Half Yearly Report

RNS Number : 3379Q

First Derivatives PLC

18 October 2011

 

18 October 2011

First Derivatives plc

("First Derivatives" or the "Company")

Interim results for the six months ended 31 August 2011

First Derivatives (AIM: FDP.L, IEX:FDP.I), a leading provider of software and consulting services to global investment banks and hedge funds, today announces its results for the six months ended 31 August 2011.

Financial Highlights

·     Turnover £22.4m (2010: £17.7m) +26.2%

·     EBITDA £5.0m (2010: £4.2m) +21.1%

·     Operating profit £3.6m (2010: £3.1m) +14.3%

·     Profit before tax and associate income £3.3m (2010: £2.8m) +16.2%

·     Pre-tax profit £3.4m (2010: £3.2m) +5.1%

·     Earnings per share 16.3p (2010: 15.6p) +4.5%

·     Net Assets £29.0m (2010: £21.7m) +33.4%

·     Interim dividend of 3.00p per share (2010: 2.90p) +3.4%

Business Highlights

·     Growth across all parts of the business

·     Significant increase in Software transactional/recurring revenue streams (+51.6%)

·     Increasing pipeline for Software products with additional new products in development

·     Three new Consulting initiatives launched in period contributing to strong performance

David Anderson, Chairman of First Derivatives commented:

"We have continued to invest in the Group's activities, the benefits of which are starting to show through.  We have signed 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 have made a strong start to the second half and expect to report profits for the year in line with market expectations."

For further information please contact:

First Derivatives	[phone]
Brian Conlon, Managing Director	www.firstderivatives.com
Graham Ferguson, Finance Director
Charles Stanley Securities, Nominated Adviser	[phone]
Russell Cook
Carl Holmes
Goodbody Stockbrokers, ESM Adviser	[phone]
Diane Hodgson
Linda Hickey
Finbarr Griffin
Walbrook PR	[phone]
Bob Huxford
Fiona Henson
Stakeholder Communications	[phone]
Carl Whyte
John Hart

About First Derivatives

First Derivatives is a global provider of software and consulting services to the financial services industry.  With over 15 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 650 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

Revenues for the six months ended 31 August 2011 increased 26.2% to £22.4m from £17.7m in the corresponding period of the previous year. Earnings before interest, depreciation, amortisation and share option costs were £5.0m, up 21% from £4.2m in the same period last year, reflecting a period of robust underlying trading. Pre-tax profit for the period was £3.4m, (H1 2010: £3.2m), up by 5%.  Earnings per share for the period were 16.3p, an increase of 4% (H1 2010: 15.6p).

Dividend

The group continues to generate a strong operating cash flow and the Board is pleased to announce the payment of an interim dividend of 3p per share (H1 2010: 2.9p), an increase of 3%. This will be paid on 8 December 2011 to those shareholders on the register on 11 November 2011.  The shares will be marked ex-dividend on 9 November 2011.

Software

Software sales at £7.0m (H1 2010: £6.7m) were up 5% on the corresponding period of the previous year  with transactional/recurring license revenues up 52%. We are continuing to invest heavily in the Delta suite and have a number of new products in an early stage of development. The products are all developed on the common Delta technology platform - this strategy makes it easier to add new product lines and facilitates cross-selling to the installed customer base. We have made a significant investment in establishing the physical infrastructure necessary to operate the software in the "cloud" or on a software as a service model ("SaaS"). We are also actively looking for partners to help bring the products to new markets and new industries. This continuing investment in our platform, increasing the channels to market and the successful deployment of our solutions, allied with our flexible licensing and service model, gives us confidence in our ability to deliver continued growth in software revenues.

Delta Stream

Delta Stream, our tick data management and Complex Event Processing ("CEP") engine has a myriad of potential uses across all asset classes in the Capital Markets and other industry sectors. We have continued to secure sales this year with wins in both Asia and Europe. These wins and subsequent implementations continue to prove the established nature of this product and we are developing a healthy pipeline of prospects.

Delta Algo

Delta Algo is targeted at hedge funds and proprietary trading desks. Following preliminary single site sales of the product at the start of this year we secured a major new sale with a large investment bank for the implementation of the Delta Algo software as part of a new programme. This major implementation has now gone live, showcasing the ability of the product on an enterprise level. With this strong reference site in place we have been steadily building our pipeline and have a number of proofs of concept of the software underway with other institutions.

Delta Data Factory

The management of data in the face of increasing volumes and complexity is a constant challenge in the Capital Markets arena. At the start of the financial year we referred to a large SaaS win with a major data provider to manage and distribute their reference data. We are pleased to advise this service is now live and in production use. We have added market data and time series management capability to our offering which allows us to pitch it not only to the finance industry, but to other sectors as well. To support the product initiative we also announced the formation of a dedicated data management team, bringing together a group of highly experienced and respected professionals from the data management industry. We now have a growing pipeline for our data management products.

Delta Flow

At the time of the 2011 results we outlined our intention to make significant investment in this product during the period. Following the successful launch and deployment of the legacy RealStream product last year, feature enhancements and redeploying to the Delta platform leave us in a position to deliver a ground breaking and disruptive technology to the various participants in the massive and growing retail and institutional FX market. We will be launching the latest release of Delta Flow to new customers (and migrating existing customers) in the coming months and we have generated a lot of interest in the market. The benefits of this will not be felt until the financial year 2013. At the half year 14 customers had signed contracts of which 9 are already trading, albeit some in the early stages of implementation, and we have a good pipeline of prospects. 

Consulting

Consulting revenues at £15.4m (H1 2010: £11.1m) were up 39% on the corresponding period of the previous year and accounted for 69% of total revenues (H1 2010: 62%). The first half has been a period of continued growth, both in our client base and in expansion of the number of assignments undertaken with existing customers. 

In the period we have launched three major initiatives. As well as the launch of the data management unit mentioned above we have also undertaken a new legal consulting initiative aimed at providing resources to banks in areas such as non-core asset disposal, compliance and securitisation, where personnel with a combination of IT, finance skills, and legal are in short supply. In addition, we have launched a strategic vendor service practice focused on the delivery of global, large scale implementation and support services for leading third party trading technology platforms. The initial rollout has focused on the service to Calypso global customers. Initial market reaction has proven positive with a number of engagements already underway under these initiatives. As well as increasing the breadth of our range of services these initiatives will allow us to pitch for larger scale projects.

Properties

In my Chairman's statement accompanying the annual accounts for the year ended 28^th February 2011 I indicated that disposals of individual properties in our accommodation portfolio would be made when suitable profitable opportunities arise. I am pleased to report that sales of 2 properties were completed during the period. The net proceeds of these disposals have been applied toward the reduction of our borrowings.

Outlook

We have continued to invest in the Group's activities, the benefits of which are starting to show through.  We have signed 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 have made a strong start to the second half and expect to report profits for the year in line with market expectations.

Consolidated Statement of Comprehensive Income (unaudited)

		6 months ended 31 August 2011	6 months ended 31 August 2010
		£'000	£'000
Revenue		22,384	17,736
Cost of sales		(14,363)	(11,081)
Gross profit		8,021	6,655
Administrative expenses		(3,663)	(3,052)
Other income		683	558
Earnings (EBITDA)		5,041	4,161
Depreciation and Amortization and share option expense		(1,473)	(1,040)
Results from operating activities		3,568	3,121
Financial income		-	2
Financial expenses Finance translation (charge)/credit		(202) (96)	(274) (35)
Net financing costs		(298)	(307)
Profit before tax and associate income		3,270	2,814
Income from associates		132	423
Profit before tax		3,402	3,237
Income tax expense		(738)	(891)
Profit for the period		2,664	2,346
		Pence	Pence
Earnings per Share Basic		16.3	15.6

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 2010	72	3,906	983	174	694	10,481	16,310
Total comprehensive income for the period
Profit for the period	-	-	-	-	-	2,346	2,346
Other comprehensive income
Deferred tax on share options outstanding	-	-	283	-	-	-	283
Net gain on net investment in foreign subsidiary and associate	-	-	-	-	318	-	318
Net loss on hedge of net investment in foreign subsidiary and associate	-	-	-	-	(206)	-	(206)
Total other comprehensive income	-	-	283	-	112	-	395
Total comprehensive  income for the period	-	-	283	-	112	2,346	2,741
Transactions with owners, recorded directly in equity
Exercise or issue of shares	5	3,373	-	-	-	-	3,378
Share based payment charge	-	-	294	-	-	-	294
Dividends to equity holders	-	-	-	-	-	(975)	(975)
Total contributions by and distributions to owners	5	3,373	294	-	-	(975)	2,697
Balance at 31 August 2010	77	7,297	1,560	174	806	11,852	21,748

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 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 financial position (unaudited)

	As at 31 August 2011		As at 31 August 2010		As at 28 February 2011
	£'000		£'000		£'000
Assets
Property, plant and equipment	17,143		18,350		18,292
Intangible assets	27,672		24,551		26,732
Other financial assets	6,926		7,527		7,447
Deferred tax asset	2,147		922		1,860
Non-current assets	53,888		51,350		54,331
Trade and other receivables	11,345		8,573		12,563
Cash and cash equivalents	1,007		4,163		3,501
Current assets	12,352		12,736		16,064
Total assets	66,240		64,086		70,395
Equity
Share capital	83		77		80
Share premium	10,141		7,279		7,846
Shares option reserve	2,644		1,560		2,384
Revaluation reserve	174		174		174
Currency translation adjustment reserve Retained earnings	292 15,684		806 11,852		197 14,207
Equity attributable to shareholders	29,018		21,748		24,888
Liabilities
Interest bearing borrowings	19,114		17,015		21,544
Deferred tax liability Contingent deferred consideration	1,412 1,926		820 2,138		1,319 1,993
Provisions	357		350		344
Trade  and other payable	2,053		977		2,034
Non-current liabilities	24,862		21,300		27,234
Interest bearing borrowings	2,239		4,342		1,124
Trade and other payables	6,346		6,432		7,955
Current tax payable	1,773		1,387		1,176
Employee benefits	1,441		2,005		2,401
Contingent deferred consideration	561		6,872		5,617
Current liabilities	12,360		21,038		18,273
Total liabilities	37,222		42,338		45,507
Total equity and liabilities	66,240		64,086		70,395

Consolidated statement of cashflows (unaudited)

	6 months ended 31 August 2011		6 months ended 31 August 2010
	£'000		£'000
Cashflows from operating activities
Profit before taxation	3,402		3,237
Associate income	(132)		(423)
Finance income	-		(2)
Finance expense	202		309
Depreciation	405		285
Amortisation of intangible assets	808		575
(Profit)/Loss on disposal of fixed assets	(154)		-
Equity settled share-based payment transactions	260		180
	4,791		4,161
Change in trade and other receivables	1,298		1,152
Change in trade and other payables	(2,370)		(1,818)
Corporation tax paid	(261)		(507)
Net cash from operating activities	3,458		2,988
Cash flows from investing activities
Interest received	-		2
Acquisition of subsidiary	-		(614)
Acquisition of property, plant and equipment	(649)		(459)
Acquisition of intangible assets	(1,894)		(958)
Disposal of property, plant and equipment	1,467		-
Received from associates	573		654
Payment of deferred consideration	(3,040)		(121)
Net cash used in investing activities	(3,543)		(1,496)
Cash flows from financing activities
Proceeds from issue of share capital	215		3,379
Repayment of borrowings	(1,289)		(889)
Payment of finance lease liabilities	(26)		(31)
Interest paid	(202)		(274)
Dividends paid	(1,187)		(975)
Net cash from financing activities	(2,489)		1,210
Net increase in cash and cash equivalents	(2,574)		2,702
Cash and cash equivalents at 1 March 2011	3,501		1,711
Effects of exchange rate changes on cash and cash equivalents	80		(250)
Cash and cash equivalents at 31 August 2011	1,007		4,163

Notes to the Interim Results

1              Basis of Preparation

The results for the six months ended 31 August 2011 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 28 February 2011.

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 28 February 2011 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 28 February 2011 have been delivered to the Registrar of Companies.

2              Segmental Reporting

Revenue by division

	Consulting division		Software division		Total
	2011 £'000	2010 £'000	2011 £'000	2010 £'000	2011 £'000	2010 £'000
Total Segment Revenue	15,355	11,062	7,029	6,674	22,384	17,736

Revenue by geographical location

	UK		Rest of Europe		America			Australasia		Total
	2011	2010	2011	2010		2011	2010	2011	2010	2011	2010
	£000	£000	£000	£000		£000	£000	£000	£000	£000	£000
Revenue from external customers	10,189	7,815	1,776	1,296		8,684	7,341	1,735	1,284	22,384	17,736

3              Dividends

An Interim Dividend of 3.0p per share is proposed for the six months to 31 August 2011. This will be paid to shareholders on 8 December 2011 to shareholders on the register on 11 November 2011. The shares will be Ex-Dividend on 9 November 2011.

4              Earnings per Share

The earnings per share for the six months ended 31 August 2011 has been calculated on the basis of the profit after taxation of £2.7m.  Earnings per share of 16.3 pence have been calculated based on the weighted average number of shares for the period being 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.

 

END

 

 

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