REG - FD Technologies PLC - Results for the six months ended 31 August 2023
24/10/2023 07:00
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RNS Number : 0285R FD Technologies PLC 24 October 2023
24 October 2023
FD Technologies plc
("FD Technologies" or the "Group")
Results for the six months ended 31 August 2023
FD Technologies (AIM: FDP.L, Euronext Growth: FDP.I) announces its results for
the six months ended 31 August 2023.
Business highlights
Strategic progress across the Group led by KX advancing its opportunity in AI
- KX performed in line with our first half expectations, with ARR up 15% to
£69.3m; recurring revenue was up 23% with a significant H2 pipeline providing
confidence in delivering our FY24 target of ARR growth of at least 35%
- Delivered a 4x increase in our cloud service provider (CSP) pipeline by
working with their respective go-to-market teams following general
availability (GA) during H1 of:
· kdb Insights Enterprise as a managed application on Microsoft Azure;
· AWS KX managed service; and
· Customer self-managed kdb Insights and kdb Insights Enterprise in Azure, AWS
and Google Cloud Platform marketplaces
- Completed the shift in KX from selling solutions to selling software products,
with shorter sales cycles and greater scalability driving growth from new
product sales that is expected to exceed 60% CAGR from FY22 to FY24
- Launch of KDB.AI, our vector database for real-time contextual AI, for
enterprise use across industries which is generating positive developer and
customer feedback and building pipeline
- Multiple new strategic partnerships announced during H1 including AWS, Google,
Snowflake, McLaren Applied, SRC and EIPGRID, further increasing routes to
market and reflecting KX's market-leading position in real-time predictive
analytics and AI
- First Derivative revenue declined by 1% due to increased spending caution
among customers in H1, with measures taken to improve efficiency reducing the
impact on adjusted EBITDA
- In this market, our expectations for growth have reduced for the current year
and we expect the second half to be similar to the first half in revenue and
margin
- Market conditions remain challenging and we continue to manage resources to
meet demand, but we see evidence of improvement in our pipeline for projects
to be delivered next year
- We retain our view that First Derivative can deliver 10-15% annual revenue
growth through the economic cycle with an adjusted EBITDA margin of 15% by
FY26
- MRP revenue stabilised in Q1 and grew in Q2 compared to Q4 FY23, in line with
our expectations, and we expect further progress in H2, enabling us to
reiterate FY24 guidance for an improvement in adjusted EBITDA over FY23.
Bringing investment forward in KX to accelerate growth
- Incremental £9-10m in FY24 investment in KX to maximise revenue from our CSP
pipeline and to invest in product engineering and go-to-market to capitalise
on range of opportunities in AI, driven by customer and partner demand
- Targeting accelerated growth to £180m of KX ARR in FY26, representing
compound growth of 45% per annum from next year
- KX to achieve free-cash EBITDA breakeven by FY26 and margin of 20-25% by FY28
- Investment funded from Group cash flows supported by debt facilities.
We will host an investor and analyst event in London on 29 November that will
detail the AI growth opportunity for KX.
Group structure
In May 2021 the Board implemented, alongside its accelerated growth
strategy, a change in Group structure to enable each of our business units to
communicate its value proposition and maximise its growth opportunity. This
strategy has been effective and the Group now comprises strong businesses with
good competitive positions in large and growing markets. Each has a distinct
investment proposition, resulting from their differing operating models, and
therefore capital allocation requirements. In light of this, the Board has
decided to undertake a preliminary review of the optimal organisational
structure and allocation of capital to best position the Group to drive value
for shareholders. The review is at an early stage and the Board anticipates
the result of this review will be communicated to shareholders not later than
publication of the Group's FY24 results.
Seamus Keating, CEO of FD Technologies, commented: "We have continued to drive
strategic progress across the Group in the first half, with KX highlights
including the launch of KDB.AI and strong progress with our global partners.
We delivered a resilient performance in First Derivative and MRP despite
weaker customer demand in their respective markets and will continue to manage
these businesses to protect margins while ensuring they are well positioned to
grow as demand improves.
In May 2021 we set out plans for additional investment in KX accompanied by
ambitious targets that called for rapid acceleration in ARR. Having exceeded
these targets in each of the past two years, we stated in May 2023 our belief
that additional investment in KX could further accelerate our annual growth
rates to 45% plus. The breadth and scale of opportunities within KX, resulting
in rapid growth in our pipeline, has convinced the Board that now is the right
time to make this additional investment in both product and go-to-market. This
investment is a statement of confidence in the prospects for KX and is
accompanied by targets that would create significant value for shareholders."
Financial summary
Six months to end August 2023 2022 Change
Revenue £142.5m £147.4m (3%)
Gross profit £59.4m £60.2m (1%)
(Loss)/profit before tax (£4.5m) £1.1m N/A
Reported diluted (LPS)/EPS (22.2p) 2.9p N/A
Net debt* £7.2m £7.4m 2%
Adjusted performance measures
Adjusted EBITDA** £14.0m £16.0m (12%)
Adjusted diluted (LPS)/EPS (4.3p) 14.2p N/A
* Excluding lease obligations
** Adjusted for share based payments and restructure and non-operational costs
Financial highlights
- Group revenue down 3% to £143m (down 3% at constant currency), with good
growth in KX recurring revenue, a broadly flat performance at FD and a
reduction in revenue at MRP, in line with our expectations
- KX revenue growth of 12% to £37.7m (H1 FY23: £33.6m), led by recurring
revenue up 23% to represent 87% of total KX revenue (H1 FY23: 80%) with
reductions in both lower margin services revenue and lower value perpetual
license revenue. [Note that £4.6m of services revenue has been restated from
KX to First Derivative in this period, with H1 FY23 restated by £4.2m to
enable a like-for-like comparison. Further details are provided in the
financial review]
- First Derivative revenue £89.1m, down 1% (H1 FY23: £90.4m), driven by
increased customer caution from lower investment banking revenues; EBITDA
margins are expected to be similar to the first half
- MRP revenue down 33% to £15.7m (H1 FY23: £23.4m), although Q1 revenue
stabilised and Q2 saw some growth compared to Q4 FY23 due to measures we have
taken to sharpen focus and improve efficiency
- Adjusted EBITDA down 12% to £14.0m (H1 FY23: £16.0m), principally due to a
weaker comparative performance at MRP
- Net debt £7.2m (H1 FY23: £7.4m) as we continue our focus on cash management
Current trading and outlook
The Group delivered a resilient performance in H1, with good progress in KX
and challenging market conditions in First Derivative and MRP. The growth in
our KX pipeline, driven by our partnerships with CSPs and the recent launch of
KDB.AI, provide confidence in achieving our target of at least 35% growth in
ARR for the full year. In First Derivative, we anticipate similar market
conditions through H2 with the efficiency measures taken to date mitigating
the impact on adjusted EBITDA, resulting in an H2 revenue and EBITDA
performance similar to H1. In MRP we continue to expect to deliver an adjusted
EBITDA similar to last year.
At the Group level we expect FY24 revenue to be in the range of £285m to
£295m. The additional investment in KX announced today is expected to result
in a £9-10m impact to adjusted EBITDA in H2, resulting in FY24 adjusted
EBITDA in the range of £24m to £26m.
Looking beyond the current year, we are pleased with the progress and momentum
across the Group, particularly in KX where the partnerships with CSPs and
launch of KDB.AI provide confidence in the medium-term outlook to accelerate
our industry-leading growth rates.
For further information, please contact:
FD Technologies plc +44(0)28 3025 2242
Seamus Keating, Chief Executive Officer www.fdtechnologies.com (http://www.firstderivatives.com)
Ryan Preston, Chief Financial Officer
Ian Mitchell, Head of Investor Relations
Investec Bank plc +44 (0)20 7597 5970
(Nominated Adviser and Broker)
Carlton Nelson
Virginia Bull
Goodbody (Euronext Growth Adviser and Broker) +353 1 667 0420
David Kearney
Don Harrington
Nick Donovan
J.P. Morgan Cazenove (Broker) +44 (0)20 3493 8000
James A. Kelly
Mose Adigun
FTI Consulting +44 (0)20 3727 1000
Matt Dixon
Dwight Burden
Victoria Caton
About FD Technologies
FD Technologies is a group of data-driven businesses that unlock the value of
insight, hindsight and foresight to drive organisations forward. The Group
comprises KX, which provides software to accelerate AI-driven innovation;
First Derivative, providing consulting services which drive digital
transformation in financial services and capital markets; and MRP, which
provides technology-enabled services for enterprise demand generation. FD
Technologies operates from 14 locations across Europe, North America and Asia
Pacific, and employs 2,800 people worldwide.
For further information, please visit www.fdtechnologies.com
(http://www.fdtechnologies.com) and www.kx.com (http://www.kx.com)
Results presentation
A presentation for analysts will be held at FTI Consulting at 9.30am today,
following which a recording of the presentation will be available on the
Group's website.
Business Review
FD Technologies comprise three business units - KX, software to accelerate
AI-driven innovation; First Derivative, consulting services which drive
digital transformation in financial services and capital markets; and MRP,
which provides technology-enabled services for enterprise demand generation.
KX - Software to accelerate AI-driven innovation
KX's mission is to revolutionise AI-driven business innovation by empowering
enterprises to extract value from the ever-growing volume of data, much of it
machine-generated and temporal and the explosion of new unstructured and
synthetic data sets made possible by generative AI. During the period we
continued to enhance our position as the engine for real-time analytics in the
cloud, achieving general availability status on Microsoft Azure; launching a
collaboration with Amazon Web Services (AWS) to make kdb Insights available as
an AWS fully managed service on Amazon FinSpace; delivering native
availability of kdb Insights and kdb Insights Enterprise on Google Cloud
Marketplace; and joining the Snowflake partner network. We are seeing good
traction across these partners and are pleased with the acceleration in
pipeline build achieved through working with their respective go-to-market
teams.
In addition, our technology is extremely well positioned to meet the needs of
the rapidly growing AI market. Building on best-in-class capabilities for
mission critical and enterprise-scale historical and real-time data analytics,
our vector native technology is exceptionally well suited for new data types,
volumes and requirements of generative AI workflows. With further product
innovation we developed and launched KDB.AI, including a free developer
edition, which provides differentiated capabilities for multi-mode hybrid
search across vector embeddings, real-time pipelines, temporal and historical
data.
KDB.AI works seamlessly with popular large language models (LLMs) and machine
learning workflows and tools, including LangChain and ChatGPT, while native
support for Python and RESTful APIs means developers can perform common
operations like data ingestion, search and analytics using their preferred
applications and languages.
The launch of KDB.AI represents a major milestone in the development of KX and
positions us ahead of a potential wave of enterprise adoption. KDB.AI enhances
existing AI solutions by adding the capability to process numerical and time
series data and train models on streaming data to ensure they are always
up-to-date. It also provides the ability for enterprises to develop their own
proprietary data management systems and store the data used in queries for
auditing and compliance purposes. KDB.AI's high performance capabilities
enable us to provide these benefits using CPU-based systems, reducing the cost
and availability issues associated with GPU-based solutions.
We have seen high levels of interest in KDB.AI, with an oversubscribed
Technical Preview scheme providing positive feedback on its unique
capabilities. We have also worked during this period with a number of global
systems integrators who are interested in how KDB.AI can help their customers,
with potential partner announcements expected to flow from these evaluations.
We believe the evolution of our product portfolio has expanded our addressable
market, with industry analysts such as Gartner indicating that the markets in
which KX operates are moving towards mainstream adoption, with the vector
database market adding further growth potential.
Strategic partnerships
Working with strategic partners is key to rapidly and efficiently achieving
our growth objectives, and our priority is to establish KX as the
high-performance engine within the CSPs. We continue to make good progress and
KX is now available across all three major global CSPs - Microsoft Azure, AWS
and Google. We will continue to work to deepen our relationships and product
integration as well as add cloud platform partners who process significant
data volumes on their platforms.
We also made good progress adding new partners who have market-leading
expertise in the sectors we are targeting, including Lockheed Martin
(defence), McLaren (automotive / telemetry), SRC (defence) and EIPGRID
(utilities), as well as DataArt, Data Intellect and Caspian One in financial
services.
Through our dedicated teams we will continue to develop our relationships with
existing partners and seek new agreements with systems integrators, OEMs and
independent software vendors (ISVs) seeking to integrate our technology into
their data and AI-driven applications.
Commercial progress
During H1 we delivered £6.9m of incremental ACV as we focused our resources
on building pipeline with the global CSPs, resulting in a record level of
opportunities through these partners. This initial success underpins our
expectation of a significantly stronger H2 and provides confidence in
achieving our FY24 guidance of ARR growth of at least 35%.
During the period we strengthened our leadership team with several significant
hires, including a Chief Financial Officer, Anitha Gopalan, who has 25 years
of finance and operational expertise in the SaaS and technology sectors; a
Chief Product & Engineering Officer, Michael Gilfix, who has 20 years of
experience in software in the areas of data and AI; and a Chief Marketing
Officer, Peter Finter, who has experience building marketing strategies at
hyper-growth technology companies. We continue to invest in sales and
marketing, strengthening and evolving our go-to-market team at all levels to
target new opportunities horizontally across industries.
We have now completed the shift in KX from selling custom solutions to selling
scalable products, our flagship deal in the period was a large expansion with
a recent customer in financial services. This resulted from the recent launch
of PyKX, our Python interface, which enables developers to work in Python
rather than our proprietary language and validates our view of the importance
of this capability to drive adoption of KX. Other significant deals included
the first to close from our strategic partnership with Microsoft, which was
also based on PyKX and which closed significantly faster than our average
direct sale. We also won several important new customers during the period
where the deal size starts relatively small, but which are expected to
increase in value significantly over time.
The launch of our products across our CSP partners was an important milestone
to unlock revenue opportunities, working with their go-to-market teams. For
our three largest CSP partners we saw a 4x increase in our pipeline working
with them post GA, which is expected to benefit both the current financial
year and beyond.
Investment to accelerate growth
IDC reported in its September 2023 spending update that AI software spending
will increase at a 36% CAGR between 2023 and 2027. Positive industry trends
such as this, combined with the scale of the opportunity provided by our
partnerships with the cloud CSPs and the positive customer and partner
response to the launch of KDB.AI, have convinced the Board that now is the
right time to increase investment in KX to accelerate our growth further.
We are investing a further £9-10m in the second half of FY24 across product
& engineering and go-to-market to capitalise on these opportunities. In
product & engineering the investment will enable us to deliver product
innovation in the vector database market and to enable developers, customers
and systems integrators to accelerate adoption of solutions based on KX. On
go-to-market we will scale our sales capability to meet market demand,
increase our capacity to assist OEM and systems integrator partners and
support our positioning as a leader in the vector database market.
The Board expects the investment to deliver significant value creation for
shareholders. From next year we expect to deliver compound annual growth in
ARR of 45%, resulting in an ARR target of £350m for FY28, representing a more
than 5x increase over the £65m reported in FY23. We expect that cash EBITDA
margins in KX will be negative through FY25 and turn positive in FY26, rising
to 20-25% in FY28.
First Derivative - driving digital transformation in financial services and
capital markets
First Derivative is a professional services business operating exclusively in
investment banking in areas where knowledge and expertise are high barriers to
entry, with long-standing relationships with key clients that have the
capability to drive long-term growth. Our expectation is that over the
economic cycle it can deliver 10-15% annual revenue growth and our target is
to achieve 15% adjusted EBITDA margin by FY26.
First Derivative saw a 1% revenue decline during H1, resulting from the weaker
demand environment that has been widely reported among our peer group, driven
by concerns earlier in the year post the collapse of SVB and later in the
period by a downturn in M&A revenue at our investment bank clients. This
increased caution resulted in a number of delays to the start of new
assignments and longer sales cycles in H1.
In response to market conditions, we acted to improve efficiency across the
business. We strengthened the sales team to focus on global management of our
largest clients and introduced a delivery function to manage our entire
project portfolio and increase our ability to pursue and close larger deals.
We also reinvented our graduate programme, adding a new commercial and
operational approach that has received positive feedback from clients, and
creating a focus on areas of skills shortage such as quants and cybersecurity.
In total we removed £2.8m of annualised cost from the business in H1.
Demand remains uneven, leading us to be cautious on the outlook for full year
revenue, although we expect the efficiencies implemented in H1 to mitigate the
impact.
We remain positive about the mid to long-term outlook for First Derivative.
Despite the current market uncertainty, in the past 12 months we have won a
number of important new clients across geographies to add to our strong
existing relationships. Our service offerings are highly relevant to our
clients' key challenges, and we continue to evolve and develop them. This has
enabled us to build a large pipeline, while organisationally and in terms of
service delivery we are well placed to grow as market conditions improve.
These fundamental strengths reinforce our view regarding the high-quality
nature of the First Derivative business and the significant growth opportunity
through the economic cycle.
MRP - technology-enabled services for enterprise demand generation
MRP is our smallest business unit, representing 11% of revenue during the
period. It provides B2B sales and marketing decision makers with full funnel
demand generation solutions, powered by Prelytix. Prelytix tracks more than
1.5 billion intent signals per day, enabling MRP customers to identify the
right customers, and prioritise their budgets and resources on accounts that
have the highest propensity to convert to pipeline.
MRP's customer budgets remain under pressure, and in response we have taken
several steps including a sharpened focus on the key differentiators that MRP
delivers for clients and a further reduction in the cost base.
As anticipated, we saw a stabilisation in revenue in Q1 of the financial year
and a return to growth in Q2 compared to Q4 FY23 and we continue to expect MRP
to deliver adjusted EBITDA in FY24 similar to that delivered in FY23. Looking
further out, as spending in digital marketing returns to growth, we believe we
are implementing strategies to benefit from that growth and with a lean
organisation can return to double digit revenue growth and deliver significant
margin improvement.
Corporate responsibility and sustainability
The Group currently employs 2,800 people, down from the 3,100 employed at the
same time last year. The reduction in headcount resulted from efficiency
measures in both MRP and First Derivative as described above.
During the period we focused attention on ensuring we have the leadership
across the business to deliver growth, making several strategic senior hires
in each of the business units, as well as investing further in leadership
development programmes to fast-track high potential individuals.
We continued our Board-led focus on minimising the impact of our operations on
the environment and recognise the importance of setting carbon reduction
targets and reporting our progress on these. We are also committed to
supporting our customers and suppliers achieve their own low carbon futures.
We have focused our efforts in this period on ensuring the environmental
efficiency of our corporate real estate, particularly during the refurbishment
and upgrade of several key offices.
Principal risks and uncertainties
The principal risks and uncertainties relating to the Group's operations for
the next six months are considered to remain consistent with those disclosed
in the Group's Annual Report and Accounts 2023. Please refer to pages 25 to 29
thereof which can be found at
www.fdtechnologies.com/investor-relations/news-results/results-centre/
(http://www.fdtechnologies.com/investor-relations/news-results/results-centre/)
.
Financial review
Revenue and Margins
The table below shows the breakdown of Group performance by business unit for
each of KX, First Derivative and MRP.
H1 FY24 H1 FY23
Group KX First MRP Group KX First MRP Group change
Derivative Derivative
£m £m £m £m £m £m £m £m
Revenue 142.5 37.7 89.1 15.7 147.4 33.6 90.4 23.4 (3%)
Cost of sales (83.1) (8.5) (66.0) (8.7) (87.2) (8.2) (65.3) (13.7) (5%)
Gross profit 59.4 29.2 23.1 7.1 60.2 25.4 25.1 9.7 (1%)
Gross margin 42% 78% 26% 45% 41% 76% 28% 42%
R&D expenditure (16.3) (14.7) (0.5) (1.2) (11.9) (10.2) (0.1) (1.5) 37%
R&D capitalised 13.7 12.1 0.4 1.2 10.1 8.4 0.1 1.5 36%
Net R&D (2.6) (2.6) 0.0 0.0 (1.8) (1.8) 0.0 0.0 43%
Sales and marketing costs (22.6) (14.8) (4.4) (3.4) (27.1) (14.4) (7.8) (4.9) (16%)
Adjusted admin expenses (20.1) (7.0) (9.3) (3.9) (15.4) (5.4) (6.9) (3.1) 31%
Adjusted EBITDA 14.0 4.8 9.4 (0.2) 16.0 3.9 10.4 1.7 (12%)
Adjusted EBITDA margin 10% 13% 11% (1%) 11% 11% 12% 7%
The revenue performance was led by 12% growth in KX while First Derivative
declined by 1% and MRP by 33%, both driven by cautious customer spending in
their markets. This resulted in a 3% decline in Group revenue in the period.
There was no appreciable currency impact on results due to similar average
dollar FX rates this year compared to last year, with the exception of Net
Revenue Retention (NRR) which is calculated quarterly and where constant
currency NRR was 117% compared to the 112% reported. Gross profit increased to
42% (H1 FY23: 41%), with performance led by KX. We continue to invest in our
KX software product development and in people and systems to achieve our
ambitious growth targets. This, together with the revenue declines at First
Derivative and MRP, resulted in adjusted EBITDA declining by 12% to £14.0m
(H1 FY23: £16.0m).
Reclassification of KX service revenue to First Derivative
During the period we transferred professional services contracts relating to
post implementation consultancy and development from KX to First Derivative,
where it is better placed to be serviced and grow. The numbers stated above
reflect this change and the prior year results have also been restated to
enable like-for-like comparison. The impact in the period was to move £4.6m
of KX services revenue to First Derivative (H1 FY23: £4.2m), along with
£3.0m cost of sales (H1 FY23: £2.6m) resulting in an impact on gross profit
of £1.6m (H1 FY23: £1.7m). A £0.1m movement in adjusted admin expenses (H1
FY23: £0.1m) resulted in a net movement in adjusted EBITDA of £1.5m from KX
to FD for the period (H1 FY23: £1.6m).
KX
KX total Financial services Industry
H1 FY24 H1 FY23 Change H1 FY24 H1 FY23 Change H1 FY24 H1 FY23 Change
£m £m £m £m £m £m
Revenue 37.7 33.6 12% 29.9 28.6 4% 7.8 5.0 56%
Recurring 32.9 26.8 23% 26.9 23.5 14% 6.0 3.2 85%
Perpetual 0.6 0.8 (25%) 0.1 0.2 (74%) 0.6 0.6 (8%)
Total software 33.5 27.6 21% 27.0 23.8 13% 6.5 3.9 70%
Services 4.2 6.0 (30%) 2.9 4.9 (40%) 1.2 1.1 10%
Gross profit 29.2 25.4 15%
Adjusted EBITDA 4.8 3.9 25%
KX delivered 12% revenue growth in the period, driven by 23% growth in
recurring revenue to £32.9m, balanced by a 30% reduction in services to
£4.2m. The reduction in services reflects the increased ease of adoption of
our software and therefore lower level of implementation services required,
which increases the return on investment for our customers and drives our
growth in recurring revenue. Annual contract value added was £6.9m (H1 FY23:
£11.4m), in line with our expectations, as we worked with our CSP partners to
build pipeline following general availability of our software on their
platforms. Revenue from perpetual license sales relates to continuing customer
engagements entered into before our decision in 2021 to focus exclusively on
subscription sales for new customers, and now represents just 2% of KX
revenue.
Financial services revenue grew by 4% to £29.9m, with recurring revenue up
14%. We continue to benefit from adoption of kdb Insights by existing and new
customers, attracted by its performance, ease of use and rapid time to value,
as well as native integration with important developer languages such as
Python and SQL. We had several new customer wins in the period driven by the
release of PyKX, our Python interface, as well as our first customer wins
through our partnership with Microsoft Azure.
Industry revenue grew by 56% to £7.8m with recurring revenue growing by 85%
to £6.0m. We saw a broad range of drivers for this growth, including new
customers and expansion within existing customers, and across industries
including healthcare, utilities, manufacturing, telecoms and defence.
A key focus in H1 was working with our partners as they prepared to launch our
software on their platforms, which has resulted in rapid growth in our
pipelines with them.
Performance metrics H1 FY24 H1 FY23 Change
Annual recurring revenue (ARR) £m 69.3 60.2 15%
Net revenue retention (NRR) 112% 119%
Gross margin 78% 76%
R&D expenditure as % of revenue 39% 31%
Sales and marketing spend as % of revenue 39% 43%
Adjusted EBITDA margin 13% 11%
ARR increased by 15% to £69.3m while NRR of 112% was broadly in line at
constant currency with the 119% achieved in H1 FY23. With the growth in our
pipeline post GA with our CSP partners, these metrics are expected to improve
in H2 and beyond. We continue to invest in R&D and sales and marketing in
line with our strategy and to execute on our significant growth opportunities.
First Derivative
H1 FY24 H1 FY23 Change
£m £m
Revenue 89.1 90.4 (1%)
Gross profit 23.1 25.1 (8%)
Adjusted EBITDA 9.4 10.4 (10%)
Revenue for the period was £89.1m, a decline of 1% on H1 FY23 as a result of
increased caution at our customers following the collapse of SVB and lower
M&A activity impacting the income of our investment banking customers.
While we won a number of assignments in Q4 last year, onboarding was slower
than expected and sales cycles in H1 were elongated. Natural roll-offs from
project completions outpaced consultants onboarding to new assignments, which
resulted in the revenue decline.
Performance in First Derivative was strongest in its technology services
(revenue up 3%) and engineering services (revenue up 7%) practices, while
business services decreased by 9%. We are fully utilised in several of our
key areas of expertise and are targeting our resources in areas of strongest
demand.
In response to lower activity levels we removed £2.8m of annualised operating
costs, while simplifying the sales, delivery and practice management of the
business. This, together with an easing of the attrition and wage inflation,
has reduced the impact of lower revenue on both gross and adjusted EBITDA
margin.
Performance metrics H1 FY24 H1 FY23
Gross margin 26% 28%
Adjusted EBITDA margin 11% 12%
Gross margin was 26%, a decline from 28% in the prior year period, for the
reasons outlined above, while the impact of our efficiency measures limited
the impact on adjusted EBITDA margin, which decreased to 11% (H1 FY23: 12%).
MRP
H1 FY24 H1 FY23
£m £m Change
Revenue 15.7 23.4 (33%)
Gross profit 7.1 9.7 (27%)
Adjusted EBITDA (0.2) 1.7 (110%)
MRP derives revenue by combining cutting-edge predictive analytics with a full
suite of products and services to assist our customers to generate demand.
Many of our customers continue to operate demand generation activity below
historic levels, driven by economic concerns, leading to a decline in revenue
of 33% compared with H1 FY23 - however, revenue stabilised in Q1 of FY24 and
increased in Q2 relative to Q4 FY23 and we expect H2 to demonstrate growth on
H1.
Adjusted EBITDA decreased to a loss of £0.2m, with Q2 generating a profit. We
continue to take action to ensure costs are aligned with business activity,
and combined with the improving revenue outlook we continue to expect to
deliver an adjusted EBITDA for the full year similar to the £1.4m reported in
FY23.
Performance metrics H1 FY24 H1 FY23
Gross margin 45% 42%
Adjusted EBITDA margin (1%) 7%
Gross margin increased to 45% (H1 FY23: 42%) as a result of cost efficiencies
in third-party costs incurred in our display marketing offering. This was not
sufficient to overcome the impact of the reduction in revenue in the period,
which impacted the adjusted EBITDA margin, particularly in Q1, although note
that adjusted EBITDA margin was positive in Q2 and we anticipate it remaining
positive through the rest of the year.
Group Performance
Adjusted EBITDA
The reconciliation of operating loss to adjusted EBITDA is provided below. The
movements to note are the reduction in non-operational IT expenses, following
the successful implementation of the Group's Oracle Cloud Fusion ERP system,
and the reduction in amortisation costs, principally as a result of a
reduction in the amortisation of acquired intangibles. Included within
restructure and non-operational costs is £1.7m in relation to costs to
implement efficiency measures at First Derivative and MRP.
H1 FY24 H1 FY23
£m £m
Operating loss (0.7) (1.0)
Restructure and non-operational costs 2.3 2.5
Non-operational IT expenses* 0.6 2.6
Share based payment and related costs 1.5 0.9
Depreciation and amortisation 10.3 11.0
Adjusted EBITDA 14.0 16.0
*Non-operational IT expenses represents ERP implementation costs that are
required to be expensed under accounting standards
(Loss)/profit before tax
Adjusted profit before tax decreased to £1.9m, resulting from the reduction
in adjusted EBITDA, higher software amortisation costs resulting from our
investment in R&D and an increase in financing costs resulting from higher
interest rates, partially offset by a reduction in our gross debt.
The Group reported a loss before tax of £4.5m for the period, compared to a
profit of £1.1m in H1 FY23. The major factor here was a £5.3m swing in
foreign currency translation, largely resulting from weakening of the dollar
in H1 FY24 compared to the same period last year, partially offset by a
reduction in receivables and cash on hand in H1 FY24.
The reconciliation of adjusted EBITDA to reported profit before tax is
provided below.
H1 FY24 H1 FY23
£m £m
Adjusted EBITDA 14.0 16.0
Adjustments for:
Depreciation (3.2) (3.7)
Amortisation of software development costs (6.8) (5.5)
Net financing costs (2.1) (1.7)
Adjusted profit before tax 1.9 5.0
Adjustments for:
Amortisation of acquired intangibles (0.3) (1.7)
Share based payment and related costs (1.5) (0.9)
Restructure and non-operational costs (2.3) (2.5)
Non-operational IT expenses (0.6) (2.6)
(Loss)/profit on foreign currency translation (1.6) 3.7
Profit on disposal of associate 0.1 0.1
Net financing costs (0.2) -
Reported (loss)/profit before tax (4.5) 1.1
(Loss)/earnings per share
The Group reported a loss after tax of £6.2m for the period, compared to a
profit after tax of £0.8m in H1 FY23. Adjusted loss after tax was £1.2m,
decreased from £4.0m profit in H1 FY23, resulting in a decrease in adjusted
diluted loss per share for the period to 4.3p.
The calculation of adjusted profit after tax is detailed below:
H1 FY24 H1 FY23
£m £m
Reported (loss)/profit before tax (4.5) 1.1
Tax (1.7) (0.3)
Reported (loss)/profit after tax (6.2) 0.8
Adjustments from (loss)/profit before tax (as per the table above) 6.4 3.9
Tax effect of adjustments (1.4) (0.8)
Adjusted (loss)/profit after tax (1.2) 4.0
Weighted average number of ordinary shares (diluted) 28.1m 28.0m
Reported (LPS)/EPS (diluted) (22.2p) 2.9p
Adjusted (LPS)/EPS (diluted) (4.3p) 14.2p
Cash generation and net cash (excluding lease liabilities)
The Group generated £11.9m of cash from operating activities before the
Oracle ERP implementation cash outlay incurred during the period of £2.5m,
representing an 85% conversion of adjusted EBITDA, higher than the 75% in H1
FY23. We continue to focus on cash collection and working capital improvements
and our target for the full year remains to generate cash conversion in the
range of 80-85% of adjusted EBITDA.
At the period end we had a net debt position of £7.2m, broadly unchanged from
the prior year. The factors impacting the movement in net cash (excluding
lease liabilities) are summarised in the table below:
H1 FY24 H1 FY23
£m £m
Opening net cash (excluding lease liabilities) 0.4 0.3
Cash generated from operating activities before non-operational IT expenses 11.9 12.0
Non-operational IT expenses (2.5) (2.6)
Cash generated from operating activities 9.4 9.4
Taxes paid (2.4) (0.7)
Capital expenditure: property, plant and equipment (0.3) (2.0)
Capital expenditure: intangible assets (13.7) (10.6)
Sale of other investments and associates 2.8 0.1
Issue of new shares 0.1 2.6
Interest, foreign exchange and other (3.5) (6.6)
Closing net debt (excluding lease liabilities) (7.2) (7.4)
The drivers of cash performance in H1 FY24 were the increasing spend on
research and development, where of the total £16.3m spend £13.7m (84%) was
capitalised, lower capex costs following heavy investment in prior periods and
an earnout payment relating to the sale of our investment in RxDataScience Inc
in FY22.
We refinanced our banking facility in early 2023 on improved terms and it
comprises a £130m revolving credit facility, with an interest rate payable of
SONIA/SOFR plus a margin range of 1.85% to 2.85%.
Definition of terms
The Group uses the following definitions for its key metrics:
Annual recurring revenue (ARR): the value at the end of the accounting period
of recurring software revenue to be recognised in the next twelve months.
Annual contract value (ACV): the sum of the value of each customer contract
signed during the year divided by the number of years in each contract.
Net revenue retention rate (NRR): is based on the actual revenues in the
quarter annualised forward to twelve months and compared to the revenue from
the four quarters prior. The customer cohort is comprised of customers in the
quarter that have generated revenue in the prior four quarters.
Adjusted admin expenses: is a measure used in internal management reporting
which comprises administrative expenses per the statement of comprehensive
income of £34.1m (H1 FY23: £31.2m) adjusted for depreciation and
amortisation of £10.3m (H1 FY23: £11.0m), share based payments and related
costs of £1.5m (H1 FY23: £0.9m), restructure and non-operational costs of
£2.3m (H1 FY23: £2.5m), IT systems implementation costs expensed £0.6m (H1
FY23: £2.6m) and other £(0.8)m (H1 FY23: £(1.1)m).
Consolidated income statement (unaudited)
Six months ended 31 August
2023 2022
Note £'000 £'000
Revenue 3 & 4 142,471 147,411
Cost of sales (83,113) (87,210)
Gross profit 59,358 60,201
Operating costs
Research and development costs (16,329) (11,908)
- of which capitalised 13,730 10,092
Sales and marketing costs (22,596) (27,060)
Administrative expenses (34,095) (31,222)
Impairment loss on trade and other receivables (760) (1,162)
Total operating costs (60,050) (61,260)
Other income 7 62
Operating loss (685) (997)
Finance income 39 8
Finance expense (2,356) (1,720)
(Loss)/gain on foreign currency translation (1,593) 3,680
Net finance (cost)/income (3,910) 1,968
Profit on disposal of associate 88 100
(Loss)/profit before taxation (4,507) 1,071
Income tax expense 6 (1,721) (250)
(Loss)/profit for the period (6,228) 821
Pence Pence
(Loss)/earnings per share 7
Basic (22.2) 2.9
Diluted (22.2) 2.9
Consolidated balance sheet (unaudited)
As at As at As at
31 August
31 August
28 February
2023
2022
2023
Note £'000 £'000 £'000
Assets
Property, plant and equipment 22,151 28,734 25,593
Intangible assets and goodwill 176,987 173,636 175,660
Other financial assets 8,337 18,407 9,356
Trade and other receivables 2,211 4,130 2,548
Deferred tax assets 21,601 20,838 21,313
Non-current assets 231,287 245,745 234,470
Trade and other receivables 73,364 78,270 96,749
Current tax receivable 7,113 5,566 6,114
Cash and cash equivalents 22,887 44,777 36,905
Current assets 103,364 128,613 139,768
Total assets 334,651 374,358 374,238
Equity
Share capital 8 140 140 140
Share premium 104,119 103,359 103,789
Shares option reserve 20,418 19,243 18,974
Fair value reserve 530 8,393 3,002
Currency translation adjustment reserve (119) 8,045 5,354
Retained earnings 63,381 68,212 69,609
Equity attributable to shareholders 188,469 207,392 200,868
Liabilities
Loans and borrowings 9 45,135 65,127 17,026
Trade and other payables 10 4,522 3,799 3,681
Deferred tax liabilities 16,337 16,444 15,758
Non-current liabilities 65,994 85,370 36,465
Loans and borrowings 9 3,307 9,866 39,911
Trade and other payables 10 32,912 32,165 41,466
Deferred Income 35,794 31,908 48,407
Current tax payable 1,044 197 682
Employee benefits 7,131 7,460 6,439
Current liabilities 80,188 81,596 136,905
Total liabilities 146,182 166,966 173,370
Total equity and liabilities 334,651 374,358 374,238
Consolidated statement of changes in equity (unaudited)
Six months ended 31 August 2023
Share Share Share Fair value reserve Currency translation adjustment Retained Total
capital
premium
option
earnings
equity
reserve
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Balance at 1 March 2023 140 103,789 18,974 3,002 5,354 69,609 200,868
Total comprehensive income for the period
Loss for the period - - - - - (6,228) (6,228)
Other comprehensive income
Net exchange loss on net investment in foreign subsidiaries - - - - (6,371) - (6,371)
Net exchange gain on hedge of net investment in foreign subsidiaries - - - - 898 - 898
Net change in fair value of equity investments at FVOCI - - - (2,472) - - (2,472)
Total comprehensive income for the period - - - (2,472) (5,473) (6,228) (14,173)
Transactions with owners of the Company
Tax relating to share options - - (56) - - - (56)
Exercise of share options - 63 - - - - 63
Issue of shares - 267 - - - - 267
Share-based payment charge - - 1,500 - - - 1,500
Dividends to owners of the Company - - - - - - -
Balance at 31 August 2023 140 104,119 20,418 530 (119) 63,381 188,469
Consolidated statement of changes in equity (unaudited)
Six months ended 31 August 2022
Share Share Share Fair value reserve Currency translation adjustment Retained Total
capital
premium
option
earnings
equity
reserve
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Balance at 1 March 2022 139 100,424 18,404 9,755 (3,574) 67,391 192,539
Total comprehensive income for the period
Profit for the period - - - - - 821 821
Other comprehensive income
Net exchange gain on net investment in foreign subsidiaries - - - - 15,321 - 15,321
Net exchange loss on hedge of net investment in foreign subsidiaries - - - - (3,702) - (3,702)
Net change in fair value of equity investments at FVOCI - - - (1,362) - - (1,362)
Total comprehensive income for the period - - - (1,362) 11,619 821 11,078
Transactions with owners of the Company
Tax relating to share options - - 39 - - - 39
Exercise of share options - - - - - - -
Issue of shares 1 2,935 - - - - 2,936
Share-based payment charge - - 800 - - - 800
Dividends to owners of the Company - - - - - - -
Balance at 31 August 2022 140 103,359 19,243 8,393 8,045 68,212 207,392
Consolidated cash flow statement (unaudited)
Six months ended 31 August
2023 2022
£'000 £'000
Cash flows from operating activities
Loss/profit for the period (6,228) 821
Adjustments for:
Net finance cost/(income) 3,910 (1,968)
Depreciation of property, plant and equipment 3,229 3,636
Amortisation of intangible assets 7,070 7,331
Loss on disposal of fixed assets - 3
Profit on disposal of associate (88) (100)
Equity-settled share-based payment transactions 1,500 800
Grant income (8) (191)
Tax expense 1,721 250
11,106 10,582
Changes in:
Trade and other receivables 15,482 (1,100)
Trade and other payables and deferred income (17,192) (63)
Cash generated from operating activities 9,396 9,419
Taxes paid (2,386) (695)
Net cash from operating activities 7,010 8,724
Cash flows from investing activities
Interest received 40 8
Sale of associate 3,005 100
Acquisition of other investments (249) -
Acquisition of property, plant and equipment (279) (1,967)
Acquisition of intangible assets (13,730) (10,618)
Net cash used in investing activities (11,213) (12,477)
Cash flows from financing activities
Proceeds from issue of share capital 64 2,650
Repayment of borrowings (4,907) (3,072)
Payment of finance lease liabilities (1,645) (1,928)
Interest paid (2,526) (1,385)
Net cash used in financing activities (9,014) (3,735)
Net decrease in cash and cash equivalents (13,217) (7,488)
Cash and cash equivalents at 1 March 36,905 48,564
Effects of exchange rate changes on cash held (801) 3,701
Cash and cash equivalents at 31 August 22,887 44,777
Notes to the Interim Results
1. General information
FD Technologies plc ("FD Technologies", the "Company" or the "Group") is a
public limited company incorporated and domiciled in Northern Ireland. The
Company's registered office is 3 Canal Quay, Newry BT35 6BP. This condensed
consolidated interim financial information was approved for issue by the Board
of Directors on 23 October 2023.
This condensed consolidated interim financial information does not comprise
statutory financial statements within the meaning of section 434 of the
Companies Act 2006. Statutory financial statements for the year ended 28
February 2023 were approved by the Board of Directors on 22 May 2023 and
delivered to the Registrar of Companies. The auditors reported on those
accounts: their report was unqualified, did not draw attention to any matters
by way of emphasis and did not contain a statement under section 498(2) or (3)
of the Companies Act 2006.
2. Accounting policies
Basis of Preparation
The annual financial statements for the Group will be prepared in accordance
with United Kingdom adopted International Financial Reporting Standards. This
condensed consolidated interim financial information for the half-year ended
31 August 2023 has been prepared in accordance with United Kingdom adopted IAS
34, 'Interim financial reporting'. The interim report does not include all
the notes of the type normally included in an annual financial report.
Accordingly, this report is to be read in conjunction with the annual
financial statements for the year ended 28 February 2023, which have been
prepared in accordance with UK-adopted IFRSs.
This condensed consolidated interim financial information is unaudited and has
not been reviewed by the Company's Auditors. Except as described below they
have been prepared on accounting bases and policies that are consistent with
those used in the preparation of the financial statements of the Company for
the year ended 28 February 2023.
Going concern
The directors are satisfied that the Group has sufficient resources to
continue in operation for the foreseeable future, a period of not less than 12
months from the date of this report. Accordingly, we continue to adopt the
going concern basis in preparing the condensed financial statements.
Changes in accounting policies
The following standards, amendments and interpretations were effective for
accounting periods beginning on or after 1 January 2023 and these have been
adopted in the Group financial statements where relevant:
· Amendments to IAS 1 Presentation of Financial Statements and IFRS Practice
Statement 2 Making Materiality Judgements-Disclosure of Accounting Policies
· Amendments to IAS 8 Accounting Policies, Changes in Accounting Estimates and
Errors-Definition of Accounting Estimates
· Amendments to IAS 12 Income Taxes
There are no other standards that are not yet effective and that would be
expected to have a material impact on the entity in the current or future
reporting periods and on foreseeable future transactions.
Critical accounting estimates and judgements
The critical accounting judgements and key sources of estimation uncertainty
are consistent with the Group financial statements for the year to 28 February
2023 and no additional new uncertainties or estimation uncertainty have
arisen.
Information about critical judgements in applying accounting policies that
have the most significant impact on the amounts recognised in the financial
statements are as follows:
· In determining Capitalised Internally Developed Software Costs management will
need to apply judgement and evaluate the technical and commercial feasibility
of each product, and the ability to yield future economic benefits, and assess
likelihood of success, and ability of the Group to complete each product.
Judgements are applied on a product basis in accordance with IAS 38.
· Management applies judgement in the recognition of revenue, determining when
performance obligations are satisfied, and control transferred. For software
products provided as an annual license, including the right to regular
upgrades, judgement is required when assessing whether the annual license is a
separate performance obligation from the provision of upgrades to the
customer. Management has assessed that the ongoing updates and upgrades to the
software are fundamental to the value of the software and that without these
updates the value of the software will substantially deteriorate over time.
Therefore, the annual license and the updates and upgrades are combined as one
performance obligation and revenue is recognised over the life of the license
as the service is delivered.
· The Group and Company have incurred sales and marketing costs and software
development costs in developing the KX business. As a result, the Group and
Company have significant tax losses being carried forward which contribute to
the Group and Company's deferred tax asset balances. Management have
forecasted that the Company and Group will generate future taxable profits
from the KX trade against which these deferred tax assets will be utilised.
Information about assumptions and estimation uncertainties that have a
significant risk of resulting in a material adjustment to the carrying amounts
of assets and liabilities are as follows:
· Under IFRS goodwill on acquisitions is not amortised but is tested
for impairment on an annual basis. Management has assessed goodwill for
impairment based on the projected profitability of the individual
cash-generating unit to which the goodwill relates. No impairments have been
identified. Other intangibles are being amortised and tested for impairment if
an indicator of impairment is identified.
· Management has estimated the fair value of equity investments and
convertible loans. Management has reviewed recent market activity and has
applied a discounted cash flow valuation technique to assess the fair value of
the assets as at year end considering the forecast revenue and EBITDA,
together with forecast exit value applying market multiples, discounted using
a risk-adjusted discount rate.
Management has assessed that there are no other estimates or judgements that
have a significant risk of causing a material adjustment to the carrying
amounts of assets and liabilities recognised in the financial statements.
Use of non-GAAP measures - Adjusted EBITDA
The Group believes that the consistent presentation of adjusted Earnings
Before Interest, Tax, Depreciation and Amortisation (EBITDA), adjusted
effective tax rate, adjusted basic earnings per share and adjusted diluted
earnings per share provides additional useful information to shareholders on
the underlying trends and comparable performance of the Group over time.
Adjusted EBITDA is defined as results from operating activities before
restructure and non-operational costs, IT Systems implementation costs
expensed, share based payments and related costs, depreciation of property,
plant and equipment and amortisation of intangible assets, and non-recurring
income from investments. Restructure and non-operational costs relate to items
that are considered significant in size and non-operational in nature and
include restructuring costs and costs associated with the management of our
equity investment portfolio. The Group uses adjusted EBITDA as an underlying
measure of its performance. A reconciliation between GAAP and underlying
measures is set out in note 5 (Adjusted EBITDA).
3. Segmental Reporting
Information about reportable segments
Operating segments are reported in a manner consistent with the internal
reporting provided to the chief operating decision maker. The chief operating
decision maker, who is responsible for allocating resources and assessing
performance of the operating segments, has been identified as the Chief
Executive Officer and Chief Financial Officer jointly.
The Group is organised into three operating segments (as identified under IFRS
8 Operating Segments) and generates revenue through the following activities:
· KX - software to accelerate AI-driven innovation.
· First Derivative (FD) - driving digital transformation in financial
services and capital markets.
· MRP - technology-enabled services for enterprise demand generation.
The chief operating decision maker monitors the operating results of segments
separately in order to allocate resources between segments and to assess
performance. Segment performance is predominantly evaluated based on operating
profit before restructure and non-operational costs, IT Systems implementation
costs expensed, share based payment and related costs, depreciation and
amortisation of intangible assets ('adjusted EBITDA'). These costs are managed
on a centralised basis and therefore these items are not allocated between
operating segments for the purpose of presenting information to the chief
operating decision maker and accordingly are not included in the detailed
segmental analysis.
Intersegment revenue is not material and thus not subject to separate
disclosure.
KX First Derivative MRP TOTAL
H1 H1 H1 H1 H1 H1 H1 H1
2024 2023* 2024 2023* 2024 2023 2024 2023
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Revenue by segment 37,675 33,603 89,082 90,388 15,714 23,420 142,471 147,411
Gross Profit 29,202 25,394 23,094 25,079 7,062 9,728 59,358 60,201
Adjusted EBITDA 4,807 3,856 9,374 10,418 (169) 1,691 14,012 15,965
Restructure and non-operational costs (2,263) (2,517)
IT systems implementation costs expensed (635) (2,557)
Share based payment and related costs (1,500) (921)
Depreciation and amortisation (10,017) (9,261)
Amortisation of acquired intangible assets (282) (1,706)
Operating loss (685) (997)
Net Finance (cost)/income (3,910) 1,968
Profit on disposal of associate 88 100
(Loss)/profit before taxation (4,507) 1,071
*Reclassification of KX service revenue to First Derivative
During the period we transferred professional services positions relating to
post implementation consultancy and development from KX to First Derivative,
which is better placed to service and grow this work. The numbers stated above
reflect this change and the prior year results have also been restated to
enable like-for-like comparison. The impact in the period was to move £4.6m
of KX services revenue to FD (H1 FY23: £4.2m), along with £3.0m cost of
sales (H1 FY23: £2.6m) resulting in an impact on gross profit of £1.6m (H1
FY23: £1.7m). A £0.1m movement in adjusted admin expenses (H1 FY23: £0.1m)
resulted in a net movement in adjusted EBITDA of £1.5m from KX to FD for the
period (H1 FY23: £1.6m).
Geographical location analysis H1 H1
2024 2023
£'000 £'000
UK 41,050 46,484
EMEA 23,848 28,243
The Americas 62,528 59,377
Asia Pacific 15,045 13,307
Total 142,471 147,411
4. Revenue
Disaggregation of revenue
KX First Derivative MRP Total
H1 H1 H1 H1 H1 H1 H1 H1
2024 2023* 2024 2023* 2024 2023 2024 2023
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Type of good or service
Sale of goods - perpetual 614 822 - - - - 614 822
Sale of goods - recurring 32,881 26,785 - - - - 32,881 26,785
Rendering of services* 4,180 5,996 89,082 90,388 15,714 23,420 108,976 119,804
37,675 33,603 89,082 90,388 15,714 23,420 142,471 147,411
Timing of revenue recognition
At a point in time 614 822 - - - - 614 822
Over time 37,061 32,781 89,082 90,388 15,714 23,420 141,857 146,589
37,675 33,603 89,082 90,388 15,714 23,420 142,471 147,411
*Previously some MRP revenues were presented as sale of goods - recurring, all
MRP revenues are now included in rendering of services which is more
representative of the revenue stream and the prior year has also been
restated.
5. Adjusted EBITDA
H1 H1
2024 2023
£'000 £'000
Operating loss (685) (997)
Restructure and non-operational costs 2,263 2,517
IT Systems implementation costs 635 2,557
Share based payment and related costs 1,500 921
Depreciation and amortisation 10,299 10,967
Adjusted EBITDA 14,012 15,965
6. Tax Expense
The total tax charge for the six months ended 31 August 2023, including
discrete items is £1.7m (H1 FY23: £0.3m). This tax charge equates to an
effective tax rate of (37.4%) (H1 FY23: 23.4%).
In the period ended 31 August 2023, the group did not recognise any deferred
tax asset in respect of tax losses arising in the period, which increased the
tax charge for the period by £1.9m.
From 1 April 2024 the enacted rate of corporation tax is 25%. Deferred tax
balances have been calculated at this rate.
7. (Loss)/earnings per Share
Basic loss per share for the six months ended 31 August 2024 has been
calculated on the basis of the reported loss after taxation of £6.2m (H1
FY23: profit of £0.8m) and the weighted average number of shares for the
period of 28,071,111 (H1 FY23: 27,858,836). This provides basic loss per share
of 22.2 pence (H1 FY23: earnings per share 2.9 pence).
At 31 August 2023 in accordance with IAS 33, due to the loss in the financial
period share options in issue are anti-dilutive meaning there is no difference
between basic and diluted earnings per share. For the six months ended 31
August 2022 calculated on the basis of the reported profit after taxation of
£0.8m and the weighted average number of shares after adjustment for the
effects of all dilutive potential ordinary shares 27,990,830 resulting in a
diluted earnings per share of 2.9 pence.
The Board considers that adjusted (loss)/earnings is an important measure of
the Group's financial performance. Adjusted loss after tax in the period was
£1.2m (H1 FY23: Adjusted earnings after tax £4.0m), which excludes the
amortisation of acquired intangibles after tax effect of £0.3m, (H1 FY23:
£1.4m) share-based payments after tax effect of £1.2m (H1 FY23: £0.7m),
restructure and non-operational costs after tax effect of £1.8m (H1 FY23:
£2.0m), IT systems implementation costs after tax effect £0.5m (H1 FY23:
£2.1m), loss on foreign currency translation of £1.6m (H1 FY23: gain
£3.0m), finance costs after tax effect of £0.2m (H1 FY23: £nil), and profit
on disposal of associate after tax effect of £0.1m (H1 FY23: £0.1m). Using
the same weighted average of shares as above provides adjusted basic loss per
share of 4.3 pence (H1 FY23: earnings per share 14.3 pence) and adjusted
diluted loss per share of 4.3 pence (H1 FY23: earnings per share 14.2 pence).
8. Share capital
During the period the Group issued 23,302 shares as part of share-based
compensation for employees and remuneration. These increased the number of
shares in issue from 28,064,854 as at 28 February 2023 to 28,088,156.
The holders of ordinary shares are entitled to receive dividends as declared
from time to time and are entitled to one vote per share at meetings of the
Company.
9. Loans and borrowings
31 August 2023 28 February 2023
£'000 £'000
Current liabilities
Secured bank loans - 36,499
Lease liabilities 3,307 3,412
3,307 39,911
Non-current liabilities
Secured bank loans 30,131 -
Lease liabilities 15,004 17,026
45,135 17,026
We refinanced our banking facility in early 2023 on improved terms and it
comprises a £130m revolving credit facility, with an interest rate payable of
SONIA/SOFR plus a margin range of 1.85% to 2.85%.
10. Trade and other payables
31 August 2023 28 February 2023
£'000 £'000
Current liabilities
Trade payables 9,555 11,291
Other payables 10,052 15,745
Accruals 12,394 13,460
Government grants 911 970
32,912 41,466
Non-current liabilities
Government grants 4,522 3,681
4,522 3,681
11. Financial instruments
Fair values
a) Accounting classifications and fair values
Group
The following table shows the carrying amounts and fair values of financial
assets and liabilities. The carrying amount of all financial assets and
liabilities not measured at fair value is considered to be a reasonable
approximation of fair value.
Carrying value
FVPL FVOCI Financial Other Total Fair value
assets at financial
amortised liabilities
cost
31 August 2023 £'000 £'000 £'000 £'000 £'000 £'000 Level
Financial assets measured
at fair value
Equity securities - 863 - - 863 - 1
Equity securities - 7,474 - - 7,474 7,474 3
Convertible loans 82 - - - 82 82 3
82 8,337 - - 8,419 7,556
Financial assets not
measured at fair value
Trade and other receivables - - 66,474 - 66,474 ( 1 )
Cash and cash equivalents - - 22,887 - 22,887 ( 1 )
- - 89,361 - 89,361
Financial liabilities not
measured at fair value
Secured bank loans - - - 30,131 30,131 ( 1 )
Trade and other payables - - - 51,305 51,305 ( 1 )
- - - 81,436 81,436
(1) Fair value not disclosed as the carrying amounts are considered to be a
reasonable approximation of fair value.
Carrying value
FVPL FVOCI Financial Other Total Fair value
assets at financial
amortised liabilities
cost
28 February 2023 £'000 £'000 £'000 £'000 £'000 £'000 Level
Financial assets measured
at fair value
Equity securities - 886 - - 886 - 1
Equity securities 8,470 8,470 8,470 3
Convertible loans 283 - - - 283 283 3
283 9,356 - - 9,639 8,753
Financial assets not
measured at fair value
Trade and other receivables - - 90,578 - 90,578 ( 1 )
Cash and cash equivalents - - 36,905 - 36,905 ( 1 )
- - 127,483 - 127,483
Financial liabilities not
measured at fair value
Secured bank loans - - - (36,499) (36,499) ( 1 )
Trade and other payables - - - (71,240) (71,240) ( 1 )
- - - (107,739) (107,739)
(1) Fair value not disclosed as the carrying amounts are considered to be a
reasonable approximation of fair value.
b) Measurement of fair values
Group
Outside of external market events that showed a material change to the fair
value of investment valuations, as reflected in the table below, no other
indicators have arisen from the valuation model to indicate a change to the
measurement of fair values of investments.
Reconciliation of Level 3 fair value:
Group
Convertible Unquoted
loans equities
£'000 £'000
Balance at 1 March 2023 282 8,470
Additions - 250
Adjustments to fair value - (2,495)
Debt to Equity Transfers (200) 1,249
Foreign exchange gain - -
Balance at 31 August 2023 82 7,474
Convertible Unquoted
loans equities
£'000 £'000
Balance at 1 March 2022 282 19,676
Transfer to Level 1 - (2,774)
Disposals - (2,324)
Adjustments to fair value - (6,275)
Transfers - -
Foreign exchange gain - 167
Balance at 28 February 2023 282 8,470
12. Subsequent Events Note
There were no subsequent events at signing date.
13. Interim Report
Copies can be obtained from the Company's head and registered office: 3 Canal
Quay, Newry, Co. Down, BT35 6BP and are available to download from the
Company's web site www.fdtechnologies.com (http://www.fdtechnologies.com) .
14. Responsibility Statement
The Directors confirm that to the best of their knowledge:
a) the condensed set of financial statements has been prepared in accordance
with UK-adopted IAS 34 'Interim Financial Reporting';
b) the interim management report includes a fair review of the information
required by DTR 4.2.7R (indication of important events and their impact during
the first six months and description of principal risks and uncertainties for
the remaining six months of the year); and
c) the interim management report includes a fair review of the information
required by DTR 4.2.8R (disclosure of related parties' transactions and
changes therein).
The Directors are responsible for the maintenance and integrity of the
Company's website. Legislation in the United Kingdom governing the preparation
and dissemination of financial statements may differ from legislation in other
jurisdictions.
The Directors of FD Technologies plc are listed in the Company's Report and
Accounts for the year ended 28 February 2023. A list of current Directors is
maintained on the FD Technologies plc website: www.fdtechnologies.com
(http://www.fdtechnologies.com) .
15. Forward Looking Statements
The financial information contained in this announcement has not been audited.
Certain statements made in this announcement are forward-looking statements.
Undue reliance should not be placed on such statements, which are based on
current expectations and are subject to a number of risks and uncertainties
that could cause actual results to differ materially from any expected future
results in forward-looking statements.
The Company accepts no obligation to publicly revise or update these
forward-looking statements or adjust them to future events or developments,
whether as a result of new information, future events or otherwise, except to
the extent legally required.
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