FD Technologies Regulatory News (FDP)

5 November 2013

First Derivatives plc

("First Derivatives", the "Company" or the "Group")

Interim results for the six months ended 31 August 2013

First Derivatives (AIM: FDP.L, ESM: FDP.I), a leading provider of software and consulting services to the capital markets industry, today announces its results for the six months ended 31 August 2013.

Financial Highlights

· Turnover £34.4m (2012: £27.6m) +25%

· EBITDA £5.8m (2012: £5.7m) +2% after funding significant expansion of global sales team

· Pre-tax profit £3.0m (2012: £3.5m) -15%

· Adjusted* EPS down by 3.6%

· Interim dividend of 3.2p per share (2012: 3.1p) +3.2%

· Performance remains in line with current market expectations

*adjusted for amortisation and net profit after tax on sale of property.

Business Highlights

· Improving market conditions across Investment Banking with 17% increase in consulting revenue

· 46% increase in total software revenue and 16% increase in recurring software revenue

· NYSE contract underlines First Derivatives Big Data capability

· Increased investment in sales staff of £0.9m to capitalise on market interest and opportunities

· Investment in core operations for growing opportunities with recruitment of over 100 graduates in H1

· ASIC surveillance platform in Australia delivered on schedule

· Increased activity across the business driving strong second half

Seamus Keating, Chairman of First Derivatives commented:

"The first six months have seen continued strong growth across the Group's activities with total revenues up 25%. To fuel this growth we have increased the investment in the development of the Group's structure to ensure we have a strong organisation with quality product and service offerings. We have won a number of high profile contracts which we will deliver through the remainder of this year and have a healthy pipeline of prospects. We have maintained the momentum gained in the second quarter of the year and expect to report profits for the year in line with market expectations."

For further information please contact:

First Derivatives plc +44 (0)28 3025 2242

Brian Conlon, Chief Executive www.firstderivatives.com 

Graham Ferguson, Chief Financial Officer

Charles Stanley Securities, Nominated Adviser and Broker +44 (0)20 7149 6000

Russell Cook

Carl Holmes

Goodbody Stockbrokers, ESM Adviser and Broker +353 1 667 0410

Diane Hodgson

Linda Hickey

Finbarr Griffin

Walbrook PR +44 (0)20 7933 8783

Bob Huxford bob.huxford@walbrookpr.com

Helen Cresswell helen.cresswell@walbrookpr.com

Paul Cornelius paul.cornelius@walbrookir.com

About First Derivatives

First Derivatives is a global provider of software and consulting services to the financial services industry. With over 16 years experience working with leading financial institutions, it continues to deliver technologically advanced, award winning products and services that anticipate and respond to evolving needs of global capital markets.

First Derivatives currently employs over 800 people worldwide and counts many of the world's top investment banks, brokers and hedge funds as its customers. It has operations in London, New York, Stockholm, Singapore, Tokyo, Toronto, Sydney, Dublin, Newry and Hong Kong.

CHAIRMAN'S STATEMENT

The first half of 2013 has seen the Group continue to grow its operations across all regions and divisions in a market which is showing signs of improvement. The investment in our software assets and consulting offerings has bolstered our ability to compete for larger scale assignments in both divisions. This underpins the board's confidence in delivering continued strong revenue growth and margin improvement.

The software division has made significant progress in the period. Our announcement of the win with the Australian Securities and Investment Commission for our surveillance software made a significant impact on the market and has seen us involved in discussions with numerous brokers, exchanges and regulators on a global basis. This segment of the market is of growing importance with the continued growth in regulation and compliance presenting large scale opportunities. While there is a slower sales cycle than other areas, we remain confident of further successes in this area.

Our recent announcement on the Tick As A Service win with NYSE Technologies ("NYSET") highlights the potential of the software division in dealing with the ever increasing volume data demands on software solutions. This contract we believe defines a new market offering creating a cloud solution for market data for all market participants. Our partnership with NYSET gives us a strong brand and channel to market for this solution with its large customer base and sales force.

Consulting continues to drive forward bringing new clients to the Group for future cross selling. As part of the recent acquisitions of Redshift Horizons Limited and Cowrie Financial Limited we gained highly experienced personnel and this has assisted us in moving to high value consulting offerings and in the promotion of our software assets.

The Group continues to generate positive operating cash flows and the Board has decided to increase the interim dividend by 3.2% to 3.2p per share (H1 2012: 3.1p). This will be paid on 5 December 2013 to those shareholders on the register on 15 November 2013.

The fundamentals of the business are strong and the size of the capital markets and the sectors we are targeting are huge. The Group is well positioned to succeed and will continue to meet the challenges encountered to capitalise on the market opportunities that we have developed. With the current activity levels and pipeline we expect to report further growth in line with market expectations for the year to February 2014.

Seamus Keating

Chairman

CHIEF EXECUTIVE'S STATEMENT

I am pleased to report significant growth for the six months ended 31 August 2013 with revenues increasing by 24.6% to £34.4m from £27.6m in the corresponding period of the previous year. This growth is even more satisfying as it has been achieved across all regions and divisions of the organisation demonstrating the strength of the Group and its ability to react to market demands and meet the challenges presented to our customers.

The first half of this year has seen gross profit and EBITDA (Earnings before interest, tax, depreciation and amortisation) grow by 9% and 2% respectively on the prior year. This relatively modest growth in the first half reflects a significant acceleration in our investment in sales staff in Europe, North America and Asia to meet the opportunities developing for the business. Accelerated sales salary costs represented approximately £0.9m in the first half which, when adjusting for this, would have seen gross profit grow by 20%, EBITDA grow by 17.8% and profit before tax grow by 11.2%.

This investment in sales staff, along with our continued investment in core operational resources, will enable the business to deliver sales growth in H2 and beyond. While this investment in staff has held back profit growth in the first half we anticipate improvements in margin in the second half of the year as the benefit of this significant investment starts to bear fruit.

Software

Software sales of £11.0m were up 46.0% on the previous period (H1 2011: £7.5m). Transactional and recurring revenues were up 16.0% with service revenue associated with our own software product increasing by 82.5% driven by the scale of the implementations and opportunities in which we are now involved.

Our pipeline has never been so healthy. We have a portfolio of products, each of which addresses a market opportunity of hundreds of millions of dollars or more per annum. These products are hosted, multi-tenanted solutions so the incremental cost of signing new customers can be minimal. As our software applications become more established they provide us with an increasing number of prestigious reference customers across our flagship applications. These factors give us confidence in our ability to deliver continued growth in software revenues.

We continue to invest heavily in our research and development programme. Our decision to build a common technology platform for all of our applications means that our software is easier to support, deploy and upgrade. Our approach fosters rapid prototyping and innovation and allows us to convert ideas to products very quickly. From its conception we made a conscious decision to deploy Delta applications in the cloud and on mobile platforms - this decision has been validated by recent technology trends. Our software is designed to meet the "Big Data" challenge which is at the centre of the strategies of many of the world's IT giants.

We have achieved significant technology wins across our product suite and are working in partnership with some major players in the technology market. These wins are not only important in themselves but we believe they can be the springboard for even bigger opportunities in markets worth potentially billions of dollars per annum.

· Market Surveillance - In December of last year we announced that we had signed a multi-year contract with Australian Securities and Investment Commission ("ASIC"), the Australian regulator, to implement Delta Stream to assist them in maintaining an orderly market in the trading of securities. Delta Stream is used to collect real-time price and trading data from the seven different member exchanges and then analyse this using a variety of custom algorithims to identify patterns which would indicate possible insider trading, other forms of market abuse such as spoofing, or program trading algorithms oscillating out of control. The historical pattern is that the regulators and exchanges are key influencers in determining the choice of software for the compliance departments of regulated member firms - we are hopeful that the compelling functionality of Delta Stream and the size of the global surveillance market can generate significant opportunity for us in the near future.

· Market Data and Reference Data - In September of this year we announced a partnership with NYSE Technologies to bring a new Tick As A Service (TAAS) offering to the market. Delta Stream is the core of the TAAS offering and will be used to collect raw data from every major exchange in the world and to cleanse, enrich and store it. TAAS is targeted at all market participants as an alternative to building the internal global support teams and physical infrastructure (data centres, disk storage, hardware, back up facilities) required to collect and store market data. This paradigm turns data into a shared utility in the same manner as water or electricity. Every market participant needs data but raw data does not give them any competitive advantage per se, the competitive advantage comes from how they mine and utilise that data. This hosted and fully managed solution has the potential to save large financial institutions millions of dollars per annum and we would estimate the potential market size for this offering is hundreds of millions of dollars per annum. TAAS is an example of Big Data in action - on the North American financial markets alone there are c20 million price updates a second or 113 billion per day on average. Over 5 years this represents 95 trillion updates which need c21 PBs of storage.

· Foreign Exchange - Our Delta Flow product is now being used by 20 banks and brokers to help them source FX liquidity from a pool of 40 banks co-located in a data centre in New Jersey. These customers trade billions of dollars per day through our trading platform. During the year we have continued to enhance the functionality in the platform which has seen us recently being asked by one of our Japanese clients to replicate this offering in Tokyo. We see this as a major boost as it validates the direction we have taken with the product and its capabilities, while improving our ability to gain a bigger share of the largest segment (Japanese retail FX trading) of the largest market in the world (FX Market). We continue to invest heavily in Delta Flow and as we add new features we anticipate increasing our share of a potential $3 billion dollar per annum market.

· Big Data - Our software is the epitome of Big Data in action - we are one of the few companies to have moved beyond theoretical concepts to deliver real business benefits to our customers. Our software can analyse large volumes of data in tiny time periods and we record data with nanosecond timestamps. Whilst other Big Data players focus on "volume" and "veracity" issues and on tooling, it is clear that we are the market leaders in the "velocity" area as evidenced by independent technology industry benchmarks. We are talking with some of the leading Big Data companies in Silicon Valley and elsewhere to help them with the "velocity" and the "volume" piece of the Big Data story. These partnerships will help bring our technology to a wider arena beyond finance and put us on the radar of investors looking to ride the Big Data wave.

Consulting

Consulting revenues increased 16.5% to £23.4m from £20.1m in the six months to August 2013. We have achieved a number of significant wins in our key markets in the UK and the US as well as winning business in new markets such as South Africa and the Middle East. We are now firmly established as one of the leading niche capital markets consulting firms in the world and we have a reputation for the quality of our people. We are seen as a dynamic place to work and we are attracting some very senior figures from the City and Wall Street to our team. These people in turn bring their own network of potential customer contacts and future employees. Indeed these new senior employees have been to the forefront in generating new software and consulting deals and helping us forge relationships at very senior levels with customers and partners.

The Capital Markets world has changed since the crisis of 2008. The focus of our customers is no longer about expansion into new regions and new product lines. The focus is now on shoring up capital bases through cutting costs and dealing with the ever increasing tide of regulation. We have responded to this change in focus with a number of initiatives which have been instrumental in helping us to maintain double digit growth in this division;

· Our nearshore offering is resonating with our customers. Rather than pay the high costs associated with teams in the City or Manhattan we offer teams of similar quality based in our Headquarters in Newry. These teams provide a similar level of service but at a much lower cost. We distinguish ourselves from similar offerings based in places like India or the Ukraine based on language, capital market expertise, culture, timezone and the ability to spend time face to face with the client on site. As we grow, the size of the projects we bid for in this area is also growing.

· Our regulatory practice focuses on providing resources to banks in areas such as non-core asset disposal, regulation compliance and securitisation, where personnel with a combination of IT, finance and legal skills are in short supply. This service has been well received by existing and new clients who are under pressure to meet the requirements of regulations and directives such as Dodd Frank, EMIR and Basel.

· Our vendor services practice continues to grow. The acquisition of Cowrie in 2012 added Murex to the growing roster of third party products in which we have deep expertise. By building practices capable of delivering global, large scale implementation and support services for leading trading technology platforms we can penetrate practically every bank in the world. In the six months under consideration we added five new customers in this area of our business.

A key part of our strategy is to build sustainable, repeatable business. By focusing on building expertise in areas such as mission critical systems and providing nearshore support in multi-year contracts, we have created excellent revenue visibility of an estimated 80% in this area of the business. This visibility, allied with our growing brand reputation and our current pipeline, gives us confidence in our ability to continue to grow the revenues from this division.

Accommodation

The Company has made no further acquisitions of employee residential accommodation and in line with our stated strategy eight further individual properties have been disposed of in the period with a resulting profit on sale of £0.6m. The net proceeds of these disposals have been applied toward the reduction of our borrowings. We will continue to dispose of properties when suitable opportunities arise.

Outlook

The first six months have seen continued strong growth across the Group's activities with total revenues up 25%. We invested heavily in software, people and infrastructure to help us capitalise on what we believe is a huge opportunity. For example, we have recruited over 100 graduates over the last few months to help drive growth in both our software and our consulting division. We have seen a step improvement in our performance and we expect to report profits for the year in line with market expectations.

Brian Conlon

Chief Executive Officer

Consolidated Statement of Comprehensive Income (unaudited)

Consolidated Statement of changes in equity

Consolidated Statement of changes in equity (continued)

Consolidated statement of financial position (unaudited)

Consolidated statement of cashflows (unaudited)

Notes to the Interim Results

1 Basis of Preparation

The results for the six months ended 31 August 2013 are unaudited and have not been reviewed by the Company's Auditors. They have been prepared on accounting basis and policies that are consistent with those used in the preparation of the financial statements of the Company for the year ended 28 February 2013.

The financial statements contained in this report do not constitute statutory accounts within the meaning of Section 477 of the Companies Act 2006. The results for the period ended 28 February 2013 were prepared under International Financial Reporting Standards (IFRSs) as adopted by the EU ("adopted IFRSs") and reported on by the auditors and received an unqualified audit report. Full accounts for the period ended 28 February 2013 have been delivered to the Registrar of Companies.

2 Segmental Reporting

Revenue by division

Revenue by geographical location

3 Dividends

An Interim Dividend of 3.2p per share is proposed for the six months to 31 August 2013. This will be paid to shareholders on 5 December 2013 to shareholders on the register on 15 November 2013. The shares will be marked Ex-Dividend on 13 November 2013.

4 Earnings per Share

The earnings per share for the six months ended 31 August 2013 has been calculated on the basis of the profit after taxation of £2.4m (H1 2012: £2.8m). Earnings per share of 13.3 pence have been calculated based on the weighted average number of shares for the period being 18,118,787 (H1 2012: 16,823,147).

5 Interim Report

Copies can be obtained from the Company's head and registered office: 3 Canal Quay, Newry, Co. Down, BT35 6BP and are available to download from the Company's website www.firstderivatives.com.