TIDMFDP
RNS Number : 2294S
First Derivatives PLC
05 November 2019
5 November 2019
First Derivatives plc
("FD", the "Company" or the "Group")
Interim results for the six months ended 31 August 2019
FD (AIM: FDP.L, Euronext Growth: FDP.I) today announces its
results for the six months ended 31 August 2019.
Financial Highlights
Six months to 31 August 2019 2018 Change
Revenue GBP116.7m GBP105.6m +11%
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Gross profit GBP48.0m GBP43.9m +9%
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Adjusted EBITDA* GBP22.0m GBP18.1m +22%
---------- ---------- -------
Profit before tax GBP8.4m GBP7.6m +12%
---------- ---------- -------
Reported diluted EPS 24.2p 21.7p +11%
---------- ---------- -------
Interim dividend per share 8.5p 7.7p +10%
---------- ---------- -------
Net debt** GBP60.2m GBP24.2m
---------- ---------- -------
*Adjusted for share-based payments and acquisition costs; H1
2020 adjusted EBITDA (excluding impact of IFRS 16): GBP20.2m
(+12%)
**Excluding lease obligations under IFRS 16
Business Highlights
-- Software revenue up 13% to GBP71.4m (H1 2019: GBP63.1m),
driven by 19% growth in recurring software license revenue
-- Multiple contract wins across both software and managed
services and consulting providing confidence in our outlook,
including notable deals signed with a major Japanese bank for the
global roll-out of a next generation e-FX platform built on Kx and
multi-year assignments across our managed services and consulting
business
-- Software revenue from Industry increased by 45% to GBP4.4m
(H1 2019: GBP3.1m); while at an early stage we have achieved
substantial progress across a number of strategic enterprise and
partnership opportunities, some of which we expect to close and
announce during H2
-- Managed services and consulting revenue up 7% to GBP45.2m (H1
2019: GBP42.5m) with our long-term, strategic client relationships
and market-leading services enabling continued growth
-- Completion of the acquisition of the minority shareholdings
in Kx Systems, taking 100% ownership, funded by new financing
facilities which provide flexibility to support the Group's growth
plans
-- Strong pipeline and momentum going into the second half
provide us with confidence in the Group's full year
performance.
Seamus Keating, Executive Chairman of FD, commented: "We
successfully executed on our strategy during the period, signing a
number of key contracts across our business, and making strong
progress towards securing landmark contracts in the markets we are
targeting across Industry. We continue to progress our search for a
new CEO following the passing in July of our founder, Brian Conlon,
and we will provide an update when the process is complete.
Our financial performance was solid, and we are encouraged by
the growing momentum through the period that provides confidence in
achieving another year of strong growth, in line with consensus
forecasts*."
*The Group believes consensus revenue and adjusted EBITDA
(excluding the impact of IFRS 16) forecasts for the year to 29
February 2020 to be GBP242.9m and GBP43.8m respectively.
For further information, please contact:
First Derivatives plc +44(0)28 3025 2242
Seamus Keating, Executive Chairman www.firstderivatives.com
Graham Ferguson, Chief Financial Officer
Ian Mitchell, Head of Investor Relations
Investec Bank plc
(Nominated Adviser and Broker)
Andrew Pinder
Carlton Nelson
Sebastian Lawrence +44 (0)20 7597 5970
Goodbody (Euronext Growth Adviser and
Broker)
David Kearney
Don Harrington
Finbarr Griffin +353 1 667 0420
FTI Consulting
Matt Dixon
Dwight Burden
Darius Alexander
Niamh Fogarty +44 (0)20 3727 1000
About FD
FD is a global technology provider with more than 20 years of
experience working with some of the world's largest finance,
technology, automotive, utility, manufacturing and energy
institutions. The Group's Kx technology, incorporating the kdb+
time-series database, is a leader in high-performance, in-memory
computing, streaming analytics and operational intelligence. Kx
delivers the best possible performance and flexibility for
high-volume, data-intensive analytics and applications across
multiple industries. FD operates from 15 offices across Europe,
North America and Asia Pacific, including its headquarters in
Newry, and employs more than 2,400 people worldwide.
For further information, please visit www.firstderivatives.com
and www.kx.com
Business Review
The Group has delivered a solid financial performance for the
period, in which revenue increased by 11% to GBP116.7m with
adjusted EBITDA increasing by 22% to GBP22.0m, as we continue to
invest in our long-term growth strategy. The period was notable for
the strategic progress achieved across our markets but overshadowed
by the loss of our founder, Brian Conlon.
In our Kx business, we continued to build on our leading
position in FinTech, with 18% growth in recurring revenue and the
signing of notable contracts that will further contribute to
revenue growth in future periods; we posted strong underlying
growth in our MarTech business; and in Industry we saw initial
revenue from a number of contracts and partnership agreements won
in prior periods, while making progress with others that we expect
to close and announce during the second half of the financial
year.
In our managed services and consulting business we recorded 7%
growth as we transitioned some staff from the successful completion
of multi-year implementation projects onto new assignments, while
investing in public cloud training. We have achieved a number of
notable contract wins during the year to date, and we continue to
be well placed to assist our clients with both their 'run the bank'
and 'change the bank' programmes.
We employ more than 2,400 people, whose combined talents are
directed at serving our existing and potential clients. With the
combination of a proven strategy, world-class technology targeting
a vast addressable market and a talented and committed workforce,
we continue to face the future with confidence.
Kx platform
Kx is a technology platform that enables the analysis of vast
quantities of data, both real-time and historic, at cost and
performance levels unmatched by competing solutions. Kx offers a
flexible solution - at its core the platform comprises the kdb+
database, with its highly efficient 600kb footprint, and an
enterprise layer designed to maximise analytic performance while
providing vital functions such as security, control and
visualisation. The platform provides all the integration and
development tools required to enable a third party, such as an OEM
partner or a direct customer, to build their own customised
applications. This approach enables these third parties to deliver
a solution that meets their specific business needs while
benefitting from Kx's performance (Kx is typically orders of
magnitude faster than competing solutions), efficiency (including
lower hardware and power costs), and flexibility (with deployment
options ranging from the edge, to on-premise, cloud and hybrid
architectures). The stability of our platform, which is tried and
tested across some of the most demanding industries in the world,
is also a differentiator, providing competitive advantage against
emerging technologies that cannot demonstrate the resilience
achieved by Kx.
The Kx platform also provides the Group with the ability to
develop applications where the business case is compelling. Our
domain expertise in FinTech, garnered over more than twenty years,
has enabled us to build applications that target areas such as
market surveillance, regulatory reporting, algorithmic trading and
liquidity management. We continue to seek opportunities to develop
new applications; in those markets where we lack sufficient reach
or domain expertise we will continue to target partnership
agreements with systems integrators and OEMs who will be
responsible for sales and delivery, supported by us. This approach
reduces risk and enables deeper engagement across a wider range of
potential customers than the Group could achieve under a solely
direct sales model.
Research and development
Our R&D continues to focus around three key themes -
improving the performance of our technology, growing its
addressable market and making it easier to adopt.
Improving performance. We released a new version of our platform
with more than 100 new features, which included improved security
capabilities, increased support for Kafka and Python and
improvements to ease the deployment of the platform. The new
version also included increased functionality for our visualisation
solution, Kx Dashboards. Our commitment to making Kx the leading
platform for AI was reinforced by new features and performance
improvements including enhanced integration with Python's Pandas
library.
Growing addressable market. During the period, to encourage
greater use of our technology within organisations, we made our
developer tools available to all our enterprise customers as part
of their existing license agreements. This move has been
particularly well received, leading to multiple training requests
and adding expansion opportunities with existing customers to our
sales pipeline. We also released a number of our software tools as
free and open source versions, including tools that make it easier
to integrate Kx with other enterprise technology platforms as well
as tools aimed at the developer community at large. Our aim is to
increase adoption of our Kx technology and enable as wide a
community as possible to understand the potential of Kx to meet
their big data challenges.
Ease of adoption. We delivered a series of initiatives to expand
the use of Kx on the public cloud, which aims to simplify Kx
deployment. We launched 'Kx on demand' on both the Amazon Web
Services Marketplace and Google Cloud Launcher and we also achieved
'advanced partner' status with Amazon Web Services, following
investment in staff training. We are committed to enabling our
clients to adopt Kx wherever it is needed - from chip to edge to
cloud.
We have also partnered with Intel in the period to support the
release of Optane DC Persistent Memory, a technology that delivers
improved memory and storage performance and which promises
significant performance gains for enterprise analytics. Following
our work with Intel, Kx supports Optane DC natively and we are
working with Intel on joint marketing initiatives to communicate
the advantages that Kx and Optane DC can deliver when combined.
Taken together, these initiatives are boosting our technology's
performance, enabling us to increase our total addressable market
and ease the adoption and integration of Kx within our clients'
technology infrastructure, thereby driving revenue and profit
growth.
Business development
FinTech
FinTech software continued to deliver strong growth, with total
revenue up by 11% to GBP44.6m and recurring license revenue up by
18% to GBP15.8m, representing 35% of total FinTech software revenue
(H1 2019: 33%). Growth came from continued demand for solutions
such as regulatory and risk reporting, market surveillance and
trading analytics. Using Kx as a platform for these solutions
enables our clients to improve the quality and integrity of their
data, allowing them to generate more revenue, increase their
operational efficiency and to meet regulatory scrutiny in a timely
and cost-effective manner.
We continue to see our clients evaluate and prepare to move
their data operations to the public cloud, attracted by
opportunities for development agility and innovation combined with
the ability to cope with peaks in compute resource demands. FD is
well placed to assist with this transformation, which we expect to
be a multi-year strategic shift in technology delivery and which
offers the potential to drive significant growth in our revenue
from both FinTech software and managed services and consulting.
During the period we signed a number of significant new
multi-year contracts, which will underpin growth in future periods.
These included one of our largest ever deals, developing a next
generation FX trading platform for a major Japanese bank, where Kx
will become an integral component of the bank's global FX trading;
a contract for Kx to power an AI-based pricing engine and trading
platform, using our data refinery product for rapid deployment; the
displacement of a competitor at a European bank for the capture of
fixed income and FX data; and the sale of a range of our products
to a bank based in the Middle East.
We have a strong pipeline across a range of products and
geographies, including areas such as surveillance / financial crime
and our data refinery platform.
MarTech
Revenue from MarTech increased by 13% to GBP22.4m with 52% of
this revenue derived from subscription contracts (H1 2019: 49%).
Our solution, powered by Kx and branded as MRP Prelytix, is the
only enterprise-class B2B predictive Account-Based Marketing (ABM)
platform. It delivers predictive analytics derived from billions of
data points, ingested in real-time, enabling clients to dynamically
activate a wide range of sales and marketing tactics informed by
real-time insights.
The unique insights provided by MRP Prelytix and our constant
technical innovation of the platform resulted in MRP Prelytix being
recognised within its industry through the award of 'Best Overall
ABM Solution' at the 2019 MarTech Breakthrough Awards. In addition,
industry analysts Ovum published a report in which MRP Prelytix was
named as a 'Leader' in ABM, noting that MRP's "thoughtful
integrated use of artificial intelligence within ABM is going to
create many opportunities for sales and marketing organizations to
better engage with their target account portfolio."
This technical and market leadership translated into additional
direct sales during the period as well as the emergence of new
sources of revenue through global media agency and channel
partners, which represent potentially significant revenue streams
for our platform.
We continue to sign new clients on a subscription basis while a
number of existing clients increased their use of the platform
based on the strong return on investment they had achieved in prior
periods. Technology companies continue to form the core of our
client base in MarTech, as exemplified through a significant new
client win with a large semi-conductor manufacturer. However, our
platform is applicable to a wide range of industries and we were
pleased to sign new clients across a range of industries, including
several additions in financial services and a sizable deal for a
global management consultancy business.
During the period we also broadened and deepened the
capabilities of our MRP platform. We introduced new functionality,
including content syndication driven by MRP Prelytix, which extend
our reach deeper into clients by working with their agency partners
to capture more of their total sales and marketing spend. These
initiatives are expected to generate additional revenue in future
periods while increasing the appeal of our platform as a
comprehensive lead generation solution.
These additional direct and agency deals began to contribute to
our revenue during H1 and were more than sufficient to offset the
loss of a significant customer which was the subject of a corporate
restructuring in early 2019 and which significantly cut its
marketing expenditure as a result. We saw revenue build through the
period and are pleased with our momentum into H2 and beyond.
Industry
Kx technology's performance and total cost of ownership
advantages have enabled us to generate considerable interest across
a number of high value markets where data volumes and velocity
present significant challenges. Our strategy is to seek
predictable, long-term revenue streams, such as OEM and revenue
share agreements, while securing direct sales that establish our
position within our target industry markets. This means revenues
are tempered in the current investment phase, but in the longer
term should deliver strong, predictable growth across a range of
markets.
Our industry revenue grew by 45% to GBP4.4m in the period (H1
2019: GBP3.1m), with recurring revenue up by 12%. Growth came from
the progression of the OEM and partnership agreements closed in
prior periods as successful implementation of our software was
achieved in these new markets. We are pleased with the high level
of interest we are seeing across industries in the adoption of our
software, resulting from a continued focus on marketing,
development and sales expansion efforts. Importantly, during the
period we progressed a number of high-value opportunities relating
to both potential partnership and OEM agreements as well as direct
sales. Notable progress during the period included:
-- Automotive - Following our appointment last year as
Innovation Partner to Aston Martin Red Bull Racing (AMRBR), we have
continued to make progress, signing a contract during the period
with a further high-profile F1 team for the use of Kx to support
in-race telematics. We continue to see opportunities for other F1
teams to adopt Kx, with these engagements offering the potential to
push Kx deeper into the automotive ecosystem generally. We are
generating significant interest across the automotive industry and
continue to progress opportunities across engineering, design,
telemetry and connected cars.
-- Utilities - We have made progress on a number of large-scale,
long-term contract bids to deliver Kx as a platform within
utilities, working alongside our partner CGI, which counts many of
the world's leading utilities as customers. We continue to work to
deliver a next-generation electricity information exchange for
Fingrid, the transmission system operator for Finland, through
which we are building intellectual property that we will be able to
re-use in future Kx deployments. We expect numerous utility market
participants to upgrade their systems in the coming years and,
while the bid process for such deals is lengthy, we believe we are
well placed to generate significant long-term revenues from this
market.
-- Smart manufacturing - Our previously announced OEM agreements
with a Fortune 500 provider of precision manufacturing equipment
and with BISTel, a leading South Korean provider of smart
manufacturing solutions, continue to develop in line with our
expectations. Both OEMs are using Kx for Sensors and kdb+ to enable
more rapid decision making based on vast quantities of sensor data,
ultimately to assist their customers improve production yields.
This is a use case that resonates through smart manufacturing and
is enabling us to progress a pipeline of direct and OEM sales
opportunities.
After the period end, we have made further progress towards
securing a number of high-profile partnership and OEM agreements
across multiple use cases, some of which we expect to be able to
close and announce during H2. We are also in late stage discussion
with several significant direct prospects which, if signed, could
contribute to current year revenue. We see this anticipated growth
in commercial agreements as a natural evolution of our sales
process, with lengthy initial sales cycles as we penetrate new
markets, which allows Kx to establish itself and generate a
pipeline of opportunities with other participants in the
market.
Managed services and consulting
Revenue from managed services and consulting was GBP45.2m, an
increase of 7% on the prior period (H1 2019: GBP42.5m). FD has more
than 20 years of experience providing services to leading capital
markets firms, training and developing our consultants in-house
through industry-recognised programmes to equip them with data
science skill sets and an understanding of how capital markets
firms use technology to underpin their business. We provide support
for mission-critical systems, assist clients with regulatory change
initiatives and assist in the delivery of both "run-the-bank" and
"change-the-bank" projects across our client base.
While the long-term and strategic nature of our client
relationships provides high levels of visibility in our managed
services and consulting activities, growth during the period was
below that experienced in recent years. This was expected and was
due to a combination of two multi-year third party vendor
implementations completing successfully at the start of our
financial year, with the staff involved moving onto other projects
through the period and weaker economic conditions impacting client
decision making, with demand in London soft but balanced by
increased demand in Europe and UK regional centres and our near
shore activities
Notwithstanding economic uncertainty, we secured a number of
contract wins during the period, particularly around regulatory
compliance and reporting in Europe. We have also expanded the range
of third-party vendor technologies we support and developed some
additional propositions that we believe will be attractive to our
clients and increase our addressable market.
As a result, irrespective of any improvement in economic
conditions, we expect growth to accelerate in our traditionally
stronger H2. Our confidence is underlined by a number of multi-year
contracts signed in recent months which include:
-- The implementation of an application rationalisation and
migration programme for a regional division of a major investment
bank, representing a new customer win in a competitive bid
process.
-- Delivering a multi-year programme of regulatory-driven
projects and an application upgrade for a North American bank.
-- Providing implementation and delivery services under a new
agreement with a third-party independent software vendor, provided
by FD on a near-shore basis with considerable growth potential.
Given our high levels of ongoing visibility and recent contract
wins we are confident that our multi-year track record of growth in
our managed services and consulting business will continue, led by
our commitment to quality and excellence in our financial services,
vendor services, regulatory and managed services practices.
Furthermore, we believe there are a number of large-scale projects
ready to be initiated when economic conditions and macro
uncertainty improve, which provides confidence in the longer-term
growth capabilities in managed services and consulting.
CEO Succession
As announced on 29 July, FD's founder and CEO Brian Conlon
passed away during the period. Under our succession planning, a
process to appoint a successor was initiated and Non-Executive
Chairman Seamus Keating was appointed Executive Chairman to guide
the business through that process and oversee the Executive
Committee in the interim period. The CEO recruitment process is a
priority for the Group and a further update will be provided in due
course.
People
The Group employs more than 2,400 people, unchanged from the
same time last year as we have focused on consolidating our
position following record levels of recruitment in recent years.
Our graduate recruitment and training programme attracts a vibrant
team and equips them with high levels of in-demand skills. During
the period FD was awarded a Charter Mark by Diversity Mark NI for
our work on diversity and inclusion, while more than 500 of our
staff commenced cloud certification training to enhance our
capabilities across the business as our interactions with public
cloud providers such as AWS, Google and Azure continue to
deepen.
We have also extended our recruitment and development efforts
with programmes aimed at providing apprenticeships for school
leavers as they work towards their chosen degree. Retention rates
remain in line with prior periods and are significantly higher than
the industry average, driven by our commitment to continued
training and development programmes, a rewarding career path and a
fair remuneration and reward system.
Current trading and outlook
We move into the second half of our financial year with good
momentum across the business. The investment programme in recent
years has generated a strong pipeline of opportunities across our
business, and we remain confident of securing contracts across the
markets we are targeting within industry. Combined with a solid
performance in H1 this provides confidence in the achievement of
full year results in line with consensus forecasts.
Financial Review
The table below highlights the components of revenue growth
across the Group along with an analysis of gross profit. The
analysis also shows our revenue and growth by vertical market.
Revenue and Gross Margin Analysis (GBPm)
H1 H1 H1 H1 H1 H1 H1 H1
2020 2019 Change 2020 2019 Change 2020 2019 Change 2020 2019 Change
Software by sector Total Software
FinTech Revenue MarTech Revenue Industry
1.9 6.3 (69%) - - - 1.2 0.3 253% Perpetual 3.2 6.6 (52%)
15.8 13.3 18% 11.7 9.8 20% 0.8 0.7 12% Recurring 28.3 23.8 19%
------ ------ ------ ------ ------ ------ --------- -------
17.7 19.6 (10%) 11.7 9.8 20% 2.0 1.1 92% Licenses 31.5 30.4 3%
Cost of
sales (6.0) (5.0) 20%
--------- -------
Gross
profit 25.4 25.4 -
Gross
margin 81% 84% (3%)
26.9 20.7 30% 10.7 10.0 7% 2.4 2.0 20% Services 40.0 32.7 22%
Cost of
sales (28.3) (23.4) 21%
--------- -------
Gross
profit 11.7 9.3 26%
Gross
margin 29% 28% 1%
44.6 40.3 11% 22.4 19.8 13% 4.4 3.1 45% Revenue 71.4 63.1 13%
Cost of
sales (34.3) (28.4) 21%
--------- -------
Gross
profit 37.2 34.7 7%
Gross
margin 52% 55% (3%)
Total Managed services
Managed services and consulting by sector and consulting
FinTech Revenue MarTech Revenue Industry
45.2 42.5 7% - - - - - - Revenue 45.2 42.5 7%
Cost of
sales (34.4) (33.3) 3%
--------- -------
Gross
profit 10.8 9.2 18%
Gross
margin 24% 22% 2%
Sector Totals
FinTech Revenue MarTech Revenue Industry
89.8 82.7 9% 22.4 19.8 13% 4.4 3.1 45% Revenue 116.7 105.6 11%
Cost of
sales (68.7) (61.7) 11%
--------- -------
Gross
profit 48.0 43.9 9%
Gross
margin 41% 42% -
EBITDA and net margin profit analysis
R&D (5.6) (4.9) 15%
Sales
expense (17.2) (15.8) 9%
Adjusted
operating
expense (7.6) (9.0) (16%)
Adj. EBITDA
ex cap 17.6 14.2 23%
Capitalised
R&D 4.4 3.8 15%
Adj. EBITDA 22.0 18.1 22%
Adj. EBITDA
margin 19% 17% 2%
Revenue and Margins
Group revenue increased organically by 11% to GBP116.7m (H1
2019: GBP105.6m) driven by continued strong growth in recurring
software revenue, balanced by a reduction in perpetual software
license revenue and lower growth in managed services and
consulting. As a result of this mix, gross margin reduced slightly
to 41% (H1 2019: 42%).
Our continued investment in the Group's operations resulted in
an increase in sales and marketing cost of 9%, building on the 21%
increase seen in FY 2019, as we added new sales and pre-sales staff
to expand our market reach. Research and development costs
increased by 15%, in line with recent periods, as we continued to
deliver improvements in our software's performance and
interoperability for the benefit of our growing client base. Other
operating expenses increased by 2% reflecting the Group's fiscal
discipline.
Software
Total software revenue increased by 13% to GBP71.4m and
represented 61% of total Group revenue (H1 2019: 60%). While total
software license revenue increased by 3%, this included a 52% fall
in perpetual license revenue and a 19% gain in recurring license
revenue as we focused on growing our high-quality recurring
revenue. Perpetual license revenue is lumpy and difficult to
predict and the prior year represented a strong comparator period.
We expect H2 to deliver an increased level of perpetual license
revenue over H1, given the status of our advanced pipeline.
Software revenue from FinTech increased by 11% to GBP44.6m,
reflecting a 10% decline in license revenue (18% increase in
recurring license revenue offset by a 69% decrease in perpetual
licenses) and 30% growth in services revenue. Our software
services, comprising implementation, managed services and
development work for our Kx clients, have been in high demand
during the period as the use cases for our technology continue to
expand as further reliance is placed on our technology stack.
Total revenue from MarTech was up by 13% to GBP22.4m, driven by
continued growth in subscription revenue, which was up by 20% to
GBP11.7m, and a 7% increase in services revenue. For the first
time, revenue from software subscriptions formed the majority of
MarTech revenue and we continue to expect the subscription
component of the mix to trend upwards. Momentum increased through
the period, driven by new client wins and additional revenue
streams, and we are confident of ongoing good growth in
MarTech.
Software revenue from Industry increased by 45% to GBP4.4m. Our
short-term performance in this is driven by the level of perpetual
license revenue which, from a low base, was up 253% in the period
as some of our previous OEM and partner wins moved into production.
We have maintained our focus on obtaining revenue share agreements,
particularly through OEM agreements, accepting perpetual deals only
where necessary. While slower to generate revenue in early periods,
we are confident this approach will result in larger ongoing
royalty-style payments to the Group in future periods as products
and solutions with "Kx Inside" are brought to market by our clients
and partners. Recurring revenue grew by 12% in the period and we
expect H2 to show growth on H1 in both recurring and perpetual
license revenue.
Software gross margin decreased slightly from 55% to 52%, driven
by the reduction of high margin perpetual license revenue in the
mix. Software license gross margin fell to 81% (H1 2019: 84%) and
license revenue was 44% of total software revenue (H1 2019: 48%).
Software services gross margin grew marginally to 29% (H1 2019:
28%) as utilisation increased in the period. We invested to grow
the Kx services team in H1 and will continue to invest in H2 to
support the expansion of our technology across our markets.
Managed services and consulting
Managed services and consulting revenue increased by 7% to
GBP45.2m while delivering gross margins of 24%, up from 22% in the
prior period. While revenue growth was lower than in recent periods
due to the reasons discussed in the Business Review, our high level
of visibility in this business enabled us to match our recruitment
requirements to growth levels and therefore increase margins. Based
on current activity levels we anticipate another year of
double-digit revenue growth and have increased our recruitment in
recent months in line with future growth expectations.
Profit before tax
Reported profit before tax increased by 12% to GBP8.4m (H1 2019:
GBP7.6m). Adjusted profit before tax increased by 6% to GBP13.3m
(H1 2019: GBP12.6m) held back by increased interest costs following
the completion of the acquisition of the minority interest in Kx
Systems Inc. The calculation of adjusted profit before tax is
detailed below.
H1 2020 H1 2019
GBPm GBPm
Reported profit before tax 8.4 7.6
Adjustments for:
Amortisation of acquired intangibles 1.9 1.8
Share-based payment and related costs 1.6 1.5
Acquisition costs, associate disposal costs and
changes in deferred consideration 0.9 1.6
Loss on foreign currency translation 0.5 -
Share of loss of associate - -
Adjusted profit before tax 13.3 12.6
Other income, which relates mostly to employment and training
incentive grants, was GBP0.1m for the period, down from GBP0.4m in
the prior year period.
The Group continued to invest in research and development to
maintain its technology lead, with total R&D up 15% to GBP5.6m.
Net capitalisation of R&D decreased by 23% in the period, as
detailed below:
H1 2020 H1 2019 Movement
GBPm GBPm
Research and development costs:
Expensed during the period 1.2 1.1 12%
Capitalisation of product development
costs 4.4 3.8 15%
Total research and development 5.6 4.9 15%
Amortisation of R&D (4.0) (3.3) 22%
Net capitalisation of R&D 0.4 0.6 (23%)
IFRS 16
The Group has implemented IFRS 16, the new accounting standard
dealing with leases, using the modified retrospective method
applied from 1 March 2019. The impact of the new standard is to
move the charge on the income statement for operating leases from
operating costs to depreciation and interest, while on the balance
sheet there is an asset recognising the right of use and a future
lease liability within both current and non-current
liabilities.
These impacts are detailed in note 1 to the statement.
Earnings per share
Reported profit after tax increased by 12% to GBP6.6m (H1 2019:
GBP5.9m) and reported diluted earnings per share increased by 11%
to 24.2p per share (H1 2019: 21.7p).
The adjusted profit after tax for the period of GBP10.9m (H1
2019: GBP10.6m) represented growth of 3%. The major factors
impacting earnings per share growth were a higher interest charge
and an increase in the Group's adjusted tax rate to 18.0% (H1 2019:
16.0%).
The calculation of adjusted profit after tax is detailed
below:
H1 2020 H1 2019
GBPm GBPm
Reported profit after tax 6.6 5.9
Adjustments from profit before tax 4.9 5.0
Tax effect of adjustments and US tax reform (0.6) (0.4)
Adjusted profit after tax 10.9 10.6
Weighted average number of ordinary shares (diluted) 27.5m 27.3m
Adjusted EPS (fully diluted) 39.6p 38.7p
The fully diluted average number of shares in issue increased to
27.5m (H1 2019: 27.3m) as additional existing share options were
exercised. This resulted in adjusted fully diluted earnings per
share of 39.6p, representing growth of 2% for the period (H1 2019:
38.7p).
Balance sheet
Total assets increased by 17% to GBP317.7m (H1 2019: GBP272.3m).
The purchase of the minority interest in Kx Systems for $53.8m in
cash in June 2019 impacted the balance sheet by eliminating the
liability due to the minority interest shareholders. The result of
this transaction saw interest costs increase in the period as new
loans were drawn in U.S. dollars. This transaction, along with the
implementation of IFRS 16, saw non-current loans and borrowings
increase by GBP61.4m.
In February 2019 the Group announced it had secured new
financing facilities comprising a term loan of GBP65m and a
revolving loan facility of a further GBP65m, replacing the existing
facilities on improved terms. While the Group is comfortable
operating at this level of indebtedness, it is expected that the
current level of net debt represents the peak and should reduce in
future periods, driven by operating cash flow, subject to other
strategic activities that may be undertaken in future periods.
Other financial assets, which includes equity investments,
increased to GBP15.4m (FY 2019: GBP13.7m) reflecting the lower
increase in funding provided for venture companies during the
period.
Deferred revenue at the period end was up 9% at GBP17.5m (H1
2019: GBP16.1m), arising from the continued growth in recurring
license revenue in the period.
Cash generation and net debt
The Group generated GBP16.4m of cash from operating activities
before taxes paid (H1 2019: GBP13.5m) representing 74% conversion
of adjusted EBITDA (H1 2019: 74%). The Group typically has a
stronger H2 cash generation profile as it benefits from the billing
and collection of the majority of the Group's recurring revenue,
while H1 sees larger payments out in the form of taxation and
dividend payments in addition to staff bonuses.
At the period end, net debt was GBP60.2m (H1 2019: GBP24.2m).
The factors impacting the movement in net debt are summarised in
the table below:
H1 2020 H1 2019
GBPm GBPm
Opening net debt (excluding lease liabilities) (16.1) (16.2)
Operating cash flow 16.4 13.5
Taxes paid (3.0) (3.7)
Dividends paid (5.1) (4.3)
Capital expenditure: property, plant and equipment (1.2) (2.5)
Capital expenditure: intangible assets (4.4) (3.8)
Deferred consideration paid - (4.1)
Acquisition of subsidiaries (43.0) -
Investments (1.0) (3.3)
Issue of new shares 3.6 2.6
Finance leases (1.6) -
Interest, foreign exchange and other (4.8) (2.3)
Closing net debt (60.2) (24.2)
The Group assists innovative start-up and scale-up businesses
seeking to use the power of Kx, in return for a revenue share. In
some cases we inject seed capital to help launch the business and
bring solutions to market quickly. The table below summarises the
investments made in such companies to date as well as the maximum
future commitment and the revenue generated for the Group. Future
commitments to these businesses are typically payable only if
certain pre-determined challenging performance milestones are
achieved. In H1 2020 the Group advanced GBP1.0m in equity and loans
to its new and existing venture agreement companies with a maximum
further commitment of up to GBP1.9m across all 21 venture
agreements.
Total to
H1 2020 H1 2019 date
Number of venture agreements in period 3 4 21
Equity and loans advanced (GBPm) 1.0 3.3 17.7
Outstanding commitment (GBPm) 1.9 2.7
Revenue share agreements 4 4 20
Revenue recognised for software services
(GBPm) 0.4 0.9 5.6
Licenses recognised under revenue share
agreements (GBPm) 0.1 0.0 0.8
Dividend
The Board has declared an interim dividend of 8.50p per share
(H1 2019: 7.70p per share) which will be paid on 5 December 2019 to
those shareholders on the register on 15 November 2019.
Consolidated income statement (unaudited)
Six months ended 31 August 2019
2019 2018
Note GBP'000 GBP'000
Revenue 2 & 3
Software licenses and services 71,441 63,111
Managed services and consulting 45,235 42,463
--------- ---------
Total revenue 116,676 105,574
Cost of sales 2
Software licenses and services (34,286) (28,399)
Managed services and consulting (34,411) (33,293)
--------- ---------
Total cost of sales (68,697) (61,692)
Gross profit 47,979 43,882
Operating costs
Research and development costs (5,605) (4,883)
Of which capitalised 4,425 3,833
Sales and marketing costs (17,244) (15,785)
Administrative expenses (18,874) (19,337)
Impairment (loss)/gain on trade and other
receivables (200) 249
Other income 121 364
--------- ---------
Total operating costs (37,377) (35,559)
Operating profit 10,602 8,323
Acquisition costs and changes in contingent
deferred consideration 871 1,582
Share-based payment and related costs 1,578 1,543
Depreciation and amortisation 7,083 4,774
Amortisation of acquired intangible assets 1,850 1,846
--------- ---------
Adjusted EBITDA 21,984 18,068
--------------------------------------------- ------ --------- ---------
Finance income 14 1
Finance expense (1,628) (714)
Loss on foreign currency translation (548) (46)
--------- ---------
Net finance costs (2,162) (759)
Share of loss of associate, net of tax (8) (6)
--------- ---------
Profit before taxation 8,432 7,558
Income tax expense (1,791) (1,626)
Profit for the period 6,641 5,932
========= =========
Pence Pence
Earnings per share 5
Basic 25.2 23.0
Diluted 24.2 21.7
The Group has initially applied IFRS 16 at 1 March 2019. Under
the transition method chosen comparative information has not been
restated; see note 1.
Consolidated statement of changes in equity (unaudited)
Six months ended 31 August 2019
Share Share Merger Share Fair value Currency Retained Total
capital premium reserve option reserve translation earnings equity
reserve adjustment
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 1 March 2019 131 79,726 8,118 10,744 3,587 3,944 36,560 142,810
Impact of changes in accounting
policy - see note 1 - - - - - - 399 399
-------- -------- -------- -------- ---------- ------------ --------- -------
Restated balance at 1 March
2019 131 79,726 8,118 10,744 3,587 3,944 36,959 143,209
-------- -------- -------- -------- ---------- ------------ --------- -------
Total comprehensive income
for the period
Profit for the period - - - - - - 6,641 6,641
Other comprehensive income
Net exchange gain on net
investment
in foreign subsidiaries - - - - - 10,563 - 10,563
Net exchange loss on hedge
of net investment in foreign
subsidiaries - - - - - (4,840) - (4,840)
Net change in fair value of - - - - - - - -
equity investments at FVOCI
-------- -------- -------- -------- ---------- ------------ --------- -------
Total comprehensive income
for the period - - - - - 5,723 6,641 12,364
Transactions with owners of
the Company
Tax relating to share options - - - 1,026 - - - 1,026
Exercise of share options 2 4,579 - (976) - - - 3,605
Issue of shares as contingent
deferred consideration - 1,096 - - - - - 1,096
Share-based payment charge - - - 737 - - - 737
Dividends to owners of the
Company - - - - - - (5,084) (5,084)
-------- -------- -------- -------- ---------- ------------ --------- -------
Balance at 31 August 2019 133 85,401 8,118 11,531 3,587 9,667 38,516 156,953
======== ======== ======== ======== ========== ============ ========= =======
The Group has initially applied IFRS 16 at 1 March 2019. Under
the transition method chosen comparative information has not been
restated; see note 1.
Consolidated statement of changes in equity (unaudited)
Six months ended 31 August 2018
Share Share Merger Share Fair value Currency Retained Total
capital premium reserve option reserve translation earnings equity
reserve adjustment
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 1 March 2018 128 81,286 - 14,341 - (6,874) 49,218 138,099
Impact of correction of reserves
classification(1) - (8,118) 8,118 - - 8,588 (8,588) -
Impact of changes in accounting
policy(2) - - - - - - (1,002) (1,002)
-------- -------- -------- -------- ---------- ------------ --------- -------
Restated balance at 1 March
2018 128 73,168 8,118 14,341 - 1,714 39,628 137,097
-------- -------- -------- -------- ---------- ------------ --------- -------
Total comprehensive income
for the period
Profit for the period - - - - - - 5,932 5,932
Other comprehensive income
Net exchange gain on net
investment
in foreign subsidiaries - - - - - 6,076 - 6,076
Net exchange loss on hedge
of net investment in foreign
subsidiaries - - - - - (1,588) - (1,588)
Net change in fair value of - - - - - - - -
equity investments at FVOCI
-------- -------- -------- -------- ---------- ------------ --------- -------
Total comprehensive income
for the period - - - - - 4,488 5,932 10,420
Transactions with owners of
the Company
Tax relating to share options - - - 1,307 - - - 1,307
Exercise of share options 2 2,565 - - - - - 2,567
Change in measurement of NCI
put - - - - - - (9,346) (9,346)
Share-based payment charge - - - 645 - - - 645
Dividends to owners of the
Company - - - - - - (4,383) (4,383)
-------- -------- -------- -------- ---------- ------------ --------- -------
Balance at 31 August 2018 130 75,733 8,118 16,293 - 6,202 31,831 138,307
======== ======== ======== ======== ========== ============ ========= =======
(1) See note 33 in the Group's financial statements for the
period ended 28 February 2019 for details of restatement relating
to reserves classification.
(2) See note 1a in the Group's financial statements for the
period ended 28 February 2019 for impact of changes in accounting
policy relating to the adoption of IFRS 9 at 1 March 2018. The
Group has also initially applied IFRS 16 at 1 March 2019. Under the
transition method chosen comparative information has not been
restated; see note 1.
Consolidated balance sheet (unaudited)
As at 31 August 2019
As at As at As at
31 August 31 August 28 February
2019 2018 2019
Restated(1)
Note GBP'000 GBP'000 GBP'000
Assets
Property, plant and equipment 6 32,597 8,691 10,162
Intangible assets and goodwill 160,559 156,996 151,965
Equity accounted investee 2,710 2,631 2,711
Other financial assets 15,374 3,870 13,706
Trade and other receivables 4,809 9,810 5,720
Deferred tax assets 17,367 20,223 15,352
----------- ------------ -------------
Non-current assets 233,416 202,221 199,616
Trade and other receivables 61,516 57,065 57,915
Current tax receivable 2,655 - 1,461
Cash and cash equivalents 20,128 12,984 18,798
----------- ------------ -------------
Current assets 84,299 70,049 78,174
Total assets 317,715 272,270 277,790
=========== ============ =============
Equity
Share capital 133 130 131
Share premium 85,401 75,733 79,726
Merger reserve 8,118 8,118 8,118
Shares option reserve 11,531 16,293 10,744
Fair value reserve 3,587 - 3,587
Currency translation adjustment
reserve 9,667 6,202 3,944
Retained earnings 38,516 31,831 36,560
----------- ------------ -------------
Equity attributable to shareholders 156,953 138,307 142,810
----------- ------------ -------------
Liabilities
Loans and borrowings 7 95,188 33,805 289
Trade and other payables 3,773 1,360 3,300
Deferred tax liabilities 11,153 10,382 10,827
----------- ------------ -------------
Non-current liabilities 110,114 45,547 14,416
Loans and borrowings 7 8,094 3,339 34,998
Trade and other payables 8 37,392 75,689 77,546
Current tax payable 537 639 1,004
Employee benefits 4,625 5,966 5,945
Contingent deferred consideration - 2,783 1,071
----------- ------------ -------------
Current liabilities 50,648 88,416 120,564
Total liabilities 160,762 133,963 134,980
----------- ------------ -------------
Total equity and liabilities 317,715 272,270 277,790
=========== ============ =============
(1) See note 33 and note 1a in the Group's financial statements
for the period ended 28 February 2019 for details of restatement
relating to reserves classification and impact of changes in
accounting policy relating to the adoption of IFRS 9 at 1 March
2018 respectively. The Group has also initially applied IFRS 16 at
1 March 2019. Under the transition method chosen comparative
information has not been restated; see note 1.
Consolidated cash flow statement (unaudited)
Six months ended 31 August 2019
2019 2018
GBP'000 GBP'000
Cash flows from operating activities
Profit for the period 6,641 5,932
Adjustments for:
Net finance costs 2,162 759
Depreciation of property, plant and equipment 3,086 1,495
Amortisation of intangible assets 5,847 5,125
Associate income 8 6
Increase in deferred consideration - 842
Equity settled share-based payment transactions 1,578 1,543
Grant income (121) (364)
Tax expense 1,791 1,626
--------- ---------
20,992 16,964
Changes in:
Trade and other receivables (2,067) (3,110)
Trade and other payables (2,560) (396)
--------- ---------
Cash generated from operating activities 16,365 13,458
Taxes paid (2,986) (3,695)
--------- ---------
Net cash from operating activities 13,379 9,763
Cash flows from investing activities
Interest received 14 1
Acquisition of subsidiary (42,874) -
Acquisition of other investments and associates (668) (437)
Increase in loans to other investments (345) (2,883)
Acquisition of property, plant and equipment (1,239) (2,465)
Acquisition of intangible assets (4,425) (3,833)
Deferred consideration paid (IFRS 3 purchase consideration) - (4,111)
--------- ---------
Net cash used in investing activities (49,537) (13,728)
Cash flows from financing activities
Proceeds from issue of share capital 3,605 2,567
Drawdown of loans and borrowings 76,933 8,900
Repayment of borrowings (35,210) (1,766)
Payment of finance lease liabilities (1,547) (7)
Interest paid (1,386) (679)
Dividends paid (5,107) (4,316)
--------- ---------
Net cash generated from financing activities 37,288 4,699
Net increase in cash and cash equivalents 1,130 734
Cash and cash equivalents at 1 March 18,798 12,365
Effects of exchange rate changes on cash held 200 (115)
--------- ---------
Cash and cash equivalents at 31 August 20,128 12,984
========= =========
The Group has initially applied IFRS 16 at 1 March 2019. Under
the transition method chosen comparative information has not been
restated; see note 1.
Notes to the Interim Results
1 Accounting policies
Basis of Preparation
The results for the six months ended 31 August 2019 are
unaudited and have not been reviewed by the Company's Auditors.
Except as described below they have been prepared on accounting
bases and policies that are consistent with those used in the
preparation of the financial statements of the Company for the year
ended 28 February 2019.
The financial statements contained in this report do not
constitute statutory accounts within the meaning of Section 477 of
the Companies Act 2006. They have been prepared in accordance with
International Accounting Standard 34 'Interim Financial Reporting',
as adopted by the European Union. The results for the period ended
28 February 2019 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 2019 have
been delivered to the Registrar of Companies.
Going concern
The directors are satisfied that the Group has sufficient
resources to continue in operation for the foreseeable future, a
period of not less than 12 months from the date of this report.
Accordingly, they continue to adopt the going concern basis in
preparing the condensed financial statements.
Changes in accounting policies
The following standards, amendments and interpretations were
effective for accounting periods beginning on or after 1 March 2019
and these have been adopted in the Group financial statements where
relevant:
-- IFRS 16 Leases;
-- Amendments to IAS 28 Long-term interests in Associates and Joint Ventures;
-- Annual Improvements to IFRS Standards 2015-2017 Cycle;
-- IFRIC 23 Uncertainty over income tax treatment.
The effects of applying IFRS 16 is described in further detail
below. The other changes listed above did not result in material
changes to the Group financial statements.
IFRS 16 Leases
The Group adopted IFRS 16 from 1 March 2019 using the modified
retrospective method with the cumulative effect of initially
applying the standard reflected as an adjustment to the opening
balance of retained earnings as of 1 March 2019; as such,
comparative information has not been restated to reflect the new
requirements.
IFRS 16 changed lease accounting mainly for lessees and replaced
the existing standard IAS 17. An asset for the right to use the
leased item and a liability for future lease payments is recognised
for all leases, subject to limited exemptions for short-term leases
and low-value lease assets. The costs of leases are recognised in
profit or loss split between depreciation of the lease asset and a
finance charge on the lease liability. This is similar to the
accounting for finance leases under IAS 17, but substantively
different to the accounting treatment for operating leases under
which no lease asset or lease liability was recognised. IFRS 16
also includes an election which permits a lessee not to separate
non-lease components (e.g. maintenance) from lease components and
instead capitalise both the lease cost and associated non-lease
costs.
The standard primarily affected the accounting for the Group as
a lessee under operating leases. The application of IFRS 16
resulted in the recognition of additional assets and liabilities in
the Group balance sheet and in the consolidated income statement
and it replaced the straight-line operating lease expense with a
depreciation charge for the right-of-use asset and an interest
expense on the lease liabilities. The Group availed of the
recognition exemption for short-term and low-value leases. The
Group also elected to use the following practical expedients
available on transition to IFRS 16:
-- not to reassess whether a contract is or contains a lease.
Accordingly, the definition of a lease in accordance with IAS 17
and IFRIC 4 will continue to be applied to those leases entered
into or modified before 1 March 2019;
-- use hindsight in determining the lease term;
-- apply a single discount rate to portfolios of leases with reasonably similar characteristics;
-- not to separate non-lease components, instead accounting for
any lease and associated non-lease components as a single
arrangement.
All right-of-use assets were measured at the amount of the lease
liability on adoption. The Group's weighted average incremental
borrowing rate applied to lease liabilities as at 1 March 2019 is
3.75%.
Details of the Group's accounting policies under IFRS 16 are set
out below:
At inception of an arrangement, the Group determines whether
such an arrangement is or contains a lease. A lease conveys a right
to control the use of an identified asset for a period of time in
exchange for consideration. At inception or upon reassessment of
the arrangement, the Group allocates the consideration for lease
and non-lease components on the basis of their relative fair
values. However, for certain leases of properties the Group has
elected not to separate non-lease components and instead accounts
for the lease and non-lease components as a single arrangement. The
Group recognises a right-of-use asset and a corresponding lease
liability with respect to all lease arrangements in which it is the
lessee, except for short-term leases (defined as leases with a
lease term of 12 months or less) and leases of low value
assets.
The lease liability is initially measured at the present value
of the lease payments that are not paid at the commencement date,
discounted by using the rate implicit in the lease. If this rate
cannot be readily determined, the Group uses its incremental
borrowing rate. Generally, the Group uses its incremental borrowing
rate as the discount rate. The lease liability is subsequently
measured by increasing the carrying amount to reflect interest on
the lease liability and by reducing the carrying amount to reflect
the lease payments made. It is remeasured, with a corresponding
adjustment to the right-of-use asset, when there is a change in the
future lease payments. The lease liability is presented within
loans and borrowings in the consolidated balance sheet.
The right-of-use assets is initially measured at cost,
comprising the initial measurement of the corresponding lease
liability, any lease payments made at or before the commencement
day and any initial direct costs. They are subsequently measured at
cost less accumulated depreciation and impairment losses.
Right-of-use assets are depreciated on a straight-line basis over
the shorter of the lease term and useful life of the underlying
asset. The depreciation starts at the commencement date of the
lease. The right-of-use asset is tested for impairment if there are
any indicators of impairment. The right-of-use assets are presented
within the same line item as that within which the corresponding
underlying assets would be presented if they were owned - for the
Group this is property, plant and equipment.
For short-term leases and leases of low-value assets lease
payments are recognised in profit or loss on a straight-line basis
over the term of the lease unless another systematic basis is more
representative of the time pattern in which economic benefits from
the leased assets are consumed. This expense is presented within
other operating expenses in the consolidated income statement.
Prior to 1 March 2019 the policy was as follows:
i) Operating lease payments
Payments made under operating leases are recognised in profit or
loss on a straight-line basis over the term of the lease. Lease
incentives received are recognised in profit or loss as an integral
part of the total lease expense, over the terms of the lease.
ii) Finance lease payments
Minimum lease payments made under finance leases are apportioned
between the finance charge and the reduction of the outstanding
liability. The finance expense is allocated to each period during
the lease term so as to produce a constant periodic rate of
interest on the remaining balance of the liability.
iii) Determining whether an arrangement contains a lease
At inception of an arrangement, the Group determines whether
such an arrangement is or contains a lease. A specific asset is the
subject of a lease if fulfilment of the arrangement is dependent on
the use of that specified asset. An arrangement conveys the right
to use the asset if the arrangement conveys to the Group the right
to control the use of the underlying asset.
At inception or upon reassessment of the arrangement, the Group
separates payments and other consideration required by such an
arrangement into those for the lease and those for other elements
on the basis of their relative fair values. If the Group concludes
for a finance lease that it is impracticable to separate the
payments reliably, then an asset and a liability are recognised at
an amount equal to the fair value of the underlying asset.
Subsequently the liability is reduced as payments are made and an
imputed finance charge on the liability is recognised using the
Group's incremental borrowing rate.
Impact of conversion
The following table summarises the impact of transition to IFRS
16 on retained earnings at 1 March 2019.
Retained earnings Impact of
adopting
IFRS 16
at 1 March
2019
GBP'000
a Property, plant and equipment: Recognition of property, plant
and equipment 23,159
b Trade and other receivables: Rent prepayment adjustment 399
c Loan and borrowings non-current: Recognition of long-term lease
liability (19,988)
c Loan and borrowings current: Recognition of short-term lease
liability (3,171)
------------
Impact at 1 March 2019 399
============
The following tables summarise the impacts of adopting IFRS 16
on the Group's interim income statement for the six months ended 31
August 2019 and the Group's interim balance sheet for each of the
line items affected.
Impact on the consolidated income statement
Six months
ended 31
Six months ended 31 August August 2018
2019 (unaudited) (unaudited)
Amounts Amounts
without without
adoption adoption
As reported Adjustments of IFRS of IFRS
(IFRS 16) 16 16
GBP'000 GBP'000 GBP'000 GBP'000
Total revenue 116,676 - 116,676 105,574
Total cost of sales (68,697) - (68,697) (61,692)
------------ -------------- ---------- -------------
Gross profit 47,979 - 47,979 43,882
Administrative expenses (18,874) (272) (19,146) (19,337)
Other operating costs (18,503) - (18,503) (16,222)
------------ -------------- ---------- -------------
Total operating costs (37,377) (272) (37,649) (35,559)
Operating profit 10,602 (272) 10,330 8,323
Depreciation and amortisation 7,083 (1,557) 5,526 4,774
Other EBITDA adjustments 4,299 - 4,299 4,971
------------ -------------- ---------- -------------
Adjusted EBITDA 21,984 (1,829) 20,155 18,068
--------------------------------- ------------ -------------- ---------- -------------
Finance expense (1,628) 272 (1,356) (714)
Other finance costs (534) - (534) (45)
------------ -------------- ---------- -------------
Net finance costs (2,162) 272 (1,890) (759)
Share of loss of associate, net
of tax (8) - (8) (6)
------------ -------------- ---------- -------------
Profit before taxation 8,432 - 8,432 7,558
Income tax expense (1,791) - (1,791) (1,626)
------------ -------------- ---------- -------------
Profit for the period 6,641 - 6,641 5,932
============ ============== ========== =============
Impact on the consolidated balance sheet
As at 31 As at 28
As at 31 August 2019 August 2018 February
2019
(unaudited) (unaudited) (audited)
Amounts Amounts Amounts
without without without
adoption adoption adoption
As reported Adjustments of IFRS of IFRS of IFRS
(IFRS 16) 16 16 16
Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Property, plant
and equipment a 32,597 (22,332) 10,265 8,691 10,162
Other non-current
assets 200,819 - 200,819 193,530 189,454
------------ -------------- ---------- ------------- ----------
Non-current assets 233,416 (22,332) 211,084 202,221 199,616
Trade and other
receivables b 61,516 (697) 60,819 57,065 57,915
Other current assets 22,783 - 22,783 12,984 20,259
------------ -------------- ---------- ------------- ----------
Current assets 84,299 (697) 83,602 70,049 78,174
Total assets 317,715 (23,029) 294,686 272,270 277,790
============ ============== ========== ============= ==========
Retained earnings 38,516 (399) 38,117 31,831 36,560
Other equity 118,437 - 118,437 106,476 106,250
------------ -------------- ---------- ------------- ----------
Equity attributable
to shareholders 156,953 (399) 156,554 138,307 142,810
------------ -------------- ---------- ------------- ----------
Loans and borrowings c 95,188 (19,284) 75,904 33,805 289
Other non-current
liabilities 14,926 - 14,926 11,742 14,127
------------ -------------- ---------- ------------- ----------
Non-current liabilities 110,114 (19,284) 90,830 45,547 14,416
Loans and borrowings c 8,094 (3,346) 4,748 3,339 34,998
Other current liabilities 42,554 - 42,554 85,077 85,566
------------ -------------- ---------- ------------- ----------
Current liabilities 50,648 (3,346) 47,302 88,416 120,564
Total liabilities 160,762 (22,630) 138,132 133,963 134,980
------------ -------------- ---------- ------------- ----------
Total equity and
liabilities 317,715 (23,029) 294,686 272,270 277,790
============ ============== ========== ============= ==========
2 Segmental Reporting
Information about reportable segments
Managed services Software Total
and consulting
2019 2018 2019 2018 2019 2018
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Revenue by segment
Revenue 45,235 42,463 71,441 63,111 116,676 105,574
Cost of sales (34,411) (33,293) (34,286) (28,399) (68,697) (61,692)
Gross profit 10,824 9,170 37,155 34,712 47,979 43,882
Geographical location analysis
2019 2018
GBP'000 GBP'000
UK 31,272 29,891
Rest of Europe 21,920 17,483
North America 49,599 47,105
Asia Pacific 13,885 11,095
Total 116,676 105,574
3 Revenue
Disaggregation of revenue
Managed services Software Total
and consulting
2019 2018 2019 2018 2019 2018
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Revenue by industry
FinTech 45,235 42,463 44,565 40,252 89,800 82,715
MarTech - - 22,429 19,789 22,429 19,789
Other - - 4,447 3,070 4,447 3,070
------------------------------- ------------------------------- ------------------------------- ------------------------------- -------------------------------- -------------------------------
45,235 42,463 71,441 63,111 116,676 105,574
------------------------------- ------------------------------- ------------------------------- ------------------------------- -------------------------------- -------------------------------
Type of good or service
Sale of goods - perpetual - - 3,160 6,615 3,160 6,615
Sale of goods - recurring - - 28,293 23,823 28,293 23,823
Rendering of services 45,235 42,463 39,988 32,673 85,223 75,136
------------------------------- ------------------------------- ------------------------------- ------------------------------- -------------------------------- -------------------------------
45,235 42,463 71,441 63,111 116,676 105,574
------------------------------- ------------------------------- ------------------------------- ------------------------------- -------------------------------- -------------------------------
Timing of revenue
recognition
At a point in time - - 3,160 6,615 3,160 6,615
Over time 45,235 42,463 68,281 56,496 113,516 98,959
------------------------------- ------------------------------- ------------------------------- ------------------------------- -------------------------------- -------------------------------
45,235 42,463 71,441 63,111 116,676 105,574
------------------------------- ------------------------------- ------------------------------- ------------------------------- -------------------------------- -------------------------------
4 Dividends
An Interim dividend of 8.50p per share will be made for the six
months to 31 August 2019. This will be paid to shareholders on 5
December 2019 to shareholders on the register on 15 November 2019.
The shares will be marked Ex-Dividend on 14 November 2019.
5 Earnings per Share
Basic earnings per share for the six months ended 31 August 2019
has been calculated on the basis of the reported profit after
taxation of GBP6.6m (H1 2019: GBP5.9m) and the weighted average
number of shares for the period of 26,396,587 (H1 2019:
25,767,759). This provides basic earnings per share of 25.2 pence
(H1 2019: 23.0 pence).
Diluted earnings per share for the six months ended 31 August
2019 has been calculated on the basis of the reported profit after
taxation of GBP6.6m (H1 2019: GBP5.9m) and the weighted average
number of shares after adjustment for the effects of all dilutive
potential ordinary shares 27,496,863 (H1 2019: 27,341,839). This
provides diluted earnings per share of 24.2 pence (H1 2019: 21.7
pence).
The Board considers that adjusted earnings is an important
measure of the Group's financial performance. Adjusted earnings in
the period was GBP10,892k (H1 2019: GBP10,571k), which excludes the
amortisation of acquired intangibles of GBP1,850k, (H1 2019:
GBP1,846k) share-based payments of GBP1,578k (H1 2019: GBP1,543k),
acquisition costs of GBP871k (H1 2019: GBP1,582k), loss on foreign
currency translation of GBP548k (H1 2019: GBP46k), share of loss of
associate GBP8k (H1 2019: GBP6k) and associated taxation impact of
these adjustments of GBP604k (H1 2019: GBP384k). Using the same
weighted average of shares as above provides adjusted basic
earnings per share of 41.3 pence (H1 2019: 41.0 pence) and adjusted
diluted earnings per share of 39.6 pence (H1 2019: 38.7 pence).
6 Property, plant and equipment
Leasehold Plant and Office furniture Right-of-use Total
improvements equipment GBP'000 assets
GBP'000 GBP'000 GBP'000 GBP'000
Cost
At 1 March 2019 5,092 16,151 1,201 - 22,444
Adjustment on initial
application of IFRS
16 - - - 23,159 23,159
Additions 18 1,211 10 - 1,239
Exchange adjustments 76 620 10 762 1,468
-------------- ----------------- ----------------------- --------------- ---------------
At 31 August 2019 5,186 17,982 1,221 23,921 48,310
-------------- ----------------- ----------------------- --------------- ---------------
Depreciation
At 1 March 2019 2,099 9,425 758 - 12,282
Charge for the period 189 1,224 116 1,557 3,086
Exchange adjustments 45 258 10 32 345
-------------- ----------------- ----------------------- --------------- ---------------
At 31 August 2019 2,333 10,907 884 1,589 15,713
-------------- ----------------- ----------------------- --------------- ---------------
Leasehold Plant and Office furniture Right-of-use Total
improvements equipment GBP'000 assets
GBP'000 GBP'000 GBP'000 GBP'000
Cost
At 1 March 2018 3,622 12,840 869 - 17,331
Additions 1,005 1,208 252 - 2,465
Exchange adjustments 38 7 4 - 49
-------------- ----------------- ----------------------- ------------- -------------
At 31 August 2018 4,665 14,055 1,125 - 19,845
-------------- ----------------- ----------------------- ------------- -------------
Depreciation
At 1 March 2018 1,696 7,357 564 - 9,617
Charge for the period 302 1,112 81 - 1,495
Exchange adjustments 6 35 1 - 42
-------------- ----------------- ----------------------- ------------- -------------
At 31 August 2018 2,004 8,504 646 - 11,154
-------------- ----------------- ----------------------- ------------- -------------
Carrying amounts
At 1 March 2018 1,926 5,483 305 - 7,714
===== ===== === ====== ======
At 31 August 2018 2,661 5,551 479 - 8,691
===== ===== === ====== ======
At 1 March 2019 2,993 6,726 443 - 10,162
===== ===== === ====== ======
At 31 August 2019 2,853 7,075 337 22,332 32,597
===== ===== === ====== ======
7 Loans and borrowings
31 August 31 August 28 February
2019 2018 2019
GBP'000 GBP'000 GBP'000
Current liabilities
Secured bank loans 4,651 3,339 34,909
Lease liabilities 3,443 - 89
8,094 3,339 34,998
Non-current liabilities
Secured bank loans 75,638 33,805 -
Lease liabilities 19,550 - 289
95,188 33,805 289
8 Trade and other payables
31 August 31 August 28 February
2019 2018 2019
GBP'000 GBP'000 GBP'000
Current liabilities
Trade payables 7,143 6,632 6,638
Other payables 11,117 9,852 10,191
Accruals 888 901 699
Deferred income 17,546 16,078 19,537
Government grants 698 899 390
NCI forward - 41,327 40,091
37,392 75,689 77,546
31 August 31 August 28 February
2019 2018 2019
GBP'000 GBP'000 GBP'000
Non-current liabilities
Government grants 2,729 1,360 2,597
Accruals 1,044 - 703
3,773 1,360 3,300
9 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 web site
www.firstderivatives.com.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR BIBDBCSGBGCS
(END) Dow Jones Newswires
November 05, 2019 02:00 ET (07:00 GMT)
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