Interim Results

RNS Number : 4407F
First Derivatives PLC
09 October 2008
 



9 October 2008

First Derivatives plc

(AIM:FDP.L, IEX:GYQ.I) 


Interim results for the six months ended 31 August 2008


The principal activities of First Derivatives plc ('First Derivatives', 'FDP' or the 'Company') are the provision of a range of support services to the investment banking market and the derivatives technology industry and the provision of its own range of niche banking applications.


Financial Highlights

-    Turnover £6.828 m (2007: £5.641 m) +21%

-    Operating profit £2.424m (2007: £2.009m) +21%

-    Operating margins of 36.4% (2007: 35.6%)

-    Pre-tax profit £2.240 m (2007: £1.849 m) +21 %

-    Earnings per share 10.8p (2007: 10.4p) +4%

-    Net Assets £8.923m (2007: £6.574m) +36%

-    Interim dividend 2.35p per share (20072.3p) +2%


Business Highlights

-    Trading performance remains robust

-    Increase in Capital Markets Consulting activity

-    Further sales of FDP software products

-    Number of employees currently 144


David Anderson, Chairman of First Derivatives commented

'We are extremely pleased to report further progress in the first half of the year and the Company expects to be able to report further progress at the end of the year.'



For further information please contact:


First Derivatives                                          028 3025 2242

Managing Director

Brian Conlon

www.firstderivatives.com 


Charles Stanley Securities                           020 7149 6000

Nominated Adviser

Russell Cook

Carl Holmes


Goodbody Stockbrokers                              +353 1 667 0410

IEX Adviser

Linda Hickey

Diane Hodgson


Stakeholder Communications    

Carl Whyte                                                     02890 339949

Lisa Nugent                                                    020 7903 5148

  CHAIRMAN'S STATEMENT


Despite reporting in a period of turbulent financial markets and significant global concernsI am pleased to again report further progress for the Company in the six months to 31 August 2008.  First Derivatives announces a 21% increase in interim pre-tax profit of £2.240 million compared with £1.849 million in the corresponding period of the previous year. Revenues were £6.828 million (2007: £5.641 million) and earnings per share increased by 4% to 10.8p (2007:10.4p).


The Company generated operating cashflow of £3.341 million in the six months to August and had retained cash of £1.377 million at the 31 August. Net assets have risen from £6.574 million at 31 August 2007 to £8.923 million at the period end.


The Board announces the payment of an interim dividend of 2.35p per share (2007: 2.3p) an increase of 2%. This will be paid on 31 October 2008 to those shareholders on the register on 17 October 2008. The shares will be marked ex-dividend on 15 October 2008.


We continue to experience increased demand for our consulting services from both existing and new customers.  We have secured a number of new contracts in the last six months.  Most of our assignments are long-term and rolling in nature and we maintain a high revenue visibility for this year.  Strong interest has also been shown in our 'near shore support services' and we anticipate that further contracts will be agreed during the second half of the financial year.


First Derivatives announced on 9 July that it has signed the Company's first global contract for its qAlgo algorithmic trading product. The Company continues to invest in the development of qAlgo and other trading, risk, Complex Event Processing and market data focused software.  These sales are on an annual recurring licence basis which further increases our revenue visibility.  The sales pipeline is developing well and further sales are expected in the second half of the year. The Company continues to identify additional client product needs, consequently we have, and will continue to, strengthen the development team.


Following exceptionally strong revenue in the second half of last year, new sales of Partner products during the first half of the current year returned to normal levels.  The pipeline remains healthy and we expect to maintain this level in the coming six months.  The demand for services in this area remains strong.


O15 September FDP announced the acquisition of MRP for an initial consideration of $6.0 million. $4.5 million was paid in cash and the balance by the issue of 436,644 ordinary shares.  Additional consideration of up to a maximum of $14 million is payable over the next two years, linked to the performance of MRP.


MRP designs and executes marketing strategies for clients in the technology industry. This acquisition will provide a springboard for First Derivatives to consolidate and expand its presence in North America and will allow the replication of its near shore model there. With a presence in Europe, North America and Asia it will be able to offer 24/7 global support to its customers on a 'follow the sun' model which should enable it to bid for larger contracts.  MRP is expected to be earnings enhancing in the current year further adding to shareholder value.


Graham Ferguson joined the Board as Finance Director on 1 September and is already actively involved in the integration of MRP into First Derivatives. The Board anticipates that it will make further additions to the management team over the next year in line with the continuing development of business. Staff levels have now risen to 144, compared with 102 this time last year The acquisition of MRP has resulted in an additional 95 employees joining the FDP workforce.


The Company is now firmly established in its new head office at Canal Quay in Newry. The space that was originally earmarked for sub-letting is now being fitted out to accommodate additional nearshore support teams as this business expands.


The current turbulence in the financial markets is characterised by increased trading volumes, a move towards consolidation, and probable increased oversight and regulation.  The Board continues to look forward with confidence as the Company is trading strongly, has increasing levels of revenue visibility and expects to report further progress in the full financial year. The Company considers that its expertise and product base is well placed to take advantage of opportunities emerging from this shifting landscape.

  Income statement (unaudited)


 

6 months ended 31 August
2008

6 months ended 31 August
2007

 

£'000

£'000

Revenue

6,828

5,641

Cost of sales

(3,672)

(3,159)

Gross profit

3,156

2,482

 

 

 

Administrative expenses

(808)

(496)

Other income 

134

23

Results from operating activities

2,482

2,009

 

 

 

Financial income

2

1

Financial expenses

(244)

(149)

Net financing costs

(242)

(148)

 

 

 

Share of (loss)/profit of equity accounted associates

-

(12)

Profit before tax

2,240

1,849

 

 

 

Income tax expense  

(807)

(496)

 

 

 

Profit for the period

1,433

1,353

 

 

 

Pence

Pence

Earnings per Share 
Basic


10.8


10.4


  Statement of changes in equity


Share
capital

Share
premium

Shares
option
reserve

Available
for sale
reserve

Retained
earnings

Total
equity


£'000

£'000

£'000

£'000

£'000

£'000

 

 

 

 

 

 

 

Balance at 1 March 2007

65

1,020

535

190

3,616

5,426

Deferred tax on share options outstanding

-

-

-

-

5

5

 

 

 

 

 

 

 

Total income and expense recognised directly in equity

-

-

-

-

5

5

Profit for the year

-

-

-

-

1,353

1,353

Total recognised income and expense

-

-

-

-

1,353

1,353

Shares issued

-

86

-

-

-

86

Share based payment charge

-

-

172

-

-

172

Dividends to equity holders

-

-

-

-

(468)

(468)

Balance at 31 August 2007

65

1,106

707

190

4,506

6,574

 

 

 

 

 

 

Balance at 1 March 2008

66

1,278

719

223

6,016

8,302

Deferred tax on share options outstanding

-

-

-

-

-

-

 

 

 

 

 

 

 

Total income and expense recognised directly in equity

-

-

-

-

-

-

Profit for the year

-

-

-

-

1,433

1,433

Total recognised income and expense

-

-

-

-

1,433

1,433

Shares issued

1

7

-

-

-

8

Share based payment charge

-

-

175

-

(222)

(47)

Dividends to equity holders

-

-

-

-

(773)

(773)

Balance at 31 August 2008

67

1,285

894

223

6,454

8,923


  

Balance Sheet (unaudited)


 

As at
31 August
2008

 

As at
31 August
2007

 

As at 
2
9 February
2008

 

£'000

 

£'000

 

£'000

 

 

 

 

 

 

Intangible assets

250

 

140

 

125

Property, plant and equipment

17,073

 

11,327

 

16,786

Investments accounted for using the equity method

-

 

243

 

-

Other investments

1,872

 

209

 

520

Deferred tax asset

277

 

567

 

541

 

19,472

 

12,486

 

17,972

Current assets

 

 

 

 

 

Trade and other receivables

2,534

 

3,798

 

4,126

Cash and cash equivalents

1,377

 

1,077

 

396

 

3,911

 

4,875

 

4,522

Current liabilities

 

 

 

 

 

Interest bearing borrowings

(1,820)

 

(2,415)

 

(1,834)

Trade and other payables

(2,203)

 

(1,491)

 

(2,453)

Current tax payable

(1,315)

 

(1,260)

 

(1,228)

Employee benefits

(866)

 

(711)

 

(625)

 

(6,204)

 

(5,877)

 

(6,140)

 

 

 

 

 

 

Net current liabilities

(2,293)

 

(1,002)

 

(1,618)

 

 

 

 

 

 

Total assets less current liabilities

17,179

 

11,484

 

16,354

 

 

 

 

 

 

Non-current liabilities

 

 

 

 

 

Interest bearing borrowings

(8,256)

 

(4,910)

 

(7,965)

Deferred tax liability

-

 

-

 

(87)

 

 

 

 

 

 

Net assets

8,923

 

6,574

 

8,302

 

 

 

 

 

 

Equity

 

 

 

 

 

Issued capital

67

 

65

 

66

Share premium account

1,285

 

1,106

 

1,278

Shares to be issued

894

 

707

 

719

Available for sale reserve

223

 

190

 

223

Retained earnings

6,454

 

4,506

 

6,016

 

 

 

 

 

 

Total equity

8,923

 

6,574

 

8,302

  Cash Flow Statement (unaudited)


 

6 months ended
31 August

2008

 

6 months ended
31 August

2007

 

£'000

 

£'000

 

 

 

 

Cashflows from operating activities

 

 

 

Cash receipts from customers

8,226

 

6,813

Cash paid to suppliers and employees

(4,643)

 

(4,470)

Cash generated from operations

3,583

 

2,343

Interest paid

(242)

 

(333)

Net cash from operating activities

3,341

 

2,010

 

 

 

 

Cashflows from investing activities

 

 

 

Interest received

1

 

1

Acquisition of property, plant and equipment

(396)

 

(484)

Acquisition of other financial assets

(1,352)

 

-

Acquisition of intangibles

(125)

 

(50)

Net cash from investing activities

(1,872)

 

(533)

 

 

 

 

Cash flow from financing activities

 

 

 

Repayment of borrowings

(910)

 

(372)

New borrowings

1,187

 

-

Proceeds from issue of share capital

8

 

87

Dividends paid

(773)

 

(468)

Net cash from financing activities

(488)

 

(753)

 

 

 

 

Net increase in cash and cash equivalents

981

 

724

Cash and cash equivalents at 1 March

396

 

353

Cash and cash equivalents at 31 August

1,377

 

1,077


  

Notes to the Interim Results


1    Basis of Preparation

The results for the six months ended 31 August 2008 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 2008.


The financial statements contained in this report do not constitute statutory accounts within the meaning of Article 248 of the Companies (Northern Ireland) Order 1986 (as amended by Article 12 of the Companies (Northern Ireland) Order 1990.  The results for the period ended 29 February 2008 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 2008 have been delivered to the Registrar of Companies.


2.    Dividends

An Interim Dividend of 2.35p per share is proposed for the six months to 31 August 2008. This will be paid to shareholders on 31 October 2008 to shareholders on the register on 17 October 2008The shares will be Ex-Dividend on 15 October 2008.


3.    Earnings per Share

The earnings per share for the six months ended 31 August 2008 has been calculated on the basis of the profit after taxation of £1.433m. Earnings per share of 10.8 pence has been calculated based on 13,280,523 shares outstanding.


4.    Post Balance Sheet 

On the 15 September 2008 the Company announced the acquisition of Market Resource Partners ('MRP') a US based technology marketing company headquartered in Philadelphia, PA, for a total consideration of up to $20 million (£11.3m) (the 'Acquisition'). The Acquisition comprised an initial cash payment of $4.5m (£2.5m) and a further $1.5m (£0.8m) through the issue of 436,644 First Derivatives new ordinary shares (the 'Consideration Shares').  The Consideration Shares were allotted and accepted to the AIM and IEX Markets on 2 October 2008.  An additional deferred consideration of up to a maximum of $14m (£7.9m) will be payable, subject to MRP achieving certain profit goals during the two years ending 31 August 2010.


5.    Interim Report

The interim report will be circulated to all shareholders. 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.



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