TIDMFDP
RNS Number : 2719N
First Derivatives PLC
19 May 2020
19 May 2020
First Derivatives plc
("FD", the "Company" or the "Group")
Full year results for the year ended 29 February 2020
FD (AIM: FDP.L, Euronext Growth: FDP.I) today announces its
audited results for the year ended 29 February 2020.
Financial Highlights
Year to 29 February 2020 2019 Change
Revenue GBP237.8m GBP217.4m +9%
---------- ---------- -------
Gross profit GBP101.1m GBP91.3m +11%
---------- ---------- -------
Adjusted EBITDA* GBP45.5m GBP38.9m +17%
---------- ---------- -------
Profit** before tax GBP18.3m GBP16.7m +9%
---------- ---------- -------
Reported diluted EPS 54.2p 47.9p +13%
---------- ---------- -------
Full year dividend per share 8.5p 27.0p -69%
---------- ---------- -------
Net debt*** GBP49.4m GBP16.5m
---------- ---------- -------
*Adjusted for share-based payments and acquisition costs; FY
2020 adjusted EBITDA (excluding impact of IFRS 16): GBP41.4m
(+6%)
**Includes foreign currency translation effect and deferred
consideration on prior acquisitions
***Excluding lease obligations under IFRS 16
Business Highlights
-- Software revenue up 13% to GBP148.4m (2019: GBP130.9m), driven by 23%
growth in recurring software license revenue.
-- Significant contract wins in our core FinTech market and progress in
our drive to achieve market leadership by building out the capabilities
of our solutions.
-- Partner agreements and contract wins across our target markets of automotive,
manufacturing and energy as we focus on those markets where Kx provides
the greatest competitive advantage, including a global Kx partnership
agreement announced separately today with Tata Consultancy Services
(TCS).
-- MRP Prelytix subscription revenue up 33% to GBP25.6m (2019: GBP19.3m)
as we increase the platform's functionality and it becomes recognised
as a leader in its market.
-- Managed services and consulting revenue up 3% to GBP89.4m (2019: GBP86.5m)
with strong order intake in H2 but lower growth due to a delayed start
to two multi-year contracts.
-- Launch of Kx 4.0 with increased performance, security, visualisation
and machine learning capabilities to spearhead our push to wide adoption
of Kx across industries.
-- Finalisation 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.
-- Appointments of Seamus Keating as Chief Executive Officer and Donna
Troy as Chairman in January 2020.
Donna Troy, Chairman of FD, commented: "The past year has been
one of the most significant in the Group's history, having to cope
with the sudden loss of our founder and CEO, Brian Conlon, and then
the challenges posed by COVID-19. I am proud of the way our
business has pulled together to address these challenges, working
as one to support our customers and position ourselves for the next
stage of our growth journey.
Against that backdrop, these results represent a period of solid
execution. In the short term, while it is still too early to
determine the impact of COVID-19, the Group has acted to protect
the health and wellbeing of employees, to support the
business-critical operations of our customers and to ensure our
ongoing financial liquidity. In the longer term, we believe the
Group has never been so strategically well placed, with our
customers and partners telling us that Kx streaming analytics
technology changes the game for them. We have set ourselves some
demanding goals and I firmly believe we have the best technology
and people to achieve them."
For further information, please contact:
First Derivatives plc +44(0)28 3025 2242
Seamus Keating, Chief Executive Officer 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 +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, 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
Conference call and webcast
FD will host a live webcast at 09.30 BST today which can be
accessed via this link:
https://edge.media-server.com/mmc/p/xbwpximc
Business Review
The Group has delivered another year of solid growth, in which
revenue increased by 9% to GBP237.8m and adjusted EBITDA increased
by 17% to GBP45.5m. This growth was driven by good progress in the
execution of our strategy, although we also faced challenges,
including the loss of our CEO and founder, Brian Conlon, and
dealing with the impact of COVID-19.
In line with our continuity planning Seamus Keating was
appointed as Executive Chairman in July 2019 and, following a
selection process, as Chief Executive Officer in January 2020.
Donna Troy, previously a Non-Executive Director, was appointed
Chairman in January 2020. Throughout the year, our strategy has
remained unchanged while our execution has evolved to focus more
sharply on the most compelling commercial opportunities across the
business. These include:
-- In FinTech, by combining the performance of Kx with our domain expertise
to focus on achieving market leadership for our core solutions. This
includes, for example, building out the capabilities of our surveillance
platform to cover multiple asset classes in a single platform.
-- In software markets outside FinTech, by focusing on those markets where
Kx provides the greatest competitive advantage. This typically means
enabling streaming analysis of data from machines, including at the
edge.
-- In managed services and consulting, by focusing on commercialising our
expertise in middle and front-office trading systems, risk and regulatory
reform and back-office efficiency programmes.
Across our business, as our customers increasingly pivot to the
cloud, we are directing our efforts to ensure that Kx and our data
expertise are in pole position to help them obtain the benefits of
agility and flexibility by enabling easy access to the competitive
advantages Kx provides. The recent launch of serverless kdb+ is an
important initiative to accelerate this process.
Kx streaming analytics is a game changer, enabling new ways of
working that deliver operational efficiency and generate new
revenue streams for our clients. Examples include analysing
streaming data from machines in precision manufacturing to improve
yields and reduce waste; mining vast volumes of intent data to
deliver sales leads that convert at higher rates than competing
methods; and streaming analytics on F1 cars to increase safety and
improve lap times.
We are harnessing all of our R&D and sales and marketing
efforts to support our focus on these key areas, which represent
enormous market opportunities. Our aim over the medium term is to
ensure that our targeted investment in these areas enables us to
scale our business and create value for all stakeholders.
Kx streaming analytics
Kx enables the analysis of vast quantities of data, both
streaming and historical, at cost and performance levels unmatched
by competing solutions. At its core, the technology comprises the
kdb+ database, with its highly efficient 800kb footprint, and an
enterprise layer designed to maximise analytic performance while
providing vital functions such as security, control and
visualisation.
Kx streaming analytics delivers considerable competitive
advantage. In addition to being orders of magnitude faster than
competing solutions, Kx delivers hardware, space, cooling and power
savings of 80-90%, based on the results of head-to-head testing
during proof of concept projects with potential clients.
Flexibility is another differentiator, with the ability to deploy
at the edge, on-premise, and in any cloud architecture. The
stability of our platform, which is tried and tested across some of
the most demanding industries in the world, is also important to
clients, providing competitive advantage against emerging
technologies that cannot demonstrate the resilience achieved by
Kx.
To harness the power of Kx, the Group has developed a number of
applications specific to FinTech and MarTech, while third parties,
such as an OEM partner or a direct customer, have integrated Kx
into their own solutions and built new applications using our
development tools. This approach enables these third parties to
deliver a solution that meets their specific business needs while
benefiting from Kx's performance advantages.
Research and development
Our R&D initiatives are designed to further our strategy, by
building on our leading position in FinTech and by enabling Kx to
penetrate other target markets. We also continue our ongoing focus
to ensure that the significant performance advantages Kx holds over
competing solutions are maintained, if not enhanced. Taken
together, our R&D efforts are crucial to our ability to change
the game for customers and therefore for our long-term
competitiveness.
Over the course of the past year we picked up the pace of our
technology development, adopting an agile product development
strategy that resulted in major improvements to Kx's performance
and over 250 separate features across our platform and application
products. We also increased support for Kafka and Python, aiding
our push to make Kx a leading platform for machine learning and
AI.
We also set a roadmap for Kx streaming analytics which we
believe will further enhance our market position in FinTech and
provides the foundation for growth across our target markets.
Building on our leading position in FinTech . Our enterprise
customers across financial services use our technology for its
performance, enabling them to capture, store and analyse millions
of data points per second in streaming market data and enormous
volumes of historical data. We augmented this capability with
improved real-time visualisation functionality, enhanced security
features and by making our developer tools available to our
enterprise customers as part of their existing license
agreements.
Penetrating other target markets using the performance
advantages of Kx. To increase awareness and promote our technology
we 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 Kx
and enable as wide a community as possible to understand its
potential to solve the toughest data challenges.
Another key focus of our recent R&D work has been on
boosting Kx's performance and ability to operate in cloud
environments:
-- The recent launch of version 4.0 delivers major performance improvements
by taking advantage of all the processing capability inherent in modern
computing systems, which builds on the work we have done over the years
with partners such as Intel. We anticipate that 4.0 will set new benchmarks
that will further extend Kx's performance leadership.
-- Kx has long been able to run in the cloud, whether public, private or
hybrid, and we are extending that capability to deliver serverless kdb+,
removing the need for users to run and manage physical infrastructure.
This approach significantly accelerates development effort and allows
users to pay only for the time they use for functional workloads. This
reduces the operational cost of Kx solutions and as a result broadens
the addressable market for our technology. The initial launch of serverless
Kx will be on the Amazon Web Services Lambda platform.
-- Kx is the only database that offers native support for Intel's Optane,
a high-performance storage and memory technology that Amazon and Google
are deploying across their datacentres.
Taken together, our R&D initiatives are supporting our
strategy by 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,
with the goal of driving revenue and profit growth.
Business development
FinTech
FinTech software continued to deliver strong growth, with
revenue up by 11% to GBP89.4m (2019: GBP80.2m). This growth was
driven by continued demand for solutions such as regulatory and
risk reporting, market surveillance and trade analytics. Combining
the power of our Kx platform with our domain expertise within
capital markets enables us to develop applications that have both
the power and functionality to lead the market.
During the year we signed several new multi-year contracts,
including:
-- One of our largest ever deals, developing a next generation FX trading
platform for SMBC Bank, where Kx will become an integral component of
the bank's global FX trading.
-- A multi-asset class surveillance solution for a North American bank.
-- 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.
We are well positioned to continue to grow our solution revenue
as market trends move increasingly in favour of our technology. The
introduction of serverless kdb+ comes at a time when banks are
accelerating their plans to move their data and applications to the
cloud, driven by development agility and business flexibility
demands. We expect this will be a multi-year structural shift that
will drive growth across our business, as banks seek to standardise
on best-in-class technologies.
We also see an increase in regulatory demands, leading banks to
implement powerful solutions to demonstrate compliance to their
industry regulators across asset classes. Given this backdrop we
have enhanced our powerful and flexible trade surveillance
software, to enable banks to achieve a holistic solution. This
encompasses communications surveillance, launched during the year
with a reference customer, and multi-asset class surveillance
within a single platform. This is a unique offering that simplifies
the process of surveillance and enables new insights across the
bank's activities.
We have a growing base of recurring revenue within FinTech and a
pipeline of opportunities across our solutions and the geographies
in which we operate.
MarTech
Revenue from MarTech increased by 14% to GBP47.3m (2019:
GBP41.4m). Our solution, powered by Kx and branded as MRP Prelytix,
changes the game for organisations by enabling them to identify and
engage potential customers earlier and more effectively, driving
greater revenue and market share. It does so using predictive
analytics derived from billions of data points, enabling clients to
dynamically activate a wide range of sales and marketing tactics
informed by real-time insights, in an approach known as Account
Based Marketing (ABM).
Industry analyst Forrester recently forecast that by 2025 ABM
would become the mainstream approach for business-to-business
marketing, as organisations adopt an account-centric view to
identify, plan, manage and measure their activities. In its report
Forrester recognised MRP Prelytix as a "leading, established" ABM
vendor.
We provide our platform on a subscription basis, supported by
engagement services to assist lead management and conversion. Our
clients report that we generate a return on investment for them
that is considerably higher than competing solutions. Global
technology companies currently form the core of our client base, as
exemplified through significant new client wins during the year
including Advanced Micro Devices, a cloud-based communications
provider and several leading hardware providers. We continue to
seek to diversify our MRP Prelytix client base, with financial
services and management consultancy representing particularly
attractive markets that delivered important new clients in the
year.
During the year we continued to add new functionality to extend
our market leadership. We increased the advanced analytics
available in our platform, enabling our customers to build their
own AI-driven models to optimise results, and delivered a new
configurable dashboard that provides a single view of the customer
using all the available data. We also introduced content
syndication, which extends our reach deeper into clients by working
with their agency partners to capture more of their total sales and
marketing spend.
The unique insights provided by MRP Prelytix and our constant
technical innovation resulted in growing industry recognition. In
addition to securing 'Best Overall ABM Solution' at the 2019
MarTech Breakthrough Awards, analyst Research in Action categorised
our solution as 'Market Leader' and noted that it scored highest in
customer satisfaction in its market review.
We ended the year with good momentum in MarTech, as our
investment in innovation drives industry recognition and increasing
use of MRP Prelytix is proving the value it delivers for customers.
Our priorities for the current year are to further differentiate
our platform by building on its functionality, to drive awareness
of our platform to generate new direct and agency customers, and to
penetrate deeper within our existing customers by demonstrating the
return on investment we generate for them.
Industry
Revenue from industry grew by 26% to GBP11.7m (2019: GBP9.3m).
The performance of Kx streaming analytics and the operational
efficiency it enables make it of considerable interest across
multiple high value markets where the volume and velocity of data
present significant challenges. Having evaluated these
opportunities, we are focusing on the markets where our competitive
advantage is most compelling in terms of the return on investment
it delivers for our customers. These are:
-- Automotive - The initial deployments of Kx in automotive were in F1,
notably with Aston Martin Red Bull Racing where in our role as Innovation
Partner we provide analytics both in the wind tunnel and in-race telemetry
through streaming analytics on sensor data. We have added further contract
wins with F1 teams for similar applications of Kx and we have a growing
pipeline of opportunities across motor sport. Our capabilities have
attracted the attention of global automotive companies and we are engaged
with them on different initiatives around the design and production
of vehicles. We are also engaged with vendors in the connected car ecosystem,
where the capability of Kx to operate at the edge and in real time is
particularly attractive. We see a growing opportunity for Kx streaming
analytics to be a key element of the automotive ecosystem.
-- Energy - Analysing data from the vast number of smart meters and sensors
attached to production, transmission and distribution systems is increasingly
challenging for energy market participants. Based on working with a
range of partners and customers we believe Kx is the ideal platform
for use cases across efficiency, regulation, and innovative services.
Working alongside our partner CGI, which counts many of the world's
leading utilities as customers, we are on track to deliver a next generation
electricity information exchange for Fingrid, the transmission system
operator for Finland. We expect this to act as a reference site, with
numerous utilities due to upgrade their systems in the coming years.
In February 2020 we signed an agreement with a global oilfield services
company to provide operational intelligence at the edge, where compute
resources are limited, while aggregating data centrally. These use cases
are illustrations of the many ways in which Kx can provide high returns
on investment across the energy market.
-- Manufacturing - Maximising yield and reducing waste are key goals for
manufacturers and Kx has demonstrated its ability in both these areas
through multiple contract wins and partner agreements. During the year
we announced a partnership agreement with Keysight Technologies, to
integrate Kx within its PathWave Manufacturing Analytics platform, adding
to prior agreements with global semiconductor manufacturing companies
including BISTel and a Fortune 500 company that are expected to contribute
to our growth in this market. After the year-end we signed a global
partnership agreement with Tata Consultancy Services (TCS) under which
it will develop and deploy solutions based on Kx streaming analytics,
targeted at its customer base across multiple industries. We see manufacturing
as a very large and attractive market and expect to continue to sign
customer and partnership agreements.
Our strategy is to seek predictable, long-term revenue streams,
such as OEM and revenue share agreements, while securing direct
sales that establish a beach head in these markets. We are pleased
with the high level of interest we are seeing across industries in
the adoption of our software, from both potential customers and
partners. We also have a significant pipeline of direct sales
opportunities across these markets.
Managed services and consulting
Revenue from managed services and consulting was GBP89.4m, an
increase of 3% on the prior year (2019: GBP86.5m). 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
technology skill sets and domain expertise within capital
markets.
Our strategy is to become a leading global capital markets
practice and to achieve that we are focused on building out and
scaling up the services we provide supporting middle and
front-office trading systems, delivering risk and regulatory reform
programs, and using AI and automation to increase efficiency in
back-office systems. Our clients tell us that our highly skilled
and motivated consultants change the game for them - they set the
pace, direct others in their organisation and challenge the ways
things are done.
We seek long-term relationships with our clients, working as a
trusted partner to deliver under managed services contracts and
multi-year assignments. This approach provides high levels of
revenue visibility, with a typical expectation that at any point in
time at least 80% of current revenue will repeat during the next 12
months.
Growth during the period, while ahead of the market in which we
operate, was below that delivered in recent years. This was due to
a combination of slower client decision making throughout the year
and timing issues relating to roll-on and roll-off on several
third-party vendor implementation projects. Despite this we believe
that we have made good progress in delivering our strategic
objective during the year, with important new multi-year contract
wins across our target markets including:
-- A European bank selected us to deliver the multi-year implementation
of a third-party trading and risk management system, which will transition
to support and development when the implementation is complete.
-- A North American bank selected us to deliver a programme of regulatory-driven
projects coupled with an application upgrade.
-- A Japanese bank selected us to implement Robotic Process Automation
for recurring back-office tasks.
-- A UK financial institution selected us to assist with its cloud strategy.
Leadership and people
FD founder and CEO Brian Conlon passed away in July 2019. Brian
stamped his culture and values throughout FD, and this will ensure
his legacy will live on, even though Brian will be sorely
missed.
Under the Group's succession planning, Non-Executive Chairman
Seamus Keating was appointed Executive Chairman in July 2019 and,
following a search process led by the Non-Executive Directors,
appointed Chief Executive Officer in January 2020. Seamus has
extensive leadership expertise in the global technology sector,
including executive roles in both finance and operations within
multi-national technology companies, notably at Logica, and is a
qualified accountant.
Donna Troy, who has been a Non-Executive Director since January
2018, was appointed Non-Executive Chairman in January 2020. She has
held CEO, division general management and sales leadership roles in
organisations including IBM, Partnerware, McAfee, SAP, Dell and
Epicor, delivering revenue and margin growth and implementing
global go-to-market strategies.
More than 2,400 people work for FD, broadly unchanged from last
year as we have focused on consolidating our position following
record levels of recruitment in recent years. We provide
outstanding career opportunities, driven by our graduate
recruitment process that attracts motivated, high-achieving
individuals and our training programme that equips them with high
levels of in-demand skills.
During the year we recruited 291 graduates, while retention
rates remain in line with prior periods and are significantly
higher than the industry average. We are committed to providing our
employees with continued training and development programmes, a
rewarding career path and a fair remuneration and reward
system.
The past year has seen considerable change and challenge,
including new leadership and the current COVID-19 pandemic towards
the end of our financial year. The talent and work ethic of FD
employees has been a key driver of the Group's success over the
years and their flexibility and determination has ensured another
period of success. The Board would like to thank them all for their
efforts.
Post year-end event: COVID-19
Towards the end of our financial year, we successfully
implemented our pandemic plan in response to COVID-19, protecting
the health and wellbeing of our employees and supporting our
customers. The Group issued a trading statement on 9 April 2020
relating to the impact of COVID-19 and the mitigating actions it
has taken to maintain productivity and ensure financial
liquidity.
In summary, by transitioning employees to remote working the
Group has not seen any material financial impact on revenue to
date. Sales cycles across the Group have lengthened, and we
continue to monitor the impact of this on the likely financial
performance for the current year. We have conducted a scenario
testing exercise with a range of assumptions including a severe,
extended downturn in economic activity which showed that even in
this scenario the Group remains profitable and cash generative.
Notwithstanding the comfort provided by our scenario testing,
the Group has acted to mitigate any future potential impact of
COVID-19, including suspending non-essential business travel and
deferral of the summer graduate intake. The Executive Directors
will not receive a bonus payment relating to the financial year to
29 February 2020 and as noted above, the Board has determined not
to recommend a final dividend payment for the year. To ensure
liquidity, on 24 March 2020 we drew down GBP35m from our available
finance facility. These funds have been placed on deposit and the
Group has significant headroom on its covenants, with a further
GBP15m of undrawn revolving credit facilities available to it.
Current trading and outlook
We entered the current financial year with a strong pipeline,
good momentum and a clear strategy that provided confidence in
delivering a year of strong growth . While COVID-19 has had no
material financial impact to date, we have seen a lengthening of
sales cycles, although it remains too early to determine the
probable impact on our full year performance. We have a robust
balance sheet and high levels of financial liquidity which leave us
well positioned to weather the challenge and continue to invest and
grow the business.
In the short term, our high levels of repeat and recurring
revenue provide some mitigation from the impact of COVID-19. In the
longer term, FD remains confident in its strategy and the growing
demand for its world-class Kx streaming analytics from both
potential customers and partners.
Financial Review
The table below details revenue growth by vertical market along
with an analysis of gross profit and adjusted EBITDA.
Revenue and Gross Margin Analysis (GBPm)
2020 2019 Growth 2020 2019 Growth 2020 2019 Growth 2020 2019 Growth
Software by sector Total Software
FinTech Revenue MarTech Revenue Industry
7.8 9.7 (19%) - - - 4.0 3.7 11% Perpetual 11.9 13.3 (11%)
31.4 27.7 13% 25.6 19.3 33% 2.8 1.6 77% Recurring/subscription 59.8 48.6 23%
------ ------ ----- ----- ----- ----- ---------- --------
39.2 37.4 5% 25.6 19.3 33% 6.8 5.2 31% Licenses 71.6 62.0 16%
Cost of
sales (12.1) (10.6) 14%
---------- --------
Gross
profit 59.6 51.4 16%
Gross
margin 83% 83% -
50.2 42.8 17% 21.7 22.0 (2%) 4.9 4.1 20% Services 76.8 68.9 11%
Cost of
sales (55.1) (48.9) 13%
---------- --------
Gross
profit 21.7 20.0 8%
Gross
margin 28% 29% (1%)
89.4 80.2 11% 47.3 41.4 14% 11.7 9.3 26% Revenue 148.4 130.9 13%
Cost of
sales (67.2) (59.5) 13%
---------- --------
Gross
profit 81.2 71.4 14%
Gross
margin 55% 55% -
Total Managed services and
Managed services and consulting by sector consulting
FinTech Revenue MarTech Revenue Industry
89.4 86.5 3% - - - - - - Revenue 89.4 86.5 3%
Cost of
sales (69.5) (66.6) 4%
---------- --------
Gross
profit 19.9 19.9 -
Gross
margin 22% 23% (1%)
Sector Totals
FinTech Revenue MarTech Revenue Industry
178.8 166.7 7% 47.3 41.4 14% 11.7 9.3 26% Revenue 237.8 217.4 9%
Cost of
sales (136.6) (126.1) 8%
---------- --------
Gross
profit 101.1 91.3 11%
Gross
margin 43% 42% 1%
EBITDA and net margin profit analysis
R&D (13.1) (10.7) 23%
Sales
expense (35.4) (32.3) 10%
Adjusted
operating
expense (17.5) (18.0) (3%)
Adj. EBITDA
ex cap 35.1 30.3 16%
Capitalised
R&D 10.4 8.6 22%
Adj. EBITDA 45.5 38.9 17%
Adj. EBITDA
margin 19% 18% 1%
Revenue and Margins
Group revenue increased organically by 9% to GBP237.8m (2019:
GBP217.4m) with software revenue increasing by 13% and managed
services and consulting revenue by 3%. Software growth was led by
growth in recurring and subscription license revenue, balanced by a
reduction in perpetual license revenue. Gross margin increased
slightly to 43% (2019: 42%) as growth was weighted to higher margin
software revenue.
Our continued investment in the Group's operations resulted in
an increase in R&D cost of 23% as we accelerated the pace of
our development work. Sales and marketing costs increased by 10% as
we added new sales and pre-sales staff to expand our market reach.
Adjusted operating expense, reflecting the underlying operating
cost of our business, fell by 3% reflecting continued control over
these costs.
Software
Total software revenue increased by 13% to GBP148.4m (2019:
GBP130.9m) and represented 62% of Group revenue (2019: 60%).
Software license and subscription revenue increased by 16%,
reflecting an 11% fall in perpetual license revenue and a 23%
increase in recurring license and subscription revenue as we
focused on growing this high-quality revenue. Perpetual license
revenue grew by 29% in H2 against the prior year period after a
weak H1; however, it remains lumpy and difficult to predict.
Software services revenue increased by 11% as our implementation,
development and managed services continue to experience high demand
as customers engage our technology services to maximise the value
that Kx delivers across industries.
Software revenue from FinTech increased by 11% to GBP89.4m
(2019: GBP80.2m), reflecting a 5% increase in license revenue (13%
increase in recurring license revenue offset by a 19% decrease in
perpetual licenses) and 17% growth in services revenue. Total
revenue from MarTech was up by 14% to GBP47.3m (2019: GBP41.4m),
driven by continued growth in subscription revenue, which was up by
33% to GBP25.6m (2019: GBP19.3m), and a 2% decline in services
revenue as we focus on the utilisation by customers of our platform
MRP Prelytix. Subscription represented 54% of MarTech revenue, up
from 47% in 2019 .
Software revenue from Industry increased by 26% to GBP11.7m
(2019: GBP9.3m). Of note was the increasing proportion of recurring
revenue in this segment, which now represents 24% of the total
(2019: 17%). While perpetual license revenue represents 35% of the
total, increasingly it is delivered via partner relationships with
a growing pipeline of opportunities. We continue to add to our OEM
and systems integrator partnerships and see their domain expertise
as important to deliver solutions to customers with "Kx
inside".
Software gross margin was maintained at 55%, with a significant
weighting to H2 (57%) compared to H1 (52%) due to the higher
proportion of license revenue in H2.
Managed services and consulting
Managed services and consulting revenue increased by 3% to
GBP89.4m (2019: GBP86.5m) while delivering gross margins of 22%,
down from 23% in the prior period. A number of factors impacted
revenue and profitability, including slower client decision making
through the year. During H2 we achieved several important contract
wins, as discussed in the Business review; however, the start of
two of these multi-year projects were delayed by several months, in
each case for client-specific reasons, impacting both revenue and
profit for the year. These projects are now underway.
Profit before tax
Reported profit before tax increased by 9% to GBP18.3m (2019:
GBP16.7m) and adjusted profit before tax decreased by 6% to
GBP25.9m (2019: GBP27.5m). Both were held back by an increase of
GBP2.2m in interest charges following the completion of the
acquisition of the minority interest in Kx Systems Inc, with a
further GBP1.0m of additional interest relating to IFRS 16 lease
costs. The calculation of adjusted profit before tax is detailed
below.
2020 2019
GBPm GBPm
Reported profit before tax 18.3 16.7
Adjustments for:
Amortisation of acquired intangibles 3.7 3.8
Share based payment and related costs 3.1 2.4
Acquisition costs, associate disposal costs and
changes in deferred consideration 2.0 4.0
(Profit)/loss on foreign currency translation (1.0) 0.6
Share of profit of associate (0.1) -
Adjusted profit before tax 25.9 27.5
The Group continued to invest in research and development to
maintain its technology lead, with total R&D up 23% to
GBP13.1m.
2020 2019 Movement
GBPm GBPm
Research and development costs:
Expensed during the period 2.7 2.1 29%
Capitalisation of product development
costs 10.4 8.6 22%
Total research and development 13.1 10.7 23%
Amortisation of R&D (8.7) (7.2) 21%
Net capitalisation of R&D 1.7 1.4 28%
IFRS 16
The Group implemented IFRS 16, the accounting standard dealing
with leases, using the cumulative catch-up 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.
Earnings per share
Reported profit after tax increased by 13% to GBP14.9m (2019:
GBP13.2m) and reported diluted earnings per share also increased by
13% to 54.2p per share (2019: 47.9p).
The adjusted profit after tax for the year was GBP21.3m (2019:
GBP22.9m), a decrease of 7%. The major factors impacting earnings
per share were the higher interest charge referred to above and an
increase in the Group's adjusted tax rate to 17.8% (2019:
16.8%).
The calculation of adjusted profit after tax is detailed
below:
2020 2019
GBPm GBPm
Reported profit after tax 14.9 13.2
Adjustments from profit before tax 7.6 10.8
Tax effect of adjustments and US tax reform (1.3) (1.1)
Adjusted profit after tax 21.3 22.9
Weighted average number of ordinary shares (diluted) 27.5m 27.5m
Adjusted EPS (fully diluted) 77.4p 83.2p
The fully diluted average number of shares in issue was
maintained at 27.5m resulting in adjusted fully diluted earnings
per share of 77.4p, representing a decrease of 7% for the year
(2019: 83.2p).
Balance sheet
Total assets increased by 21% to GBP335.8m (2019: GBP277.8m).
The purchase of the non-controlling interest (NCI) in Kx Systems
for $53.8m in cash in June 2019 impacted the balance sheet
following settlement of the NCI forward liability. The result of
this transaction saw interest costs increase in the period as new
loans were drawn in US dollars. This transaction, along with the
implementation of IFRS 16, saw an increase in non-current loans and
borrowings of GBP94.0m.
Other financial assets, which includes equity investments,
increased to GBP15.8m (2019: GBP13.7m).
Deferred revenue at the period end was up 11% at GBP21.8m (2019:
GBP19.5m), arising from the continued focus on growing our
recurring revenue.
Cash generation and net debt
The Group generated GBP34.4m of cash from operating activities
before taxes paid (2019: GBP27.3m) representing 75% conversion of
adjusted EBITDA (2019: 84%).
At the period end, net debt (excluding finance leases) was
GBP49.4m (2019: GBP16.5m). The factors impacting the movement in
net debt are summarised in the table below:
2020 2019
GBPm GBPm
Opening net debt (excluding lease liabilities) (16.5) (16.2)
Operating cash flow 34.4 27.3
Deferred consideration paid (IAS 19 remuneration) - 5.3
--------- -------
Operating cash flow before impact of IAS 7 for deferred
consideration paid 34.4 32.7
Taxes paid (3.0) (3.5)
Dividends paid (7.4) (6.3)
Capital expenditure: property, plant and equipment ( 2.3 ) (4.1)
Capital expenditure: intangible assets ( 11.0 ) (9.2)
Deferred consideration paid - (5.3)
Acquisition of subsidiaries - (0.6)
Settlement of NCI forward (42.9)
Investments ( 1.6 ) (4.6)
Issue of new shares 10.1 3.2
Interest, foreign exchange and other ( 9.2 ) (2.5)
Closing net debt (excluding lease liabilities) (49.4) (16.5)
The Group assists innovative start-up and scale-up businesses
seeking to use the power of Kx to change the game, 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 2020 the Group advanced GBP2.3m in equity and
loans to its new and existing venture agreement companies with a
maximum further commitment of up to GBP1.8m across all 27 venture
agreements.
Total to
2020 2019 date
Number of venture agreements in period 9 9 27
Equity and loans advanced (GBPm) 2.3 7.8 18.9
Outstanding commitment (GBPm) 1.8 2.3
Revenue share agreements 9 9 20
Revenue recognised for software services
(GBPm) 2.8 2.1 8.0
Licenses recognised under revenue share
agreements (GBPm) 0.8 0.4 1.5
Dividend
The Board has determined not to recommend a final dividend for
the year, as communicated in the trading update issued on 9 April
2020. As a result, the total distribution relating to the year is
the interim dividend of 8.50p per share (2019 total dividend:
27.00p per share).
Consolidated statement of comprehensive income
Year ended 29 February 2020
2020 2019
Note GBP'000 GBP'000
------------------------------------------------ ------ ---------- ----------
Revenue
Software licenses and services 2 148,401 130,888
Managed services and consulting 2 89,389 86,463
------------------------------------------------ ------ ---------- ----------
Total revenue 237,790 217,351
Cost of sales
Software licenses and services 2 (67,184) (59,465)
Managed services and consulting 2 (69,458) (66,594)
------------------------------------------------ ------ ---------- ----------
Total cost of sales (136,642) (126,059)
------------------------------------------------ ------ ---------- ----------
Gross profit 101,148 91,292
------------------------------------------------ ------ ---------- ----------
Operating costs
Research and development costs (13,132) (10,662)
- Of which capitalised 10,431 8,573
Sales and marketing costs (35,399) (32,273)
Administrative expenses (41,818) (38,455)
Impairment loss on trade and other receivables 336 (19)
Other income 179 277
------------------------------------------------ ------ ---------- ----------
Total operating costs (79,403) (72,559)
------------------------------------------------ ------ ---------- ----------
Operating profit 21,745 18,733
------------------------------------------------ ------ ---------- ----------
Acquisition costs and changes in contingent
deferred consideration 1,990 3,975
Share based payment and related costs 3,119 2,473
Depreciation and amortisation 5 & 6 14,984 9,958
Amortisation of acquired intangible assets 6 3,684 3,799
------------------------------------------------ ------ ---------- ----------
Adjusted EBITDA 45,522 38,938
------------------------------------------------ ------ ---------- ----------
Finance income 26 37
Finance expense (4,666) (1,478)
Gain/(Loss) on foreign currency translation 1,019 (592)
------------------------------------------------ ------ ---------- ----------
Net finance costs (3,621) (2,033)
Share of gain/(loss) of associate, net of tax 126 (23)
------------------------------------------------ ------ ---------- ----------
Profit before taxation 18,250 16,677
Income tax expense (3,357) (3,502)
------------------------------------------------ ------ ---------- ----------
Profit for the year 14,893 13,175
------------------------------------------------ ------ ---------- ----------
2020 2019
GBP'000 GBP'000
-------------------------------------------------------- ----- -------- --------
Profit for the year 14,893 13,175
Other comprehensive income
Items that will not be reclassified subsequently
to profit or loss
Equity investments at FVOCI - net change in
fair value - 3,587
Items that will or may be reclassified subsequently
to profit or loss
Net exchange gain/(loss) on net investment
in foreign subsidiaries 1,394 2,958
Net (loss)/gain on hedge of net investment
in foreign subsidiaries (2,920) (728)
-------------------------------------------------------- ----- -------- --------
(1,526) 2,230
-------------------------------------------------------- ----- -------- --------
Other comprehensive income for the period,
net of tax (1,526) 5,817
-------------------------------------------------------- ----- -------- --------
Total comprehensive income for the period attributable
to owners of the parent 13,367 18,992
-------------------------------------------------------- ----- -------- --------
Note Pence Pence
-------------------------------------------------------- ----- -------- --------
Earnings per share
Basic 4a 55.9 50.9
Diluted 4a 54.2 47.9
-------------------------------------------------------- ----- -------- --------
All profits are attributable to the owners of the Company and
relate to continuing activities
Consolidated balance sheet
As at 29 February 2020
2020 2019
Note GBP'000 GBP'000
---------------------------------------------- ----- -------- --------
Assets
Property, plant and equipment 5 37,143 10,162
Intangible assets and goodwill 6 154,416 151,965
Equity accounted investee 2,937 2,711
Other financial assets 15,750 13,706
Trade and other receivables 5,000 5,720
Deferred tax assets 14,982 15,352
---------------------------------------------- ----- -------- --------
Non-current assets 230,228 199,616
---------------------------------------------- ----- -------- --------
Trade and other receivables 76,330 57,915
Current tax receivable 3,142 1,461
Cash and cash equivalents 26,068 18,798
---------------------------------------------- ----- -------- --------
Current assets 105,540 78,174
---------------------------------------------- ----- -------- --------
Total assets 335,768 277,790
---------------------------------------------- ----- -------- --------
Equity
Share capital 136 131
Share premium 91,002 79,726
Merger reserve 8,118 8,118
Share option reserve 13,775 10,744
Fair value reserve 3,587 3,587
Currency translation adjustment reserve 2,418 3,944
Retained earnings 44,125 36,560
---------------------------------------------- ----- -------- --------
Equity attributable to owners of the Company 163,161 142,810
---------------------------------------------- ----- -------- --------
Liabilities
Loans and borrowings 94,311 289
Trade and other payables 2,610 3,300
Deferred tax liabilities 10,585 10,827
---------------------------------------------- ----- -------- --------
Non-current liabilities 107,506 14,416
---------------------------------------------- ----- -------- --------
Loans and borrowings 10,868 34,998
Trade and other payables 47,719 77,546
Current tax payable 312 1,004
Employee benefits 6,202 5,945
Contingent deferred consideration - 1,071
---------------------------------------------- ----- -------- --------
Current liabilities 65,101 120,564
---------------------------------------------- ----- -------- --------
Total liabilities 172,607 134,980
---------------------------------------------- ----- -------- --------
Total equity and liabilities 335,768 277,790
---------------------------------------------- ----- -------- --------
Consolidated statement of changes in equity
Year ended 29 February 2020
Share Fair Currency
Share Share Merger option value translation Retained Total
capital premium reserve reserve reserve adjustment earnings equity
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
Total comprehensive
income for the year
Profit for the year - - - - - - 14,893 14,893
Other comprehensive
income
Net exchange gain on
net investment in
foreign
subsidiaries - - - - - 1,394 - 1,394
Net exchange loss on
hedge of net
investment
in foreign
subsidiaries - - - - - (2,920) - (2,920)
Total comprehensive
income for the year - - - - - (1,526) 14,893 13,367
Transactions with
owners of the Company
Tax relating to
share options - - - 1,411 - - - 1,411
Exercise of share
options 4 10,123 - - - - - 10,127
Issue of shares - 58 - - - - - 58
Issue of shares
as contingent
deferred
consideration 1 1,095 - - - - - 1,096
Share based payment
charge - - - 1,645 - - - 1,645
Transfer on forfeit
of share options - - - (25) - - 25 -
Dividends to owners
of the Company - - - - - - (7,353) (7,353)
Balance at 29
February
2020 136 91,002 8,118 13,775 3,587 2,418 44,125 163,161
---------------------- --------- --------- --------- --------- --------- ------------- ---------- --------
Consolidated statement of changes in equity
Year ended 28 February 2019
Share Fair Currency
Share Share Merger option value translation Retained Total
capital premium reserve reserve reserve adjustment earnings equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------- --------- --------- --------- --------- --------- ------------- ---------- --------
Balance at 1 March 2018 128 73,168 8,118 14,341 - 1,714 39,628 137,097
-------------------------- --------- --------- --------- --------- --------- ------------- ---------- --------
Total comprehensive
income
for the year
Profit for the year - - - - - - 13,175 13,175
Other comprehensive
income
Net exchange gain on net
investment in foreign
subsidiaries - - - - - 2,958 - 2,958
Net exchange loss on
hedge
of net investment in
foreign
subsidiaries - - - - - (728) - (728)
Net change in fair value
of equity investments
at FVOCI - - - - 3,587 - - 3,587
-------------------------- --------- --------- --------- --------- --------- ------------- ---------- --------
Total comprehensive
income
for the year - - - - 3,587 2,230 13,175 18,992
Transactions with owners
of the Company
Tax relating to share
options - - - (4,292) - - - (4,292)
Exercise of share options 2 3,829 - (684) - - - 3,147
Change in measurement
of NCI put - - - - - - (9,932) (9,932)
Issue of shares - 29 - - - - - 29
Issue of shares as
contingent
deferred consideration 1 2,700 - - - - - 2,701
Share based payment
charge - - - 1,452 - - - 1,452
Transfer on forfeit of
share options - - - (73) - - 73 -
Dividends to owners of
the Company - - - - - - (6,384) (6,384)
Balance at 28 February
2019 131 79,726 8,118 10,744 3,587 3,944 36,560 142,810
-------------------------- --------- --------- --------- --------- --------- ------------- ---------- --------
Consolidated cash flow statement
Year ended 29 February 2020
2020 2019
GBP'000 GBP'000
---------------------------------------------------------------- --------- ---------
Cash flows from operating activities
Profit for the year 14,893 13,175
Adjustments for:
Net finance costs 3,621 2,033
Depreciation of property, plant and equipment 6,291 2,744
Amortisation of intangible assets 12,377 11,013
Increase in deferred consideration - 3,230
Equity-settled share based payment transactions 1,645 1,452
Grant income (179) (277)
Share of loss of associate (126) 23
Deferred consideration paid (IAS 19 remuneration) - (5,317)
Tax expense 3,357 3,502
---------------------------------------------------------------- --------- ---------
41,879 31,578
Changes in:
Trade and other receivables (18,869) (6,468)
Trade and other payables 11,340 2,230
---------------------------------------------------------------- --------- ---------
Cash generated from operating activities 34,350 27,340
Taxes paid (2,957) (3,462)
---------------------------------------------------------------- --------- ---------
Net cash from operating activities 31,393 23,878
Cash flows from investing activities
Interest received 26 37
Increase in loans to other investments (604) (1,944)
Acquisition of subsidiaries, net of cash acquired - (591)
Settlement of NCI forward (42,874) -
Acquisition of other investments and associates (1,044) (2,652)
Acquisition of property, plant and equipment (2,295) (4,105)
Acquisition of intangible assets (10,972) (9,238)
Net cash used in investing activities (57,763) (18,493)
Cash flows from financing activities
Proceeds from issue of share capital 10,127 3,147
Drawdown of loans and borrowings 76,933 8,900
Repayment of borrowings (36,751) (3,558)
Payment of lease liabilities (2019: finance lease liabilities) (4,531) (48)
Interest paid (3,482) (1,457)
Dividends paid (7,397) (6,336)
---------------------------------------------------------------- --------- ---------
Net cash generated in financing activities 34,899 648
Net increase in cash and cash equivalents 8,529 6,033
Cash and cash equivalents at 1 March 18,798 12,365
Effects of exchange rate changes on cash held (1,259) 400
---------------------------------------------------------------- --------- ---------
Cash and cash equivalents at 29 February 26,068 18,798
================================================================ ========= =========
1. Basis of preparation
The consolidated financial statements consolidate those of the
Company and its subsidiaries (together referred to as the
"Group").
The financial information included in this preliminary
announcement does not constitute statutory accounts of the Group
for the years ended 29 February 2020 or 28 February 2019 but is
derived from those accounts. Statutory accounts for 2019 have been
delivered to the Registrar of Companies and those for 2020 will be
delivered following the Company's Annual General Meeting. The
auditors have reported on those accounts; their reports were (i)
unqualified, (ii) did not include a reference to any matters to
which the auditors drew attention by way of emphasis without
qualifying their report, and (iii) did not contain a statement
under section 498(2) or (3) of the Companies Act 2006.
Both the consolidated financial statements and the Company
financial statements have been prepared and approved by the
Directors in accordance with International Financial Reporting
Standards as adopted by the EU ("IFRSs").
Changes in accounting policies
IFRS 16 Leases
The Group adopted IFRS 16 from 1 March 2019 using the cumulative
catch-up method with the 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 statement of
comprehensive income 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; and
-- 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%.
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 24,964
b Trade and other payables: Rent accruals adjustment 1,109
c Loan and borrowings non-current: Recognition of long-term
lease liability (22,906)
c Loan and borrowings current: Recognition of short-term lease
liability (3,167)
--------------
Impact at 1 March 2019 -
==============
The adoption of IFRS 16 has also impacted the classification of
associated cash flows in the consolidated cash flow statement -
lease cash flows previously presented as operating cash flows are
presented as financing cash flows split into payments of principal
and interest (payment of finance lease liabilities and interest
paid respectively).
2. Operating and business segments
Information about reportable segments
Managed services
and consulting Software Total
-------------------- -------------------- ----------------------
2020 2019 2020 2019 2020 2019
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------- --------- --------- --------- --------- ---------- ----------
Revenue by industry
Revenue 89,389 86,463 148,401 130,888 237,790 217,351
Cost of sales (69,458) (66,594) (67,184) (59,465) (136,642) (126,059)
--------------------- --------- --------- --------- --------- ---------- ----------
Gross profit 19,931 19,869 81,217 71,423 101,148 91,292
--------------------- --------- --------- --------- --------- ---------- ----------
Geographical location analysis
Revenues Non-current assets
------------------ ---------------------
2020 2019 2020 2019
GBP'000 GBP'000 GBP'000 GBP'000
---------------- -------- -------- ---------- ---------
UK 66,878 63,309 56,485 42,800
Rest of Europe 42,862 38,090 15,218 11,739
North America 100,596 94,511 142,476 129,584
Australasia 27,454 21,441 1,067 141
---------------- -------- -------- ---------- ---------
Total 237,790 217,351 215,246 184,264
---------------- -------- -------- ---------- ---------
Disaggregation of revenue
Managed services
and consulting Software Total
------------------- ------------------ ------------------
2020 2019 2020 2019 2020 2019
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------- --------- -------- -------- -------- -------- --------
Revenue by industry
FinTech 89,389 86,463 89,398 80,239 178,787 166,702
MarTech - - 47,299 41,355 47,299 41,355
Industry - - 11,704 9,294 11,704 9,294
------------------------------- --------- -------- -------- -------- -------- --------
89,389 86,463 148,401 130,888 237,790 217,351
------------------------------- --------- -------- -------- -------- -------- --------
Type of good or service
Sale of goods - perpetual - - 11,856 13,348 11,856 13,348
Sale of goods - recurring - - 59,789 48,615 59,789 48,615
Rendering of services 89,389 86,463 76,756 68,925 166,145 155,388
------------------------------- --------- -------- -------- -------- -------- --------
89,389 86,463 148,401 130,888 237,790 217,351
------------------------------- --------- -------- -------- -------- -------- --------
Timing of revenue recognition
At a point in time - - 11,856 13,348 11,856 13,348
Over time 89,389 86,463 136,545 117,540 225,934 204,003
------------------------------- --------- -------- -------- -------- -------- --------
89,389 86,463 148,401 130,888 237,790 217,351
------------------------------- --------- -------- -------- -------- -------- --------
3. Dividends
2020 2019
GBP'000 GBP'000
-------------------------------------------- -------- --------
Dividends paid to the owners of the parent
Final dividend relating to the prior year 5,084 4,383
Interim dividend paid 2,269 2,001
-------------------------------------------- -------- --------
7,353 6,384
Dividends paid to NCI - -
-------------------------------------------- -------- --------
7,353 6,384
-------------------------------------------- -------- --------
The dividends recorded in each financial year represent the
final dividend of the preceding financial year and the interim
dividend of the current financial year. The final dividend relating
to the prior year amounted to 19.30p (previous year: 17.00p) per
share and the interim dividend paid during the year amounted to
8.50p (previous year: 7.70p) per share. The cumulative dividend
paid during the year amounted to 27.80p (previous year: 24.70p) per
share.
After the respective reporting dates, the following dividends
were proposed by the Directors. The dividends have not been
provided for and there are no income tax consequences.
2020 2019
GBP'000 GBP'000
---------------------------------------- --------- --------
Nil p per ordinary share (2019: 19.3p) - 5,049
---------------------------------------- --------- --------
4. a) Earnings per ordinary share
Basic
The calculation of basic earnings per share at 29 February 2020
was based on the profit attributable to ordinary shareholders of
GBP14,893k (2019: GBP13,175k), and a weighted average number of
ordinary shares in issue of 26,628k (2019: 25,909k).
2020 2019
Pence Pence
per share per share
-------------------------- ----------- -----------
Basic earnings per share 55.9 50.9
-------------------------- ----------- -----------
Weighted average number of ordinary shares
2020 2019
Number Number
'000 '000
----------------------------------------------------------- ------- -------
Issued ordinary shares at 1 March 26,162 25,641
Effect of share options exercised 437 243
Effect of shares issued as purchase consideration 27 24
Effect of shares issued as remuneration 2 1
----------------------------------------------------------- ------- -------
Weighted average number of ordinary shares at 29 February 26,628 25,909
----------------------------------------------------------- ------- -------
Diluted
The calculation of diluted earnings per share at 29 February
2020 was based on the profit attributable to ordinary shareholders
of GBP14,893k (2019: GBP13,175k) and a weighted average number of
ordinary shares after adjustment for the effects of all dilutive
potential ordinary shares of 27,502k (2019: 27,523k).
2020 2019
Pence Pence
per share per share
---------------------------- ----------- -----------
Diluted earnings per share 54.2 47.9
---------------------------- ----------- -----------
Weighted average number of ordinary shares (diluted)
2020 2019
Number Number
'000 '000
------------------------------------------------------ ------- -------
Weighted average number of ordinary shares (basic) 26,628 25,909
Effect of dilutive share options in issue 874 1,614
------------------------------------------------------ ------- -------
Weighted average number of ordinary shares (diluted)
at 29 February 27,502 27,523
------------------------------------------------------ ------- -------
At 29 February 2020 18,885 shares (2019: 75) were excluded from
the diluted weighted average number of ordinary shares calculation
as their effect would have been anti-dilutive. The average market
value of the Group's shares for the purposes of calculating the
dilutive effect of share options was based on quoted market prices
for the year during which the options were outstanding.
4. b) Earnings before tax per ordinary share
Earnings before tax per share are based on profit before
taxation of GBP18,250k (2019: GBP16,677k). The number of shares
used in this calculation is consistent with note 4(a) above.
2020 2019
Pence Pence
per share per share
------------------------------------------------ ----------- -----------
Basic earnings before tax per ordinary share 68.5 64.4
Diluted earnings before tax per ordinary share 66.4 60.6
------------------------------------------------ ----------- -----------
Reconciliation from earnings per ordinary share to earnings
before tax per ordinary share:
2020 2019
Pence Pence
per share per share
--------------------------------------- ----------- -----------
Basic earnings per share 55.9 50.9
Impact of taxation charge 12.6 13.5
--------------------------------------- ----------- -----------
Basic earnings before tax per share 68.5 64.4
--------------------------------------- ----------- -----------
Diluted earnings per share 54.2 47.9
Impact of taxation charge 12.2 12.7
--------------------------------------- ----------- -----------
Diluted earnings before tax per share 66.4 60.6
--------------------------------------- ----------- -----------
Earnings before tax per share is presented to facilitate pre-tax
comparison returns on comparable investments.
4. c) Adjusted earnings after tax per ordinary share
Adjusted earnings after tax per share is based on an adjusted
profit after taxation of GBP21,283k (2019: GBP22,912k). The
adjusted profit after tax has been calculated by adjusting for the
amortisation of acquired intangibles after tax effect of GBP3,155k
(2019: GBP3,370k), share based payment and related charges after
tax effect of GBP2,526k (2019: GBP2,003k), acquisition costs after
tax effect of GBP1,635k (2019: GBP3,838k), share of profit of
associate after tax effect of GBP126k (2019: loss GBP23k), the gain
on foreign currency translation after tax effect of GBP802k (2019:
loss GBP503k). The number of shares used in this calculation is
consistent with note 4(a) above.
2020 2019
Pence Pence
per share per share
-------------------------------------------------------- ----------- -----------
Adjusted basic earnings after tax per ordinary share 79.9 88.4
Adjusted diluted earnings after tax per ordinary share 77.4 83.2
-------------------------------------------------------- ----------- -----------
5. Property, plant and equipment
Leasehold Plant and Office
improvements equipment furniture Lease Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------- -------------- ----------- ----------- ---------- ---------
Cost
At 1 March 2019 5,092 16,151 1,201 - 22,444
Recognition of right-of-use
asset on initial application
of IFRS 16 - - - 24,964 24,964
Additions 124 1,767 404 5,612 7,907
Exchange adjustments 742 (755) 158 338 483
------------------------------- -------------- ----------- ----------- ---------- ---------
At 29 February 2020 5,958 17,163 1,763 30,914 55,798
------------------------------- -------------- ----------- ----------- ---------- ---------
Depreciation
At 1 March 2019 2,099 9,425 758 - 12,282
Charge for the year 657 1,848 288 3,498 6,291
Exchange adjustments 95 (45) 50 (18) 82
------------------------------- -------------- ----------- ----------- ---------- ---------
At 29 February 2020 2,851 11,228 1,096 3,480 18,655
------------------------------- -------------- ----------- ----------- ---------- ---------
Leasehold Plant and Office
improvements equipment furniture Lease Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------- -------------- ----------- ----------- ---------- ---------
Cost
At 1 March 2018 3,622 12,840 869 - 17,331
Additions 1,470 3,378 331 - 5,179
Exchange adjustments - (67) 1 - (66)
---------------------- -------------- ----------- ----------- ---------- ---------
At 28 February 2019 5,092 16,151 1,201 - 22,444
---------------------- -------------- ----------- ----------- ---------- ---------
Depreciation
At 1 March 2018 1,696 7,357 564 - 9,617
Charge for the year 419 2,132 193 - 2,744
Exchange adjustments (16) (64) 1 - (79)
---------------------- -------------- ----------- ----------- ---------- ---------
At 28 February 2019 2,099 9,425 758 - 12,282
---------------------- -------------- ----------- ----------- ---------- ---------
Carrying amounts
At 1 March 2018 1,926 5,483 305 - 7,714
---------------------- -------------- ----------- ----------- ---------- ---------
At 28 February 2019 2,993 6,726 443 - 10,162
---------------------- -------------- ----------- ----------- ---------- ---------
At 29 February 2020 3,107 5,935 667 27,434 37,143
---------------------- -------------- ----------- ----------- ---------- ---------
6. Intangible assets and goodwill
Internally
Customer Acquired Brand developed
Goodwill lists software name software Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------- --------- --------- ---------- --------- ----------- ---------
Cost
Balance at 1 March 2019 107,390 12,897 28,668 751 59,559 209,265
Development costs - - 541 - 10,431 10,972
Additions - - - - - -
Exchange adjustments 3,249 362 699 18 290 4,618
------------------------- --------- --------- ---------- --------- ----------- ---------
At 29 February 2020 110,639 13,259 29,908 769 70,280 224,855
------------------------- --------- --------- ---------- --------- ----------- ---------
Amortisation
Balance at 1 March 2019 - 8,303 18,818 566 29,613 57,300
Amortisation for the
year - 1,315 2,315 54 8,693 12,377
Exchange adjustment - 230 423 13 96 762
------------------------- --------- --------- ---------- --------- ----------- ---------
At 29 February 2020 - 9,848 21,556 633 38,402 70,439
------------------------- --------- --------- ---------- --------- ----------- ---------
Internally
Customer Acquired Brand developed
Goodwill lists software name software Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------- --------- --------- ---------- --------- ----------- ---------
Cost
Balance at 1 March 2018 103,903 12,539 27,375 738 51,293 195,848
Development costs - - - - 8,573 8,573
Additions - - 665 - - 665
Exchange adjustments 3,487 358 628 13 (307) 4,179
------------------------- --------- --------- ---------- --------- ----------- ---------
At 28 February 2019 107,390 12,897 28,668 751 59,559 209,265
------------------------- --------- --------- ---------- --------- ----------- ---------
Amortisation
Balance at 1 March 2018 - 6,783 16,186 505 22,630 46,104
Amortisation for the
year - 1,308 2,437 54 7,214 11,013
Exchange adjustment - 212 195 7 (231) 183
------------------------- --------- --------- ---------- --------- ----------- ---------
At 28 February 2019 - 8,303 18,818 566 29,613 57,300
------------------------- --------- --------- ---------- --------- ----------- ---------
Carrying amounts
At 1 March 2018 103,903 5,756 11,189 233 28,663 149,744
------------------------- --------- --------- ---------- --------- ----------- ---------
At 28 February 2019 107,390 4,594 9,850 185 29,946 151,965
------------------------- --------- --------- ---------- --------- ----------- ---------
At 29 February 2020 110,639 3,411 8,352 136 31,878 154,416
------------------------- --------- --------- ---------- --------- ----------- ---------
7. Loans and borrowings
2020 2019
GBP'000 GBP'000
---------------------------------------- --- -------- --------
Current liabilities
Secured bank loans 6,337 34,909
Lease liabilities (2019: Finance lease 4,531 -
liabilities)
---------------------------------------- --- -------- --------
10,868 34,909
-------------------------------------------- -------- --------
Non-current liabilities
Secured bank loans 69,156 -
Lease liabilities (2019: Finance lease 25,155 -
liabilities)
---------------------------------------------- -------- --------
94,311 -
-------------------------------------------- -------- --------
8. Report and accounts
Copies of the Annual Report will be available as of 4 June 2020
on the Group's website, www.firstderivatives.com and from the
Group's headquarters at 3 Canal Quay, Newry, BT35 6BP.
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
FR FVLLFBELZBBL
(END) Dow Jones Newswires
May 19, 2020 02:00 ET (06:00 GMT)
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