Half Yearly Report

RNS Number : 3846Q
First Derivatives PLC
06 November 2012
 



First Derivatives plc

("First Derivatives", the "Company" or the "Group")

 

Interim results for the six months ended 31 August 2012

 

First Derivatives (AIM: FDP.L, ESM:FDP.I), a leading provider of software and consulting services to the capital markets industry, today announces its results for the six months ended 31 August 2012.

 

Financial Highlights

·     Turnover £27.6m (2011: £22.4m) +23.3%

·     EBITDA £5.7m (2011: £5.0m) +12.8%

·     Operating profit £4.1m (2011: £3.6m) +14.2%

·     Normalised Pre-tax profit* £3.8m (2011: £3.5m) +9.8%

·     Earnings per share 16.7p (2011: 16.3p) +2.5%

·     Net Assets £33.5m (2011: £29.0m) +15.3%

·     Interim dividend of 3.1p per share (2011: 3.0p) +3.3%

 

Business Highlights

·     New contracts and growth across all parts of the business

·     Significant increase in Software transactional/recurring revenue streams (+40.8%)

·     Increasing pipeline for Software products

·     Significant increase in Consulting revenue streams (+30.7%)

·     Strategic new consulting initiatives launched expanding client base

·     Four property disposals in period in line with stated strategy

 

Post-Period Highlights

·     Acquisition of Redshift Horizons Ltd expanding managed services provision for data and trading systems

·     Acquisition of Cowrie Financial Ltd bringing deep domain expertise in delivery of Murex technology 

·     Appointment of Gerry Buggy as Global Head of Software Sales

 

* excluding finance translation charges

 

 

David Anderson, Chairman of First Derivatives commented:

 

"The first six months have seen continued strong growth across the Group's activities with total revenues up over 23%.  To fuel this growth we have continued to make substantial investment in the development of all the Group's activities to ensure we have a strong organisation that can react to the market through the quality of our product and service offerings.  This investment has resulted in us signing a number of contracts during the period which will start to become revenue generating in the second half and we have a healthy pipeline of prospects. Despite a background of market turbulence we expect to report profits for the year in line with market expectations."

 

For further information please contact:

 

First Derivatives plc

+44(0)28 3025 2242

Brian Conlon, Chief Executive

www.firstderivatives.com

Graham Ferguson, Chief Financial Officer




Charles Stanley Securities
Nominated Adviser and Broker

+44 (0)20 7149 6000

Russell Cook


Carl Holmes




Goodbody Corporate Finance
ESM Adviser and Broker

+353 1 667 0420

Diane Hodgson


Linda Hickey




Walbrook PR

+44 (0)20 7933 8780

Bob Huxford

bob.huxford@walbrookpr.com

Paul Cornelius

paul.cornelius@walbrookir.com



Stakeholder Communications

+44 (0) 2890 339949

Jonathan King


John Hart


 

About First Derivatives

 

First Derivatives is a global provider of software and consulting services to the financial services industry.  With over 16 years experience working with leading financial institutions, it continues to deliver technologically advanced, award winning products and services that anticipate and respond to evolving needs of global capital markets.

 

First Derivatives currently employs over 720 people worldwide and counts many of the world's top investment banks, brokers and hedge funds as its customers.  It has operations in London, New York, Stockholm, Singapore, Tokyo, Toronto, Sydney, Dublin, Newry and Hong Kong.

 

 



CHAIRMAN'S STATEMENT

 

 

Financials

 

I am pleased to report that revenues for the six months ended 31 August 2012 increased 23.3% to £27.6m from £22.4m in the corresponding period of the previous year.  This continued growth when market trends are particularly challenging is even more satisfying given the increase in earnings before interest, depreciation, amortisation and share option costs of 12.8% to £5.7m (H1 2011: £5.0m).  Pre-tax profit (before finance translation charges) for the period was £3.7m, (H1 2011: £3.4m), up by 11.3%.  Earnings per share for the period were 16.7p, an increase of 2.5% (H1 2011: 16.3p).  Our ability to grow in this challenging and volatile market demonstrates the underlying strength of the Group and its ability to react to market demands and meet the challenges it presents.

 

Dividend

 

The Group continues to generate strong operating cash flow and this allows the Board to recommend an interim dividend of 3.1p per share (H1 2011 3.0p), an increase of 3.3%.  This will be paid on 6 December 2012 to those shareholders on the register on 16 November 2012.  The shares will be marked ex-dividend on 14 November 2012.

 

Software

 

Software sales of £7.5m were up 7.2% on the previous period (H1 2011: £7.0m).  This modest increase does not reflect the progress made in revenue generated from the Delta Suite.  Transactional and recurring revenues were up 40.8% on the corresponding previous period showing the significant progress achieved.  This increase was offset by a reduction of 16.9% in one off license fee income and a reduction of 60.7% in legacy technology income (Auto Deal+) obtained as part of the acquisition of "Cognotec" in 2010. 

 

We continue to invest heavily in our research and development programme. Our decision to build a common technology platform for all of our applications means that our software is easier to support, deploy and upgrade. Our approach fosters rapid prototyping and innovation and allows us to convert ideas to products very quickly. From its conception we made a conscious decision to deploy Delta applications in the cloud and on mobile platforms - this decision has been validated by recent technology trends. Our software is designed to meet the "Big Data" challenge which is at the centre of the strategies of many of the world's IT giants.

 

We have achieved a number of contract wins for our flagship products including sales of Delta Stream and Delta Algo to some of the world's largest banks and exchanges. The latest version of our foreign exchange trading platform launched in June, Delta Flow, has a number of compelling features that have attracted very positive feedback from customers and prospects. As with any cloud application building confidence takes a period of time and this bedding down period will continue into the New Year and give us the springboard then to launch a major sales campaign. 

 

Our sales in the current period have been on a recurring and transactional revenue basis. It should be borne in mind that revenue recognition under these licensing models is such that these sales will make a contribution to revenue in the second half with the full effect not being seen until the next financial year.  We have a healthy pipeline of prospects and we are receiving inquiries from an increasing breadth of potential customers - banks, hedge funds, asset managers, brokers, exchanges and regulators.  As our software applications becoming more established they provide us with an increasing number of prestigious reference customers across our flagship applications. These factors give us confidence in our ability to deliver continued growth in software revenues.

 

Consulting

 

Consulting revenues increased 30.7% to £20.0m from £15.4m in the previous six month period.  The first half has continued to be a period of growth across the division, both in our client base and in the expansion of the number of assignments undertaken with new and existing clients.  Along with the continued growth of our core business a key stimulus has been the three new initiatives which we launched last year.  These along with the quality of our people, commitment to training and the flexibility of our service,  strongly positions the Group within the markets in which we operate.

 

Last year we responded to the regulatory changes beginning to impact our customer base by the creation of our Legal Services Consulting Stream.  The service focuses on providing resources to banks in areas such as non-core asset disposal, regulation compliance and securitisation, where personnel with a combination of IT, finance and legal skills are in short supply.  Demand for these services has seen success not only in our existing consulting client base but also has enabled us to penetrate into three new banking clients to the Group. 

 

In response to the continuation globalization of banking systems, increasing complexity and the fast moving technology innovation we launched a dedicated data management team along with commencing the development of a strategic vendor services practice.  These were focused on the delivery of global, large scale implementation and support services for leading third party trading technology platforms and the ever complex issue of the management of data.  Again demand for these services has been well received not only by our existing client base but also has provided the stimulus to penetrate five new banking clients to the Group.

 

Penetration of new clients in a market where our customers are striving to reduce the preferred supplier lists underpins the strength of our consulting service.  As we undertake complex assignments for our clients each new client leads to repeat business as our inherent knowledge of their systems is key for upgrades and ongoing development.    This recurring revenue business model is a core focus of our strategyand to ensure we maximize this source of income we aim to provide relevant market or domain expertise along with a competitive cost operating model.

 

Acquisition

 

On28 September 2012 the Company announced the acquisition of Cowrie Financial Limited ("Cowrie"), Redshift Horizons Limited ("Redshift") and Redshift Horizons LLP.  These acquisitions continue our strategy in developing strategic vendor services focused on our target market segment.  Cowrie brings key domain knowledge and expertise in the delivery and management of Murex Technology, a software which is widely used within the industry across asset classes for trading, risk management and processing.  Redshift deepens our expertise in the provision of managed services for data and trading systems.  We are pleased to have concluded these acquisitions, not only because they have further expanded our service offerings but because they have brought seasoned individuals to the management team like Tom Kozlowski and Anjum Waheed, and more latterly Gerry Buggy, all of whom will be instrumental in assisting the Group further growth.

 

Accommodation

 

The Company has made no further acquisitions of employee residential accommodation and in line with our stated strategy four further individual properties have been disposed of in the period with a resulting profit on sale of £0.5m.  The net proceeds of these disposals have been applied toward the reduction of our borrowings.  We will continue to dispose of properties when suitable opportunities arise.

 

Outlook

 

The first six months have seen continued strong growth across the Group's activities with total revenues up over 23.3%.  To fuel this growth we have continued to make substantial investment in the development of all the Group's activities to ensure we have a strong organisation that can react to the market through the quality of our product and service offerings.  This investment has resulted in us signing a number of contracts during the period which will start to become revenue generating in the second half and we have a healthy pipeline of prospects. Despite a background of market turbulence we expect to report profits for the year in line with market expectations.

 

 

David Anderson

Chairman



Consolidated Statement of Comprehensive Income (unaudited)

 



6 months ended 31 August
2012

6 months ended 31 August
2011


Notes

£'000

£'000





Revenue

2

27,599

22,384

Cost of sales


(18,601)

(14,363)

Gross profit


8,998

8,021





Administrative expenses


(4,164)

(3,663)

Other income


856

683

Earnings (EBITDA)


5,690

5,041





Share based payments


(243)

(260)

Depreciation and Amortization


(1,374)

(1,213)

Results from operating activities


4,073

3,568





Financial income


1

-

Financial expenses

Finance translation charge


(328)

(374)

(202)

(96)

Net financing costs


(701)

(298)





Profit before tax and associate income

 


3,372

3,270

Income from associates


95

132

 

Profit before tax


 

3,467

 

3,402





Income tax expense 


(659)

(738)





Profit for the period


2,808

2,664











Pence

Pence

Earnings per Share
B
asic

4


16.7


16.3

 


Consolidated Statement of changes in equity

 

 


Share
capital

 

Share
premium

 

Shares
option
reserve

Revaluation reserve

 

Currency translation adjustment

Retained
earnings

 

Total
equity

 


£'000

£'000

£'000

£'000

£'000

£'000

£'000









Balance at 1 March 2011

80

7,846

2,384

174

197

14,207

24,888

Total comprehensive income for the period








Profit for the period

-

-

-

-

-

2,664

2,664

Other comprehensive income








Deferred tax on share options outstanding

-

-

74

-

-

-

74

Net gain on net investment in foreign subsidiary and associate

-

-

-

-

195

-

195

Net loss on hedge of movement in foreign subsidiary and associate

-

-

-

 

-

 

(100)

-

(100)

Total other comprehensive income

-

-

74

-

95

-

169

Total comprehensive  income for the period

-

-

74

-

95

2,664

2,833

Transactions with owners, recorded directly in equity








Exercise or issue of shares

3

2,295

-

-

-

-

2,298

Share based payment charge

-

-

186

-

-

-

186

Dividends to equity holders

-

-

-

-

-

(1,187)

(1,187)

Total contributions by and distributions to owners

3

2,295

186

-

-

(1,187)

1,297

Balance at 31 August 2011

83

10,141

2,644

174

292

15,684

29,018

 



 

Consolidated Statement of changes in equity (continued)

 

 


Share
capital

Share
premium

Shares
option
reserve

Revaluation reserve

Currency translation adjustment

Retained
earnings

Total
equity


£'000

£'000

£'000

£'000

£'000

£'000

£'000









Balance at 1 March 2012

83

10,502

2,673

167

290

18,521

32,236

Total comprehensive income for the period








Profit for the period

-

-

-

-

-

2,808

2,808

Other comprehensive income








Deferred tax on share options outstanding

-

-

(202)

-

-

-

(202)

Net loss on net investment in foreign subsidiary and associate

-

-

-

-

(696)

-

(696)

Net loss on hedge of movement in foreign subsidiary and associate

-

-

-

 

-

 

(18)

-

(18)

Total other comprehensive income

-

-

(202)

-

(714)

-

(916)

Total comprehensive  income for the period

-

-

(202)

-

(714)

2,808

1,892

Transactions with owners, recorded directly in equity








Exercise or issue of shares

2

547

(76)

-

-

-

473

Share based payment charge

-

-

312

-

-

-

312

Transfer or forfeiture

-

-

(10)

-

-

10

-

Dividends to equity holders

-

-

-

-

-

(1,369)

(1,369)

Total contributions by and distributions to owners

2

547

226

-

-

(1,359)

(584)

Balance at 31 August 2012

85

11,049

2,697

167

(424)

19,970

33,544


 

Consolidated statement of financial position (unaudited)

 


As at
31 August
2012


As at
31 August
2011


As at
28 February
2012


£'000


£'000


£'000







Assets






Property, plant and equipment

12,671


17,143


14,738

Intangible assets

30,551


27,672


30,053

Other financial assets

6,390


6,926


7,059

Trade and other receivables

-


-


437

Deferred tax asset

1,447


2,147


1,750

Non-current assets

51,059


53,888


54,037







Trade and other receivables

18,943


11,345


13,767

Cash and cash equivalents

2,228


1,007


1,318

Assets held for sale

1,967


-


1,598

Current assets

23,138


12,352


16,683







Total assets

74,198


66,240


70,720







Equity






Share capital

85


83


83

Share premium

11,049


10,141


10,502

Shares option reserve

2,697


2,644


2,673

Revaluation reserve

167


174


167

Currency translation adjustment reserve

(424)


292


290

Retained earnings

19,970


15,684


18,521

Equity attributable to shareholders

33,544


29,018


32,236







Liabilities






Interest bearing borrowings

18,536


19,114


18,598

Deferred tax liability

2,301


1,412


2,224

Contingent deferred consideration

-


1,926


-

Provisions

-


357


-

Trade  and other payable

2,196


2,053


2,901

Non-current liabilities

23,033


24,862


23,723







Interest bearing borrowings

3,460


2,239


3,603

Trade and other payables

9,247


6,346


7,456

Current tax payable

1,044


1,773


702

Employee benefits

3,222


1,441


2,110

Contingent deferred consideration

648


561


890

Current liabilities

17,621


12,360


14,761







Total liabilities

40,654


37,222


38,484







Total equity and liabilities

74,198


66,240


70,720









Consolidated statement of cashflows (unaudited)

 


6 months ended 31 August 2012


6 months ended 31 August 2011


£'000


£'000

Cashflows from operating activities




Profit before taxation

2,808


2,664

Net finance costs

702


202

Share of profit of associate

(95)


(132)

Depreciation

367


405

Amortisation of intangible assets

1,006


808

Gain on sale of property, plant and equipment

(535)


(154)

Equity settled share-based payment transactions

243


260

Tax expenses

659


738


5,155


4,791





Changes in:




Trade and other receivables

(5,113)


1,298

Trade and other payables

2,181


(2,370)

Taxes

(135)


(261)

Net cash from operating activities

2,088


3,458





Cash flows from investing activities




Interest received

1


-

Acquisition of property, plant and equipment

(841)


(649)

Disposal of property, plant and equipment

2,849


1,467

Acquisition of intangible assets

(1,920)


(1,894)

Dividend received from associate

776


573

Payment of deferred consideration

(233)


(3,040)

Net cash generated/(used) in investing activities

632


(3,543)





Cash flows from financing activities




Proceeds from issue of share capital

471


215

Receipt of new long term loan

2,730


-

Repayment of borrowings

(2,783)


(1,289)

Payment of finance lease liabilities

(153)


(26)

Interest paid

(328)


(202)

Dividends paid

(1,349)


(1,187)

Net cash from financing activities

(1,412)


(2,489)





Net increase/(decrease) in cash and cash equivalents

1,308


(2,574)

Cash and cash equivalents at 1 March 2012

1,318


3,501

Effects of exchange rate changes on cash and cash equivalents

(398)


80

Cash and cash equivalents

at 31 August 2011

 

2,228


 

1,007



 

Notes to the Interim Results

 

1              Basis of Preparation

 

The results for the six months ended 31 August 2012 are unaudited and have not been reviewed by the Company's Auditors.  They have been prepared on accounting basis and policies that are consistent with those used in the preparation of the financial statements of the Company for the year ended 29 February 2012.

 

The financial statements contained in this report do not constitute statutory accounts within the meaning of Section 477 of the Companies Act 2006.  The results for the period ended 29 February 2012 were prepared under International Financial Reporting Standards (IFRSs) as adopted by the EU ("adopted IFRSs") and reported on by the auditors and received an unqualified audit report. Full accounts for the period ended 29 February 2012 have been delivered to the Registrar of Companies.

 

2              Segmental Reporting

 

Revenue by division

 


Consulting division

Software division

Total


2012

2011

2012

2011

2012

2011


£'000

£'000

£'000

£'000

£'000

£'000

Total Segment Revenue

20,063

15,355

7,536

7,029

27,599

22,384

 

Revenue by geographical location

 


UK

Rest of Europe

America

Australasia

Total













2012

2011

2012

2011

2012

2011

2012

2011

2012

2011


£000

£000

£000

£000

£000

£000

£000

£000

£000

£000

Revenue from external customers

9,887

10,189

3,569

1,776

11,455

8,684

2,688

1,735

27,599

22,384

 

3              Dividends

An Interim Dividend of 3.1p per share is proposed for the six months to 31 August 2012. This will be paid to shareholders on 6 December 2012 to shareholders on the register on 16 November 2012. The shares will be marked Ex-Dividend on 14 November 2012.

 

4              Earnings per Share

The earnings per share for the six months ended 31 August 2012 has been calculated on the basis of the profit after taxation of £2.8m (H1 2011: £2.7m).  Earnings per share of 16.7 pence have been calculated based on the weighted average number of shares for the period being 16,823,147 (H1 2011: 16,375,816).

 

5              Interim Report

Copies can be obtained from the Company's head and registered office: 3 Canal Quay, Newry, Co. Down, BT35 6BP and are available to download from the Company's website www.firstderivatives.com.

 


This information is provided by RNS
The company news service from the London Stock Exchange
 
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