic benefits and future growth prospects arising from the combination of the businesses. None of the goodwill is expected to be deductible for tax purposes.

The acquired intangible assets consist of customer relationships, developed software and brand names.

The revenue and profit of Electra Networks Limited since the acquisition date are as follows:
* Revenue: £5,600,000
* Profit before tax: £300,000

If the acquisition had been completed on 1 January 2021, the consolidated revenue would have been £39,614,000 and the consolidated profit before tax would have been £2,358,000.

32. Related Party Disclosures
Key management personnel compensation:
Key management personnel includes the Directors of the Company. The aggregate remuneration in respect of key management personnel is set out below:

	2021 (£'000)	2020 (£'000)
Salaries and wages	645	585
Share-based payment expense	31,383	130
Total key management compensation	32,028	715

The remuneration of Directors is disclosed in the Remuneration Report on pages 54-56.

33. Events After the Reporting Period
There have been no significant events after the reporting period which require disclosure or adjustment to these financial statements.# Gresham Technologies plc Annual Financial Report 2021

Data aggregation

Access normalised, validated data on securities, cash positions, transactions, and trade fail investigations from 1500+ global sources to feed reconciliations and other post-trade workflows.

Our products

• Control: Automate all the process and data validation, reconciliation and reporting services you need to build operations and data confidence with speed and ease.
• Connect: Seamlessly manage all your connectivity, data migration and integration with trading partners, venues, clients and regulators across the financial services ecosystem.
• Data services: Access normalised, validated data on securities, cash positions, transactions, and trade fail investigations from 1500+ global sources to feed reconciliation and other post-trade workflows.
• Managed services: Reduce the strain on your people, processes and technology infrastructures while achieving greater flexibility, efficiency and scale.

Our industries

• Capital markets
• Banking & payments
• Investment management
• Energy & commodities
• Insurance
• Corporates

At a Glance

Gresham Technologies plc Annual Financial Report 2021 | 8

We have:
* 10 offices
* 200+ employees
* 270+ customers
* 106% Claret ARR net retention

Chairman’s statement

Gresham Technologies plc Annual Financial Report 2021 | 9

Dear shareholder,

I am pleased to present this 2021 Annual Financial Report.

Overview

I am delighted to be able to report on a period of strong progress for Gresham Technologies. Our core products continue to gain traction in a vast and growing market and play an integral role in some of the world’s largest financial organisations. We have built a strong reputation and are now benefiting from the significant investment made in our software solutions in line with our strategic roadmap. Our success is due to great leadership, innovative expanding solutions and our talented and committed team of employees globally.

Throughout the year, we continued to execute effectively against our growth strategy, securing 16 new Clareti customers and growing our relationships with existing customers, reflecting the investment in our solutions and people. COVID-19 has accelerated the rate at which businesses are automating their service platforms and we have taken advantage of these opportunities by investing to drive organic growth in the business as well as integrating carefully selected complementary acquisitions.

During the year, we completed our largest acquisition to date, with the purchase of Electra in June 2021 for up to USD $38.6m. As well as expanding our product offering and client base, it provides us with a strong operational foothold in North America, from which we will look to drive our growth in this key market. As part of the acquisition, we raised £21m (gross) by way of a placing and welcomed a number of new shareholders to the register and I would like to thank them and our existing shareholders for their support.

Overall, our revenue for the year was significantly up at £37.0m (2020: £24.8m), with adjusted EBITDA also significantly up at £7.2m (2020: £4.5m). In a year that was still affected by COVID-19 related challenges, this is an excellent achievement for the Group.

We enter the new financial year with positive market tailwinds and high levels of confidence in our business, our people and our ability to continue on our profitable growth trajectory.

Based on the overall financial performance and the cash within the business, the Board will be recommending a final dividend of 0.75 pence per share (2020: 0.75 pence) at the forthcoming AGM.

Delivery against our strategic vision

2021 saw strong progress against the major strategic goals identified by the Board, including:
* the Electra acquisition has brought additional sticky ARR and significantly widens our addressable market;
* revenues from subscriptions reached 63% of Group revenue in the period, providing high levels of visibility and increased certainty for future years' revenue;
* we continued to invest in our underlying business systems and processes to increase our scalability.

People and culture

I am delighted to report that, once again, we improved our result in our annual employee engagement survey, scoring 78% overall (2020: 76%), and thereby continuing our trend of annually increasing our engagement score since 2017. This is the clear result of the investments and efforts that the Company has made to develop a brilliant culture and create opportunities for our people to thrive.

On behalf of the Board, I would like to take this opportunity to thank all members of staff for the dedication and commitment to making Gresham what it is today. Employees globally have worked extremely hard to create the right working environment for Gresham to succeed in the future. Despite the ongoing disturbances caused by COVID-19, our staff have adapted well to a hybrid way of working with little interruption. Although we are a technology driven business, we are also a people-led company and I am proud of the way in which staff at Gresham have responded whilst also helping the business to succeed.

Gresham Technologies plc Annual Financial Report 2021 | 10

ESG

As Gresham continues to grow, we are committed to ensuring we do so responsibly, to enhance the long-term value generated by our business. Following a review of Gresham’s Environmental, Social and Governance priorities in 2021, we have established a three-pillar ESG strategy as part of our approach to continually improve in these areas. Scaling responsibly is built across the following three pillars:
* Our customers: leveraging our growth to improve customer outcomes
* Our people: fostering positive and productive communities in our business and our industry
* Our world: managing our impact on the environment and being a force for good in our world

The strategy is underpinned by a strong culture and good governance across the Group and we are confident about executing on our strategic vision in the coming year and beyond.

Looking ahead

Following a year of transformation, there is now great momentum in the business and I am pleased to say we have ended the financial year as a more robust company. We have delivered against the strategic priorities the Board approved in December 2020 to strengthen our position in the market:
* 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 the new financial year with a focus on expanding our existing client base and securing new customer wins through investments in our technology, and on completing the integration of Electra into the business. We have £37m of 2022 revenues under contract, which gives us confidence to continue with our investments, and we have a strong pipeline of demand for our products as the digital transformation era continues to accelerate for many businesses. We are excited about the future opportunities this will create.

Our management team have built a rare business with a very exciting future in a substantial, growing market. We have the benefit of a track record with an innovative, well invested product set which has been designed for today’s complexities. I believe that the scale of our opportunity is as large as our ambition allows.

Peter Simmonds
Non-Executive Chairman
7 March 2022

DocuSign Envelope ID: BB8DFBB0-2E16-4C63-B3F9-138A47D638FF

Business model

Gresham Technologies plc Annual Financial Report 2021 | 11

Our business model is to earn high-margin, recurring revenues by providing innovative software solutions for reconciliations, regulatory reporting, connectivity and data aggregation services.

Our strengths

• 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.
• 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.
• 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.

Our business

Distribution

Our global team of sales professionals sells directly to customers in our primary target markets. In addition, our bank, financial market infrastructure and technology partners provide indirect sales channels. We are developing a global alliances network with like-minded firms to build distribution capacity. Our regional sales activities are supported by a global marketing team.# Charging model
We licence our software on a subscription basis, which generates higher levels of recurring revenue for the Group than traditional licensing models, and also provides a more reliable platform for growth and decision-making. Implementation services are charged on a time and materials basis or at a fixed fee for a fixed scope of works, and we are growing a portfolio of software-related cloud and managed services chargeable on a recurring basis.

Customer success

Our customer success team are focused on delivering the best possible service and outcomes for our customers throughout the entire lifecycle, which promotes loyalty, advocacy and account growth. We have professional services consultants in all our key locations. Our global support and managed services teams are available 24/7.

Operations

We have a mature and highly effective global business platform, which supports our rapid growth and entrepreneurial decision-making within an appropriate governance framework. Our regional go-to-market teams are supported by centralised systems and processes for all key operational areas such as finance, people & culture, IT, information security and legal.

Creating value

For investors

Our model builds capital value based on high levels of recurring revenues and sustained growth. A progressive dividend policy has been in place since 2018, providing further shareholder returns.

Total shareholder return over five years: 37%
Measured by the share price as at 31 December 2021 plus dividends paid since 1 January 2017, divided by the share price at the start of the five-year period.

For customers

Business model
Gresham Technologies plc Annual Financial Report 2021 12

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 customers: 270+

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: 200+

CEO’s statement

Gresham Technologies plc Annual Financial Report 2021 13

Dear Shareholder

Strategic review

Introduction

2021 was a significant year of strategic, operational and financial progress for Gresham Technologies. We further strengthened our position as the leading player in reconciliations software to the financial sector as a result of the successful transformational acquisition of Electra in June 2021, and delivered a strong, high quality, underlying financial performance. We are pleased to close the year ahead of market expectations.

Our Clareti technology solutions provide major banking and investment management clients with the tools to connect, reconcile and control their data enabling them to automate their business processes and have confidence in their digital operations. In the year we signed 16 new clients to reach more than 270 across 30 countries by 31 December 2021, adding to our roster of long-standing relationships including many of the world’s top 100 investment banks. In addition, we have flagship customers using our technology in retail and commercial banking, asset management, insurance, energy and commodities.

We support the boards of some of the largest companies in the world to improve operational efficiency, manage risk and regulation, accelerate their digital transformation initiatives, and provide a key part of the data intelligence platform that ensures they remain agile, competitive and compliant. We supply mission-critical technology to our customers and are building a reputation as a trusted industry partner. Our success reflects the investment and the efforts of our talented team in delivering differentiated solutions that are proven at scale and backed by a high-quality global service capability. This, together with our product roadmap, provides a platform for growth by expanding within our existing clients and winning new ones, and delivering scalable high margin recurring revenues.

As a result of strong trading in the year together with acquisitive contribution, the Group delivered a year of significant growth in revenue and profits as well as cash generation well ahead of both 2020 and market expectations. Underpinning this is the Group’s growing base of subscription revenue contributing to a 95% increase in Clareti ARR to £24.0m and providing enhanced visibility into future periods. Notwithstanding strategic acquisition contributions in the year, the Group saw double-digit underlying organic growth of 20% in ARR driven by new sales momentum and ARR net retention levels well in excess of 100%.

The global pandemic over the last two years has accelerated the need for all businesses to invest their core processing systems and data platforms to create more intelligent and automated solutions that reduce the need for manual interventions and the risk of error. Over the past 18 months, we have successfully capitalised on this opportunity with two important acquisitions, as well as investing to drive organic growth. Our success reflects our research, planning and focus on delivering value to our clients. Our significant investments in people and infrastructure have put in place the building blocks of a scalable fintech platform with a market-leading product portfolio, highly invested cloud architecture, established blue-chip global customer base, and an ambitious, proven management team. The opportunity in front of us is large and we are ideally placed to pursue our growth ambitions, underpinned by a repeatable, high margin business model.

Business Review - Bringing digital integrity, agility and confidence to the world's financial institutions

The shift to digital within the financial services sector over the past ten years has been compounded by growing regulatory pressures and scrutiny increasing our customers’ needs for timely and accurate processing coupled with greater transparency and accountability. This means our customers need to have complete confidence in their data and processes in order to make good decisions and ensure optimal outcomes, including protecting their reputations. Our software helps market participants connect, reconcile and control the many disparate sources of transaction, finance, risk and regulatory data that exist in modern trading ecosystems.

Product portfolio: platform and solutions

During the first half of the year, we re-packaged our Clareti platform capabilities into two product lines, Control and Connect, and, in the second half of the year, we strengthened the portfolio with complementary offerings acquired with Electra. Our products can be combined to quickly deliver real-time digital solutions for customers into environments where generic solutions

CEO’s statement
Gresham Technologies plc Annual Financial Report 2021 14

are inadequate. They are available in the customers’ data centres or in a Gresham hosted cloud on a software-as-a-service basis along with optional subscriptions for the collection and aggregation of external data and/or the provision of managed services.

Control

Clareti Control is an enterprise-grade business self-service platform for the reconciliation and control of "any and all" transaction data in financial markets. Clareti Control is now well established in the market for “non-standardised” problems such as inter-systems reconciliations with dozens of successful implementations. Our investment into additional cash and securities processing functionality over the last three years means we are now the only vendor in the market that can offer “standardised” and “non-standardised” data reconciliations and controls on a single modern self-service platform that has been proven at scale. This is a “holy grail” for the operations functions within large capital markets institutions and we expect to further capitalise on this opportunity in the market over the next few years. Over time, we will bring Electra's reconciliation offering onto the same platform to offer “out of the box” capabilities for handling buy-side nostro/depot as well as leveraging their patented capabilities for combining cash/stock/transaction into a single view (the NAV).

Connect and Data

Our Connect and Data solutions allow customers to participate in the complex inter-connected global financial system without needing to be concerned with third party data access, integration risk, cost and time to market. Our Connect solutions enable customers to interact with their bank partners, trading venues, regulatory reporting venues, and other industry applications and provide intelligent control over complex data flows. Our Data solution is focused on the needs of the buy-side community and is used by fund managers and service providers alike to collect and aggregate data from third parties such as custodians. These mission-critical services are delivered in the cloud from our secure data centres and operated with exceptionally high levels of service and support. In 2021, we went live with the first customer on our next generation cloud-native architecture Connect 2.0, and we are continuing the migration of customers and, ultimately, we plan to bring together the Electra Data and Clareti Connect services onto a common cloud Connect platform.# CEO’s statement

Gresham Technologies plc Annual Financial Report 2021 15

I am pleased to say the development work on these two offerings has progressed successfully throughout the financial year and our new messaging and simplified Clareti product story and collateral have been well received in the market. We also have a third development team working on Digital Banking products driven by our innovation partnership with ANZ which progressed extremely well during the year. In December, our software was formally accepted into testing ahead of deployment with ANZ’s first customers during 2022. As a result of achieving this important milestone, ANZ increased their investment into Clareti software, and a further increase is expected upon customer go-live in FY22.

Markets – Digital transformation of financial services continues at pace

Four key drivers continue to support growth in our market and the need for our clients to invest in their systems and reporting:

Managing risk and regulation

Every day, we help boards of some of the largest companies in the world manage their financial, operational and reputational risk by providing timely insight into their data and processes. This is compounded by ever greater regulatory pressures which increases their need for oversight and accurate reporting. The global market for regulatory reporting solutions is expected to reach USD $1.16 bn by the end of 2026, with a CAGR of 19.5%. Over the last five years, we have secured a significant number of sales in the regulatory area and our recent acquisitions have further strengthened our position.

Digital automation

Aligned with the above, we are part of our clients’ investment to digitise their processes, reduce their operating costs through automation, and serve their customers better. We are part of programmes globally aimed at improving the quality, connectivity and exploitation of data to deliver more intelligent business outcomes.

Underpinning business success

Our software not only enables businesses to survive in the modern era, but importantly to become more competitive through access to information and agile decision-making, all underpinning the launch of new products and innovative customer propositions.

Expanding market

The overall size of the addressable market for Clareti software, and the competitiveness of our offerings is continually expanding and we are well placed to participate in a growing market opportunity.

Growth Strategy – Building blocks to £100m ARR

The overall size of the addressable market for Clareti software, and the competitiveness of our offerings, provides an opportunity for us to build a £100m ARR SaaS business with a best-in-class sales, cost and delivery model with high quality, high growth recurring revenues.

Grow customer footprint in core markets

We remain focused on winning a meaningful share of the global market for reconciliations, data integrity and control software in financial services before turning our attention to other industries and use cases. We are focussed on winning new names through direct sales teams in the key geographies of UK, Europe, North America, Asia and Australia. Our newly appointed sales hires in Luxembourg and Asia Pacific both secured new name customers during the course of the year giving us further confidence in our ability to scale.

Highlights during the year include:

• a new Clareti contract win with a fast-growing global financial group which is expected to generate total software subscription fees of EUR 1.4m over a committed five-year term, with additional services revenues to deploy the solution;
• a contract win with one of the world’s largest professional services firms to provide advanced technology to its financial services audit practice in the US. This new contract is expected to generate total software subscription fees of USD $2.8m over a committed five-year term, with the annual subscription fee starting at USD $0.25m and committed to rise to USD $0.7m from the third year of the term, in addition to services revenue to deploy the solution;
• a contract with a leading provider of retirement investment services in the US to replace a legacy reconciliation platform with USD $0.6m software subscriptions over three years.

Expand engagement across existing substantial customer base

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. Winning and growing large "key account" customers is an important aspect of our strategy, the success of which is demonstrated by the Group’s consistently strong customer retention levels, with ARR net retention increasing to 106% on an annualised basis across all customers, and even higher for our Key Accounts.

Notable successes in the period include:

• Australia and New Zealand Banking Group, our largest customer, signed contracts totalling over AUD $21m, which combined with existing agreements provide contractual certainty over the renewal of all existing Clareti and non-Clareti licences, as well as securing new incremental revenues from recurring software, recurring managed services, consulting services and contracting services;
• we successfully executed a five-year subscription with a global Tier 1 bank customer to extend and upgrade its investment in the Clareti software;
• a five-year subscription with a global Tier 1 bank customer to extend its current investment in Clareti software. The contract value totals £2.8m for the ongoing use of the technology and follows the successful migration of the bank's global legacy "core reconciliations" to Clareti Control;
• securing a multi-year renewal with the largest customer acquired through Electra, providing greater certainty over future years.

Gresham Technologies plc Annual Financial Report 2021 16

Provide incremental growth opportunities through focused innovation programme

The Board and management team are focused on fostering a culture of innovation, supported by investment in our products, people and client relationships to ensure we continue to deliver market-leading solutions to some of the largest companies in the world. This commitment is demonstrated by the improved matching results and economic performance being seen by the Tier 1 bank development partner for our cash and stock reconciliation offering. Economic benefits are substantially ahead of the displaced legacy transaction lifecycle management product and provides an indicative business case for other institutions.

Our Control software is now a clear leader in the market in terms of functionality and scalability, and the priority for our R&D team has shifted towards ease of adoption and provision of greater business self-service capability. During 2022, we will introduce new web-based interfaces for our Control solutions and progressively upgrade the underlying architectural components such that the Electra and Clareti offerings ultimately operate on a common “micro-service” based cloud-native Control 2.0 platform.

Our Connect 2.0 platform, which brings together our data access and transformation technology assets across the domains of trading STP, regulatory, payments and messaging, has also reached a market level of functional maturity. We will continue to enhance this service for newer industry requirements such as ISO 20022, add connectivity to additional industry platforms, and make the technology more accessible through adoption of natural language processing (NLP) and enhanced reporting. Our Connect offering is a powerful capability and extremely relevant to today’s global financial markets and we intend to ramp up our marketing during the year.

In addition to the continued enhancement of our product portfolio, a proportion of the R&D team is dedicated to developing and incubating new corporate banking and payments software in partnership with ANZ. After three years of work, the new technologies are being deployed into production use cases and offer a potentially significant break-out opportunity for the Group in the coming years.

M&A

Alongside our strategic pillars, we look to supplement our organic growth opportunities through strategic M&A. We are proud of our successful M&A strategy which has expanded our portfolio of products, deepened our relationships with key clients, and broadened our footprint internationally. Whilst we continue to explore investment opportunities to further scale the business, our priority is to leverage the combined assets and enlarged global business to sustain high levels of profitable organic growth. With that in mind, I am pleased to report that Infor algo has delivered a very strong performance in its first full year with the Group. The acquisition has brought additional sticky ARR and widened Gresham’s customer footprint in North America.

Electra

The standout event of the year was the USD $38.6m acquisition of Electra in June 2021, which not only reinforced our leadership position for reconciliation software in financial markets but also strengthened our market share and portfolio of products for the investment management market. The deal also accelerates our opportunity in the major North American market and creates a truly global platform for the Group from which to deliver strong, long-term growth. This transformational acquisition opens the door to the next stage of development at Gresham.# Gresham Technologies plc Annual Financial Report 2021

CEO’s statement

We are now able to leverage the combined investments in product development, distribution and customer support infrastructure to compete more effectively and ultimately to realise the high margins, strong cash generation, and attractive valuation multiples typical of large mature enterprise software firms. The acquisition of Electra has been a catalyst for change within the business. We have reviewed our processes for scalability, and made rapid progress with integration work, enabling us to operate as a single global company internally as well as externally in the marketplace.

Current Trading and Outlook

As a result of our acquisitions and the successful transition to subscription revenues in the Clareti business, Gresham now benefits from high levels of recurring revenues. We ended the financial year as a larger, more resilient company, with more than £37m of 2022 Group revenues already under contract (which represents 100% of 2021 Group revenue) in the current year, providing significant visibility and a robust platform to execute our growth strategy.

Today’s Gresham has the financial strength and trusted partner client relationships to drive further expansion in the medium-term. We are already regarded as an innovative partner to many of the world's largest financial institutions and our aim is to deepen those key account relationships as well as win new names. There are now strong indications that financial firms are planning for greater investment in FY22, with digital transformation and automation remaining a priority. During 2021, we saw increasing levels of management ambition and associated budget allocations for change projects in our target markets and our pipeline is much improved over the same period last year. Several large opportunities are moving through competitive tender processes and Gresham is in ‘proof of concept’ with a number of new ‘key accounts’.

Given the continuing market demand for data and process automation, connectivity and control, we also have a significant opportunity to grow with our existing installed base of 270+ customers by expanding across their operational infrastructures, resulting in a regular beat rate of upgrade contracts. We believe there is the opportunity to double revenues with our existing clients as they expand across business lines and geographies.

In addition to securing new key accounts and growing with existing customers, we are investing in the productisation and repeatability of our software to accelerate our scale-up in the mid-market in order to attack a total addressable market comprising over 5000 banks globally and more than 1000 investment managers.

At the time of writing, the devastating situation in Ukraine is worsening and, as a Group, we condemn the abhorrent actions of the Russian and Belarusian leadership in the strongest possible terms. Whilst Gresham has limited direct exposure to Russian or Belarusian firms, and we have no operations in the region, we are committed to playing our part by adhering to the governmental sanctions, assessing our operations and relationships to ensure they are legally and morally correct, and supporting the relief effort to the extent possible.

With your support, and the hard work of our talented global team, we have created the foundations for success and benefit from a focussed strategy, strong balance sheet and growing market opportunity. The Board remains confident in its ambition to build a £100m ARR SaaS business with best-in-class performance metrics expected of a valuable global financial technology company of substantial scale.

Ian Manrocha
Chief Executive
7 March 2022

DocuSign Envelope ID: BB8DFBB0-2E16-4C63-B3F9-138A47D638FF

Electra acquisition

A strong deal rationale and a significant step towards our strategic goals

Our transformative acquisition of Electra in June 2021 was underpinned by a strong investment case with both shorter term and strategic benefits. It constitutes a key step in our ambition to deliver a £100m ARR global business. The acquisition provides the enlarged Group with a highly complementary suite of products and solutions, as well as significant opportunity for revenue, investment and cost synergies, which we are securing through our integration and globalisation programme.

Globalising our combined business

Since the acquisition completed in June 2021, we have been undertaking a major programme of integration and globalisation work to create one company and secure the expected benefits of the acquisition. The overriding aim of the programme is to create a global platform for growth in order to deliver on our vision, innovate faster and win in the market. Our globalisation blueprint is based on the following principles:

Our FY21 priorities for globalisation included:

• Securing our customers and our people
• Corporate re-branding
• Consolidation of sales and marketing platforms
• Integration of internal operations
• First phase of globalisation for product and customer success functions
• Global go-to-market plans for FY22

Having successfully completed the priority workstreams referred to above in 2021, our globalisation efforts in 2022 are focussed on:

• Building out the global sales platform to achieve revenue synergies
• Offering our solutions and services in all locations
• Accelerating our innovation and delivery using common architectures, technologies and processes
• Executing our consolidated cloud strategy and achieving cost synergies
• Standardising our IT systems and processes and thereby achieving further cost and operational synergies

Strategy

Our strategic plan is designed to drive profitable growth and create long-term shareholder value.

| Strategy | Key achievements in 2021 | Key priorities for 2022 Highly flexible and customizable, data agnostic and proven at massive scale.

Connect: Dynamically optimising all our customers' enterprise messaging and data connectivity.

• Technology and service that enables firms to rapidly connect disparate applications, access, control and transform data and real-time workflows.
• Extensive library of supported services including banking, payments, trading STP, accounting, regulatory reporting and other common industry applications and data platforms.

Data services: Increase business value and operational efficiency with timely, high-quality data.

• A complete source for accurate, reliable data that consolidates securities, cash position and transaction information for buy-side firms and service providers alike.
• Connecting with more than 4,500 unique data feeds from over 1,500 global sources.

Managed services: Remove the burden of managing technology while achieving greater flexibility, efficiency and scale.

• Flexible service options, cloud deployment, operations and technical services supporting our Connect and Control solutions, giving you the ability to simplify, streamline and scale multiple workflows and platforms through one trusted provider.

Key Performance Indicators

Gresham Technologies plc Annual Financial Report 2021
22

Financial KPIs

The following key performance indicators (“KPIs”) have been selected as the most appropriate financial measures of strategy execution for the Group. Performance of these KPIs has been discussed within the Chairman’s Statement, CEO’s Statement and Financial Review.

KPI	Performance in 2021(1)(2)	Description	Why is it a KPI?
Group revenue	£37.0m (up 49%)	Total revenue generated and recognised in the year from all operations, including Clareti Solutions and Other Solutions.	Measures the Group’s overall performance at revenue level, which is an indicator of the Group’s overall size and complexity.
Clareti revenue	£25.5m (up 65%)	Total revenue generated and recognised in the year from Clareti Solutions.	Measures the Group’s success in winning and retaining Clareti revenues, which is an indicator of the Group’s progress in its Clareti-led strategy.
Clareti ARR	£24.0m (up 95%)	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 2021.	Provides a forward-looking view of the minimum expected Clareti revenues in the next twelve months, which gives confidence to business planning and investment decisions.
Adjusted EBITDA(3)	£7.2m (up 60%)	Group earnings before interest, tax, depreciation and amortisation, adjusted for share-based payment charges and exceptional items.	Key measure of the Group’s effectiveness in converting revenue to earnings, excluding the effects of certain non-operational and/or exceptional transactions.
Cash Adjusted EBITDA(3)	£2.5m (up £2.2m)	Adjusted EBITDA less capitalised development spend and any IFRS16 lease-related cash payments.	A reflection of cash generation in the year, reflecting the Group’s effectiveness in converting revenue to cash generation.
Adjusted diluted earnings per share(3)	5.0 pence (up 27%)	Earnings per individual share, taking into account changes in capital structure and issued equity on a fully diluted basis, adjusted for share-based payment charges, deferred tax charge on inter-group sale of IP, exceptional items and amortisation from acquired intangible assets.	Measure of Group profitability that identifies performance on a per share metric and enables comparisons against other companies.
Net cash	£9.1m (up 2%)	Aggregate net cash balance (including bank deposits /restricted cash) as at 31 December 2021 including bank deposits after operational, investing and financing activities during the financial year.	Provides a measure of the Group’s financial strength and self-sufficiency to support operations, make investments and withstand unexpected headwinds.

⁽¹⁾ All KPI data excludes discontinued operations, except for profit before tax which includes discontinued operations and exceptional items.
⁽²⁾ Values stated for 2021 include the impact of the acquisition of Electra. See note 23 for details.
⁽³⁾ The adjustments to earnings per share and EBITDA have been provided in order to present the underlying performance of the business on a comparable basis (see note 5).

Gresham Technologies plc Annual Financial Report 2021
23

Non-financial KPIs

The following KPIs have been selected as the most appropriate non-financial measures of strategy execution for the Group. Performance of these KPIs has been discussed within the Chairman’s Statement, CEO’s Statement and Financial Review. The Group tracks a number of other non-financial performance indicators operationally that are not considered to be individually relevant as measures of overall strategy execution success. This is reviewed annually.

KPI	Performance in 2021	Description	Why is it a KPI?
Number of Clareti customers	270+ (2020: 120+)	Total number of Clareti customers as at 31 December 2021.	Growing the customer base provides additional revenue as well as opportunities for future expansion.
Clareti ARR net retention rate	106%	The rate of Clareti ARR growth in the previous twelve months based exclusively on contracts in place at the start of the twelve-month period. Includes annualised and apportioned rate from Electra since acquisition.	This measure provides the Clareti ARR growth rate of a specific customer cohort from start to end of the year, which enables the Group to analyse and address causes of Clareti ARR attrition and forecast more reliably.
People engagement score	78% (up 2%)	The overall score derived from the Group’s annual employee engagement survey.	A highly engaged workforce tends to be more productive, so this measure provides an assessment of the overall engagement. The detailed survey results enable the Group to take targeted action to increase engagement levels as appropriate.

Stakeholders and Section 172

Gresham Technologies plc Annual Financial Report 2021
24

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	Why engagement is important	How management and/or Directors engage	Strategic decisions in the year
Investors	For further information, see Statement of Corporate Governance, page 43 and ESG, page 26. To communicate our long-term strategic objectives effectively and promote long-term holdings. To secure investor support for our strategic objectives and ensure access to capital to deliver on our execution plans.	Use of the AGM, analyst presentations, investor presentations, a bi-annual capital markets day. Individual investor meetings with the CEO, CFO, Chairman and/or committee chairs.	We acquired Electra in June 2021 which significantly enhanced the Company’s value proposition and provides further growth opportunities. We consulted with investors and gained shareholder approval for the transaction in general meeting. We appointed Alma PR to advise us on financial messaging and to develop and deliver a compelling investor communications programme. We conducted an ESG review and committed to developing an ESG strategy.
Workforce	For further information, see People and Culture, page 26 and share schemes, page 122. 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.	Use of transparent, anonymous workforce engagement surveys, with commitments to address areas of concern. 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.	We continued to offer flexible working in light of the COVID-19 pandemic and operated all our offices in line with governmental guidelines. We introduced a new benefits provider in the UK and we aligned benefits and terms and conditions for all US employees following the acquisition of Electra. We introduced an additional birthday leave policy for all employees globally.
Gresham Technologies plc Annual Financial Report 2021 25

Customers

For further information, see CEO’s statement, page 13 and ESG, page 26.

• 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.

• 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 invested heavily in developing new features and capabilities for cash and stock reconciliations, directly aligned to customer requirements. We conducted an ESG review and committed to developing an ESG strategy.

Suppliers

• To ensure that we operate our business effectively and without disruption.
• To act fairly and responsibly with respect to our suppliers.
• To adhere to our contractual obligations to suppliers.

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 did not make any strategic decisions in the year affecting suppliers.

Environment, social and governance

Gresham Technologies plc Annual Financial Report 2021 26

Scaling up responsibly

Gresham is growing and globalising. As we do, we are committed to ensuring that we’re “Scaling up responsibly”. Having completed a review of environment, social and governance (“ESG”) considerations in 2021, we are now developing a strategic direction to sustainability. During the review, we learned a great deal about the macrotrends, industry trends, regulatory and policy directions, and employee and senior team member thoughts and perceptions of ESG and sustainability. These insights have enabled us to develop a three-pillar ESG strategic direction for Gresham Tech, under the umbrella proposition of Scaling up responsibly.

Scaling up responsibly is built across the following three interwoven pillars:

• Our Customers – leveraging our growth to improve sustainable customer outcomes.
• Our People – fostering positive, inclusive and productive communities in our business and our industry.
• Our World – managing our impact on the environment and being a force for good in our world.

The strategy is underpinned by culture and governance as the existing foundations for our success. We are excited about developing and executing our ESG strategy over the coming months and years.

People and culture

Our aim is to be a highly valued, engaging and responsible employer across the Group, where our people uphold our core values and are encouraged to excel. We challenge ourselves to be an inclusive and collaborative place to be successful. We know that our people are key to our collective expertise and growth plans. Our business model is to attract, retain and develop talented individuals to help us deliver our long-term objective of becoming one of the world’s leading providers of enterprise financial technology solutions. We seek to foster a culture of innovation and empowerment where talent, enterprise and collaboration are recognised and rewarded.

Our core values

We Embrace Difference

We value different backgrounds, experience, expertise and ways of thinking. We encourage curiosity and respect every individual, recognising that everyone has the potential to bring something extraordinary to the table. We each apply our unique talents with passion and integrity and we are all committed to making Gresham an exceptional place to work.

We Create Together

Working together with our colleagues, customers and partners, we create energy and a dynamic approach to challenge the norm and find innovative ways to solve problems. Through open discussion and feedback, healthy debate and continuous learning, we combine the virtues of experience and fresh thinking. We operate at pace, taking the lead where appropriate, ensuring that we work together to seamlessly deliver outstanding products and services.

We Champion Success

We are passionate about delivering successful outcomes for our customers 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.

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 teamwork 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 continue growing at Gresham.

Trust is vital in order to support and promote the exceptional levels of employee engagement we enjoy and helps to ensure that the working environment balances wellbeing, provides motivating opportunities for growth and operates with compassion.

Early careers programme

Our early career entry programme is one of the ways that we attract promising new colleagues to the business. Our graduate and apprenticeship paths within our professional services, development and IT teams have been running for several years with minimal attrition.

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 believe we have an important role to play in supporting the work of charities, both corporately and individually. We encourage our people to support charitable causes and, as a company, we often provide assistance (such as guidance and insights) or resources (such as surplus IT equipment) to charities.

Every year, we pledge to donate £1 to charity for every customer who completes our single-click customer satisfaction survey. Since inception of this scheme several years ago, we have collected £3,316 and will be donating this sum to charities selected by ballot of our global customer success team.

We also operate a policy whereby employees can purchase their corporate device (laptop or mobile phone) from Gresham when it is due for upgrade, with 100% of proceeds donated to charity. Not only does this raise funds for charity, but it also promotes recycling and device longevity. We are pleased to have raised £3,200 for charity from our employees from the sale of used corporate devices in 2021.

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 2021, the Group had the following split of gender of staff:

	Female	Male	Total
Executive Directors	-	2	2
Senior managers	2	6	8
Staff	42	156	198
Total	44	164	208
Non-Executive Directors	2	2	4

Environment, social and governance

Gresham Technologies plc Annual Financial Report 2021 29

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;
* seeking to influence its supply chain by preferring suppliers who uphold industry-leading environmental standards over those who do not.

Climate Change

The Board is responsible for the Group’s climate change policy, and the matter is discussed at Board meetings as appropriate. The Board has commissioned a review of the Group’s ESG credentials and has determined a high-level strategic direction under the theme of “scaling up responsibly” (see page 26 for further details). The Group does not consider that there are any significant risks associated with climate change impacting the Gresham Group. As Gresham is currently defining its climate change strategy as part of its broader ESG strategy, no significant climate targets have been identified to date. The risk management process for identifying, assessing and managing climate-related risks is currently being defined as part of the wider review of our ESG strategy. Therefore we are currently not in full compliance with the TCFD guidance.

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 2021. 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.

For the purposes of global greenhouse gas emissions data for the year ended 31 December 2021, the following disclosure is made:

UK Group Emissions from	31 December 2021	31 December 2020	31 December 2021	31 December 2020
Electricity, heat, steam and cooling purchased for own use – tonnes of CO2e	19	24	40	37

Group’s chosen intensity measurement	Emissions reported above normalised to tonnes of CO2e per total £1,000,000 revenue
	1.8

The Group’s total energy consumption for the year ended 31 December 2021 was 186,000 kWh (2020: 158,000 kWh). Emissions data has been reported for Gresham’s operations in the UK, USA, Luxembourg and Australia, with locations in Malaysia 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.

Principal risks and uncertainties

Gresham Technologies plc Annual Financial Report 2021 31

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 47. 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.# Principal risks and uncertainties

Failure to win new Clareti business

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. We continue to see strong market demand for Clareti solutions, but sales cycles become and remain 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 performance in 2021 and the notable sales successes achieved, despite the challenging market conditions.
Commentary
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. We continue to see strong market demand for Clareti solutions, but sales cycles become and remain 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 performance in 2021 and the notable sales successes achieved, despite the challenging market conditions.

Misdirected product, operational or strategic investments

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. Our ongoing investments in product innovation are an essential part of our strategy. In 2021, we continued our significant investments in delivering production-ready market-differentiating features for key customers to enable us to target the large market currently dominated by legacy reconciliation providers. We also continued to invest in our strategic cash management solution with ANZ, which we believe has strong growth prospects over the medium to long-term. The Electra business, acquired in June 2021, has been materially integrated and is performing as expected.
Commentary
Our model is to invest in product development and other areas to support Clareti-led organic growth. Strategic investments such as acquisitions present opportunity for accelerated growth. Failing to achieve meaningful returns on investments would hinder the Group’s strategic growth plan and potentially jeopardise the Group’s position in the market and its prospects. Our ongoing investments in product innovation are an essential part of our strategy. In 2021, we continued our significant investments in delivering production-ready market-differentiating features for key customers to enable us to target the large market currently dominated by legacy reconciliation providers. We also continued to invest in our strategic cash management solution with ANZ, which we believe has strong growth prospects over the medium to long-term. The Electra business, acquired in June 2021, has been materially integrated and is performing as expected.

Product and service delivery failures

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. 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.
Commentary
Issues or failures with our software products or services could lead to failed implementations, project delays, cost overruns, data loss, security issues, customer dissatisfaction, early termination, service level breaches and contractual claims, all of which could adversely impact the Group’s revenues, earnings and reputation. 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.

Accelerated decline in non-Clareti revenues

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. Risks in the non-Clareti portfolio have remained stable this year and we broadly expect this to remain the case in 2022. However, we regularly review individual portfolio risks and will consider strategic options such as discontinuations or disposals in mitigation where risk reaches unacceptable levels. Specifically, our ability to support the EDT portfolio is becoming increasingly challenging and, given its steady decline over the last few years, we are actively considering a discontinuation of this portfolio in the short-term.
Commentary
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. Risks in the non-Clareti portfolio have remained stable this year and we broadly expect this to remain the case in 2022. However, we regularly review individual portfolio risks and will consider strategic options such as discontinuations or disposals in mitigation where risk reaches unacceptable levels. Specifically, our ability to support the EDT portfolio is becoming increasingly challenging and, given its steady decline over the last few years, we are actively considering a discontinuation of this portfolio in the short-term.

Economic, international trade and market conditions

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. In light of the ongoing COVID-19 pandemic, we continued to manage our business prudently and in accordance with our incident response plans. Having adjusted to this situation in 2020, we did not suffer any business interruption during 2021, and trading conditions were generally settled during 2021, although the pandemic continues to hinder sales efforts as customers are more difficult to engage and their budgets are under greater scrutiny. We expect these risks to continue in 2022. Furthermore, Russia’s invasion of the Ukraine and the sanctions imposed upon Russia by the UK, the EU and the USA (amongst others) could have a significant detrimental effect on the global economy and trading conditions generally.
Commentary
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. In light of the ongoing COVID-19 pandemic, we continued to manage our business prudently and in accordance with our incident response plans. Having adjusted to this situation in 2020, we did not suffer any business interruption during 2021, and trading conditions were generally settled during 2021, although the pandemic continues to hinder sales efforts as customers are more difficult to engage and their budgets are under greater scrutiny. We expect these risks to continue in 2022. Furthermore, Russia’s invasion of the Ukraine and the sanctions imposed upon Russia by the UK, the EU and the USA (amongst others) could have a significant detrimental effect on the global economy and trading conditions generally.

People risks

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. People risks were generally stable in the year, although market factors are driving salary inflation and we are experiencing higher staff turnover than normal. This is particularly affecting the technical departments, such as product development, where there appears to be a skills shortage in the UK. Consequently, we are focussing significantly on people retention strategies, as well as using our expanded global footprint to recruit into the most suitable and cost-effective geographies. These risks are expected to continue in 2022.
Commentary
A loss or material issue with key members of staff could cause material disruption and a skills shortage. Competitor poaching could result in intellectual property leakage. Staff misconduct, negligence or fraud could cause Gresham significant reputational damage and potential financial loss. People risks were generally stable in the year, although market factors are driving salary inflation and we are experiencing higher staff turnover than normal. This is particularly affecting the technical departments, such as product development, where there appears to be a skills shortage in the UK. Consequently, we are focussing significantly on people retention strategies, as well as using our expanded global footprint to recruit into the most suitable and cost-effective geographies. These risks are expected to continue in 2022.

IP, data and cyber risks

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. Like all businesses, Gresham is exposed to an increasing range of cyber attacks but there were no material incidents in the year. We made considerable investments in 2021 to enhance the security of our systems and processes. We believe these are necessary investments for our customers and intend to make further investments in 2022. Specifically, we are working towards achieving internationally recognised security accreditations during 2022 and 2023. At the time of writing, we are on a heightened state of alert regarding cyber attacks from bad actors as a result of the sanctions imposed by the UK and other states in relation to the situation in Ukraine.
Commentary
A significant IP loss, third party IP challenge, data loss, security breach or cyber attack could significantly threaten Gresham’s ability to do business, particularly in the short term, and could result in significant financial loss. Like all businesses, Gresham is exposed to an increasing range of cyber attacks but there were no material incidents in the year. We made considerable investments in 2021 to enhance the security of our systems and processes. We believe these are necessary investments for our customers and intend to make further investments in 2022. Specifically, we are working towards achieving internationally recognised security accreditations during 2022 and 2023. At the time of writing, we are on a heightened state of alert regarding cyber attacks from bad actors as a result of the sanctions imposed by the UK and other states in relation to the situation in Ukraine.

Governance, regulatory and compliance risks

Description
The Group is subject to rules, laws and regulations pertaining to its business operations in the various territories in which it operates (particularly the UK, the EU and the US), and also in relation to its status as a premium-listed publicly traded company on the London Stock Exchange. A breach of these rules, laws and regulations could lead to public censure, fines, or other enforcement action by governmental or regulatory authorities, all of which could cause reputational and/or financial loss, and could significantly threaten the Group’s performance and prospects. This risk was introduced in the course of 2021 in order to recognise the Group’s key role in supporting financial services firms in their operational resilience and affirm its commitment to do so, particularly in light of the Group’s expanded global footprint and more diverse customer base following the acquisition of Electra in 2021. Governance, regulatory and compliance risks are generally overseen and managed by the Group’s internal legal function. This risk is considered stable.
Commentary
The Group is subject to rules, laws and regulations pertaining to its business operations in the various territories in which it operates (particularly the UK, the EU and the US), and also in relation to its status as a premium-listed publicly traded company on the London Stock Exchange. A breach of these rules, laws and regulations could lead to public censure, fines, or other enforcement action by governmental or regulatory authorities, all of which could cause reputational and/or financial loss, and could significantly threaten the Group’s performance and prospects. This risk was introduced in the course of 2021 in order to recognise the Group’s key role in supporting financial services firms in their operational resilience and affirm its commitment to do so, particularly in light of the Group’s expanded global footprint and more diverse customer base following the acquisition of Electra in 2021. Governance, regulatory and compliance risks are generally overseen and managed by the Group’s internal legal function. This risk is considered stable.

Financial review

Transformative acquisition of Electra

Description
We were delighted to complete the transformative acquisition of Electra on 22 June 2021 and are grateful for the support provided by our new and existing shareholders for the transaction. We are also pleased to confirm that since the acquisition Electra has been integrated to become part of the Clareti business segment, thus will be reported as such. Electra was acquired on a debt free, cash free basis with an upfront consideration of USD $28.95m. Subject to the achievement of performance criteria based on the retention of acquired customer recurring revenues, a maximum of USD $9.65m (£7.2m) in contingent consideration will be due, payable in two instalments after the first and second anniversaries of completion. Upon acquisition, Electra had £9.2m of forward-looking ARR and the following significant balance sheet items: intangible fixed assets consisting of customer relationships with a fair value of £11.8m and software of £5.0m; right of use assets of £0.3m; trade and other receivables of £1.6m; cash and cash equivalents of £0.1m; trade, lease and other liabilities of £2.3m and a deferred tax liability (generated on acquisition) of £4.1m. Subsequent to the acquisition, we are also pleased to report that Electra as a standalone business has performed slightly ahead of management’s plans.
Commentary
We were delighted to complete the transformative acquisition of Electra on 22 June 2021 and are grateful for the support provided by our new and existing shareholders for the transaction. We are also pleased to confirm that since the acquisition Electra has been integrated to become part of the Clareti business segment, thus will be reported as such. Electra was acquired on a debt free, cash free basis with an upfront consideration of USD $28.95m. Subject to the achievement of performance criteria based on the retention of acquired customer recurring revenues, a maximum of USD $9.65m (£7.2m) in contingent consideration will be due, payable in two instalments after the first and second anniversaries of completion. Upon acquisition, Electra had £9.2m of forward-looking ARR and the following significant balance sheet items: intangible fixed assets consisting of customer relationships with a fair value of £11.8m and software of £5.0m; right of use assets of £0.3m; trade and other receivables of £1.6m; cash and cash equivalents of £0.1m; trade, lease and other liabilities of £2.3m and a deferred tax liability (generated on acquisition) of £4.1m. Subsequent to the acquisition, we are also pleased to report that Electra as a standalone business has performed slightly ahead of management’s plans.

Forward-looking annualised recurring revenue “ARR”

Description
Our ARR is an aggregated value of all recurring revenues that are either fully or partially contracted for the next twelve months and/or are highly expected to renew in the next twelve months.
Commentary
Our ARR is an aggregated value of all recurring revenues that are either fully or partially contracted for the next twelve months and/or are highly expected to renew in the next twelve months.# Financial review

Future uplifts in variable usage or contingent recurring fees are not included in ARR unless they are contractually certain with all deliverables having already been met.

Clareti ARR	£m	2021	2020	Variance	%
Clareti ARR at start of year	£m	12.3	9.5	N/a	N/a
Acquired with Electra/Inforalgo	£m	9.2	1.2	N/a	N/a
Organic increase in ARR	£m	2.5	1.6	0.9	56%
Clareti ARR at end of year KPI	£m	24.0	12.3	11.7	95%

Other ARR	£m	2021	2020	Variance	%
Other ARR	£m	4.1	3.5	0.6	17%

Group ARR	£m	2021	2020	Variance	%
Group ARR	£m	28.1	15.8	12.3	78%

Our ARR from our strategic growth business, Clareti, is a critical KPI for the Group as it provides a forward-looking view of the minimum expected revenues in the next twelve months which gives confidence to business planning and investment decisions. Whilst the Electra acquisition, completed in June 2021, was transformative to our Clareti ARR, it is pleasing to also have seen strong organic growth of £2.5m or 20% on the ARR brought forward at the start of the year. Our retention and upsell measures remain strong, with the trailing twelve month net Clareti ARR retention rate being 106%, including the annualised Electra rate since acquisition. We calculate our net ARR retention rate as ARR from end of period from customers existing at the start of the period divided by ARR at the start of the period. There remains a significant market opportunity to both upsell and cross-sell to our continually growing existing customer base that we’re strategically investing in capturing. ARR from our Other businesses has also grown by £0.6m to £4.1m in 2021, although it should be noted that the growth has come from increased end customer usage in the lower margin software reselling business as ARR from our own high-margin legacy solutions continues to decline as planned. It remains encouraging to see the ongoing longevity of these business lines continuing to provide predictability and further ability to invest with confidence in the Clareti business. In addition to Group ARR of £28.1m, expected revenues from non-recurring contracts in place as at 31 December 2021 total £9.1m, thus giving near contractual certainty over £37.2m of revenue for 2022 before any new or incremental contracts are won.

Income Statement

Revenues

Gresham Technologies plc Annual Financial Report 2021 34

Our income is analysed between revenues from Clareti Solutions and from our ‘Other’ non-strategic solutions and services, revenues from each business of these business segments are then broken into:

• Recurring revenues – which are generated for software and software-related services such as support, maintenance, and other ongoing managed services all of which are contracted or expected to continue for the foreseeable future.
• Non-recurring revenues – include professional services, contracting, training and other services that are expected to be one-off or periodic in nature.

Given the transformational nature of the Electra acquisition, we have also broken out the Clareti business to show the Electra revenues (and gross margin in the Earnings section below) as individual line items within the Clareti business.

Clareti solutions		£m	2021	2020	Variance	%
Recurring		£m	13.5	11.5	2.0	18%
Recurring – Electra		£m	5.3	-	N/a	N/a
Recurring – Clareti total KPI	£m	18.8	11.5	7.3	63%
Non-recurring		£m	6.4	4.0	2.4	60%
Non-recurring – Electra		£m	0.3	-	N/a	N/a
Non-recurring – Clareti total	£m	6.7	4.0	2.7	68%
Total Clareti revenues KPI	£m	25.5	15.5	10.0	65%

Other solutions & services		£m	2021	2020	Variance	%
Recurring		£m	4.6	3.7	0.9	24%
Non-recurring		£m	6.9	5.6	1.3	23%
Total	£m	11.5	9.3	2.2	23%

Group Total KPI	£m	2021	2020	Variance	%
Group Total KPI	£m	37.0	24.8	12.2	49%

Clareti Solutions

Clareti recurring revenues increased by 63%, up £7.3m on 2020, this included a contribution of £5.3m from Electra since the acquisition late in June 2021. Excluding the impact of Electra, Clareti recurring revenues increased by 18%, or £2.0m since the prior year. These increases were as a result of new recurring revenue sales, increased consumption of Clareti solutions from our existing customers and a full year’s contribution from our 2020 acquisition, Inforalgo. Clareti non-recurring revenues increased by 68%, up £2.7m on the prior year, with a relatively small services contribution from Electra. Excluding the impact of Electra the increase was 60%. This increase is being driven by new implementations associated with the increase in Clareti recurring revenues, step ups in ongoing client support that was delayed during the 2020 lock-down, and a significant pull through of additional services with key customer ANZ. ANZ are transitioning towards go-live with our new digital banking products and we are building out the ongoing support and managed service capability, part of which will begin being recognised as a recurring revenue.

Other Solutions & Services

Total revenues from Other solutions and services increased by 23% to £11.5m, exceeding our original expectations. This business line includes revenues from: a legacy partner relationship where we act as a reseller of third party software; our sole remaining, own IP, legacy software product; and our contracting services business where we provide fixed margin services at a margin of 13% under twelve-month contractual terms. Recurring revenues within the Other solutions and services portfolio increased by 24% to £4.6m as a result of increased end-user consumption fees from existing customers of our reseller arrangement. As expected we saw lower revenues from our own-IP software, however, these revenue reductions were more than offset by increases in reselling and contracting revenues, albeit at lower margins. The mix of revenues within the Other solutions and services portfolio continues to evolve, and we continue to manage the portfolio carefully benefitting from good visibility of customer intentions.

Gresham Technologies plc Annual Financial Report 2021 35

Earnings

		£m	2021	2020	Variance	%
Clareti Solutions
Gross margin		£m	16.6	14.3	2.3	16%
Gross margin – Electra		£m	4.9	-	N/a	N/a
Gross margin – Clareti total	£m	21.5	14.3	7.2	50%
Gross margin %			83%	92%	(9%)	N/a
Gross margin – Electra %			88%	-	N/a	N/a
Gross margin – Clareti total %			84%	92%	(8%)	N/a
Other solutions & services
Gross margin (*)	£m	3.7	3.4	0.3	9%
Gross margin (*) %			32%	37%	(5%)	N/a
Group
Gross margin (*)	£m	25.2	17.7	7.5	42%
Gross margin (*) %			68%	71%	(3%)	N/a
Adjusted EBITDA KPI	£m	7.2	4.5	2.7	60%
Adjusted EBITDA KPI %			19%	18%	1%
Cash
Adjusted EBITDA KPI	£m	2.5	0.3	2.2	733%
Adjusted EBITDA KPI %			7%	1%	6%
Statutory profit/(loss) after tax	£m	(1.0)	1.3	(2.3)	(177%)
Adjusted diluted EPS KPI	pence	5.02	3.96	1.06	27%

Gross margin and reporting reclassification

(*) 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; (ii) third party contractor costs incurred by our contracting services business; and (iii) In this report we have reclassified fixed-term payrolled employees that provide fixed margin contracting/recruitment services to ANZ from operating expenses to cost of sales as we consider this a better reflection of our gross margin. The 2020 comparative has also been restated, the value of this reclassification in the current year is £2.6m (2020: £3.1m).

The acquisition of Electra has accelerated the growth of our high gross margin Clareti business, which in line with long standing Group strategy, offsets the continued and expected decline in gross margin being generated from the legacy Other solutions and services businesses. At a group level, including the impact of the Electra acquisition, gross margins have reduced slightly from 71% to 68%, this is as a result of an increased usage of contractors throughout all areas of the business. The gross margin within the existing Clareti business has reduced from 92% to 83%, this is due to an increased use of contractors to assist with project delivery and an increasing proportion of business being hosted in one of our cloud infrastructures. The acquired Electra business is carrying another very high gross margin of 88%. The combination of these is driving a gross margin of 84% for 2021. As planned and described in the revenue section above, the Other solutions and services business mix has continued to move in balance towards the lower margin software reselling and contracting services business lines from our higher margin legacy owned IP which remains in structural decline.

Adjusted EBITDA

Adjusted EBITDA (earnings before interest, tax, depreciation and amortisation) 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. We also consider this to be consistent with the manner in which similar small-cap LSE (or AIM) listed companies present their results and how we understand the global investment community assesses performance, with this particularly being the case for growth shares in which the recurring cash performance is considered important. However, whilst we consider them consistent and appropriate, this EBITDA measure and the cash adjusted EBITDA measure below are not necessarily directly comparable to other companies

Gresham Technologies plc Annual Financial Report 2021 36

as they are not strictly governed IFRS accounting measures, nor should they be considered as a substitute for, or superior to, any IFRS measures.Group adjusted EBITDA has improved by £2.7m or 60% since the prior year with the margin improving by 1% to 19% in 2021. This is as a result of the existing higher margin Clareti business continuing to grow and beginning to drive improved operational leverage as it scales along with the impact of the Electra acquisition, which offset the continued reducing margin of the Other solutions and services business lines. Whilst we will ensure that we maximise the current market opportunity through appropriate strategic investments, we do expect to continue to see improvements to these margins in future years.

Cash Adjusted EBITDA

Cash adjusted EBITDA refers to adjusted EBITDA reduced by the value of capitalised development spend and any IFRS16 lease-related cash expenses classified as depreciation and interest. We consider this a good measure of cash profitability for modern SaaS businesses who continue to invest in product development to ensure they remain market leading.

Group cash adjusted EBITDA has also improved since the prior year, with £2.2m of the £2.7m improvement in adjusted EBITDA (mentioned above) dropping through to improvement cash EBITDA. The £0.5m difference between the improvements in the two EBITDA measures is as a result of capitalised development spend and IFRS-16 lease-related cash expenses in the acquired Electra business. This has resulted in a cash adjusted EBITDA margin of 7%, an improvement of 6% from a margin of 1% in the prior year. Like adjusted EBITDA, we expect to see continued improvements in these margins in future years.

Statutory profit/(loss) after tax and Adjusted diluted EPS

There has been a reduction in statutory profit after tax to a loss of £1.0m from a prior year profit of £1.3m. This reduction of £2.3m is due to the combination of: improved adjusted operating profit of £2.2m as a result of the growth and improved profitability of the Group; offset by; increased exceptional expenses of £1.1m (see below); increased share-based payment charges of £0.2m; increased amortisation on acquired intangibles largely due to the Electra acquisition of £0.8m; and an increased tax charge of £2.4m (see below).

Adjusted diluted EPS has improved by 27% to 5.02 pence per share. Adjusted earnings used in this calculation adjust the statutory result after tax for: exceptional items; amortisation of acquired intangibles, share-based payments and the deferred tax charge in relation to the sale of the IP acquired with Electra from the US to the UK business (see taxation below).

Exceptional items

During the year, the Group recognised exceptional costs of £1.8m, of which:
(i) £1.3m were acquisition costs in relation to the acquisition of Electra Information Systems, Inc on 22 June 2021; and
(ii) £0.5m related to various integration expenses in relation to the same acquisition.

The prior year exceptional costs of £0.4m were in relation to the July 2020 acquisition of Inforalgo and various restructuring costs upon the July 2020 expiry of the earn-out period relating to the acquisition of the B2 Group in July 2018.

Offsetting the exceptional costs in the year was exceptional income of £0.3m, which occurred from currency hedging activities taking place to fund the USD denominated Electra acquisition. There was no such exceptional income in the prior year.

Taxation

For the year ended 31 December 2021, the Group has recorded a net tax charge of £1.4m (2020: credit of £1.0m). The material drivers for the variance from the prior year being:
* an increase in overseas current tax charges of £0.5m as a result of the increased profits from our US and Australian operations as those businesses continue to grow, with US taxes also increasing as a result of the Electra acquisition;
* a one-off deferred US tax charge of £1.4m has also been incurred in the year as a result of the Group’s long-term global tax planning, part of which included the sale of the IP acquired in the Electra acquisition from our US business to our UK business to ensure the UK remains the centralised IP generating entrepreneur within the Group; and
* the surrender of tax losses in relation to UK R&D activities being £0.3m lower than the prior year which included the surrender of two years worth of qualifying R&D.

Cash flow

The Group’s financial position remained very strong throughout 2021, at a headline level the cash balance at the year end of £9.1m remained fairly consistent with that of the prior year end of £8.9m, however there were a number of significant movements beneath the headline balances which are described below. There continues to be no debt in the business, the USD $15m revolving credit facility, put in place at the time of the Electra acquisition as an insurance policy to fund the contingent consideration payments which coincide with the annual low point in cash, has not been drawn upon.

Operating cash flow excluding working capital and exceptional items has increased by £3.0m to £7.5m in the year as a result of the improved cash EBITDA of the Group in existence prior to the Electra acquisition and the cash generative impact of the operations of Electra post acquisition.

Operating cash outflow from exceptional items has increased by £1.4m since the prior year to £1.8m. This increase is one-off in nature with the significant majority being advisory and integration fees in respect of the Electra acquisition.

The movement in working capital has increased by £0.7m to £1.3m at the end of the year. The increase in the movement in working capital is as a result of the inclusion of Electra working capital in the Group balance sheet since acquisition which was offset by a reduction relating to the unwinding of an initial three-year prepayment of £3.0m from a £1.0m per annum subscription licence that became non-contingent in March 2019.

Net tax payments of £1.1m were made during the year (2020: net tax receipts of £0.8m). Gross tax payments were made in the year of £1.1m (2020: £0.5m), the increase on the prior year largely as a result of increased profitability in the US and Australia. In the prior year the Group also received gross tax receipts of £1.3m in the year as a result of research and development activities performed during 2018 and 2019 where enhanced relief was available, an equivalent gross tax reclaim was made during 2021 totalling £1.1m, however, this was not received from HMRC until January 2022.

The capitalised development expenditure of £4.2m has increased by £0.7m from the prior year, the vast majority of the increase being in relation to such expenditure within the acquired Electra business.

During the year the Group paid £0.9m of contingent consideration in relation to the July 2020 Inforalgo acquisition, in the prior year the initial consideration of £1.9m was paid. The Group is delighted to report that the contingent consideration payment of £0.9m was paid in full shortly after the first anniversary of the acquisition as the target metrics agreed with the sellers were met in full. Subsequent to the year end, the final contingent consideration payment of £0.4m was also paid in full during February 2022.

The Group paid £19.6m (net of cash acquired) of initial consideration during the year to acquire Electra in June 2021. This was funded through the capital raised of £20.2m (net of costs) in June 2021.

The Group received £0.1m upon the exercise of share options during the year (2020: £0.5m).

As was the case in the prior year, with increasing Clareti sales (now including Electra) from the growing annuity base and new customer wins, coupled with carefully selected and controlled investments, we expect the cash-generation capacity of the business to continue and are looking at opportunities to best utilise 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.

	2021	2020	Variance	%
Opening cash & cash equivalents at 1 January £m	8.9	9.6	(0.7)	(7%)
Operating cash flow excluding exceptional items £m	7.2	4.5	2.7	60%
Operating cash flow from exceptional items £m	(1.5)	(0.4)	(1.1)	(275%)
Total operating cash flow excluding working capital £m	5.7	4.1	1.6	39%
Movement in working capital £m	1.3	0.6	0.7	117%
Cash inflow from operations £m	7.0	4.7	2.3	49%
Net tax (payments)/receipts £m	(1.1)	0.8	(1.9)	(239%)
Capital expenditure - development costs £m	(4.2)	(3.5)	(0.7)	19%
Capital expenditure - other £m	(0.1)	(0.1)	-	-
Principal paid on lease liabilities £m	(0.6)	(0.6)	-	-
Inforalgo acquisition (net of cash acquired) £m	(0.9)	(1.9)	1.0	51%
Electra acquisition (net of cash acquired) £m	(19.6)	-	(19.6)	-
Shares issued – Electra acquisition (net of costs) £m	20.2	-	20.2	-
Shares issued - upon option exercises £m	0.1	0.5	(0.4)	(80%)
Dividend £m	(0.5)	(0.5)	-	-
Other £m	(0.1)	(0.1)	-	-
Net increase /(decrease) in cash and cash equivalents £m	0.2	(0.7)	0.9	129%
Closing cash & cash equivalents at 31 December KPI £m	9.1	8.9	0.2	2%

Consolidated statement of financial position

Intangible fixed assets have increased from £31.1m to £62.3m, largely as a result of the Electra acquisition in June 2021. Trade receivables increased from £2.5m to £3.## Financial Review

8m and accrued income (a contract asset) have increased from £0.4m to £1.2m, both of these increases are aligned with the proportioned increase in revenues from the Electra acquisition and associated billing cycles. Income tax receivable has increased from nil to £1.1m due to a timing difference in the receipt of funds from HMRC in relation to R&D credits, in which the cash from the 2021 claim in relation to 2020 activity was received in January 2022, whereas the cash from the equivalent claim made in 2020, in relation to 2018 and 2019 was received in December 2020. Called up equity share capital increased by £0.7m to £4.2m and the share premium account increased by £19.6m to £23.9m. These are both as a result of the capital raise in June 2021 that funded the Electra acquisition. Deferred tax liabilities have increased by £5.5m to £6.8m as a result of £1.4m deferred tax charge in the year on the IP sale from the US to the UK (see tax section), £3.8m deferred tax generated upon the acquisition of intangibles upon the Electra acquisition (net of subsequent amortisation) and £0.4m in relation to the expected increase in future UK tax rates from 19% to 25%. Non-current contingent consideration has increased by £3.3m to £3.6m and current contingent consideration has increased by £3.0m to £3.9m. Within non-current contingent consideration during the year, £3.6m was generated on the acquisition of Electra, with the second contingent consideration payment of £0.4m in relation to the Inforalgo acquisition moving from non-current to current contingent consideration since the prior year. Within current contingent consideration during the year £3.6m was generated on the acquisition of Electra, the first contingent consideration payment of £0.9m was paid upon targets being met on the first anniversary of the Inforalgo acquisition and the aforementioned £0.4m in relation to the Inforalgo acquisition moved from non-current to current contingent consideration since the prior year. Trade payables increased from £0.9m to £1.1m, which is largely aligned with the increased size of the combined business subsequent to the Electra acquisition. Other payables have increased from £3.3m to £6.5m as a result of various other payables related to the Electra acquisition, other payables in relation to regular Electra business activity (e.g. sales tax) and an increase in the bonus provision to all employees and executives reflecting the performance against annual targets. Contract liabilities have increased from £11.0m to £12.0m, the increase is as a result of the proportioned increase in revenues from the Electra acquisition and associated billing cycles; offset by to the unwinding of an initial three-year prepayment of £3.0m from a £1.0m per annum subscription licence that became non-contingent in March 2019.

Financial outlook

Management are very pleased with the financial performance for the year, particularly given that the Group entered 2021 with a weaker pipeline than desired as a result of the COVID-10 challenges of 2020. It is a testament to the Group that we achieved a 20% organic growth rate in Clareti ARR, bolstered to 95% including the Electra acquisition. The Group plans to at least maintain this level of organic Clareti ARR growth going forward. The other (non-Clareti) software portfolio continues to surpass expectations. Parts of the portfolio are in long-term decline and since the general trend is towards the lower margin products and services, we continue to plan for a declining contribution to Group earnings. We expect our contracting services business to remain relatively stable in 2022.

Gresham Technologies plc Annual Financial Report 2021

Overall, through continued organic growth and the Electra acquisition we have further increased levels of revenue predictability throughout the Group. In addition to the significantly increased Clareti recurring revenue base, high levels of contracted backlog of Clareti services for ongoing implementations and innovation services and a high portion of the non-Clareti portfolio already is already under contract for 2022. This was the case as we entered 2020 and 2021 and is the case to an even greater degree as we enter 2022. With this in mind, we continue to invest for growth, including the reinvestment of cost synergies generated through the scale that the combined Clareti and Electra provides the Group. This net investment will be focussed on distribution, product and customer success, to drive revenue synergies to ensure that we are best placed to take advantage of the significant market opportunities.

Tom Mullan
Chief Financial Officer
7 March 2022

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Gresham Technologies plc Annual Financial Report 2021
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The Strategic Report was approved by the Board of Directors on 7 March 2022.

On behalf of the Board

Ian Manoch a
Chief Executive

7 March 2022

Tom Mullan
Chief Financial Officer

7 March 2022

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Chairman’s introduction to governance

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The Board is committed to upholding high standards of corporate governance throughout the Group. As part of that, the Board acknowledges its role in setting the culture, values and ethics of the Group, and its collective responsibility in developing a healthy corporate culture and delivering long-term success to the Group. Specifically, the Board acknowledges its role in leading and overseeing the Group’s environmental, social and governance (“ESG”) strategy. To this end, the Board commissioned a review of the Group’s ESG credentials in 2021 and has formulated a high-level ESG strategy (see page 26), which will be refined and implemented over the coming months and years. The Board’s aim is to operate as effectively as possible, in line with the governing principles of the UK Corporate Governance Code. A description of the Group’s application of the principles set out therein for 2021 is set out in the Statement of Corporate Governance, and I am pleased to report that the Company has complied with all relevant provisions of the Code in 2021.

A Board effectiveness evaluation was carried out in the year with constructive input from all directors and productive outcomes. 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 31), in light of the new and emerging risks or uncertainties arising from the Group’s strategic growth plans and the economic, political and market conditions. The Board challenges management to ensure appropriate risk mitigation measures are in place and is planning to formalise certain aspects of risk management and reporting in 2022.

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 any necessary COVID-19 precautions.

Peter Simmonds
Non-Executive Chairman
7 March 2022

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Board of Directors

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Peter Simmonds, Non-Executive Chairman

Peter was appointed to the Board as a Non-Executive Director in August 2020 and became Non-Executive Chairman in September 2020. 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 since 2015 and, until January 2022, of Cloudcall plc. Peter is FCCA qualified and has more than 40 years of senior management and board-level experience, principally in software, banking, insurance, finance and outsourcing. Peter is an advocate of high standards of corporate governance, and has been deputy chair of the Quoted Companies Alliance since 2019.

Committees: Nomination (chair), Remuneration (member).

Andy Balchin, Senior Independent Non-Executive Director

Andy was appointed to the Board as a Non-Executive Director in May 2017 and became Senior Independent Non-Executive Director in October 2020. He 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.

Committees: Audit (chair), Remuneration (member), Nomination (member).

Jenny Knott, Non-Executive Director

Jenny was appointed to the Board in October 2020.Jenny, Non - Executive Director
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 being a fellow for Be-The-Business, Jenny is an adviser to many leaders, Fintechs and other young businesses.
Committees: Remuneration (chair), Audit (member), Nomination (member)

Ruth Wandhöfer, Non - Executive Director
Ruth was appointed to the Board in October 2020. Ruth is a Global Fintech 50 Influencer and is currently chair of the Payment Systems Regulator Panel and a partner at Gauss Ventures, as well as holding non-executive director positions at Permanent TSB (Ireland) and Digital Identity Net. Her prior roles have included spearheading regulatory and market strategy for treasury and trade solutions at Citi, advising the European Banking Federation on policy making for securities services and payments and serving as a NED of the London Stock Exchange Group.
Committees: Audit (member), Nomination (member)

Ian Manocha, Chief Executive Officer
Ian was appointed to the Board in June 2015. 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.

Tom Mullan, Chief Financial Officer
Tom joined Gresham on 1 March 2018 and was appointed to the Board on 13 March 2018. 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.

Statement of Corporate Governance

Gresham Technologies plc Annual Financial Report 2021 43

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.

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 well-being at work, seeks to create an environment where individuals are fulfilled, and operates a share incentive plan that ensures our people share in the success of the Group.

Dialogue with Institutional Shareholders

The Board as a whole is responsible for ensuring that a dialogue is maintained with shareholders based on the mutual understanding of objectives. Members of the Board meet with major shareholders on a regular basis, including presentations after the Company’s announcement of the 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 restrictions, shareholders were requested not to attend the 2021 AGM. Subject to COVID-19 precautions, the Chairman will aim to ensure that all members of the Board will be available at the forthcoming AGM, whether it is operated as an in-person or electronic meeting. 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 2021.

Division of Responsibilities

Board Membership, Roles and Responsibilities

Statement of Corporate Governance
Gresham Technologies plc Annual Financial Report 2021 44

The Board is currently comprised of the Non-Executive Chairman, two Executive Directors and three Non-Executive Directors, details of which are set out on page 42. 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 47.

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.

Director	Board Meetings	Audit Committee	Remuneration Committee	Nomination Committee
Mr P Simmonds	9	0	0	0
Mr A Balchin	9	3	3	3
Ms J Evans	9	3	3	3
Ms R Wandhöfer	6	2	2	2
Mr I Manocha	9	0	0	0
Mr T Mullan	9	0	0	0
Ms J Lally	9	3	3	3

	Meetings Attended	Audit	Remuneration	Nomination
P Simmonds	12/12	-	5/5	1/1
A Balchin	11/12	3/3	4/5	1/1
J Knott	12/12	3/3	5/5	1/1
R Wandhöfer	12/12	3/3	-	1/1
I Manocha	12/12	-	-	-
T Mullan	12/12	-	-	-

Composition, succession and evaluation

Nomination committee

A report from the chair of the nomination committee is set out on page 51.

Statement of corporate governance

Gresham Technologies plc Annual Financial Report 2021

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 Board has undertaken a formal review encompassing the performance of the Board as a whole, its committees and each Director. In performing these reviews, criteria that are taken into account include the ability of the Director to take the perspective of creating shareholder value; to contribute to the development of strategy and identification of risks; to provide clarity of direction to management; to be a source of wise counsel; to bring a broad perspective to discussions and an understanding of key issues; to commit the time required to fulfil the role; and to listen to and respect the ideas of other Directors and management. This review included a Board effectiveness survey, with responses collected anonymously by the Company Secretary and compared against the results of the previous Board effectiveness survey. The Chairman has formally reviewed the performance of the Non-Executive Directors and satisfied himself that they remain committed to the role and their performance continues to be effective. Mr A Balchin has evaluated the performance of the Chairman taking into account the views of other Directors and is satisfied that he remains committed to the role and his performance continues to be effective.

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 47.

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 69.

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 31.

Going concern

Statement of corporate governance

Gresham Technologies plc Annual Financial Report 2021

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 65.

Viability statement

The Directors confirm that they have assessed the prospects of the Group over a three-year period commencing 1 January 2022 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, with Clareti software contracts typically being signed for three-year minimum contract terms, balanced against the likely attrition rate of other, non-Clareti, revenues. In making this statement, the Directors have considered the Group’s current position and the potential impact of the principal risks and uncertainties described on page 31 on the Group’s business model, future performance, solvency or liquidity, taking account of severe but reasonable scenarios and the effectiveness of any mitigating actions, and have performed stress test analyses based on likely outcomes.

Control environment

The Group operates within a control framework developed and strengthened over a number of years and communicated as appropriate by a series of written procedures. These lay down accounting policies and financial control procedures, in addition to controls of a more operational nature. The key procedures that the Directors have established with a view to providing internal control are as follows:

• the establishment of the organisational structure and the delegated responsibilities of operational management;
• the definition of authorisation limits, including matters reserved for the Board;
• regular site visits by the Executive Directors, with the results reported to Board meetings;
• the establishment of detailed operational plans and financial budgets for each financial year;
• maintenance of a 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 52.

Audit committee report

Gresham Technologies plc Annual Financial Report 2021

Dear shareholder

As chair of the audit committee, I am pleased to present the committee’s report for the year ended 31 December 2021. 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 consists of me, as chair, Ms J Knott and Ms R Wandhöfer as members. The Board considers that the committee has recent and relevant financial experience, including competence in accounting, relevant to the sector in which we operate, as well as operational skills. I am satisfied that the committee has appropriately discharged its duties in the year in accordance with its terms of reference, which are reviewed annually and are available at www.greshamtech.com/investors.

In order for the committee to properly discharge its role, it is critical that we have the opportunity to openly discuss with management any matter which falls within our remit and probe and challenge where necessary. The Chief Executive 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.# Audit Committee Report

In the year, the committee specifically considered and challenged management on the impact and potential risks associated with the financing, acquisition, and integration of Electra Information Systems, Inc., ensuring a robust approach to the related processes, including due diligence, risk management, internal controls, and financial reporting. This included paying significant attention to KPIs and segmental reporting, including alternative performance measures of the enlarged Group, ensuring that reporting was reflective of the continued weighting of the Group towards that of a subscription software business. The committee has continued to pay 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 13 and 31. 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 2022, as well as the impact of the geopolitical and economic instability caused by the deplorable actions of the Russian and Belarusian leadership in Ukraine.

Responsibilities

Our principal role is to assist the Board in performing its responsibilities in relation to financial reporting, internal controls, and risk management and in maintaining an appropriate relationship with our external auditor. The work of the committee in discharging its responsibilities includes:

• Monitoring the integrity of the reported financial statements of the Group, and any formal announcements relating to the Group’s financial performance, and reviewing significant financial issues and judgments contained in them.
• Challenging and monitoring the appropriateness, relevance, and integrity of the Group’s alternative performance measures (APMs), including their selection, measurement, and presentation.
• Reviewing and assessing the process which management has put in place to support the Board when giving its assurance that the Annual Financial Report 2021, 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.
• 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.
• 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 judgment 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

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 judgment, 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.

Work undertaken by the committee in forming an opinion

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, judgments, estimates, and disclosures were reasonable and appropriate.

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 judgment to assess performance obligations associated with each revenue stream and further judgment 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.

Work undertaken by the committee in forming an opinion

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 judgments such as bundling or unbundling of revenue streams, and the resulting impact on revenue and profit recognition. Revenue recognition is an area of focus for the external auditor, which reported its findings to us. We considered whether the accounting treatment for revenue and profit recognition was in accordance with agreed methodology, the Group’s accounting policies, and IFRS 15 “Revenue from Contracts with Customers” and concurred with management’s opinion that it was.

Impairment reviews

The Group is required to perform impairment reviews of goodwill annually at the reporting date and, in addition, performs impairment reviews of capitalised development costs to identify any intangible assets that have a carrying value that is in excess of their recoverable value. Determining the recoverability of an intangible asset requires judgment 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.

Work undertaken by the committee in forming an opinion

The committee has considered management’s assessments of value in use of cash-generating units of intangible assets (principally goodwill and capitalised development costs) at the reporting date. This included specifically considering and subsequently approving business plans prepared by management supporting the future performance expectations used in the calculation of the value in use. Impairment reviews were also an area of focus for the external auditor, which reported its findings to us. We considered whether the accounting treatment performing impairment reviews was in accordance with agreed methodology, the Group’s accounting policies, and IAS 36 “Impairment of Assets”. We concluded that management’s key assumptions were reasonable.

Acquisition accounting and contingent consideration

In determining the fair value of intangible assets arising on acquisition, management is required to make judgments regarding the timing and amount of future cash flows applicable to the businesses being acquired, discounted using an appropriate discount rate. Such judgments 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. Contingent consideration relating to acquisitions is included based on management’s estimates of the most likely outcome. Those judgments 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.

Work undertaken by the committee in forming an opinion

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.# Audit Committee Report

Gresham Technologies plc Annual Financial Report 2021 50

The committee has 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.

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.

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.

Internal audit function

During the year, the committee considered the need for a separate internal audit function and its impact on the external audit and concluded that, based on the size of the Group, a separate internal audit function is not necessary at this stage of the Group’s maturity. The need for an internal audit function is reviewed at least annually.

External auditor

The committee reviews and makes recommendations with regard to the appointment of the external auditor. In making these recommendations, the committee considers auditor effectiveness and independence, partner rotation and any other factors which may impact the external audit or’s appointment. As reported last year, BDO LLP was reappointed as the Company’s auditor in 2020, notwithstanding its previous ten-year tenure, and remains the Company’s auditor for the current year. Refer to last year’s report and the Independent Auditor’s Report on page 70 for further information.

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 auditor¹ (2020: nil). The committee is satisfied with the effectiveness and independence of the external auditor.

Andy Balchin
Chair of the audit committee
7 March 2022

¹ This excludes fees for the historical financial audit carried out by BDO LLP in connection with the acquisition of Electra Information Systems Inc, which are exempt.

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Nomination Committee Report

Gresham Technologies plc Annual Financial Report 2021 51

Dear shareholder

I am pleased to present the report of the nomination committee for the year ended 31 December 2021. As Chairman of the Board, I also chair the nomination committee. All of the other Non-Executive Directors are also members of the committee.

Following the Board transitions in 2020, there were no changes to the Board and this gave the committee the opportunity to focus on other priorities such as succession planning and diversity and inclusion.

Regarding 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.

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. See page 29 for gender balance data across the Group.

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
7 March 2022

Annual statement from the chair of the remuneration committee

Gresham Technologies plc Annual Financial Report 2021 52

Dear shareholder

I am pleased to introduce the Directors’ Remuneration Report for the year ended 31 December 2021. The remuneration committee has met several times during the financial year to formally oversee the compensation matters for the Company. The committee consists of me, as chair, and Mr P Simmonds and Mr A Balchin as members. All of these meetings were attended, at the committee’s invitation, by the Executive Directors, except that they were not present in any discussions affecting their own remuneration.

For 2021, the committee has continued to operate a remuneration structure made up of basic salary, performance-related bonuses, share options, benefits and pensions. As in previous years, a significant proportion of executive remuneration is based on performance, designed to align executive pay with shareholder interests.

The committee took the following key decisions in relation to the year reported:
* Implemented a one-off “acquisition success” bonus in relation to the acquisition of Electra. The committee recommended that this be awarded in stages; the first award made is to reflect the long lead-time of significant effort invested over many years to deliver the transaction and to successfully secure the strong financial performance of the acquired business in the critical first six months of ownership; the second, and smaller component, is to carry forward into financial year 2022 to ensure certain success criteria are achieved relating to the retention and integration of clients, staff and technology.Details of this “acquisition success” bonus in relation to 2021, and how it was calculated, are set out in the following pages; • assessed that Chief Executive and Chief Financial Officer basic pay should increase by 1.25% for the year commencing 1 April 2021; • determined the performance measures and targets for variable pay awards under the Annual Bonus Scheme in respect of 2021; • determined the performance measures and targets for calculation of matching awards under the LTIP in respect of the three financial years 2021–2023; • assessed the performance of Executive Directors for 2021 against the determined targets (which excluded the acquisition of Electra) under the Annual Bonus Scheme. Details of performance-related pay awards in respect of 2021 and how they were calculated are set out in the following pages; and • reviewed and approved the grant of inaugural awards under the ten-year Performance Share Plan (“PSP”) which we introduced in December 2020 to replace the expiring 2010 discretionary Share Option Plan 2010. Awards made in 2021 under the PSP, and how they were calculated, are set out in the following pages.

As regards salary reviews in 2022, the extraordinary circumstances in today’s inflationary market mean that we have adjusted our approach to optimise retention and fairness across roles and geographies. Previously, the system has seen individuals receive a percentage of salary increase with the reward weighted by their individual performance rating. However, in 2022, employees will receive a cost-of-living rise as a fixed amount, plus a performance-related increment as a percentage of salary. This ensures that junior and lower earning members of the Group receive proportionately greater rises than our top earners. Applying this approach, the committee has assessed that Chief Executive and Chief Financial Officer basic pay should increase by 0.7% and 1.2% respectively, effective 1 April 2022. The average rise across the global population is expected to be 5%. In addition, the committee has determined performance measures and targets for variable pay awards under the Annual Bonus Scheme for 2022 and under the LTIP in respect of the three financial years 2022–2024, 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.greshanstech.com/investors.

Annual statement from the chair of the remuneration committee

Gresham Technologies plc Annual Financial Report 2021 53

I encourage you to read the Directors’ Remuneration Report on the following pages.

Jenny Knott
Chair of the remuneration committee
7 March 2022

DocuSign Envelope ID: BB8DFBB0-2E16-4C63-B3F9-138A47D638FF

Remuneration report

Gresham Technologies plc Annual Financial Report 2021 54

This report complies with the requirements of the Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008 as amended in 2019, the provisions of the UK Corporate Governance Code (2018) and the Listing Rules. The 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 2021 and how the Company intends for the remuneration policy to apply for the year ended 31 December 2022.

The Directors’ Remuneration Report will be put to an advisory shareholder vote at the forthcoming AGM.

Directors’ remuneration policy

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 2022 AGM.

| Link to strategy | Operation # Remuneration report

Gresham Technologies plc Annual Financial Report 2021

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. 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.

Chairman and Non-Executive Director fees

Link to strategy Operation Framework 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. 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.

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

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.

Gresham Technologies plc Annual Financial Report 2021

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.

Remuneration scenarios

The following graphs set out an illustration of Executive Director pay for 2022. The potential reward opportunities for 2022 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 2022 are provided, as follows:

• the “minimum” scenario includes base salary, pension and benefits (“fixed remuneration”) which are the elements of Executive Director pay that are not at risk;
• the “on-target” scenario includes fixed remuneration, plus an on-target bonus of 50% of base salary under the Annual Bonus 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
• 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.

Gresham Technologies plc Annual Financial Report 2021# 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.

Remuneration report

Gresham Technologies plc Annual Financial Report 2021 59

Salary increases in 2021

Mr I Manocha and Mr T Mullan received a base salary increase of 1.25% in 2021. The average increase across Group employees in 2021 was 2%. There is no link between base salary and the Company’s share price.

Variable pay in 2021

The variable element of Director pay in 2021 comprises a performance-based bonus under the Annual Bonus Scheme, an equity award under the Long-Term Share Incentive Plan and an equity award under the Performance Share Plan. In addition, Directors holding share options under the now-expired Share Option Plan 2010 (see page 61 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 bonus under the Annual Bonus Scheme

The annual bonus awards in respect of 2021 for Executive Directors are set out in the table below. These awards have been initially assessed by the committee by reference to predetermined annual performance targets linked to Group objectives and individual performance objectives.

Measure	Weighting	Attainment (CEO)	Attainment (CFO)
Clareti ARR	30%	94%	94%
Group revenue	15%	110%	110%
Clareti cash EBITDA	15%	105%	105%
Group adjusted EBITDA	15%	118%	118%
Personal objectives	25%	84%	86%
Bonus Outcome (% of base)		49.6%	49.8%
Bonus Payment (£)		£135,057	£83,173

One-off discretionary bonus relating to the Electra acquisition

In light of the successful and highly strategic acquisition of Electra in the year, the remuneration committee considered that it was appropriate to exceptionally award a one-off bonus to Executive Directors and a small number of other senior employees of the Company who were instrumental to the success of the acquisition (and the associated fundraise) and financial performance in the period from acquisition until year end. In making this determination, the committee recognised the importance of exercising pay restraint whilst also providing fair reward for the exceptional progress towards strategic and financial goals delivered by the acquisition. Details of the one-off discretionary bonus in 2021 to Executive Directors are set out in the table below.

Measure	CEO	CFO
Electra acquisition and fundraise	100,000	25,000
Electra FY21 financial performance	30,000	28,000
Total	130,000	53,000

In 2022, the remuneration committee intends to award an exceptional bonus to Executive Directors and a small number of other employees based on and subject to successful achievement of certain key integration deliverables. Details of any such awards in 2022 to Executive Directors will be disclosed in next year’s report.

Equity awards under the Long-Term Share Incentive Plan

Awards were made under the Long-Term Share Incentive Plan in 2021 in respect of performance in financial year 2020, details of which are set out on page 60. Awards were granted in accordance with the rules of the plan and the remuneration policy.

Equity awards under the Performance Share Plan

Remuneration report Gresham Technologies plc Annual Financial Report 2021 60

Awards were made under Performance Share Plan in 2021. These were the first awards under this plan, which was adopted by shareholders in December 2020. Details of the awards are set out on page 61. Awards were granted in accordance with the rules of the plan and the remuneration policy.

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 2021 and 2020:

31 December 2021

	Base salary / fees	Benefits in kind	Performance-related cash bonus	Discretionary bonus relating to acquisition	Pension	IFRS 2 share-based payment charge	Performance-related share bonus	Total
Executive Directors
I Manocha	271,717	1,887	67,529	130,000	13,574	64,813	67,528	617,048
T Mullan	166,595	3,103	41,587	53,000	8,317	51,367	41,586	365,555
Non-Executive Directors
P Simmonds	80,000	-	-	-	-	-	-	80,000
A Balchin	45,000	-	-	-	-	-	-	45,000
J Knott	45,000	-	-	-	-	-	-	45,000
R Wandhöfer	40,000	-	-	-	-	-	-	40,000
	648,312	4,990	109,116	183,000	21,891	116,180	109,114	1,192,603

(1) Paid 100% in cash bonus.
(2) Included within total remuneration are fixed payments of £675,193 and variable payments of £517,410.

31 December 2020

	Base salary / fees	Benefits in kind	Performance-related bonus	Discretionary bonus relating to acquisition	Pension	IFRS 2 share-based payment charge	Performance-related share bonus	Total
Executive Directors
I Manocha	267,114	2,327	55,899	-	13,350	25,789	55,898	420,377
T Mullan	163,850	2,840	34,226	-	8,180	42,506	34,226	285,828
Non-Executive Directors
P Simmonds (appointed 1 Aug 2020)	33,333	-	-	-	-	-	-	33,333
A Balchin	41,102	-	-	-	-	-	-	41,102
J Knott (appointed 12 Oct 2020)	10,096	-	-	-	-	-	-	10,096
R Wandhöfer (appointed 12 Oct 2020)	8,974	-	-	-	-	-	-	8,974
K Archer (resigned 30 Sept 2020)	60,000	-	-	-	-	-	-	60,000
I Joss (resigned 31 Oct 2020)	33,333	-	-	-	-	-	-	33,333
	617,802	5,167	90,125	-	21,530	68,295	90,124	893,043

(1) Included within total remuneration are fixed payments of £644,499 and variable payments of £248,544.

IFRS 2 share-based payment charges referred to in the table above are accounting charges that are calculated in accordance with applicable accounting rules as set out in note 23 of the Group financial statements. These charges do not represent cash payments. Benefits in kind include provision of private healthcare and death-in-service insurance.

Interests in options and conditional share awards (audited information)

The Group operated the Long-Term Share Incentive Plan and the Performance Share Plan (as shown in the remuneration policy) during the year, as well as the Share Option Plan 2010 (which is closed for new awards). The interests of the Directors under those plans at the start and end of the year are as set out in the tables below. The interests of the Directors to subscribe for or acquire ordinary shares have not changed since the year end. Further details concerning the plans, including vesting conditions, can be found in note 22 of the Group financial statements.

Long-Term Share Incentive Plan

The following table sets out the outstanding awards to Directors pursuant to the Long-Term Share Incentive Plan. Vesting is subject to performance and retention conditions in accordance with the rules of the plan. No awards are made to Non-Executive Directors.

Remuneration report Gresham Technologies plc Annual Financial Report 2021 61

	Awards at 1 January 2021	Granted	Cancelled	Exercised	Awards at 31 December 2021	Date of grant	Exercise price	Date first exercisable	Expiry date
Executive Directors
I Manocha (1) (2)	104,008	-	-	-	104,008	20.03.20	nil	20.03.23	20.03.30
I Manocha (1) (2)	-	137,937	-	-	137,937	31.03.21	nil	31.03.24	31.03.31
T Mullan (1) (2)	67,532	-	-	-	67,532	20.03.20	nil	20.03.23	20.03.30
T Mullan (1) (2)	-	84,456	-	-	84,456	31.03.21	nil	31.03.24	31.03.31
	171,540	222,393	-	-	393,933

(1) Options over which the Director has agreed to pay any employer’s National Insurance arising from the exercise of the options.
(2) Yet to vest.

Performance Share Plan 2020

The following table sets out the number of outstanding awards granted to Directors pursuant to the Performance Share Plan 2020. Vesting is subject to performance conditions in accordance with the rules of the plan. There are no outstanding awards to Non-Executive Directors.

	Awards at 1 January 2021	Granted	Cancelled	Exercised	Awards at 31 December 2021	Date of grant	Exercise price	Date first exercisable	Expiry date
Executive Directors
I Manocha (1) (2) (3)	-	203,000	-	-	203,000	21.10.21	nil	21.10.24	21.10.31
T Mullan (3)	-	75,000	-	-	75,000	21.10.21	nil	21.10.24	21.10.31
	-	278,000	-	-	278,000

(1) Awards over which the Director has agreed to pay any employer’s National Insurance arising upon vesting.
(2) The share award includes a base award of 135,000 shares and an additional potential award of up to 68,000 shares in the event of exceptional performance.
(3) Yet to vest.

Share Option Plan 2010

The following table sets out the number of outstanding options granted to Directors pursuant to the Share Option Plan 2010. Vesting is subject to performance conditions in accordance with the rules of the plan. There are no outstanding awards to Non-Executive Directors.# Directors' report

Remuneration report

Options at 1 January 2021

Date of grant	Exercise price	Date first exercisable	Expiry date	Executive Director(s)	Options at 1 January 2021	Granted	Cancelled	Exercised	Options at 31 December 2021
01.06.15	111p	01.06.18	01.06.25	I Manocha (1) (2)	1,500,000	-	-	-	1,500,000
14.03.18	227p	14.03.21	14.03.28	T Mullan (2)	200,000	-	-	-	200,000
28.03.19	97p	28.03.22	28.03.29	T Mullan (3)	100,000	-	-	-	100,000
				Total	1,800,000	-	-	-	1,800,000

(1) Options over which the Director has agreed to pay any employer’s National Insurance arising from the exercise of the options.
(2) Vested.
(3) Yet to vest.

Payments for loss of office (audited information)

No payments for loss of office were made during the year ended 31 December 2021 (2020: £nil).

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 2021. 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.

Gresham Technologies plc | Annual Financial Report 2021 | Remuneration report

	Change in base salary (effective April 2021)	2021 bonus payment (% of base salary)
CEO (I Manocha)	1.25 %	97.5 %
All staff	2%	10 %

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 2021. There were no share buy backs in the year.

Comparison of Company performance

The graph below shows the Company’s performance, as measured by total shareholder return, for each of the last six financial years in terms of the change in value (with dividends reinvested) of an initial investment of £100 on 31 December 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.

Gresham Technologies plc | Annual Financial Report 2021 | Remuneration report

Change in CEO pay

The graph below shows the single total figure of remuneration for the role of CEO for the current and previous seven years. The graph above is derived from the data in the following table:

	2016	2017	2018	2019	2020	2021
I Manocha
Base salary	250,000	254,000	259,840	261,245	267,114	271,717
Benefits in kind	1,983	1,491	2,882	2,223	2,327	1,887
Bonus	-	20,400	-	59,806	111,797	265,057
Pension	12,500	12,765	12,980	33,056	13,350	13,574
IFRS 2 share-based payment charges	75,441	220,233	73,744	-	25,789	64,813
Total	339,924	508,889	349,445	356,330	420,377	617,048

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.

Gresham Technologies plc | Annual Financial Report 2021 | Remuneration report

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 10 May 2021, the following resolution was moved:

Resolution	For (1)	Against	Withheld
Remuneration Report	95.26 %	4.74 %	0.00 %

(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 continued to engage Grant Thornton on the implementation of the new Performance Share Plan 2020 with total fees paid in the year of £7,000 (2020: £24,000).

Jenny Knott
Chair of the remuneration committee
7 March 2022

DocuSign Envelope ID: BB8DFBB0-2E16-4C63-B3F9-138A47D638FF

Directors’ report

Registered number: 01072032

The Directors present their report and the Group financial statements for the year ended 31 December 2021. The Group’s business activities, together with the factors likely to affect its future development, performance and position, are set out within the Strategic Report. Disclosures in respect of principal risks and uncertainties, people (including employees and disabled employees), global greenhouse gas emissions and product development (incorporating research and development activities) are included within the Strategic Report under section 414(c) of the Companies Act 2006. In addition, note 21 to the financial statements includes: the Group’s objectives; policies and processes for managing its capital; its financial risk management objectives; details of its financial instruments and, if any, hedging activities; and its exposures to credit risk and liquidity risk. The Statement of Corporate Governance beginning on page 43 forms part of the Directors’ Report.

Directors and officers

The Directors who served on the Board during the year are set out on page 42. Mr J Cathie served as Company Secretary throughout the year.

Results and dividends

The Group’s loss for the year, after taxation, attributable to equity shareholders amounted to £1,012,000 (2020: profit £1,261,000). A final dividend of 0.75 pence per ordinary share (2020: 0.75 pence) has been recommended by the Directors. There has been no interim dividend (2020: £nil). If approved by the passing of a resolution at the forthcoming Annual General Meeting, it is intended to pay the final dividend on 19 May 2022 to all shareholders on the register at close of business on 22 April 2022. The ex-dividend date will be 21 April 2022. 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 2021. Refer to page 46 for the viability statement required pursuant to Provision C.2.2 of the Code.

Post balance sheet events

Events after the reporting date are set out in note 28 to the financial statements.

Significant relationships

In 2021, 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 2021. In the opinion of the Directors, the Group does not have any other individually significant relationships.

Fostering relationships with stakeholders

Refer to page 24 for details of the Company’s engagement with stakeholders.

Gresham Technologies plc | Annual Financial Report 2021 | Directors’ report

Directors and their interests

The Directors at 31 December 2021 and their connected persons’ interests in the share capital of the Company (all beneficially held, other than with respect to options to acquire ordinary shares which are detailed in the analysis of options included in the Directors’ Remuneration Report) are as follows:

	Ordinary shares of 5 pence each
	31 Dec 2021
P Simmonds	92,500
A Balchin	17,608
J Knott	31,250
R Wandhöfer	19,653
I Manocha	113,034
T Mullan	34,063

There have been no further changes in the Directors’ interests disclosed above from 31 December 2021 to 4 March 2022.

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.# Directors' Report

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 25 February 2022:

Ordinary shares of 5 pence each	Percentage held (%)
Kestrel Investment Partners	19.29
Tellworth Investments	9.96
Canaccord Genuity Wealth Management	9.03
Schroder Investment Management	8.51
JO Hambro Capital Management	6.71
Amati Global Investors	5.41
Herald Investment Management	4.16
Mrs M A Green	3.69
Jupiter Asset Management	3.64
EFG Harris Allday	3.09

Political donations

No donations were made in 2021 or 2020.

Social and community

No social or community review has been performed for 2021 or 2020.

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 £1,389,407 representing one-third of the issued ordinary share capital as at 4 March 2022 and to allot and grant rights over shares for cash up to a maximum nominal amount of £208,411, representing 5% of the issued ordinary share capital as at 4 March 2022, 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 8,336,446 ordinary shares which represents 10% of the issued ordinary share capital of the Company as at 4 March 2022.
• The authority to call meetings (other than Annual General Meetings) on not less than 14 clear days’ notice.

In the opinion of the Directors, the passing of these resolutions is in the best interests of the shareholders.

Additional information for shareholders

At 31 December 2021, the Company’s issued share capital comprised:

	Number	Nominal value £	% of total share capital
Ordinary shares of 5 pence each	83,364,458	4,168,223	100%

The Company is not aware of any agreements between shareholders that may result in restrictions on the transfer of securities and for voting rights.

During the year ended 31 December 2021, certain share options granted under the Share Option Scheme 2010 were exercised and as a result the Company issued 83,000 ordinary shares (2020: 1,900,000), such shares ranking pari passu with ordinary shares then in issue. In June 2021, the Company issued 13,125,000 ordinary shares at a price of 160 pence (ranking pari passu with existing shares in issue) in connection with the acquisition of Electra. See note 22 of the Group financial statements for further details.

Ordinary shares

On a poll, every member present in person or by proxy and entitled to vote shall have one vote for every ordinary share held; on a show of hands at a general meeting of the Company, every holder of ordinary shares present in person and entitled to vote shall have one vote. The notice of the general meeting specifies deadlines for exercising voting rights either by proxy notice or present in person or by proxy in relation to resolutions to be passed at general meeting. All proxy votes are counted and the numbers for, against or withheld in relation to each resolution are announced at the Annual General Meeting and published on the Group’s website after the meeting.

There are no restrictions on the transfer of ordinary shares in the Company other than certain restrictions that may from time to time be imposed by laws and regulations (for example, insider trading laws and market requirements relating to close periods). The Company’s Articles of Association may only be amended by a special resolution at a general meeting of the shareholders. Directors are reappointed by ordinary resolution at a general meeting of the shareholders. The Board may appoint a Director but anyone so appointed must be elected by an ordinary resolution at the next Annual General Meeting. Any Director who has held office for more than three years since their last appointment by shareholders at a general meeting must offer themselves up for re-election at the following Annual General Meeting.

Significant interests

Directors’ interests in the share capital of the Company are shown in the table on page 66. Major interests (being those greater than 3%) of which the Company has been notified are shown on page 66.

Change of control

In the event of a change of control of the Company, employee share options granted under the Share Option Scheme 2010, the Deferred Share Bonus Plan 2017 and the Performance Share Plan 2020 will either accelerate vesting, will be rolled over to the acquiring company’s shares or will lapse, depending on the circumstances of the change. Further details are provided in note 23 to the Group financial statements.

There are no agreements between the Group and its Directors or employees providing for compensation for loss of office or employment (whether through resignation, purported redundancy or otherwise) because of a takeover bid.

Power of Directors to issue or buy back shares

The Directors’ existing authorities to allot and grant rights over the unissued share capital, to allot and grant rights over the unissued share capital for cash without first making a pro rata offer to all existing shareholders and to make market purchases of shares in the issued share capital of the Company are due to expire at the upcoming AGM. Resolutions will be put to shareholders at the upcoming AGM of the Company to renew previous authorities granted.

Information to be included in the Annual Financial Report 2021

As part of our requirements under the FCA Listing Rules (“LR”), the information required to be disclosed by LR 9.8.4 R can be found in the following locations in this Annual Financial Report 2021:

LR 9.8.4 R Topic	Location
(1) Interest capitalised	Not applicable
(2) Publication of unaudited financial information	Not applicable
(4) Details of long-term incentive schemes	Not applicable
(5) Waiver of emoluments by a director	Not applicable
(6) Waiver of future emoluments by a director	Not applicable
(7) Non-pre-emptive issues of equity for cash	Page 122
(8) Item (7) in relation to major subsidiary undertakings	Not applicable
(9) Parent participation in a placing by a listed subsidiary	Not applicable
(10) Contracts of significance	Page 65
(11) Provision of services by a controlling shareholder	Not applicable
(12) Shareholder waivers of dividends	Not applicable
(13) Shareholder waivers of future dividends	Not applicable
(14) Agreements with controlling shareholders	Not applicable

All the information cross-referenced above is hereby incorporated by reference into this Directors’ Report.

Auditor

A resolution to reappoint BDO LLP as the Group’s auditor will be put to the forthcoming Annual General Meeting.

Directors' statement as to disclosure of information to the auditor

The Directors who were members of the Board at the time of approving the Directors’ Report are listed on page 42. 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
7 March 2022

DocuSign Envelope ID: BB8DFBB0-2E16-4C63-B3F9-138A47D638FF

Statement of directors' responsibilities

The Directors are responsible for preparing the Annual Financial Report 2021 in accordance with applicable law and regulations. Company law requires the Directors to prepare financial statements for each financial year. Under that law, the Directors are required to prepare the Group financial statements in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006 and in accordance with international financial reporting standards as issued by the International Accounting Standards Board (ASB) 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.# Directors' Responsibilities

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 2021, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Group’s position and performance, business model and strategy.

Website Publication

The Directors are responsible for ensuring the Annual Financial Report 2021 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 in accordance with IFRS as issued by IASB and Article 4 of the IAS Regulation and give a true and fair view of the assets, liabilities, financial position and profit and loss of the Group; and
* the Annual Financial Report 2021 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 Manoch a
Chief Executive
7 March 2022

DocuSign Envelope ID: BB8DFBB0-2E16-4C63-B3F9-138A47D638FF

Independent Auditor's Report

Gresham Technologies plc Annual Financial Report 2021

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 2021 and of the Group’s profit for the year then ended;
* the Group financial statements have been properly prepared in accordance with UK adopted international accounting standards;
* the Parent Company financial statements have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and
* the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.

We have audited the financial statements of Gresham Technologies Plc (the ‘Parent Company’) and its subsidiaries (the ‘Group’) for the year ended 31 December 2021 which comprise the Consolidated Income Statement, the Consolidated Statement of Comprehensive Income, the Consolidated Statement of Financial Position, the Consolidated Statement of Changes in Equity, the Consolidated Statement of Cashflow, notes to the Consolidated financial statements, the Company Balance Sheet, the Company Statement of Changes in Equity and the notes to the financial statements, including a summary of significant accounting policies.

The financial reporting framework that has been applied in the preparation of the Group financial statements is applicable law and UK adopted international accounting standards. The financial reporting framework that has been applied in the preparation of the Parent Company financial statements is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 101 Reduced Disclosure Framework (United Kingdom Generally Accepted Accounting Practice).

Separate opinion in relation to IFRSs as issued by the IASB

As explained in note 3 to the Group financial statements, the Group in addition to complying with its legal obligation to apply UK adopted international accounting standards, 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 2021 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.

Independence

Following the recommendation of the audit committee, we were reappointed by the directors on 14 December 2021 to audit the financial statements for the year ending 31 December 2021 and subsequent financial periods. The period of total uninterrupted engagement including retenders and reappointments is 12 years, covering the years ending 31 December 2010 to 31 December 2021. 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:
* Assessed 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. Our work included stress testing the revenue growth assumptions downwards within the Groups forecasts, and concluded that such assumptions were remote.
* Reviewing the Directors’ plans for future actions in relation to the going concern assessment including whether such plans are feasible in the circumstances.
* Assessing the appropriateness of the Directors’ stress-testing of the forecasts to the extent of reasonable worst-case scenarios comparing to our own sensitivity analysis performed also considering the likelihood of these scenarios occurring.
* Reviewing the adequacy and appropriateness of disclosures in the financial statements relative to the going concern assessment.

Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the Group and the Parent Company’s ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.

In relation to the Parent Company’s reporting on how it has applied the UK Corporate Governance Code, we have nothing material to add or draw attention to in relation to the Directors’ statement in the financial statements about whether the Directors consider it appropriate to adopt the going concern basis of accounting.

Our responsibilities and the responsibilities of the Directors with respect to going concern are described in the relevant sections of this report.

---

Overview

	2021	2020
Direct coverage by the group engagement team	100%	100%
Group revenue	84%	84%
Group total assets

Key Audit Matters

	2021	2020
Development Costs	P	P
Goodwill and intangible asset impairment risk	P	P
Revenue recognition	P	P
Acquisition of Electra Information Systems Inc	P	O
Acquisition of Inforalgo Information Technology Limited*	O	P

• The Acquisition of Inforalgo Information Technology Limited was a once of event occurring in the prior year and therefore no longer a key audit matter.

Materiality

Group financial statements as a whole: £277,000 (2020: £180,000) based on 0.75% (2020: 0.75%) of revenue.

An overview of the scope of our audit

Our Group audit was scoped by obtaining an understanding of the Group and its environment, including the Group’s system of internal control, and assessing the risks of material misstatement in the financial statements.We also addressed the risk of management override of internal controls, including assessing whether there was evidence of bias by the Directors that may have represented a risk of material misstatement. The Group engagement team performed full scope audits of the significant components in the UK, comprising 52% of group revenue and 90% of group total assets. The audit of the Asia Pacific region significant component, comprising 48% of group revenue and 10% of group total assets, was performed by a BDO member firm in Australia. In respect of insignificant components, the Group engagement team, carried out specific procedures in respect of the revenue and profit recognition key audit matter as noted in the key audit matters section of this report.

Independent auditor’s report

Gresham Technologies plc Annual Financial Report 2021

72

Our involvement with component auditors

For the work performed by component auditors, we determined the level of involvement needed in order to be able to conclude whether sufficient appropriate audit evidence has been obtained as a basis for our opinion on the Group financial statements as a whole. Our involvement with component auditors included the following:

• The issuance of instructions that included materiality and detailed procedures to be performed on the significant risks of material misstatement;
• Further involvement in directing the audit strategy through remote meetings and a review of the component auditor’s planning;
• Supervision of the audit process that included regular communication with the component auditor and a remote review of their audit files; and
• Attending an audit close meeting.

Key audit matters

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) that we identified, including those which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit, and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

Key audit matter

Development Costs

Refer the accounting policies on page 87, and significant estimates and judgements on page 85.

During the year, development costs of £4,105k (2020: £3,561k) have been capitalised. Development costs are recognised as an intangible asset if specific capitalisation criteria as set out in the applicable accounting standards have been met. Judgement is required in determining whether the capitalisation criteria has been met and the allocation of the development costs to particular Clareti Control and Clareti Connect products. There is also a risk that development costs may be maintenance by nature or supersede costs previously capitalised. Due to the level of judgement, there is considered to be an inherent risk of management override of controls.

How the scope of our audit addressed the key audit matter

We evaluated the Group’s accounting policy in this area to ensure that their recognition and measurement principles were in accordance with the applicable accounting standards. We agreed a sample of capitalised costs to underlying supporting documentation. This included obtaining time records to corroborate the allocation of cost between products and inspecting employee contracts to check that their stated job roles support their involvement in development activities. We also recalculated the on-costs and overheads capitalised with reference to source data and checked that the five criteria for capitalisation, as required by the applicable accounting standard, had been met and that the costs were not maintenance by nature. The testing included gaining an understanding of the projects from the development team, as well as obtaining evidence of future economic benefits such as customer contracts and pipeline opportunities. We also assessed assumptions such as the level of non-productive time inherent in the development of each product based on factors including the product’s stage of maturity. Furthermore, we specifically reviewed the nature of costs capitalised as enhancements to software available for sale; checked that the enhancements did not supersede existing development costs; and determined whether such enhancements met each of the five criteria for capitalisation under the applicable accounting standard. This included discussions with the Group’s software developers to understand the roadmap for software products to which the development costs relate, and specifically where enhancements were made to existing products. In respect of enhancements to established software, we assessed the nature of the new releases - and resultant sales opportunities - to determine 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.

Goodwill and intangible asset impairment risk

As detailed in the accounting policies on page 87, and significant estimates and judgements on page 85.

Goodwill, capitalised costs during development and other intangible assets are tested for impairment at least annually through comparing the recoverable amount of the cash-generating unit, based on a value-in-use calculation, to the carrying value. Furthermore, once available for use, capitalised development costs are tested for impairment where an indicator of impairment arises. There is considered to be a significant risk due to the level of judgement involved relating to forecasted growth of annual recurring revenues and associated margins, the opportunity for management bias within the impairment model assumptions and impairment indicators for particular intangible assets not being identified.

We performed a review of the Group’s goodwill, development costs and other intangible assets and examined for indicators of impairment. We assessed the impairment reviews prepared by management, specifically the integrity of management’s value-in-use model and, with the assistance of our internal valuation experts, we challenged the key inputs - being forecast growth rates, operating cash flows and the discount rate. Our procedures for the review of operating cash flows and forecast growth rates included, comparing the forecast to recent financial performance and budgets approved by the Board. We also ensured the forecasts were consistent with those used in the Group’s going concern assumptions. We used market data to independently calculate a discount rate and compared to that used by management. We also performed a sensitivity analysis on the key valuation inputs.

Key observations:

Based on the procedures performed, we did not identify any matters to indicate that the judgement made by management in their impairment assessment was inappropriate.

Revenue recognition

As detailed in the accounting policies on page 87.

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 therefore presents a revenue recognition existence risk. In line with the requirements of applicable accounting standards Management continue to exercise judgement in determining whether performance obligations of solution sales, such as software licenses and support and maintenance contracts, are considered distinct; the level of consideration to be allocated to the performance obligations based on standalone selling prices; and whether the revenue in respect of the performance obligations is recognised at a point in time or overtime. Revenue and profit recognition is considered a significant risk due to the manual adjustments required in order to appropriately recognise the distinct performance obligations within revenue contracts, which can involve management judgement.

We reviewed the revenue recognition principles applied to significant new contracts written and performed during the year and ensured that the revenue recognition policies were in accordance with the applicable accounting standards and the Group’s accounting policy. In particular, we checked a sample of solution sales and assessed the appropriateness of unbundling contract revenue into separate performance obligations along with any judgements in the allocation of the consideration across the performance obligations based on estimated standalone selling prices. We assessed the unbundling judgement through benchmarking with reference to historic contracts executed by the Group and external sources in relation to the sector. For the licence revenue element of new contracts executed in close proximity to the year end, we obtained evidence that the software had been delivered to the customer prior to the end of the financial year with the licence fee being recognised up front on installation.

Independent auditor’s report

Gresham Technologies plc Annual Financial Report 2021

73

74# Independent Auditor's Report

Key Observations on Revenue Recognition

For the licence element, we agreed a sample of sales and, where relevant, underlying time costs to supporting contracts and other documentation, including user acceptance evidence, statements of works and time records. For fixed price service contracts, we assessed management’s judgement applied in determining the estimated hours, stage of completion and projected project losses to underlying contracts, statements of works and time costs.

Based on the work performed, we consider that revenue has been recognised appropriately and in accordance with the applicable accounting standards and the Group’s revenue recognition accounting policy.

Acquisition of Electra Information Systems Inc

Refer to note 24 to the financial statements on page 126, and significant estimates and judgements on page 85.

As detailed in note 24 of the Annual Financial Report, the Group undertook an acquisition during the financial year. The acquisition resulted in the recognition of intangible assets at fair value of £16.8m and goodwill of £14.3m. 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 expert was commissioned by Management to assist with the purchase price allocation. The provision for contingent consideration is based upon estimates, at the date of acquisition, of future performance of the acquired entity.

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. Our procedures on the forecasts included agreeing to pipeline, new contract wins post year end and post year end trading activity.

We ensured that the acquisition accounting exercise had been carried out in accordance with the applicable accounting standards, and reviewed and substantially audited Management’s workings relating to the estimates in respect of the fair value of the assets and liabilities acquired to supporting third party evidence, were applicable. We also assessed the competence, capability, independence and objectivity of the Management’s expert who performed the purchase price allocation exercise. 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 experts who reviewed the mechanics and methodology inherent in the model, which included ensuring the sensitivities within were appropriate. 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.

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.

Key Observations:

Based on the audit work performed, we consider that the acquisition of Electra Information Systems Inc, including the separately identifiable intangible assets and contingent consideration has been recognised appropriately in the 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
	2021 £’000	2020 £’000
Materiality	277	180
Basis for determining materiality	0.75% of revenue	56% of Group materiality
Performance materiality	180	117

Rationale for the benchmark applied

As a growing technology business, we consider revenue to be the key performance measure in driving the valuation of the Group and informing the economic decisions of the users of the financial statements. This is particularly in light of lower levels of profitability in the current environment and revenues being an increasing basis of business valuation in the sector. Capped at 56% (2020: 58%) of Group materiality given the assessment of the components aggregation risk.

Basis for determining performance materiality

On the basis of our risk assessment, together with our assessment of the Group and Parent Company’s control environment and a history of minimal errors, our judgement is that performance materiality for the financial statements should be 65%.

Component materiality

We set materiality for each component of the Group based on a percentage of between 30% 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 £83,100 to £207,750. 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 £5,540 (2020: £3,600). We also agreed to report differences below this threshold that, in our view, warranted reporting on qualitative grounds.

Other Information

The directors are responsible for the other information. The other information comprises the information included in the annual financial report other than the financial statements and our auditor’s report thereon. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon.

Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.

We have nothing to report in this regard.

Corporate Governance Statement

The Listing Rules require us to review the Directors’ statement in relation to going concern, longer-term viability and that part of the Corporate Governance Statement relating to the parent company’s compliance with the provisions of the UK Corporate Governance Code specified for our review.

Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the Corporate Governance Statement is materially consistent with the financial statements or our knowledge obtained during the audit.

Going concern and longer-term viability

• The Directors' statement with regards to the appropriateness of adopting the going concern basis of accounting and any material uncertainties identified as set out on page 46; and
• The Directors’ explanation as to its assessment of the entity’s prospects, the period this assessment covers and why they period is appropriate as set out on page 66.

Other Code provisions

• Directors' statement on fair, balanced and understandable as set out on page 69;
• Board’s confirmation that it has carried out a robust assessment of the emerging and principal risks as set out on page 31;
• The section of the annual report that describes the review of effectiveness of risk management and internal control systems as set out on page 43; and
• The section describing the work of the audit committee as set out on page 47.

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.# Independent auditor’s report

Gresham Technologies plc Annual Financial Report 2021

77

Strategic report and Directors’ report

In our opinion, based on the work undertaken in the course of the audit:

• the information given in the Strategic report and the Directors’ report for the financial year for which the financial statements are prepared is consistent with the financial statements; and
• the Strategic report and the Directors’ report have been prepared in accordance with applicable legal requirements.

In the light of the knowledge and understanding of the Group and Parent Company and its environment obtained in the course of the audit, we have not identified material misstatements in the strategic report or the Directors’ report.

Directors’ remuneration

In our opinion, the part of the Directors’ remuneration report to be audited has been properly prepared in accordance with the Companies Act 2006.

Matters on which we are required to report by exception

We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion:

• adequate accounting records have not been kept by the Parent Company, or returns adequate for our audit have not been received from branches not visited by us; or
• the Parent Company financial statements and the part of the Directors’ remuneration report to be audited are not in agreement with the accounting records and returns; or
• certain disclosures of Directors’ remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit.

Responsibilities of Directors

As explained more fully in the statement of Directors’ responsibilities, the Directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the Directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, the Directors are responsible for assessing the Group’s and the Parent Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Directors either intend to liquidate the Group or the Parent Company or to cease operations, or have no realistic alternative but to do so.

Auditor’s responsibilities for the audit of the financial statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

Extent to which the audit was capable of detecting irregularities, including fraud

Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below.

Based on our understanding of the Group and sector in which it operates, we identified that the principal risks of non-compliance with laws and regulations relate to The Corporate Governance Code, Corporate and VAT legislation, Employment Taxes and Health and Safety, and the extent to which non-compliance might have a material effect on the financial statements. We also considered those laws and regulations which have a direct impact on the preparation of the financial statements such as the Companies Act 2006 and the applicable accounting frameworks. As a result of performing the above we identified the principal risks were related to bias in accounting estimates, with the most significant considered to relate to revenue recognition and capitalisation of development costs.

The Independent auditor’s report
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Group audit engagement team shared this risk assessment with the component auditors to ensure that appropriate audit procedures were applied in response to these risks. Our procedures included:

• 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;
• Ensuring all audit team and component team members were cognizant of relevant laws and regulations through engagement discussions and the issuing of specific audit instructions;
• Obtaining and understanding of controls designed to prevent and detect irregularities;
• Review of board minutes for any evidence of fraud or non-compliance with laws and regulations; and
• Testing journal entries made to accounts that are considered to carry a greater risk of fraud as part of our planned audit approach by agreeing to supporting documentation.

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
7 March 2022

BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).

Consolidated income statement

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Notes	Year ended 31 December 2021	Restated Year ended 31 December 2020
	£'000	£'000
Revenue	4,5	37,026
Cost of sales		(11,799)
Gross profit		25,227
Adjusted administrative expenses		(21,146)
Adjusted operating profit		4,081
Adjusting administrative items:
Exceptional costs	5	(1,821)
Exceptional income	5	330
Amortisation on acquired intangibles	14	(1,673)
Share-based payments	23	(369)
	(3,533)	(1,513)
Total administrative expenses		(24,679)
Operating profit	5,6	548
Finance revenue	4,9	4
Finance costs	9	(121)
Profit before taxation		431
Taxation	10	(1,443)
(Loss)/profit after taxation attributable to the equity holders of the Parent		(1,012)
Earnings per share
Basic earnings per share	11	(1.31)
Diluted earnings per share	11	(1.31)
Adjusted Basic earnings per share	11	5.08
Diluted earnings per share	11	5.02

Consolidated statement of comprehensive income

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	Year ended 31 December 2021	Year ended 31 December 2020
(Loss)/profit after taxation attributable to the equity holders of the Parent	(1,012)	1,261
Other comprehensive expenses
Items that will or may be re-classified into profit or loss:
Exchange differences on translating foreign operations	(184)	(113)
Total other comprehensive expenses	(184)	(113)
Total comprehensive (expense)/income for the year	(1,196)	1,148

Consolidated statement of financial position

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Notes	At 31 December 2021	At 31 December 2020
	£'000	£'000
Assets
Non-current assets
Property, plant and equipment	13	218
Right-of-use assets	16	1,466
Intangible assets	14	62,267
Deferred tax assets	10	232
		64,183
Current assets
Trade and other receivables	18	5,403
Contract assets	18	1,665
Income tax receivable	18	1,204
Cash and cash equivalents	19
9,139 8,876 17,411 13,296
Total assets 81,594 46,845

Equity and liabilities
Equity attributable to owners of the Parent
Called up equity share capital 22 4,168 3,508
Share premium account 25 23,876 4,341
Own share reserve 22 (609) (778)
Other reserves 25 536 536
Foreign currency translation reserve 25 (378) (194)
Retained earnings 25 18,288 19,453
Total equity attributable to owners of the Parent 45,881 26,866

Non-current liabilities
Contract liabilities 20 60 66
Lease liabilities 16 770 1,004
Deferred tax liability 10 6,831 1,289
Provisions 20 144 146
Contingent consideration 20 3,575 349
11,380 2,854

Current liabilities
Trade and other payables 20 19,616 15,303
Lease liabilities 16 642 535
Income tax payable 20 131 378
Contingent consideration 20 3,944 909
24,333 17,125

Total liabilities 35,713 19,979
Total equity and liabilities 81,594 46,845

The financial statements were approved by the Board of Directors and authorised for issue on 7 March 2022. On behalf of the Board

Ian Manoc ha
Chief Executive

Tom Mullan
Chief Financial Officer

7 March 2022
7 March 2022

DocuSign Envelope ID: BB8DFBB0-2E16-4C63-B3F9-138A47D638FF

Consolidated statement of changes in equity

Gresham Technologies plc Annual Financial Report 2021 82

Notes	Share capital £'000	Share premium account £'000	Own share reserve £'000	Other reserves £'000	Foreign currency translation reserve £'000	Retained earnings £'000	Total £'000
At 1 January 2020	3,413	3,903	(945)	536	(81)	18,478	25,304
Attributable profit for the period	-	-	-	-	-	1,261	1,261
Other comprehensive expenses	-	-	-	-	(113)	-	(113)
Total comprehensive (expenses)/income	-	-	-	-	(113)	1,261	1,148
Exercise of share options	22	95	438	-	-	-	533
Transfer of own shares held by Employee Share Ownership Trust to employees	22	-	-	167	-	-	167
Share-based payments	23	-	-	-	-	-	220
Dividend paid	-	-	-	-	-	(506)	(506)
At 31 December 2020	3,508	4,341	(778)	536	(194)	19,453	26,866
Attributable loss for the period	-	-	-	-	-	(1,012)	(1,012)
Other comprehensive expenses	-	-	-	-	(184)	-	(184)
Total comprehensive expenses	-	-	-	-	(184)	(1,012)	(1,196)
Issue of equity shares	22	656	20,344	-	-	-	21,000
Share issue costs	22	-	(870)	-	-	-	(870)
Exercise of share options	22	4	61	-	-	-	65
Transfer of own shares held by Employee Share Ownership Trust to employees	22	-	-	169	-	-	169
Share-based payments	23	-	-	-	-	-	369
Dividend paid	12	-	-	-	-	(522)	(522)
At 31 December 2021	4,168	23,876	(609)	536	(378)	18,288	45,881

Consolidated statement of cash flows

Gresham Technologies plc Annual Financial Report 2021 83

Notes	Year ended 31 December 2021 £'000	Year ended 31 December 2020 £'000
Cash flows from operating activities
(Loss)/profit after taxation	(1,012)	1,261
Depreciation of property, plant and equipment	13	175
Amortisation of intangible assets	14	4,042
Amortisation of right-of-use assets	16	581
Share-based payments	23	369
(Increase)/decrease in trade and other receivables		(776)
Increase in contract assets		(220)
Increase in trade and other payables		1,996
Increase/(decrease) in contract liabilities		256
Taxation	10	1,443
Exchange gain on financial instrument	5	(330)
Net finance costs	9	117
Cash inflow from operations		6,641
Income taxes received		-
Income taxes paid		(1,114)
Net cash inflow from operating activities		5,527
Cash flows from investing activities
Interest received	9	4
Exchange gain on financial instrument	5	330
Purchase of property, plant and equipment	13	(145)
Payments to acquire subsidiary undertaking (net of cash)	24	(19,639)
Payment of contingent consideration on acquisition of Inforalgo	20	(923)
Payments to acquire intangible fixed assets	14	(4,150)
Net cash used in investing activities		(24,523)
Cash flows from financing activities
Interest paid	9	(39)
Principal paid on lease liabilities	16	(590)
Dividends paid	12	(522)
Share issue proceeds (net of costs)	22	20,195
Net cash from/(used in) financing activities		19,044
Net increase/(decrease) in cash and cash equivalents		48
Cash and cash equivalents at beginning of year		8,876
Effect of foreign exchange rate changes		215
Cash and cash equivalents at end of year	19	9,139

Notes to the financial statements

Gresham Technologies plc Annual Financial Report 2021 84

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 2021 were authorised for issue by the Board of Directors on 7 March 2022 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 2021.

2. Accounting judgements and estimation uncertainty

The preparation of financial statements requires management to make judgements, estimates and assumptions that affect the amounts reported for assets and liabilities as at the statement of financial position date and the amounts reported for revenues and expenses during the year. However, the nature of estimation means that actual outcomes could differ from those estimates. We review our estimates and underlying assumptions on an ongoing basis and recognise revisions to accounting estimates in the period in which we revise the estimate and in any future periods affected. It is considered that all judgements have an element of estimation.

Judgements

The key judgements that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

Revenue and profit recognition

Revenue and the associated profit are recognised from sale of software licences, rendering of services, subscriptions and maintenance and solution sales. When software licences are sold, we must exercise judgement as to when the appropriate point in time has passed at which all performance obligations for that software licence have been performed, at which point revenue in relation to the stand-alone sales price of the software licence is recognised. Whilst in most cases performance obligations clearly follow the commercial and contractual arrangement we have agreed with the customer, in some cases the revenue streams are combined as within an overall commercial arrangement. Such combined circumstances require judgement to assess performance obligations associated with each revenue stream and further judgement as to when and how such performance obligations have been discharged in order to recognise the associated revenue. The 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, 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 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-

Notes to the financial statements Gresham Technologies plc Annual Financial Report 2021 85

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.

Estimates and assumptions

The key assumptions concerning the future and other key sources of estimation uncertainty at the statement of financial position date that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.
```Contingent consideration

Contingent consideration relating to acquisitions is 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 24 to the financial statements.

Capitalised development costs

The Group invests in the development of new and enhanced features to its products. Development costs are accounted for in accordance with IAS 38 “Intangible Assets” and costs that meet the qualifying criteria are capitalised and systematically amortised over the useful economic life of the intangible asset. Determining whether development costs qualify for capitalisation as intangible assets requires judgement as to the technical and commercial viability of each asset created. These judgements are applied consistently year to year with the Group evaluating whether there are future economic benefits beyond the current period, the stage at which technical feasibility has been achieved, management’s intention to use or sell the product, the likelihood of success of completion, the availability of technical resources to complete the development and the ability to measure reliably the expenditure attributed to each product. 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 £115,000, if the useful economic life was increased by one year the amortisation charge is reduced by £443,000. The capitalised development cost is disclosed in note 14.

Impairment reviews

The Group performs impairment reviews at the reporting period end to identify any intangible assets that have a carrying value that is in excess of its recoverable value. Determining the recoverability of an intangible asset requires judgement in both the methodology applied and the key variables within that methodology. Where it is determined that an intangible asset is impaired, its carrying value will be reduced to its recoverable value with the difference recorded as an impairment charge in the income statement. The intangible asset impairment reviews are disclosed in note 15. Sensitivity analysis has been performed on the key assumptions for discount rate, growth rate and revenue growth rates to determine when impairment would occur these are disclosed in note 15.

Useful economic life of capitalised development costs

The assessment of the useful economic life of capitalised development costs is estimated by management based on past experience and reviews of competitor products available in the market.

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 14 and note 24 for further details.

Notes to the financial statements

Gresham Technologies plc Annual Financial Report 2021 86

1. 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 and international accounting standards as issued by the International Accounting Standards Board (IASB) and Interpretations (collectively IFRSs). The accounting policies which follow set out those policies which apply in preparing the financial statements for the year ended 31 December 2021.

The Group’s financial statements have been prepared on a historical cost basis, except for the following items:
* Contingent consideration
* Cash settled share-based payment liabilities

The Group financial statements are presented in Sterling, which is also the Group’s functional currency. All values are rounded to the nearest thousand pounds (£’000) except when otherwise indicated.

Basis of consolidation

The Group financial statements consolidate the financial statements of Gresham Technologies plc and the entities it controls (its subsidiaries) drawn up to 31 December each year. The consolidated financial statements incorporate the financial statements of the Company and its subsidiaries made up to the reporting date. Investees are classified as subsidiaries where the Company has control, which is achieved where the Company has the power to govern the financial and operating policies of an investee entity, exposure to variable returns from the investee and the ability to use its power to affect those variable returns. All intra-group transactions, balances, income and expenses are eliminated on consolidation. The consolidated financial statements incorporate the results of business combinations using the acquisition method. In the statement of financial position, the acquiree’s identifiable assets and liabilities are initially recognised at their fair values at acquisition date. The results of acquired entities are included in the Consolidated Statement of Comprehensive Income from the date at which control is obtained and are deconsolidated from the date control ceases.

Going concern

The Group’s business activities, together with the factors likely to affect its future development, performance and position are set out in the Strategic report on pages 3 to 40. 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 Clarity 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 2021.

The principal accounting policies adopted by the Group are set out below.

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 Notes to the financial statements

Gresham Technologies plc Annual Financial Report 2021 87

consolidation and held in a separate component of equity until the disposal of the net investment, at which time they are recognised in profit or loss. The assets and liabilities of foreign operations are translated into Sterling at the rate of exchange ruling at the statement of financial position date. Income and expenses are translated at weighted average exchange rates for the year. The resulting exchange differences are taken to the Statement of Other Comprehensive Income and recognised directly to a separate component of equity. On disposal of a foreign entity, the deferred cumulative amount recognised in equity relating to that particular foreign operation is recognised in the Income Statement. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates as at the dates of the initial transactions, on consolidation; all assets and liabilities of overseas subsidiaries which report in a different functional currency are retranslated using the closing rate.

Goodwill

Goodwill represents the excess of the cost of acquisition over the fair value of the identifiable assets, liabilities and contingent liabilities of the acquired entity at the date of acquisition. At the date of acquisition, goodwill is allocated to cash-generating units for the purpose of impairment testing. Goodwill is recognised as an asset and assessed for impairment annually. Any impairment is recognised immediately in the Group Statement of Comprehensive Income. Once recognised, an impairment of goodwill is not reversed.

Intangible assets

Acquired intangibles

Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in a business combination is fair value as at the date of acquisition.## Notes to the financial statements

Gresham Technologi es plc Annual Financial Report 202 1 88

Intangible assets

Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and any accumulated impairment losses. Internally generated intangible assets are subject to the same recognition tests as development costs, and if met, they are capitalised. Intangible assets with finite lives are amortised over their useful economic lives and assessed for impairment whenever there is an indication that they may be impaired. The amortisation period and the amortisation method for an intangible asset with a finite useful life is reviewed at least at each financial year end. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset are accounted for by changing the amortisation period or method, as appropriate, and are treated as changes in accounting estimates. The amortisation expense on intangible assets with finite lives is recognised in the income statement in the expense category consistent with the function of the intangible asset. The useful economic lives of separately acquired software is deemed to be ten years and the useful economic life of customer relations is between six and twelve years; the charge in the income statement is made within the amortisation for acquired intangibles.

Internally generated intangibles

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 twelve 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 two and twelve 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 range 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 asset to their residual value based on current prices for an asset of the age the plant and equipment is expected to be at the end of its useful life.

The carrying values of property, plant and equipment are reviewed for impairment if events or changes in circumstances indicate the carrying value may not be recoverable, and are written down immediately to their recoverable amount. Useful lives and residual values are reviewed annually and where adjustments are required these are made prospectively. An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on derecognition of the asset is included in the income statement in the period of derecognition.

Leases

All leases are accounted for by recognising a right-of-use asset and a lease liability except for leases of low value assets; and leases with a duration of twelve months or less. Lease liabilities are measured at the present value of the contractual payments due to the lessor over the lease term, with the discount rate determined by reference to the rate inherent in the lease unless (as is typically the case) this is not readily determinable, in which case the Group’s incremental borrowing rate on commencement of the lease is used. Variable lease payments are only included in the measurement of the lease liability if they depend on an index or rate. In such cases, the initial measurement of the lease liability assumes the variable element will remain unchanged throughout the lease term. Other variable lease payments are expensed in the period to which they relate. On initial recognition, the carrying value of the lease liability also includes: amounts expected to be payable under any residual value guarantee; the exercise price of any purchase option granted in favour of the Group if it is reasonably certain to assess that option; and any penalties payable for terminating the lease, if the term of the lease has been estimated on the basis of termination option being exercised. Right-of-use assets are initially measured at the amount of the lease liability, reduced for any lease incentives received, and increased for: lease payments made at or before commencement of the lease; initial direct costs incurred; and the amount of any provision recognised where the Group is contractually required to dismantle, remove or restore the leased asset. Subsequent to initial measurement, lease liabilities increase as a result of interest charged at a constant rate on the balance outstanding and are reduced for lease payments made. Right-of-use assets are amortised on a straight-line basis

Notes to the financial statements Gresham Technologi es plc Annual Financial Report 202 1 89

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.# Notes to the financial statements

Gresham Technologies plc Annual Financial Report 2021

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.

Financial assets

The Group's financial assets are all classified within the amortised cost category. The Group's accounting policy for this category is as follows:

Assets carried at amortised cost
These assets arise principally from the provision of sales and services of software and support and maintenance to customers (e.g. trade receivables), but also incorporate other types of financial assets where the objective is to hold these assets in order to collect contractual cash flows and the contractual cash flows are solely payments of principal and interest. They are initially recognised at fair value plus transaction costs that are directly attributable to their acquisition or issue, and are subsequently carried at amortised cost using the effective interest rate method, less provision for impairment. Impairment provisions for current and non-current trade receivables are recognised based on the simplified approach within IFRS 9 using a provision matrix in the determination of the lifetime expected credit losses. During this process the probability of the non-payment of the trade receivables is assessed. This probability is then multiplied by the amount of the expected loss arising from default to determine the lifetime expected credit loss for the trade receivables. For trade receivables, which are reported net, such provisions are recorded in a separate provision account with the loss being recognised within cost of sales in the consolidated statement of comprehensive income. On confirmation that the trade receivable will not be collectable, the gross carrying value of the asset is written off against the associated provision. If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed. Any subsequent reversal of an impairment loss is recognised in the income statement to the extent that the carrying value of the asset does not exceed its amortised cost at the reversal date. The Group's financial assets measured at amortised cost comprise trade and other receivables and cash and cash equivalents in the consolidated statement of financial position. Cash and cash equivalents 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 statement of cash flows - bank overdrafts. Bank overdrafts are shown within loans and borrowings in current liabilities on the consolidated statement of financial position.

Cash and cash equivalents
Cash and short-term deposits in the consolidated statement of financial position comprise cash at bank and in hand and short-term deposits with an original maturity of three months or less. For the purpose of the consolidated statement of cash flow, cash and cash equivalents consist of cash and cash equivalents as defined above, net of outstanding bank overdrafts.

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.
• 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.# Notes to the financial statements

Gresham Technologi es plc Annual Financial Report 2021

Purchases and sales of financial assets measured at fair value through other comprehensive income are recognised on settlement date with any change in fair value between trade date and settlement date being recognised in the fair value through other comprehensive income reserve.

Financial liabilities

The Group classifies its financial liabilities into one of two categories, depending on the purpose for which the liability was acquired. The Group's accounting policy for other financial liabilities (which include trade payables and other short-term monetary liabilities), are initially recognised at fair value and subsequently carried at amortised cost using the effective interest method.

Other financial liabilities include the following items:

• Bank borrowings are initially recognised at fair value net of any transaction costs directly attributable to the issue of the instrument. Such interest-bearing liabilities are subsequently measured at amortised cost using the effective interest rate method, which ensures that any interest expense over the period to repayment is at a constant rate on the balance of the liability carried in the consolidated statement of financial position. For the purposes of each financial liability, interest expense includes initial transaction costs and any premium payable on redemption, as well as any interest or coupon payable while the liability is outstanding.
• Trade payables and other short-term monetary liabilities, which are initially recognised at fair value and subsequently carried at amortised cost using the effective interest method.

Derecognition of financial assets and liabilities

A financial asset or liability is generally derecognised when the contract that gives rise to it is settled, sold, cancelled or expires. Where an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, such that the difference in the respective carrying amounts together with any costs or fees incurred are recognised in profit or loss.

Pensions

Contributions to defined contribution schemes are recognised in the income statement in the period in which they become payable.

Dividends

Dividends are recognised when they become legally payable. In the case of interim dividends to equity shareholders, this is when declared by the Directors. In the case of final dividends, this is when approved by the shareholders at the AGM.

Revenue recognition

Revenue, comprising sales of products and services to third parties, is recognised to the extent that satisfaction of contractual performance obligations has occurred and it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured. Revenue is measured at the stand-alone selling price of the performance obligation delivered, excluding discounts, rebates, VAT and other sales taxes. To note there is no material impact of variable consideration or financing components across all revenue streams.

The following criteria must also be met before revenue is recognised:

Software licences

Revenue on software licences is recognised when all of the following criteria are met:

• persuasive evidence of an arrangement exists, such as a signed contract or purchase order;
• satisfaction of the contracted performance obligations has been met, which in the case of software licences typically means delivery has occurred and no future elements to be delivered are essential to the functionality of the delivered element;
• a stand-alone selling price of the performance obligation can be measured; and
• collectability is probable.

Provision of services

Revenue and profits from the provision of professional services, such as implementation, development, training and consultancy, are delivered under a time and materials type contract and are therefore recognised over time and based upon number of hours worked. On occasion fixed price services contracts are entered into, upon which revenue is recognised on a percentage-of-completion basis, as costs incurred relate to total costs for the contract, when the outcome of a contract can be estimated reliably. Determining whether a contract’s outcome can be estimated reliably requires management to exercise judgement, whilst calculation of the contract’s profit requires estimates of the total contract costs to completion. Cost estimates and judgements are continually reviewed and updated as determined by events or circumstances. Revenue from this revenue stream creates contract assets through yet to be billed time input and expenses at the reporting date.

Support and maintenance

Revenue from support and maintenance services is recognised ratably over the period of the contract. Revenue is recognised when the provision of support and maintenance and completion of the performance obligations are carried out which is deemed to be evenly throughout the term of the contract. The customer simultaneously receives and consumes the benefits provided by the Group’s performance as the Group performs. Revenue from this revenue stream creates contract liabilities through the invoicing of services prior to performance obligations being performed.

Data services

Revenue related to providing data services is based on a consumption basis whereby revenue is recognised based on the customer utilisation of such services.

Solution sales

Contracts for the delivery of solutions with multiple elements, typically involving software licences, rendering of services, support, maintenance and infrastructure are unbundled where possible and revenue is recognised based on the accounting policy applicable to each constituent part, for example the stand-alone selling price of the software licence is recognised at a point in time, upon satisfaction of the performance obligations associated to that licence, and the stand-alone selling price of software maintenance and support is recognised over the period over which the service is provided. A typical example of such a scenario is where we sell a subscription licence but are not contracted to provide the hosted infrastructure to deploy the software upon – the customer deploys the software on-premise or on a cloud environment for which we are not responsible. We have many instances where unbundling is not possible, this is where a bundled element cannot technically or operationally be provided without another. The typical example of this is when the customer contracts our hosted Cloud software offerings, under which the customer cannot gain benefit from the software without the Group also providing, and continuing to provide, the hosted infrastructure upon which software is deployed. Where objective unbundling of a solution is not possible, revenue is recognised over the period of the contractual service provision.

Interest income

Interest income is recognised as finance revenue as interest accrues using the effective interest method. The effective interest rate is the rate that exactly discounts estimated future cash receipts through the expected life of the financial instrument to its net carrying amount.

Share-based payments

Equity-settled transactions

The cost of equity-settled transactions with employees is measured by reference to the fair value at the date at which they are granted and is recognised as an expense over the vesting period, which ends on the date on which the relevant employees become fully entitled to the award. Fair value of awards with a market condition-based performance target is determined by an external valuer using a Monte Carlo simulation pricing model. In valuing equity-settled transactions, no account is taken of any vesting conditions, other than conditions linked to the price of the shares of the Company (market conditions). Fair value of awards with a financial result-based performance target is determined by management using the Black Scholes pricing model. No expense is recognised for awards that do not ultimately vest, except for awards where vesting is conditional upon a market condition, which are treated as vesting irrespective of whether or not the market condition is satisfied, provided that all other vesting conditions are satisfied. At each statement of financial position date before vesting, the cumulative expense is calculated, representing the extent to which the vesting period has expired and management’s best estimate of the achievement or otherwise of non-market conditions and of the number of equity instruments that will ultimately vest or, in the case of an instrument subject to a market condition, be treated as vesting as described above. The movement in cumulative expense since the previous statement of financial position date is recognised in the income statement, with a corresponding entry in equity.

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.# Notes to the financial statements

Gresham Technologies plc Annual Financial Report 2021

Changes in accounting policies

New standards, interpretations and amendments effective from 1 January 2021

A number of new standards, interpretations and amendments are effective for the year ended 31 December 2021, which have been listed below; these have had no impact on the Group’s accounting policies and disclosures in these financial statements.

• IBOR reform and its Effects on Financial reporting – phase 2
• COVID-19 related rent concessions (Amendment to IFRS 16)

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 2022 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 2022 which have been adopted in these financial statements.

Prior year restatement

For the year ending 31 December 2020 the Group’s fixed margin contracting services disclosed third party contractor costs within cost of sale, with fixed term contractors that were paid through the Group’s payrolls being disclosed as administrative expenses. To provide more relevant and reliable information for the year ended 31 December 2021 all contractor costs incurred under the Group’s contracting business have been disclosed within costs of sales regardless of how the contractors have been paid. As a result of the change in accounting treatment, costs incurred of £3,143,000 previously disclosed within administrative expenses in the year ended 31 December 2020 have been reclassified as costs of sale. This is disclosed within the restated Income Statement. The overall effect of this change is to increase costs of sale by £3,143,000 from £3,860,000 as previously reported to £7,003,000 and reduce total administrative expenses by £3,143,000 from £20,567,000 to £17,424,000. There was no impact to retained earnings for the year ended 31 December 2020 and to the Statement of Financial Position at 31 December 2020.

4. Revenue

Revenue disclosed in the income statement is analysed as follows:

	2021 £'000	2020 £'000
Provision of software and services	37,026	24,752
Finance revenue	4	37
Total revenue	37,030	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 5.

2021

	Clareti Solutions £’000	Other Solutions £’000	Contracting Services £’000	Total £’000
Non-recurring software revenue (software licences)	13	7	-	21
Recurring software revenue (annually recurring software licences, support and maintenance and managed services)	18,800	4,581	-	23,381
Rendering of services	6,532	569	6,334	13,435
	25,469	5,223	6,334	37,026
Timing of revenue recognition
Non-annually recurring - at a point in time	13	7	-	21
Annually recurring - at a point in time	3,286	-	-	3,286
Rateably recognised - over contract period	22,046	5,150	6,334	33,530
	25,469	5,223	6,334	37,026

2020

	Clareti Solutions £’000	Other Solutions £’000	Contracting Services £’000	Total £’000
Non-recurring software revenue (software licences)	-	-	-	-
Recurring software revenue (annually recurring software licences, support and maintenance and managed services)	11,428	3,674	-	15,102
Rendering of services	4,025	721	4,904	9,650
	15,453	4,395	4,904	24,752
Timing of revenue recognition
Non-annually recurring - at a point in time	-	-	-	-
Annually recurring - at a point in time	2,891	-	-	2,891
Rateably recognised - over contract period	12,562	4,395	4,904	21,861
	15,453	4,395	4,904	24,752

Contract balances

	Contract assets	Contract liabilities
	2021 £'000	2020 £'000
At 1 January	3,431	3,829
Amounts included in contract liabilities that were recognised as revenue during the period	-	-
Acquisitions	1,447	93
Excess of revenue recognised over cash (or rights to cash) being recognised during the period	581	(491)
Cash received in advance of performance and not recognised as revenue during the period	-	-
At 31 December	5,460	3,431

Contract assets, including trade receivables 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 the Statement of Financial Position date which do not necessarily equal to the amount of revenue recognised on the contracts and relate to performance obligations yet to be satisfied. These are disclosed within trade and other payables. Amounts due to be recognised in more than one year are £60,000 (2020: £66,000). Trade receivables included in the above as at 1 January 2020 were £3,344,000. 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 18 for further details.

5. Segment information

The segmental disclosures reflect the analysis presented on a monthly basis to the chief operating decision maker of the business, the Chief Executive Officer and the Board of Directors. In addition, the split of revenues and non-current assets by the UK and overseas have been included as they are specifically required by IFRS 8 “Operating Segments”. For management purposes, the Group is organised into the following reportable segments:

• Clareti Solutions – supply of solutions predominantly to the finance and banking markets across Asia Pacific, EMEA and North America. Includes both software and services that can be accessed in the cloud, on-premise or deployed into hybrid environments.# Notes to the financial statements

Gresham Technologies plc Annual Financial Report 2021

98 Other Notes

These primary offerings within this segment include:
o Clareti Control products (which now includes the acquired Electra ‘Reconciliation’ products)
o Clareti Connect products (which now includes the acquired Electra products except for ‘Reconciliation’)
• 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.

	Clareti Solutions	Solutions	Contracting Services	Adjustments, central overheads and elimination	Consolidated 2021
£'000	£'000	£’000	£'000	£'000	£'000
Revenue	25,470	5,222	6,334	-	37,026
Cost of sales	(3,978)	(2,338)	(5,483)	-	(11,799)
Gross profit	21,492	2,884	851	-	25,227
Gross profit %	84%	55%	13%	-	68%
Adjusted administrative expenses	(20,996)	(150)	-	-	(21,146)
Adjusted operating profit	496	2,734	851	-	4,081
Adjusting items:
Exceptional costs				(1,491)	(1,491)
Amortisation of acquired intangibles				(1,673)	(1,673)
Share-based payments				(369)	(369)
Adjusting administrative expenses				(3,533)	(3,533)
Operating profit	548				548
Finance revenue	9				9
Finance costs	(121)				(121)
Profit before taxation	431				431
Taxation	(1,443)				(1,443)
Loss after taxation	(1,012)				(1,012)

Adjusted operating profit | 4,081 | | | | 4,081 |
Amortisation of intangibles | 14 | 2,369 | | | 2,369 |
Depreciation of property, plant and equipment | 13 | 175 | | | 175 |
Amortisation of right-of-use assets | 16 | 581 | | | 581 |
Adjusted EBITDA | 7,206 | | | | 7,206 |
Development costs capitalised | 14 | (4,105) | | | (4,105) |
Principal paid on lease liabilities | 16 | (590) | | | (590) |
Adjusted cash EBITDA | 2,511 | | | | 2,511 |

Segment assets | 8 | 1,594 | | | 1,594 |
Segment liabilities | (35,713) | | | | (35,713) |

Gresham Technologies plc Annual Financial Report 2021

99 Other Notes

	Clareti Solutions	Solutions	Contracting Services	Adjustments, central overheads and elimination	Consolidated 2020 (restated)
£'000	£'000	£'000	£’000	£'000	£'000
Revenue	15,453	4,395	4,904	-	24,752
Cost of sales	(1,126)	(1,605)	(4,272)	-	(7,003)
Gross profit after contracting fully costed	14,327	2,790	632	-	17,749
	93%	63%	13%	-	72%
Adjusted administrative expenses	(15,752)	(159)	-	-	(15,911)
Adjusted operating (loss)/profit	(1,425)	2,631	632	-	1,838
Adjusting items:
Exceptional costs				(400)	(400)
Amortisation of acquired intangibles				(893)	(893)
Share-based payments				(220)	(220)
Adjusting administrative expenses				(1,513)	(1,513)
Operating profit	325				325
Finance revenue	9	37			37
Finance costs	(54)				(54)
Profit before taxation	308				308
Taxation	10	953			953
Profit after taxation	1,261				1,261

Adjusted operating profit | 1,838 | | | | 1,838 |
Amortisation of intangibles | 14 | 1,917 | | | 1,917 |
Depreciation of property, plant and equipment | 13 | 213 | | | 213 |
Amortisation of right-of-use assets | 16 | 496 | | | 496 |
Bank charges | 9 | (13) | | | (13) |
Adjusted EBITDA | 4,451 | | | | 4,451 |
Development costs capitalised | 14 | (3,561) | | | (3,561) |
Principal paid on lease liabilities | 16 | (576) | | | (576) |
Adjusted cash EBITDA | 314 | | | | 314 |

Segment assets | | 46,845 | | | 46,845 |
Segment liabilities | | (19,979) | | | (19,979) |

The Group has a customer relationship with one banking customer which is considered by the Directors to be individually significant; revenue from this relationship exceeded 10% of the Group’s revenue, totalling £17,618,000 (2020: £11,388,000) which includes low-margin contracting revenue of £8,442,000 (2020: £5,115,000).

Gresham Technologies plc Annual Financial Report 2021

100 Other Notes

Adjusting administrative items

Operating performance is analysed excluding exceptional items, share-based payment charges and amortisation from acquired intangibles which is consistent in with the way in which the Board and most stakeholders review the financial performance of the Group. These adjusting items are all either non-cash or non-recurring IFRS expenses (or income) that do not reflect the underlying performance of the business. In the case of share-based payment charges, management acknowledge that these awards are potentially paid ‘in-lieu’ of cash salary or bonuses and therefore there is a value to these. However, the IFRS valuation methodology applied to these charges does not represent a cash cost to the business or a value that is representative of any the actual cost to the Company, its shareholders or any other Group stakeholder, nor is it representative of the ultimate value to the award beneficiary. Adjusting for these items is also consistent with the manner in which similar small and mid cap LSE (or AIM) listed present their results and how we understand the investment community to assess performance, where, for growth shares the recurring cash performance of the business is considered most important. In addition, these adjustments are also aligned with the performance methodology used by the panel of debt providers that tendered for the revolving credit facility established during the year in order to assess and continually monitor credit worthiness, risk and upon which covenants are set.

The adjusting administrative items are:

	2021	2020
£'000	£'000	£'000
Acquisition and associated integration costs	1,814	423
Advisory fees for new share option scheme	7	33
Exceptional costs	1,821	456
Exceptional income	(330)	(56)
Total exceptional items	1,491	400
Amortisation on acquired intangibles	1,673	893
Share-based payments	369	220
Total adjusting administrative items	3,533	1,513

During the year the Group incurred £1,814,000 (2020: £423,000) exceptional costs relating to legal, due diligence and professional fees for the acquisition of Electra Information Systems and associated integration costs. Exceptional legal and tax advisory costs were incurred in the year of £7,000 (2020: £33,000) associated with implementation of a new ten-year share option incentive scheme. These costs are not expected to occur for a further ten years. Exceptional income of £330,000 was recognised in the year on realising a gain on the completion of a contract to forward purchase US dollars. The contract was entered into to minimise the currency risk on the acquisition of Electra Information Systems. £56,000 was received during 2020 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. Due to the amount and nature of amortisation of acquired intangibles and share-based payments both costs were treated as an adjusting administrative item.

Gresham Technologies plc Annual Financial Report 2021

101 Other Notes

Adjusted EBITDA

Adjusted EBITDA is disclosed within the financial statements to show the underlying performance of the group on a consistent basis and to aid understanding of the financial performance during the year.

Notes	2021	2020
£’000	£’000	£’000
Profit before taxation	431	308
Adjusting items:
Amortisation of intangibles	14	4,042
Depreciation of property, plant and equipment	13	175
Amortisation of right-to-use assets	16	581
Notional interest on lease liabilities	9	43
Finance revenue	9	(4)
Interest payable	9	78
EBITDA		5,346
Exceptional items	5	1,491
Share-based payments	23	369
Adjusted EBITDA		7,206

Adjusted EBITDA is not an IFRS measure or not considered to be a substitute for or superior to any IFRS measures. It is not directly comparable to other companies.

Geographic information

	2021	2020
£'000	£'000	£'000
Revenues from external customers (by destination)
UK	5,998	6,719
EMEA	3,151	2,593
United States	9,096	3,038
Americas	517	494
Australia	17,738	11,413
Asia Pacific	526	495
	37,026	24,752

EMEA includes revenue from external customers located primarily in the Netherlands, Luxembourg, Germany, Belgium and South Africa. Asia Pacific includes revenue from external customers located primarily in Malaysia and Singapore.

	2021	2020
£'000	£'000	£'000
Non-current assets
UK	62,777	32,269
EMEA	448	588
North America	396	9
Asia Pacific	562	683
	64,183	33,549

Gresham Technologies plc Annual Financial Report 2021

102 Other Notes

Non-current assets consist of property, plant and equipment, right-of-use assets, intangible assets and deferred tax assets.

6. Group operating profit

The Group operating profit is stated after charging:

Notes	2021	2020
£'000	£'000	£'000
Research and development costs written off	1,721	1,049
Amortisation of deferred development costs recognised in administration expenses	14	2,326
Total research and development costs		4,047
Depreciation of property, plant and equipment	13	175
Amortisation of right to use assets	16	581
Amortisation of intangible assets (excluding development costs)	14	1,716
Total depreciation, impairment and amortisation expense		2,472
Employee benefit expenses	8	20,521
Net foreign currency differences losses /(gains)		69

7. Auditor’s remuneration

The Group paid the following amounts to its auditor in respect of the audit of the financial statements and for other services provided to the Group.

	2021	2020
£'000	£'000	£'000
Audit fees
Audit of the Group financial statements and associated company	29	27
Other fees to the auditor - auditing the accounts of subsidiaries	11	18
	14	10
Non-audit fees
Accountants report on historical financial information	160	-
Audit of bank covenant certificates	6	-
	166	-

Gresham Technologies plc Annual Financial Report 2021

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 2021

	Income statement	Capitalised development costs	Total excluding contracting	Contracting costs expensed	Total
£'000	£'000	£'000	£'000	£'000	£'000
Wages and salaries	13,120	3,031	16,151	2,250	18,401
Social security costs	8	33	41	1,079	1,120
Other pension costs	58	1	59	851	910
Total	13,186	3,065	16,251	4,180	20,431

31 December 2020

	Income statement	Capitalised development costs	Total excluding contracting	Contracting costs expensed	Total
£'000	£'000	£'000	£'000	£'000	£'000
Wages and salaries	9,129	2,836	11,965	2,703	14,668
Social security costs	724	299	1,023	182	1,205
Other pension costs	434	77	511	257	768
Total	10,287	3,212	13,499	3,142	16,641

Included in wages and salaries is a total expense of share-based payments of £369,000 (2020: £220,000) 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:

	2021	2020
Management	12	11
Sales and administration	42	32
Technical	128	107
Total	182	150

Details of Directors’ compensation are included in the Directors’ Remuneration Report.

9. Finance revenue and costs

	2021	2020
£'000	£'000	£'000
Finance revenue
Bank interest receivable	4	37
Finance costs
Notional interest on lease liabilities	43	38
Other interest payable	1	3
Other bank charges	77	13
Total finance costs	121	54

10. Taxation

Tax on profit on ordinary activities

	2021	2020
£’000	£’000	£’000
Current income tax
Overseas tax credit - adjustment to previous years	(93)	(124)
Overseas tax charge - current year	1,118	599
UK corporation tax credit - adjustment to previous years	(1,045)	(1,307)
Total current income tax	(20)	(832)
Deferred income tax
Movement in net deferred tax asset	1,231	(202)
Tax rate change adjustments	232	81
Total deferred income tax	1,463	(121)
Total charge /(credit) in the income statement	1,443	(953)

Reconcilia tion of the total tax charge

The tax charge in the income statement for the year is higher (2020: lower) than the standard rate of corporation tax in the UK of 19.0% (2020: 19.0%). The differences are reconciled below:

	2021	2020
£'000	£'000	£'000
Profit before taxation	431	308
Profit before taxation multiplied by the UK standard rate of corporation tax of 19.0% (2020: 19.0%)	82	59
Expenses not deductible for tax purposes	288	137
Differences in tax rates	785	168
Overseas tax credit - adjustment to previous years	(93)	(124)
Research and development credit - adjustment to previous year	(1,045)	(1,307)
Research and development enhanced relief	(1,703)	(1,424)
Movement in unrecognised losses carried forward	1,371	1,359
Recognition of deferred tax liability on the inter-group sale of intellectual property	1,398	-
Movement in unrecognised temporary differences	254	211
Movement in unrecognised fixed asset temporary differences	25	(16)
Temporary difference on share-based payments	(61)	73
Temporary movement on acquired intangibles	(318)	(170)
Tax rate change adjustments	232	81
Total tax charge /(credit) reported in the income statement	1,443	(953)

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 £35,000 (2020: £21,000).

Temporary differences associated with Group investments

At 31 December 2021, there was no recognised deferred tax liability (2020: £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.

Deferred tax

	2021			2020
£'000	Asset	Liability	Net	Asset	Liability
	£'000	£'000	£'000	£'000	£'000
1 January	552	(1,289)	(737)	489	(952)
Movement in the period:
- Tax losses	(24)	-	(24)	411	-
- Employee share award schemes	119	-	119	(219)	-
- Qualifying research and development expenditure	(494)	-	(494)	(513)	-
- Fixed asset timing differences	(96)	-	(96)	353	-
- Acquired intangibles	-	318	318	-	170
- Inter-group sale of intellectual property	-	(1,398)	(1,398)	-	-
- Acquisition of intangibles in subsidiaries	-	(4,055)	(4,055)	-	(395)
- Impact of change in tax rate	17	(407)	(390)	31	(112)
31 December	232	(6,831)	(6,599)	552	(1,289)

Comprising:

	2021	2020
£'000	£'000	£'000
Asset
Tax losses	3,639	2,784
Employee share award schemes	310	145
Qualifying research and development expenditure	(4,545)	(3,079)
Fixed asset timing differences	828	702
31 December	232	552

	2021	2020
£'000	£'000	£'000
Liability
Inter-group sale of intellectual property	(1,398)	-
Acquired intangibles	(5,433)	(1,289)
31 December	(6,831)	(1,289)

Unrecognised potential deferred tax assets

The deferred tax not recognised in the consolidated statement of financial position is as follows:

	2021	2020
£'000	£'000	£'000
Gresham Technologies (Luxembourg) S.A.	816	429
Gresham Technologies (Holdings) SARL	103	604
Inforalgo Information Technology Limited	243	205
Gresham Technologies (Singapore) Limited	129	91
Gresham Technologies (TDI) Limited	116	91
Tax losses	1,403	1,458
Gross tax losses unrecognised	5,857	6,459

Future tax rates

The main UK corporation tax rate is due to increase to 25% from 1 April 2023 as substantively enacted by the Finance Act 2021. Therefore, the rate used to calculate deferred tax balances at 31 December 2021 has increased from 19% to 25%. The Group’s recognised and unrecognised deferred tax assets in the UK, Luxembourg, Australian and US subsidiaries have been shown at the rates in the following table, being the substantively enacted rates in these countries.

	2021	2020
%	%	%
UK	25	19
Luxembourg	25	25
Australia	30	30
US	27	27

11. Earnings

Basic earnings per share amounts are calculated by dividing profit or loss for the year attributable to owners of the Parent by the weighted average number of ordinary shares outstanding during the year. Diluted earnings per share amounts are calculated by dividing profit or loss attributable to owners of the Parent by the weighted average number of ordinary shares outstanding during the year plus the weighted average number of ordinary shares that would be issued on the conversion of all the dilutive potential ordinary shares into ordinary shares except when such dilutive instruments would reduce the loss per share.

The following reflects the earnings and share data used in the basic and diluted earnings per share computations:

	2021	2020
	£'000	£'000
Adjusted earnings attributable to owners of the Parent	3,919	2,774
Adjusting items:
Exceptional items	(1,491)	(400)
Amortisation of acquired intangibles	(1,673)	(893)
Deferred tax charge on inter-group sale of intellectual property	(1,398)	-
Share-based payments	(369)	(220)
Statutory earnings attributable to owners of the Parent	(1,012)	1,261

	2021	2020
Basic weighted average number of shares	77,132,796	68,697,828
Employee share options - weighted (note 23)	890,100	1,414,549
Diluted weighted average number of shares	78,022,896	70,112,377

During the year ended 31 December 2021, share options granted under share option schemes were exercised and the Group issued 83,000 (2020: 1,900,000) ordinary shares accordingly (ranking pari passu with existing shares in issue). See note 22 for further details.

In June 2021 the Company issued 13,125,000 ordinary shares at a price of 160 pence (ranking pari passu with existing shares in issue). See note 22 for further details.

There have been no other transactions involving ordinary shares or potential ordinary shares between the reporting date and the date of completion of this Annual Financial Report 2021.

12. Dividends paid and proposed

The final dividend for the year ended 31 December 2020 was approved at the Company Annual General Meeting on 10 May 2021 and paid on 20 May 2021 of 0.75 pence per share, equating to a total of £522,000. The Company will be proposing a final dividend for approval at the AGM for the year ended 31 December 2021 of 0.75 pence per share.

13.# Notes to the financial statements

Gresham Technologies plc Annual Financial Report 2021

Property, plant and equipment

	2021		2020
	£'000	£'000	£'000	£'000
Cost
At 1 January	756		733
Additions	1		5
Additions acquired as part of a business combination	-		7
Disposals	-		-
Exchange adjustment	(12)		11
At 31 December	745		756
Depreciation and impairment
At 1 January	(691)		(609)
Charge for year	(43)		(71)
Disposals	-		-
Exchange adjustment	11		(11)
At 31 December	(723)		(691)
Net carrying amount
At 31 December	22		65
At 1 January	65		124

Fixtures and fittings

	2021		2020
	£'000	£'000	£'000	£'000
Cost
At 1 January	1,009		1,076
Additions	1		82
Additions acquired as part of a business combination	9		7
Disposals	(83)		(156)
Exchange adjustment	(6)		-
At 31 December	1,029		1,009
Depreciation and impairment
At 1 January	(831)		(813)
Charge for year	(132)		(174)
Disposals	83		156
Exchange adjustment	3		-
At 31 December	(877)		(831)
Net carrying amount
At 31 December	152		178
At 1 January	178		263

Property, plant and equipment

	2021		2020
	£'000	£'000	£'000	£'000
Cost
At 1 January	1,765		1,809
Additions	45		87
Additions acquired as part of a business combination	9		14
Disposals	(83)		(156)
Exchange adjustment	(18)		11
At 31 December	1,779		1,765
Depreciation and impairment
At 1 January	(1,522)		(1,422)
Charge for year	(175)		(245)
Disposals	83		156
Exchange adjustment	14		-
At 31 December	(1,520)		(1,522)
Net carrying amount
At 31 December	259		243
At 1 January	243		387

Total

	2021		2020
	£'000	£'000	£'000	£'000
Cost
At 1 January	1,765		1,809
Additions	45		87
Additions acquired as part of a business combination	9		14
Disposals	(83)		(156)
Exchange adjustment	(18)		11
At 31 December	1,761		1,765
Depreciation and impairment
At 1 January	(1,522)		(1,422)
Charge for year	(175)		(245)
Disposals	83		156
Exchange adjustment	14		-
At 31 December	(1,520)		(1,522)
Net carrying amount
At 31 December	241		243
At 1 January	243		387

Earnings per share

	Statutory pence	Statutory pence	Adjusted pence	Adjusted pence
	2021	2020	2021	2020
Basic earnings per share	(1.31)	1.84	5.08	4.04
Diluted earnings per share	(1.31)	1.80	5.02	3.96

14. Intangible assets

Separately identified intangibles on acquisition

	Development costs	Patents and licences	Software	Customer relationships	Goodwill	Total
	2021 £'000	2021 £'000	2021 £'000	2021 £'000	2021 £'000	2021 £'000
Cost
At 1 January	26,996	832	7,161	2,410	5,625	43,024
Additions	4,105	45	4,959	11,800	14,279	35,188
Disposals	-	(6)	-	-	-	(6)
Exchange adjustment	(29)	(13)	-	-	(56)	(98)
At 31 December	31,072	858	12,120	14,210	19,848	78,108
Amortisation and impairment
At 1 January	(8,117)	(739)	(2,141)	(669)	(250)	(11,916)
Charge for year	(2,326)	(43)	(964)	(709)	-	(4,042)
Eliminated on disposal	-	6	-	-	-	6
Exchange adjustment	65	13	-	-	33	111
At 31 December	(10,378)	(763)	(3,105)	(1,378)	(217)	(15,841)
Net carrying amount
At 31 December	20,694	95	9,015	12,832	19,631	62,267
At 1 January	18,879	93	5,020	1,741	5,375	31,108

Separately identified intangibles on acquisition

	Development costs	Patents and licences	Software	Customer relationships	Goodwill	Total
	2020 £'000	2020 £'000	2020 £'000	2020 £'000	2020 £'000	2020 £'000
Cost
At 1 January	23,345	872	6,275	1,218	2,943	34,653
Additions	3,561	4	886	1,192	2,656	8,299
Disposals	-	(44)	-	-	-	(44)
Exchange adjustment	90	-	-	-	26	116
At 31 December	26,996	832	7,161	2,410	5,625	43,024
Amortisation and impairment
At 1 January	(6,182)	(729)	(1,477)	(440)	(250)	(9,078)
Charge for year	(1,863)	(54)	(664)	(229)	-	(2,810)
Eliminated on disposal	-	44	-	-	-	44
Exchange adjustment	(72)	-	-	-	-	(72)
At 31 December	(8,117)	(739)	(2,141)	(669)	(250)	(11,916)
Net carrying amount
At 31 December	18,879	93	5,020	1,741	5,375	31,108
At 1 January	17,163	143	4,798	778	2,693	25,575

Development costs

Development costs are internally generated and are capitalised at cost. These intangible assets have been assessed as having a finite life and are amortised on a straight-line basis over their useful lives of two to eleven years. These assets are tested for impairment where an indicator of impairment arises and annually prior to them being made available for use. For the years ended 31 December 2021 and 31 December 2020 the Group has capitalised development costs in respect of individual Clareti applications which have been individually assessed against the required capitalisation criteria and been individually assigned useful economic lives reflecting the maturity and availability of comparable applications in our markets. These useful economic lives are assessed to be between two and eleven years. No changes have been made to development costs capitalised in prior years in respect of the Clareti platform, which continue to be amortised on a systematic basis over the existing useful economic life of eleven years.

Patents and licences

Patents and licences are the third party costs incurred in seeking and obtaining protection for certain of the Group’s products and services. These intangible assets have been assessed as having a finite life and are being amortised evenly over their useful economic life, to a maximum of ten years. Patents have a remaining life of three years and licences have a remaining life of one to ten years.

Separately identified acquired intangibles

Separately identified intangibles acquired through business combinations represent software and customer relationships which arose through the acquisitions of C24 Technologies Limited, B2 Group, Inforalgo and Electra Information Systems. Software is amortised over its useful economic life, which is deemed to be ten years. Customer relationships acquired in the year are amortised over their useful economic life, which is deemed to be twelve years for the Electra acquisition, eight years for the Inforalgo and C24 Technologies Limited acquisitions and six years for B2 Group.

Goodwill

Goodwill arose on the acquisition of our Asia Pacific real-time financial solutions business, C24 Technologies Limited, B2 Group, Inforalgo and Electra Information Systems. It is assessed as having an indefinite life and is assessed for impairment at least annually.

15. Impairment of 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.

	2021 £'000	2020 £'000
Clareti Solutions CGU	19,631	5,375

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:

	2021 £'000	2020 £'000
Clareti Solutions CGU	20,694	18,879

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 2022 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% (2020: 15%) and cash flows beyond the five-year period are extrapolated using a 2% growth rate (2020: 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 2022 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 23%
• Growth rate beyond year 5: Reduction from 2% to -15%
• Revenue growth: Reduction from 18% average over five years to 8% average

We are confident the assumptions in respect of operating cash flows remain appropriate. Where the operating cash flows incorporate products or solutions that will be sold in an existing known market, past experience is used as a guide to the level of sales achievable, growth rates and associated margins. Where the operating cash flows relate to products or solutions that will be sold into a new or emerging market, past experience with similar products or solutions is combined with relevant information from external market sources, such as competitor pricing and discussions with potential customers, in arriving at the level of sales achievable, growth rates and associated margins.

16. Leases

All leases are accounted for by recognising a right-of-use asset and a lease liability except for leases of low value assets or leases with a duration of twelve months or less. The expense relating to short-term leases of twelve months or less was £nil (2020: £nil). The Group held no low value asset leases. Right-of-use assets are initially measured at the amount of lease liability reduced for any lease incentives received and increased for initial direct costs incurred and any provision contractually required.# Right-of-use assets

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.

Right-of-use assets

	2021	Property £'000	Motor vehicles £'000	Total £'000
Cost
At 1 January		3,183	99	3,282
Additions		232	-	232
Acquisition		293	-	293
Disposals		(810)	(31)	(841)
Exchange adjustment		(52)	(6)	(58)
At 31 December		2,846	62	2,908
Amortisation
At 1 January		(1,570)	(66)	(1,636)
Charge for year		(556)	(25)	(581)
Disposals		704	31	735
Exchange adjustment		38	2	40
At 31 December		(1,384)	(58)	(1,442)
Net carrying amount
At 31 December		1,462	4	1,466
At 1 January		1,613	33	1,646

2020

	Property £'000	Motor vehicles £'000	Total £'000
Cost
At 1 January	2,283	146	2,429
Additions	659	5	664
Acquisition	193	-	193
Disposals	-	(60)	(60)
Exchange adjustment	48	8	56
At 31 December	3,183	99	3,282
Amortisation
At 1 January	(1,075)	(62)	(1,137)
Charge for year	(466)	(30)	(496)
Disposals	-	30	30
Exchange adjustment	(29)	(4)	(33)
At 31 December	(1,570)	(66)	(1,636)
Net carrying amount
At 31 December	1,613	33	1,646
At 1 January	1,208	84	1,292

Lease liabilities

	Land and buildings £'000	Motor vehicles £'000	Total £'000
At 1 January 2021	1,510	29	1,539
Cash items: Lease payments	(566)	(24)	(590)
Non-cash items: Additions	125	-	125
Acquisitions	306	-	306
Interest expense	42	1	43
Foreign exchange movements	(11)	-	(11)
At 31 December 2021	1,406	6	1,412

	Land and buildings £'000	Motor vehicles £'000	Total £'000
At 1 January 2020	1,161	84	1,245
Cash items: Lease payments	(516)	(60)	(576)
Non-cash items: Additions	623	-	623
Acquisitions	193	-	193
Interest expense	36	2	38
Foreign exchange movements	13	3	16
At 31 December 2020	1,510	29	1,539

	2021 £'000	2020 £'000
Due between 0 - 3 months	161	133
Due between 3 - 12 months	481	402
Due less than one year	642	535
Due more than one year	770	1,004
Lease liabilities	1,412	1,539

17. Investments

Details of Group undertakings

Details of the investments in which the Group holds 20% or more of the nominal value of any class of share capital are as follows:

Name of subsidiary company	Registered address	Holding (shares)	Proportion of voting rights and shares held	Nature of business
Gresham Technologies (UK) Limited	Aldermary House, London, England	Ordinary	100%	Software solutions
Gresham Technologies (Solutions) Limited	Aldermary House, London, England	Ordinary	100%	Software solutions
C24 Technologies Limited (4)	Aldermary House, London, England	Ordinary	100%	Software solutions
Gresham Technologies (Australia) Pty Limited (3)	Level 6, 1 Pacific Highway, North Sydney, Australia	Ordinary	100%	Software solutions
Gresham Technologies (TDI) Limited (1,4)	Aldermary House, London, England	Ordinary	100%	Software solutions
Gresham Technologies (Malaysia) SDN BHD (1)	Level 7, Menara Milenium, Jalan Damanlela, Malaysia	Ordinary	100%	Software solutions
Gresham Technologies (Singapore) Pte. Limited	138 Cecil Street, Cecil Court, Singapore	Ordinary	100%	Software solutions
Gresham Technologies (US) Inc (1,3)	381 Park Ave S, New York, US	Ordinary	100%	Software solutions
Gresham Enterprise Storage Inc (1,3)	381 Park Ave S, New York, US	Ordinary	100%	Software solutions
Electra Information Services Inc (1,3)	381 Park Ave S, New York, US	Ordinary	100%	Software solutions
Electra Solutions Inc. (1,3)	381 Park Ave S, New York, US	Ordinary	100%	Software solutions
Electra Information Services Limited (1,4)	Aldermary House, London, England	Ordinary	100%	Software solutions
Gresham Technologies (International) Limited (4)	Aldermary House, London, England	Ordinary	100%	Holding company
Gresham Technologies (Holdings) SARL	6E route de Treves, L-2633, Luxembourg	Ordinary	100%	Holding company
Gresham Technologies (Luxembourg) S.A. (1)	6E route de Treves, L-2633, Luxembourg	Ordinary	100%	Software solutions
GMS Loan Technologies Limited (4)	Aldermary House, London, England	Ordinary	100%	Software solutions
Inforalgo Information Technology Limited (4)	Aldermary House, London, England	Ordinary	100%	Software solutions
Gresham Consultancy Services Limited (2)	Aldermary House, London, England	Ordinary	100%	Dormant
Gresham Tech Limited (2)	Aldermary House, London, England	Ordinary	100%	Dormant
Gresham Telecomputing Limited (2)	Aldermary House, London, England	Ordinary	100%	Dormant
Circa Business Systems Limited (2)	Aldermary House, London, England	Ordinary	100%	Dormant
Cheerkeep Limited (2)	Aldermary House, London, England	Ordinary	100%	Dormant

(1) Held by a subsidiary undertaking.
(2) Subsidiary exempt from UK audit under section 480a of the Companies Act 2006.
(3) Subsidiary has no requirement for a local statutory audit.
(4) Subsidiary exempt from UK audit under section 479a of the Companies Act 2006.

18. Current assets

	2021 £'000	2020 £'000
Trade receivables	3,795	2,508
Prepayments	1,032	796
Other receivables	576	193
Trade and other receivables	5,403	3,497
Accrued income	1,234	447
Prepaid commission	431	476
Contract assets	1,665	923
Income tax receivable	1,204	-

Income tax receivable includes £1,045,000 for a research and development credit expected relating to the surrender of tax losses for the year ending 31 December 2020.

Trade receivables are denominated in the following currencies:

	2021 £'000	2020 £'000
Sterling	342	473
Euro	740	287
US Dollar	2,009	1,036
Singapore Dollar	-	85
Canadian Dollar	10	-
Australian Dollar	531	393
Malaysian Ringgit	163	234
Total trade receivables	3,795	2,508

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:

Total £'000	Past due but not impaired £'000	<30 days £'000	30 - 60 days £'000	60 - 90 days £'000	90 - 120 days £'000	>120 days £'000
2021	3,795	1,774	1,625	122	28	47
2020	2,508	1,462	601	-	445	-

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 have not provided for any impairment.

19. Cash and cash equivalents

	2021 £'000	2020 £'000
Cash at bank and in hand	9,139	8,876

Cash at bank earns interest at both fixed-term rates and floating rates based on daily bank deposit rates. Short-term deposits are made for varying periods of between one day and three months depending on the immediate cash requirements of the Group, and earn interest at the respective short-term deposit rates. The fair value of cash and cash equivalents is the same as stated above. For the purpose of the consolidated statement of cash flow, cash and cash equivalents comprises cash at bank and in hand and short-term deposits.

20. Trade, other payables, provisions and financial liabilities

Trade and other payables

Trade payables, other payables and contract liabilities are non-interest bearing.

Current

	2021 £'000	2020 £'000
Trade payables	1,059	934
Other payables	6,509	3,339
Contract liabilities	12,048	11,030
	19,616	15,303

	2021 £'000	2020 £'000
Income tax payable	131	378

Non-current

	2021 £'000	2020 £'000
Contract liabilities	60	66

Provisions

Property provisions

	2021 £'000	2020 £'000
At 1 January	-	-
Current	-	-
Non-current	146	144
	146	144

	2021 £'000	2020 £'000
At 1 January	-	-
Non-current	146	144
Foreign exchange movements	(2)	2
At 31 December	144	146
Current	-	-
Non-current	144	146

The provisions relate to the Group’s property portfolio and the resulting lease liabilities, comprising end-of-lease dilapidation costs and empty property costs.# 21. Financial instruments

The Group is exposed through its operations to credit risk, interest rate risk, capital risk, liquidity risk and currency risk. The Group is exposed to risks that arise from its use of financial instruments. This note describes the Group's objectives, policies and processes for managing those risks and the methods used to measure them. Further quantitative information in respect of these risks is presented throughout these financial statements. There have been no substantive changes in the Group's exposure to financial instrument risks, its objectives, policies and processes for managing those risks or the methods used to measure them from previous periods unless otherwise stated in this note.

Categories of financial assets and liabilities

Set out below is an analysis by category of the Group’s financial assets and liabilities that are carried in the financial statements (there is no material difference between the carrying amounts and fair values):

	Fair value through profit and loss	Amortised cost	Total carrying amount
2021
£'000	£'000	£'000	£'000
Financial assets
Trade receivables	-	3,795	3,795
Contract assets	-	1,665	1,665
Cash and cash equivalents	-	9,139	9,139
	-	14,599	14,599
Financial liabilities
Trade payables	-	1,059	1,059
Contingent consideration	-	7,519	7,519
Other payables	-	6,509	6,509
	-	15,087	15,087
	Fair value through profit and loss	Amortised cost	Total carrying amount
2020
£'000	£'000	£'000	£'000
Financial assets
Trade receivables	-	2,508	2,508
Contract assets	-	923	923
Cash and cash equivalents	-	8,876	8,876
	-	12,307	12,307
Financial liabilities
Trade payables	-	934	934
Contingent consideration	-	1,258	1,258
Other payables	-	3,339	3,339
	-	5,531	5,531

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 2021 and 31 December 2020 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. 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 intangible and tangible fixed assets. For those assets required in the business for day to day operations, the Group considers the use of finance lease arrangements to reduce the amount of liquidity tied up in such assets. The Group keeps its investment in fixed assets under review and actively considers converting such assets to more liquid assets.
* Other payables – the Group’s liquidity depends on the ability to fund future operating activities, the Group believes that there is sufficient cash reserves to cover any short and long-term requirements.
* Currency risk - this risk is discussed below.

The table below summarises the remaining contractual maturity for the Group’s financial liabilities, based on contractual undiscounted payments:

	Between 0 and 3 months	Between 3 and 12 months	Between one and two years	Between two and five years
2021
£'000	£'000	£'000	£'000	£'000
Trade payables	1,059	-	-	-
Other payables	5,638	871	-	-
Contingent consideration	369	3,575	3,575	-
Lease liabilities	161	4,81	394	3,76
	7,227	4,927	3,969	3,76
	Between 0 and 3 months	Between 3 and 12 months	Between one and two years	Between two and five years
2020
£'000	£'000	£'000	£'000	£'000
Trade payables	934	-	-	-
Other payables	2,715	-	-	-
Contingent consideration	-	909	349	-
Lease liabilities	133	402	506	498
	3,782	1,311	855	498

All current liabilities are expected to fall due within one year of the statement of financial position date at their carrying amount. The Group monitors and controls liquidity through the following key controls:
* weekly cash and overdue trade receivables are reported to the Executive Board;
* cash forecasts are maintained;
* foreign exchange risks are hedged where significant; and
* credit control is operated locally with Group oversight.

Where appropriate, discounts are offered for early payment by customers and finance lease and deferred payment arrangements are considered to retain or improve liquidity. In June 2021 the Group arranged a $10m revolving credit facility with the Bank of Ireland, this facility has not been used during the period and there was no outstanding liability as at 31 December 2021. Liquidity risk is not considered as a significant risk to the Group.

Currency risk

The Group has significant exposures to the following currencies: US Dollar, Australian Dollar, Euro, Malaysian Ringgit, Singapore Dollar and South African Rand. Currency exposure arises through intra-group loans and trading balances throughout all Group locations. Natural hedging is employed, to the extent possible, to minimise net exposures; however, where significant exposures arise outside of intra-group trading, it is Group policy to enter into formal hedging arrangements where these can be shown to be effective. At 31 December 2021, the Group had no foreign currency forward contracts (2020: none).# Notes to the financial statements Gresham Technologies plc Annual Financial Report 2021 120

Currency exposures comprise the monetary assets and monetary liabilities of the Group that are not denominated in the functional currency of the operating unit involved. In general, all overseas operating units trade and hold assets and liabilities in their functional currency. An analysis of trade receivables by currency is included in note 18.

Sensitivities

The following table details the Group’s sensitivities to a change in Sterling exchange rates against the respective foreign currencies. The sensitivities represent management’s assessment of the effect on monetary assets of the possible changes in foreign exchange rates, which for 2021 and 2020 take account of the potential fluctuations seen in the most recent periods. The sensitivity analysis of the Group’s exposure to foreign currency risk at the year end has been determined based on the assumption that the change is effective throughout the financial year and all other variables remain constant. The impact of translating the net assets of foreign operations into Sterling is excluded from the sensitivity analysis. A positive number indicates an increase in profit after taxation and other components of equity where Sterling weakens against the respective currencies.

Net foreign currency financial assets

Increase/decrease in exchange rates	Effect on profit before tax 2021	Effect on profit before tax 2021
	£’000	£’000
Euro 1,000	+20% (167)	- 20% 250
Australian Dollar 4,723	+20% (787)	- 20% 1,181
US Dollar 4,492	+20% (749)	- 20% 1,123
Malaysian Ringgit 285	+20% (48)	- 20% 71
Singapore Dollar 31	+20% (5)	- 20% 8
South African Rand 24	+20% (4)	- 20% 6

Increase/decrease in exchange rates	Effect on profit before tax 2020	Effect on profit before tax 2020
	£’000	£’000
Euro 397	+20% (66)	- 20% 99
Australian Dollar 4,168	+20% (695)	- 20% 1,042
US Dollar 3,716	+20% (619)	- 20% 929
Malaysian Ringgit 310	+20% (52)	- 20% 77
Singapore Dollar 112	+20% (19)	- 20% 28
South African Rand 26	+20% (4)	- 20% 7

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.

22. Issued share capital

Notes to the financial statements Gresham Technologies plc Annual Financial Report 2021 121

Ordinary shares allotted, called up and fully paid	Number	Nominal value £'000	Shares held by Employee Share Ownership Trust (“ESOT”) Number	Shares held by Employee Share Ownership Trust (“ESOT”) £’000
At 1 January 2020	68,256,458	3,413	976,596	945
Exercise of share options (note 23)	1,900,000	95	(144,996)	(167)
At 31 December 2020	70,156,458	3,508	831,600	778
Exercise of share options (note 23)	83,000	4	(202,292)	(169)
Issue of new shares	13,125,000	656
At 31 December 2021	83,364,458	4,168	629,308	609

The Company’s ordinary share capital consists of individual shares having a nominal value of 5 pence each. During the year ended 31 December 2021, share options granted under share option schemes were exercised at a price of 28.05 pence and the Group issued 83,000 (2020: 1,900,000) ordinary shares accordingly (ranking pari passu with existing shares in issue). Share premium of £61,000 was recognised as a result. In June 2021 the Company issued 13,125,000 ordinary shares at a price of 160 pence (ranking pari passu with existing shares in issue). Share premium of £19,474,000 was recognised as a result after deduction of £870,000 directly attributable expenses. At 31 December 2021 and 2020 there were outstanding options granted to acquire ordinary shares in the Company. See note 23 for further details. There are no preference shares in issue (2020: none). An explanation of the Group’s capital management process and objectives is set out in the discussion of capital management in the Strategic Report and capital risk disclosures in note 21.

The shares held by the ESOT are expected to be issued under share option contracts. The shares are held at the average purchase price.

23. Share-based payments

The following disclosures are in respect of both the Company and the Group. The grant of all options and awards is made by the remuneration committee and such grants involve equity settlement. In granting executive share options the remuneration committee has regard to both the participant’s level of responsibility within the Group and to individual and Group performance.

Share Option Schemes

The Share Option Schemes 2010 were approved by shareholders on 30 December 2010, with amendments subsequently approved by shareholders on May 2012 and February 2015. The scheme was created for a ten year period and expired in December 2020 replaced by the Share Option Scheme 2020.

Notes to the financial statements Gresham Technologies plc Annual Financial Report 2021 122

No share options have been granted under the 2010 scheme during the year and no options will be granted in the future. The 2010 schemes consisted 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 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. 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. Exercise is permitted in conjunction with a take over 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.

A new long-term incentive performance share plan, the 2020 share option scheme, was approved by shareholders in December 2020. The plan enables the remuneration committee to grant share options to key employees following the expiry of the Share Option Plan 2010 on 29 December 2020. Any conditional share award is granted on an ad hoc discretionary basis at nil cost to the participant. The share award will vest on the later of a three year vesting period and the achievement of objective performance targets which will be specified by the remuneration committee.

950,500 (2020: nil) share options have been awarded in the year to 31 December 2021 under the 2020 share option scheme. At 31 December 2021, 48 participants held awards under the share option schemes (2020: 19).

Outstanding options to subscribe for ordinary shares of 5 pence at 31 December 2021, including those noted in the Directors' Remuneration Report, are as follows:

	2021 Number	2021 WAEP (pence)	2020 Number	2020 WAEP (pence)
Outstanding at 1 January	2,588,000	123	4,498,000	81
Granted during the year	950,500	5	75,000	152
Forfeited during the year	-	-	(85,000)	(61)
Exercised during the year	(83,000)	(79)	(1,900,000)	(28)
Outstanding at 31 December	3,455,500	92	2,588,000	123
Exercisable at 31 December	2,255,000	125	2,138,000	114
Weighted average remaining contractual life (years)	6.10		4.90

Notes to the financial statements Gresham Technologies plc Annual Financial Report 2021 123

During the year 83,000 options were exercised during the period when the Company share price was between 152 pence and 161 pence. No price is payable on award of share options.# Outstanding Options and Awards

Outstand ing options and a wards to subscri be for ordina ry shares o f 5 pence a t 31 December 202 1 , including those no ted in the Dire ctors' Rem uneratio n Report s howing th e range o f exercise prices an d dates, ar e as follow s:

Number of share	Date of grant	Exercise price £	Date first exercisable	Expiry date	Cash receivable if options exercised £
Share Option Schemes 2010
45,000	15 - Aug - 12	0.6850	15 - Aug - 15	15 - Aug - 22	30,825
225,000	01 - Aug - 13	0.9630	01 - Aug - 16	01 - Aug - 23	216,675
50,000	07 - Oct - 13	1.3230	07 - Oct - 16	07 - Oct - 23	66,150
1,500,000	01 - Jun - 15	1.1057	01 - Jun - 18	01 - Jun - 25	1,658,550
50,000	21 - Jun - 16	1.0945	21 - Jun - 19	21 - Jun - 26	54,725
140,000	20 - Mar - 17	1.7352	20 - Mar - 20	20 - Mar - 27	242,928
45,000	28 - Nov - 17	2.1505	28 - Nov - 20	28 - Nov - 27	96,773
200,000	14 - Mar - 18	2.2715	14 - Mar - 21	14 - Mar - 28	454,300
100,000	28 - Mar - 19	0.9720	28 - Mar - 22	28 - Mar - 29	97,200
75,000	25 - Oct - 19	1.2210	25 - Oct - 22	25 - Oct - 29	91,575
75,000	24 - Dec - 20	1.5180	24 - Dec - 23	24 - Dec - 30	113,850
Share Option Schemes 2020
950,500	21 - Oct - 21	0.0500			4,753
					3,455,500
					3,128,304

Outstand ing option s t o s ubscrib e f or ordina ry sh ares of 5 p ence at 31 Dec ember 20 20 , including those noted in the Director s' Remunera tion Repo rt showi ng the r ange of e xercise prices and dates, are as fol lows:

Number of share	Date of grant	Exercise price £	Date first exercisable	Expiry date	Cash receivable if options exercised £
Share Option Schemes 2010
38,000	05 - Aug - 11	0.5803	05 - Aug - 14	05 - Aug - 21	22,051
45,000	15 - Aug - 12	0.6850	15 - Aug - 15	15 - Aug - 22	30,825
270,000	01 - Aug - 13	0.9630	01 - Aug - 16	01 - Aug - 23	260,010
50,000	07 - Oct - 13	1.3230	07 - Oct - 16	07 - Oct - 23	66,150
1,500,000	01 - Jun - 15	1.1057	01 - Jun - 18	01 - Jun - 25	1,658,550
50,000	21 - Jun - 16	1.0945	21 - Jun - 19	21 - Jun - 26	54,725
140,000	20 - Mar - 17	1.7352	20 - Mar - 20	20 - Mar - 27	242,928
45,000	28 - Nov - 17	2.1505	28 - Nov - 20	28 - Nov - 27	96,773
200,000	14 - Mar - 18	2.2715	14 - Mar - 21	14 - Mar - 28	454,300
100,000	28 - Mar - 19	0.9720	28 - Mar - 22	28 - Mar - 29	97,200
75,000	25 - Oct - 19	1.2210	25 - Oct - 22	25 - Oct - 29	91,575
75,000	24 - Dec - 20	1.5180	24 - Dec - 23	24 - Dec - 30	113,850
					2,588,000
					3,188,937

The fair value of equity - settled share options granted by the Share Option Schemes are estimated as at the date of grant using a Black Scholes model, taking into account the terms and conditions upon which the options were granted.

The following table lists the range of inputs to the model used for the grants made during the year:

• Vesting date: 21 - Oct - 24
• Expiry date (number of years after grant): 10
• Exercise price £: 0.05
• Share price at valuation £: 1.72
• Vested options' expected life: 5.8 years
• Volatility: 30%
• Dividend yield: 0%
• Risk free rate: 1.0%
• Impact of continued employment conditions: 0%

Vesting of options is reliant on achievement of any relevant performance conditions set by the remuneration committee, which typically take the form of sales-based targets and share price growth. The expected life of the options is based on historical data and is not necessarily indicative of exercise patterns that may occur. The expected volatility reflects the assumption that the historical volatility is indicative of future trends, which may also not necessarily be the actual outcome. No other features of options granted were incorporated into the measurement of fair value.

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 31 March 2021, 125,526 share options were granted at nil cost with two-year and three-year vesting periods; the options expire March 2031.

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:

	2021 £'000	2020 £'000
Expense recognised in respect of share-based payments	369	220

24. Business Combinations during the period

On 22 June 2021, Gresham Technologies plc acquired the entire ordinary share capital in Electra Information Systems, Inc., 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 £17,778,000 with an additional £1,991,000 consideration paid to settle outstanding liabilities. Contingent consideration dependent on performance of up to £6,936,000 is payable over a 24 month period post acquisition. The maximum potential consideration is £26,701,000.

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	-	11,800	11,800
Software	-	4,959	4,959
Property, plant and equipment	10	-	10
Right-of-use assets	285	-	285
Trade and other receivables	1,645	-	1,645
Cash and cash equivalents	130	-	130
Trade and other liabilities	(2,051)	-	(2,051)
Lease liabilities	(297)	-	(297)
Deferred tax liability	-	(4,055)	(4,055)
Total net (liabilities)/assets	(278)	12,704	12,426

Satisfied as follows:

• Cash: 19,769
• Contingent consideration: 6,936
• Total consideration: 26,705

Goodwill (note 14): 14,279

Analysis of cash flows on acquisition:

• Net cash acquired: (130)
• Cash paid: 19,769
• Net cash flow: 19,639

Fair value of consideration paid:

• Cash: 19,769
• Contingent consideration due less than one year: 3,468
• Contingent consideration due more than one year: 3,468
• Total consideration: 26,705

The goodwill recognised above is attributable to intangible assets that cannot be individually separately and reliably measured due to their nature. These items include the expected value of synergies and assembled workforce. Acquisition costs of £1,579,000 were incurred during the year ended 31 December 2021 as a result of the acquisition of Electra. These costs have been recognised as exceptional costs within the Income Statement.

From the date of acquisition, Electra has contributed revenue of £5,647,000 to the Group and operating profit of £1,352,000. If the acquisition had occurred on 1 January 2021, Group revenue would have been £41,747,000 and Group operating profit £1,345,000.

Contingent consideration

As part of the sale and purchase agreement, contingent consideration is payable up to £6,936,000 with the maximum amount payable if the Annual Recurring Revenues are £9,185,000 24 months after acquisition. The consideration is payable on a straight-line basis with no lower threshold with 50% payable in June 2022 and the balance payable in June 2023. Due to the nature of these payments, Management has performed a review and estimates that the full amount of contingent consideration is expected to be paid. As a result, contingent consideration has been recognised in full in the statement of financial position, with £3,468,000 due in less than one year and £3,468,000 due in more than one year.

25. 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 2021, share options granted under the 2010 Share Option Plans were exercised and the Group issued 83,000 (2020: 1,900,000) ordinary shares accordingly (ranking pari passu with existing shares in issue). See note 22 for further details. In June 2021 the Company issued 13,125,000 ordinary shares at a price of 160 pence (ranking pari passu with existing shares in issue).

Share premium account

The balance classified as share premium represents the premium arising from the issue of the Company’s equity share capital, comprising 5 pence ordinary shares, net of share issue expenses. There are restrictions on the use of the share premium account. It can only be used for bonus issues, to provide for the premium payable on redemption of debentures, or to write off preliminary expenses, or expenses of, or commissions paid on, or discounts allowed on, the same issues of shares or debentures of the Company.Own share reserve: Weighted average cost of own shares held in trust by the ESOT.
Other reserves: The balance classified as other reserves comprises a special reserve of £536,000. The special reserve arose on the cancellation of deferred ordinary shares in June 1992. In 2018, 134,440 shares were issued as part consideration for the acquisition of B2 Group at a placing price of £1.71. The excess over the nominal value of the shares issued has been credited to other reserves (merger reserve) in compliance with s612 and s613 of the Companies Act 2006.
Foreign currency translation reserve: The currency translation reserve is used to record exchange differences arising from the translation of the financial statements of foreign subsidiaries.
Retained earnings: All other net gains and losses and transactions with owners (e.g. dividends) that are not recognised elsewhere.

26. Capital commitments

There were no capital commitments at 31 December 2021 (2020: none).

Notes to the financial statements
Gresham Technologies plc
Annual Financial Report 2021
127

27. Related party transactions

Key management compensation (including Directors)

	2021	2020
	£'000	£'000
Directors’ emoluments
Remuneration	648	618
Social security costs	1	45
Bonuses	401	180
Pension	22	22
Share-based payments	116	68
	1,332	988

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 66 for details of all significant shareholders that the Company has been notified of.

28. 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.

Company balance sheet
Gresham Technologies plc
Annual Financial Report 2021
128

At 31 December	At 31 December
	2021	2020
	£'000	£'000
Fixed assets
Lease receivable	945	1,134
Deferred tax asset	-	18
Investments	41,638	20,466
	42,583	21,618
Current assets
Debtors	39,000	34,756
Cash at bank and in hand	643	2,996
	39,643	37,752
Creditors: amounts falling due within one year	(42,253)	(36,798)
Net current (liabilities)	(2,610)	954
Total assets less current liabilities	39,973	22,572
Contingent consideration due more than one year	-	(349)
Creditors: amounts falling due more than one year	(553)	(705)
Total assets less liabilities	39,420	21,518
Capital and reserves
Called up share capital	4,168	3,508
Share premium	23,876	4,341
Own share reserve	(609)	(778)
Special reserve	313	313
Merger reserve	1,583	1,583
Profit and loss account	10,089	12,551
Shareholders' funds - equity interests	39,420	21,518

The Company made a retained loss in the year of £2,309,000 (2020: £2,381,000).
The financial statements were approved by the Board of Directors and authorised for issue on 7 March 2022.

On behalf of the Board

Ian Manoc ha
Chief Executive

Tom Mullan
Chief Financial Officer

7 March 2022
7 March 2022

DocuSign Envelope ID: BB8DFBB0-2E16-4C63-B3F9-138A47D638FF

Company statement of changes in equity
Gresham Technologies plc
Annual Financial Report 2021
129

Notes	Share capital	Share premium	Own shares	Special reserve	Merger reserve	Profit and loss account	Total
	£'000	£'000	£’000	£'000	£'000	£'000	£'000
At 1 January 2020	3,413	3,903	(945)	313	1,583	15,218	23,485
Exercise of share options	10	95	438	-	-	-	-
Share-based payments	14	-	-	-	-	-	220
Transfer of own shares held by Employee Share Ownership Trust to employees	10	-	-	167	-	-	-
Dividend paid	4	-	-	-	-	-	(506)
Retained loss for the year		-	-	-	-	-	(2,381)
At 31 December 2020	3,508	4,341	(778)	313	1,583	12,551	21,518
Issue of equity shares		656	20,344	-	-	-	-
Share issue costs		-	(870)	-	-	-	-
Exercise of share options	10	4	61	-	-	-	-
Share-based payments	14	-	-	-	-	-	369
Transfer of own shares held by Employee Share Ownership Trust to employees	10	-	-	169	-	-	-
Dividend paid	4	-	-	-	-	-	(522)
Retained loss for the year		-	-	-	-	-	(2,309)
At 31 December 2021	4,168	23,876	(609)	313	1,583	10,089	39,420

Notes to the Company financial statements
Gresham Technologies plc
Annual Financial Report 2021
130

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 7 March 2022. No income statement is presented by the Company as permitted by section 408 of the Companies Act 2006. For the year ended 31 December 2021, the Company recorded a retained loss of £2,309,000 (2020: loss £2,381,000). The balance sheet heading relating to the Company’s investments in subsidiaries has been amended to “Fixed assets” from “Non-current assets” to be consistent with the Company’s presentation of its balance sheet in accordance with the balance sheet formats of the Companies Act 2006. Assets are classified in accordance with the definitions of fixed and current assets in the Companies Act instead of the presentation requirements of IAS 1 Presentation of Financial Statements.

Going concern
The Group and the Company’s business activities, together with the factors likely to affect its future development, performance and position are set out in the Strategic report on pages 3 to 40. 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 2021.

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.

Notes to the Company financial statements
Gresham Technologies plc
Annual Financial Report 2021
131

Financial assets
Impairment of financial assets
The Company assesses at each balance sheet date whether a financial asset or group of financial assets is impaired.
Assets carried at amortised cost
These assets arise principally from the provision of services to the Company’s subsidiary, but also incorporate other types of financial assets where the objective is to hold these assets in order to collect contractual cash flows and the contractual cash flows are solely payments of principal and interest. They are initially recognised at fair value plus transaction costs that are directly attributable to their acquisition or issue, and are subsequently carried at amortised cost using the effective interest rate method, less provision for impairment. Impairment provisions from related parties and loans to related parties are recognised based on a forward-looking expected credit loss model. The methodology used to determine the amount of the provision is based on whether there has been a significant increase in credit risk since initial recognition of the financial asset. For those where the credit risk has not increased significantly since initial recognition of the financial asset, twelve-month expected credit losses along with gross interest income are recognised. For those for which credit risk has increased significantly, lifetime expected credit losses along with the gross interest income are recognised. For those that are determined to be credit impaired, lifetime expected credit losses along with interest income on a net basis are recognised. The Company's financial assets measured at amortised cost comprise intercompany receivables and cash and cash equivalents in the consolidated statement of financial position. Cash and cash equivalents include cash in hand for the purpose of the statement of cash flows - bank overdrafts. Bank overdrafts are shown within loans and borrowings in current liabilities on the consolidated statement of financial position.

Taxation
Income taxes
Current tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities, based on tax rates and laws that are enacted or substantively enacted by the statement of financial position date. Research and development tax credits are recognised on an accruals basis and recorded as a credit in the taxation line of the income statement.# Notes to the Company financial statements

Deferred income tax

Deferred income tax is recognised on all temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements, with the following exceptions:
• where the temporary difference arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss;
• in respect of taxable temporary differences associated with investments in subsidiaries, associates and joint ventures, where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future; and
• deferred income tax assets are recognised only to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, carried forward tax credits or tax losses can be utilised.

Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply when the related asset is realised or liability is settled, based on tax rates and laws enacted or substantively enacted at the statement of financial position date. The carrying amount of deferred income tax assets is reviewed at each statement of financial position date. Deferred income tax assets and liabilities are offset only if a legally enforceable right exists to set off current tax assets against current tax liabilities, the deferred income taxes relate to the same taxation authority and that authority permits the Group to make a single net payment.

Income tax is charged or credited to other comprehensive income or directly to equity if it relates to items that are credited or charged to other comprehensive income or directly to equity. Otherwise, income tax is recognised in the income statement.

Foreign currencies

Transactions denominated in foreign currencies are translated at an approximation of the exchange rate ruling on the date of the transaction. Assets and liabilities denominated in foreign currencies are translated at the exchange rate ruling on the balance sheet date. Resulting exchange gains and losses are taken to the income statement.

Related party transactions

The Company has taken advantage of the exemption under FRS 101 from disclosing related party transactions with entities that are wholly owned subsidiary undertakings of the Gresham Technologies plc Group.

Share-based payments – equity-settled transactions

The cost of equity-settled transactions with employees is measured by reference to the fair value at the date at which they are granted and is recognised in the Company financial statements as a capital contribution to the subsidiaries for whom the employees perform services, with the credit entry being made to reserves, over the vesting period, which ends on the date on which the relevant employees become fully entitled to the award.

Fair value of awards with a market condition-based performance target is determined by an external valuer using a Monte Carlo simulation pricing model. In valuing equity-settled transactions, no account is taken of any vesting conditions, other than conditions linked to the price of the shares of the Company (market conditions). Fair value of awards with a financial result-based performance target is determined by management using the Black Scholes pricing model. No capital contribution is recognised for awards that do not ultimately vest, except for awards where vesting is conditional upon a market condition, which are treated as vesting irrespective of whether or not the market condition is satisfied, provided that all other vesting conditions are satisfied.

At each balance sheet date before vesting, the cumulative expense is calculated, representing the extent to which the vesting period has expired and management’s best estimate of the achievement or otherwise of non-market conditions and of the number of equity instruments that will ultimately vest or, in the case of an instrument subject to a market condition, be treated as vesting as described above. The movement in cumulative expense since the previous balance sheet date is recognised as a capital contribution, with a corresponding entry in equity.

Where the terms of an equity-settled award are modified or a new award is designated as replacing a cancelled or settled award, the cost based on the original award terms continues to be recognised as a capital contribution over the original vesting period. In addition, an expense is recognised as a capital contribution over the remainder of the new vesting period for the incremental fair value of any modification, based on the difference between the fair value of the original award and the fair value of the modified award, both as measured on the date of the modification. No reduction is recognised if this difference is negative.

Where an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation, and any cost not yet recognised in the income statement for the award is recorded as a capital contribution immediately. Any compensation paid up to the fair value of the award at the cancellation or settlement date is deducted from equity, with any excess over fair value being treated as a capital contribution in the balance sheet.

Employee Share Ownership Trust (ESOT)

The Company is deemed to have control of its ESOT therefore the investment in the Company’s shares is deducted from equity. The shares are valued at the average purchase price.

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 54 and in note 8 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 2020 was approved at the Company Annual General Meeting on 10 May 2021 and paid on 20 May 2021 of 0.75 pence per share, equating to a total of £522,000. The Company will be proposing a final dividend for approval at the AGM for the year ended 31 December 2021 of 0.75 pence per share.

5. Investments

	2021	2020
Investment in subsidiaries	£'000	£'000
Cost
At 1 January	34,058	30,538
Acquisitions	23,866	3,300
Disposals	(3,063)	-
Capital contribution - share-based payments	369	220
At 31 December	55,230	34,058
Impairment provisions
At 1 January	13,592	13,592
At 31 December	13,592	13,592
Net book value
At 31 December	41,638	20,466

Details of the investments in which the Company holds 20% or more of the nominal value of any class of share capital are included within note 17 to the Group financial statements.

6. Debtors

	2021	2020
	£'000	£'000
Amounts owed by subsidiary undertakings	38,904	34,635
Other receivables	-	114
Prepayments and accrued income	96	7
	39,000	34,756

All amounts that fall due for repayment within one year and are presented within current assets as required by the Companies Act. The loans to Group companies are repayable on demand with no fixed repayment date although it is noted that a significant proportion of the amounts may not be sought for repayment within one year depending on activity in the group companies.

7. Creditors

Amounts falling due within one year	2021	2020
	£'000	£'000
Amounts owed to subsidiary undertakings	41,447	35,320
Lease liabilities	313	320
Trade creditors	50	245
Contingent consideration	379	909
Other creditors and accruals	64	4
	42,253	36,798

Amounts falling due more than one year	2021	2020
	£'000	£'000
Lease liabilities	553	705

	2021	2020
	£'000	£'000
Contingent consideration	-	349

8. Leases

The Company holds a number of leases in respect of office buildings which are utilised by subsidiary companies. These leases are disclosed within the Company as a lease receivable, representing the amounts due from the subsidiaries in respect of these leases. Lease liabilities are measured at the present value of the contractual payments due to the lessor over the lease term with the discount rate determined by reference to the Group’s incremental external borrowing rate, 3.1%. Subsequent to the initial measurement lease liabilities are increased as a result of interest charged and reduced for lease payments made.## Notes to the Company financial statements

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135

The table below represents the maturity of the lease receivable:

	2021	2020
£'000	£'000	£'000
Less than 3 months	78	77
3 to 12 months	233	238
1 to 2 years	237	309
2 to 5 years	39	7
Total	945	1,134

Lease liabilities

	£'000
At 1 January 2020	746
Cash items:
Lease payments	(332)
Non-cash items:
Additions	586
Interest expense	25
At 31 December 2020	1,025
Cash items:
Lease payments	(308)
Non-cash items:
Additions	232
Disposals	(109)
Interest expense	26
At 31 December 2021	866

	2021	2020
£'000	£'000	£'000
Due between 0 - 3 months	73	80
Due between 3 - 12 months	240	240
Due less than one year	313	320
Due more than one year	553	705
Lease liabilities	866	1,025

9. Deferred tax

The Company has a recognised deferred tax asset as follows:

	2021	2020
£'000	£'000	£'000
As at 1 January	18	211
Movement in the period within the income statement	(18)	(193)
As at 31 December	-	18

Comprising:

	2021	2020
£'000	£'000	£'000
Tax losses	-	18
	-	18

10. Issued share capital

	Number	Nominal value
	£'000
At 1 January 2020	68,256,458	3,413
Exercise of share options	1,900,000	95
At 31 December 2020	70,156,458	3,508
Exercise of share options	83,000	4
Issue of new shares	13,125,000	656
At 31 December 2021	83,364,458	4,168

The Company’s ordinary share capital consists of individual shares having a nominal value of 5 pence each. During the year ended 31 December 2021, share options granted under the 2010 Share Option Plans were exercised and the Group issued 83,000 (2020: 1,900,000) ordinary shares accordingly (ranking pari passu with existing shares in issue). See note 22 of the Group financial statements for further details.

At 31 December 2021 and 2020 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 (2020: none).

	Number	£'000
Shares held by Employee Share Ownership Trust (“ESOT”)
At 1 January 2020	976,596	945
Issue of shares	(144,996)	(167)
At 31 December 2020	831,600	778
Issue of shares	(202,292)	(169)
At 31 December 2021	629,308	609

The shares held by the ESOT are expected to be issued under share option contracts. The shares are held at the average purchase price.

11. 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 2021, share options granted under the 2010 Share Option Plans were exercised and the Group issued 83,000 (2020: 1,900,000) ordinary shares accordingly (ranking pari passu with existing shares in issue). See note 22 of the Group financial statements for further details. In June 2021 the Company issued 13,125,000 ordinary shares at a price of 160 pence (ranking pari passu with existing shares in issue).

Share premium

The balance classified as share premium represents the premium arising from the issue of the Company’s equity share capital, comprising 5 pence ordinary shares, net of share issue expenses. There are restrictions on the use of the share premium account. It can only be used for bonus issues, to provide for the premium payable on redemption of debentures, or to write off preliminary expenses, or expenses of, or commissions paid on, or discounts allowed on, the same issues of shares or debentures of the Company.

Own share reserve

Weighted average cost of shares held in trust by the ESOT.

Special reserve

The special reserve arose on the cancellation of deferred ordinary shares in June 1992.

Merger reserve

The merger reserve arose on issue of shares in respect of acquisitions and mergers in the period 1992 to 1999 and in 2018.

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137

Profit and loss account

All other net gains and losses and transactions with owners (e.g. dividends) that are not recognised elsewhere.

12. Capital commitments

There were no capital commitments at 31 December 2021 (2020: none).

13. 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.

14. Share-based payments

Share-based payments in respect of both the Company and the Group are disclosed in note 23 of the consolidated financial statements.

15. 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 27 of the Group financial statements.

Corporate information

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Registered office

Aldermary House
10 – 15 Queen Street
London EC4N 1TX

Broker and financial adviser

Singer Capital Markets Limited
One Bartholomew Lane
London EC2N 2AX

Auditor

BDO LLP
Arcadia House
Maritime Walk
Ocean Village
Southampton SO14 3TL

Registrars

Equiniti Limited
Aspect House
Spencer Road
Lancing
West Sussex BN99 6DA

Solicitors

Blake Morgan LLP
Tollgate
Chandler's Ford
Eastleigh SO53 3LG

Bankers

HSBC Bank plc
55 Above Bar Street
Southampton SO14 7DZ

Annual General Meeting

10 May 2022

Singer Capital Markets Limited
One Bartholomew Lane
London EC2N 2AX

Aldermary House
10 - 15 Queen Street
London EC4N 1TX

investorrelations@greshamtech.com
www.greshamtech.com