Full year results for the year ended 29 Feb 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
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Year to 29 February |
2020 |
2019 |
Change |
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Revenue |
£237.8m |
£217.4m |
+9% |
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Gross profit |
£101.1m |
£91.3m |
+11% |
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Adjusted EBITDA* |
£45.5m |
£38.9m |
+17% |
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Profit** before tax |
£18.3m |
£16.7m |
+9% |
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Reported diluted EPS |
54.2p |
47.9p |
+13% |
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Full year dividend per share |
8.5p |
27.0p |
-69% |
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Net debt*** |
£49.4m |
£16.5m |
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*Adjusted for share-based payments and acquisition costs; FY 2020 adjusted EBITDA (excluding impact of IFRS 16): £41.4m (+6%)
**Includes foreign currency translation effect and deferred consideration on prior acquisitions
***Excluding lease obligations under IFRS 16
Business Highlights
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Software revenue up 13% to £148.4m (2019: £130.9m), driven by 23% growth in recurring software license revenue. |
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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. |
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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). |
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MRP Prelytix subscription revenue up 33% to £25.6m (2019: £19.3m) as we increase the platform's functionality and it becomes recognised as a leader in its market. |
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Managed services and consulting revenue up 3% to £89.4m (2019: £86.5m) with strong order intake in H2 but lower growth due to a delayed start to two multi-year contracts. |
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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. |
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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. |
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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:
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First Derivatives plc Seamus Keating, Chief Executive Officer Graham Ferguson, Chief Financial Officer Ian Mitchell, Head of Investor Relations |
+44(0)28 3025 2242 |
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Investec Bank plc (Nominated Adviser and Broker) Andrew Pinder Carlton Nelson Sebastian Lawrence |
+44 (0)20 7597 5970 |
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Goodbody (Euronext Growth Adviser and Broker) David Kearney Don Harrington Finbarr Griffin |
+353 1 667 0420 |
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FTI Consulting Matt Dixon Dwight Burden Darius Alexander
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+44 (0)20 3727 1000
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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 £237.8m and adjusted EBITDA increased by 17% to £45.5m. 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:
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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. |
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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. |
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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:
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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.
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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.
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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.
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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 £89.4m (2019: £80.2m). 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:
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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.
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A multi-asset class surveillance solution for a North American bank. |
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A contract for Kx to power an AI-based pricing engine and trading platform, using our data refinery product for rapid deployment.
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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 £47.3m (2019: £41.4m). 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 £11.7m (2019: £9.3m). 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:
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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. |
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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. |
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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 £89.4m, an increase of 3% on the prior year (2019: £86.5m). 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:
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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. |
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A North American bank selected us to deliver a programme of regulatory-driven projects coupled with an application upgrade. |
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A Japanese bank selected us to implement Robotic Process Automation for recurring back-office tasks. |
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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 £35m from our available finance facility. These funds have been placed on deposit and the Group has significant headroom on its covenants, with a further £15m 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 (£m)
2020 | 2019 | Growth | 2020 | 2019 | Growth | 2020 | 2019 | Growth |
| 2020 | 2019 | Growth | |
Software by sector | Total Software | ||||||||||||
FinTech Revenue | MarTech Revenue | Industry |
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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% | |
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| Cost of sales | (12.1) | (10.6) | 14% | |
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| Gross profit | 59.6 | 51.4 | 16% | |
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| Gross margin | 83% | 83% | - | |
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50.2 | 42.8 | 17% | 21.7 | 22.0 | (2%) | 4.9 | 4.1 | 20% | Services | 76.8 | 68.9 | 11% | |
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| Cost of sales | (55.1) | (48.9) | 13% | |
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| Gross profit | 21.7 | 20.0 | 8% | |
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| Gross margin | 28% | 29% | (1%) | |
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89.4 | 80.2 | 11% | 47.3 | 41.4 | 14% | 11.7 | 9.3 | 26% | Revenue | 148.4 | 130.9 | 13% | |
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| Cost of sales | (67.2) | (59.5) | 13% | |
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| Gross profit | 81.2 | 71.4 | 14% | |
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| Gross margin | 55% | 55% | - | |
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Managed services and consulting by sector | Total Managed services and consulting | ||||||||||||
FinTech Revenue | MarTech Revenue | Industry |
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89.4 | 86.5 | 3% | - | - | - | - | - | - | Revenue | 89.4 | 86.5 | 3% | |
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| Cost of sales | (69.5) | (66.6) | 4% | |
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| Gross profit | 19.9 | 19.9 | - | |
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| Gross margin | 22% | 23% | (1%) | |
Sector Totals | |||||||||||||
FinTech Revenue | MarTech Revenue | Industry |
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178.8 | 166.7 | 7% | 47.3 | 41.4 | 14% | 11.7 | 9.3 | 26% | Revenue | 237.8 | 217.4 | 9% | |
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| Cost of sales | (136.6) | (126.1) | 8% | |
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| Gross profit | 101.1 | 91.3 | 11% | |
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| Gross margin | 43% | 42% | 1% | |
EBITDA and net margin profit analysis | |||||||||||||
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| R&D | (13.1) | (10.7) | 23% | |
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| Sales expense | (35.4) | (32.3) | 10% | |
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| Adjusted operating expense | (17.5) | (18.0) | (3%) | |
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| Adj. EBITDA ex cap | 35.1 | 30.3 | 16% | |
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| Capitalised R&D | 10.4 | 8.6 | 22% | |
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| Adj. EBITDA | 45.5 | 38.9 | 17% | |
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| Adj. EBITDA margin | 19% | 18% | 1% | |
Revenue and Margins
Group revenue increased organically by 9% to £237.8m (2019: £217.4m) 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 £148.4m (2019: £130.9m) 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 £89.4m (2019: £80.2m), 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 £47.3m (2019: £41.4m), driven by continued growth in subscription revenue, which was up by 33% to £25.6m (2019: £19.3m), 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 £11.7m (2019: £9.3m). 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 £89.4m (2019: £86.5m) 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 £18.3m (2019: £16.7m) and adjusted profit before tax decreased by 6% to £25.9m (2019: £27.5m). Both were held back by an increase of £2.2m in interest charges following the completion of the acquisition of the minority interest in Kx Systems Inc, with a further £1.0m of additional interest relating to IFRS 16 lease costs. The calculation of adjusted profit before tax is detailed below.
| 2020 |
| 2019 |
| £m |
| £m |
|
|
|
|
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 £13.1m.
| 2020 |
| 2019 |
| Movement |
| £m |
| £m |
|
|
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 £14.9m (2019: £13.2m) 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 £21.3m (2019: £22.9m), 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 |
| £m |
| £m |
|
|
|
|
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 £335.8m (2019: £277.8m). 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 £94.0m.
Other financial assets, which includes equity investments, increased to £15.8m (2019: £13.7m).
Deferred revenue at the period end was up 11% at £21.8m (2019: £19.5m), arising from the continued focus on growing our recurring revenue.
Cash generation and net debt
The Group generated £34.4m of cash from operating activities before taxes paid (2019: £27.3m)representing 75% conversion of adjusted EBITDA (2019: 84%).
At the period end, net debt (excluding finance leases) was £49.4m (2019: £16.5m). The factors impacting the movement in net debt are summarised in the table below:
| 2020 |
| 2019 |
| £m |
| £m |
|
|
|
|
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 2.3m in equity and loans to its new and existing venture agreement companies with a maximum further commitment of up to 1.8m across all 27 venture agreements.
| 2020 |
| 2019 |
| Total to date |
|
|
|
|
|
|
Number of venture agreements in period | 9 |
| 9 |
| 27 |
Equity and loans advanced (£m) | 2.3 |
| 7.8 |
| 18.9 |
Outstanding commitment (£m) | 1.8 |
| 2.3 |
|
|
|
|
|
|
|
|
Revenue share agreements | 9 |
| 9 |
| 20 |
Revenue recognised for software services (£m) | 2.8 |
| 2.1 |
| 8.0 |
Licenses recognised under revenue share agreements (£m) | 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 | £'000 | £'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 | |
|
| £'000 | £'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 | £'000 | £'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 capital | Share premium | Merger reserve | Share option reserve | Fair value reserve | Currency translation adjustment | Retained earnings | Total equity | ||
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'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 capital | Share premium | Merger reserve | Share option reserve | Fair value reserve | Currency translation adjustment | Retained earnings | Total equity |
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 |
Balance at 1 March 2018 | 128 | 73,168 | 8,118 | 14,341 | - | 1,714 | 39,628 | 137,097 |
Total comprehensive income |
|
|
|
|
|
|
|
|
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 | - | - | - | - | 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 |
| £'000 | £'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 |
| £'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 |
| £'000 | £'000 | £'000 | £'000 | £'000 | £'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 |
| £'000 | £'000 | £'000 | £'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 |
| £'000 | £'000 | £'000 | £'000 | £'000 | £'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 |
| £'000 | £'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 |
| £'000 | £'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 £14,893k (2019: £13,175k), and a weighted average number of ordinary shares in issue of 26,628k (2019: 25,909k).
| 2020 | 2019 |
| Pence per share | Pence per share |
Basic earnings per share | 55.9 | 50.9 |
Weighted average number of ordinary shares
| 2020 | 2019 |
| Number '000 | Number '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 £14,893k (2019: £13,175k) 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 per share | Pence per share |
Diluted earnings per share | 54.2 | 47.9 |
Weighted average number of ordinary shares (diluted)
| 2020 | 2019 |
| Number '000 | Number '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 £18,250k (2019: £16,677k). The number of shares used in this calculation is consistent with note 4(a) above.
| 2020 | 2019 |
| Pence per share | Pence 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 per share | Pence 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 £21,283k (2019: £22,912k). The adjusted profit after tax has been calculated by adjusting for the amortisation of acquired intangibles after tax effect of £3,155k (2019: £3,370k), share based payment and related charges after tax effect of £2,526k (2019: £2,003k), acquisition costs after tax effect of £1,635k (2019: £3,838k), share of profit of associate after tax effect of £126k (2019: loss £23k), the gain on foreign currency translation after tax effect of £802k (2019: loss £503k). The number of shares used in this calculation is consistent with note 4(a) above.
| 2020 | 2019 |
| Pence per share | Pence 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 improvements £'000 | Plant and equipment £'000 | Office furniture £'000 |
Lease £'000 | Total £'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 improvements £'000 | Plant and equipment £'000 | Office furniture £'000 |
Lease £'000 | Total £'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
| Goodwill £'000 | Customer lists £'000 | Acquired software £'000 | Brand name £'000 | Internally developed software '000 | Total £'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 |
| Goodwill £'000 | Customer lists £'000 | Acquired software £'000 | Brand name £'000 | Internally developed software '000 | Total £'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 |
|
|
| £'000 | £'000 |
Current liabilities |
|
|
|
|
Secured bank loans |
|
| 6,337 | 34,909 |
Lease liabilities (2019: Finance lease liabilities) |
|
| 4,531 | - |
|
|
| 10,868 | 34,909 |
Non-current liabilities |
|
|
|
|
Secured bank loans |
|
| 69,156 | - |
Lease liabilities (2019: Finance lease liabilities) |
|
| 25,155 | - |
|
|
| 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.
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