REG - FD Technologies PLC - Results for the year ended 28 February 2023
23/05/2023 07:00
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RNS Number : 2645A FD Technologies PLC 23 May 2023
23 May 2023
FD Technologies plc
("FD Technologies" or the "Group")
Results for the year ended 28 February 2023
FD Technologies (AIM: FDP.L, Euronext Growth: FDP.I) announces its results for
the year ended 28 February 2023.
Business highlights
Strong performances by KX and First Derivative
- KX exceeded its targets with annual recurring revenue (ARR) up 39% to £65.3m
(FY22: £47.0m) and net revenue retention of 119% (FY22: 106%); incremental
annual contract value (ACV) increased by 93% to £18.7m (FY22: £9.7m)
- Launched the industry's first Data Timehouse, positioning KX as the engine for
real-time analytics in the cloud and delivering up to 100x the performance at
1/10(th) of the cost of alternative solutions
- Significant progress with a range of existing and potential partners,
including the general availability of kdb Insights Enterprise on Microsoft
Azure and an agreement to partner with AWS
- Continued our drive to accelerate time to value for customers, as well as
making our technology easier to adopt and use; our progress is reflected in
continued growth in Industry, which accounted for more than 30% of ACV
- Momentum set to continue in the current year, benefiting from growing demand
for real-time analytics as the foundation for AI-driven business innovation,
the strengthening of KX leadership and growing market recognition for the
return on investment that KX delivers
- First Derivative delivered revenue growth of 18%, also ahead of target,
benefiting from multi-year strategic growth drivers, particularly relating to
regulatory compliance and digital transformation
- Weaker demand environment continued at MRP, with revenue down by 19%; cost
base aligned to protect EBITDA in the current year
- Providing guidance for FY24 revenue in the range of £315m to £325m, with
adjusted EBITDA in the range of £38m to £40m with continued investment in KX
to drive future growth.
Seamus Keating, CEO of FD Technologies, commented: 'We are pleased with a year
of strong execution on our strategy, with KX and First Derivative beating our
expectations for FY23.
KX in particular has made strong commercial and strategic progress. Our price
to performance advantage is particularly compelling for the hyperscale cloud
providers, as evidenced by our partnerships with market leaders Microsoft and
AWS. We have a range of initiatives that we are progressing with these and
other partners that provide confidence in our outlook.
First Derivative also performed strongly in FY23, delivering impressive
revenue growth of 18% for the period. We continue to see multi-year strategic
growth drivers that underpin demand for our services.
We have set ourselves ambitious but sustainable growth targets for the years
ahead which will ensure we are focused on driving high-quality recurring
revenue growth from an expanding list of customers across a wide range of
industries, while generating value for shareholders.'
Financial summary
Year to end February 2023 2022 Change
Revenue £296.0m £263.5m 12%
Gross profit £122.3m £106.1m 15%
(Loss)/Profit before tax (£1.2m) £9.0m NM
Reported diluted (LPS)/EPS (14.4p) 22.9p NM
Net cash* £0.4m £0.3m 24%
Adjusted performance measures
Adjusted EBITDA** £34.8m £31.0m 12%
Adjusted diluted EPS 35.3p 32.3p 9%
Performance against Key Performance Indicators Target Actual
KX annual recurring revenue (ARR) growth 35-40% 39%
KX net revenue retention (NRR) 110% 119%
First Derivative revenue growth 15% 18%
MRP revenue growth 10% (19%)
* Excluding lease obligations
** Adjusted for share based payments and restructure and non-operational costs
Financial highlights
- Group revenue up 12% to £296m (up 6% at constant currency), led by good
performances at KX and First Derivative, both above full year expectations,
balanced by a reduction in revenue at MRP
- KX revenue growth of 25% to £80.2m (FY22: £64.4m), with recurring revenue up
47% to represent 72% of total KX revenue (FY22: 61%) and reductions in both
lower margin services revenue and lower value perpetual license revenue as we
continue to focus on growing our recurring revenue
- First Derivative revenue £174.3m, up 18% (FY22: £148.0m), driven by our
strategy to deliver more value from our domain and technology expertise and
our push into complementary areas such as software engineering
- MRP revenue down 19% to £41.5m (FY22: £51.1m), resulting from lower spending
on demand generation by our enterprise customers
- Adjusted EBITDA up 12% to £34.8m (FY22: £31.0m), following investment in
people and systems, including the successful implementation of an Oracle ERP
system, to enable the Group to scale
- Net cash £0.4m (FY22: £0.3m) resulting from focused cash management
Current trading and outlook
Our targets continue to be centred on key performance indicators appropriate
to value creation within each of our business units. In KX, the opportunities
we see with customers and partners gives us confidence in delivering another
strong year of ARR growth of at least 35%. In First Derivative, the alignment
of our services with the strategic priorities of our customers provides us
with confidence that we can grow faster than the market, with revenue growth
in the range of 5% to 10% as well as a meaningful improvement towards our
three-year EBITDA margin target of 15%. In MRP we expect the reduction in the
cost base to deliver an improvement in EBITDA for the current year.
At the Group level we expect FY24 revenue in the range of £315m to £325m,
with adjusted EBITDA in the range of £38m to £40m.
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) 203 493 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 3,000 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 through
time-series analytics, empowering enterprises to extract value from the
ever-growing volume of data, much of it machine-generated and time-stamped. As
the engine for real-time analytics in the cloud, our customers report that KX
delivers 100x the performance of alternative solutions at 1/10(th) of the
cost, fostering rapid innovation while maintaining cost efficiency.
During the year we launched the industry's first Data Timehouse, a new class
of data management and AI platform, to provide enterprises with access to
temporal data in a way that prioritises modelling and insight. Launched on
Azure through our strategic partnership with Microsoft, this approach is
backed by industry analysts Gartner, who are urging the adoption of
technologies such as KX that are specifically built for the analysis of
temporal data.
KX's addressable market is rapidly expanding, with the AI and data science
platforms and applications sector, as estimated by Gartner, growing at a 29%
CAGR to reach $135bn by 2025. Based on our targeted industries and geographic
markets, we project our current serviceable market opportunity to be
approximately $34bn by 2025.
Strategic partnerships
Working with strategic partners is key to achieving our mission, and our
priority is to establish KX as the high-performance engine within the
hyperscale cloud platforms. We made significant progress during the year and
the recent general availability of kdb Insights Enterprise on Microsoft Azure
was a watershed moment for our strategic partnership with Microsoft. Since the
launch we have seen positive customer reaction and strong partner engagement
on joint propositions, resulting in growth in our pipeline across multiple
industries.
The expected launch of additional products on Azure during the year, aimed for
example at application developers, will enable our existing customers to
transact via the marketplace to expand their current KX data estate. In
addition, we have a number of innovation projects where we will integrate our
technology with Large Language Models (LLMs) to bring analytics into the
day-to-day workflow of users, dramatically improving their experience.
We recently announced that KX is partnering with Amazon Web Services (AWS) to
launch kdb Insights as a fully managed cloud-native service on Amazon
FinSpace, AWS's data management and analytics service for the financial
services industry. KX and AWS are working together to attract both new
customers and to provide existing KX customers with a path to migrate their
existing kdb workloads to the cloud, benefitting from both the Python-enabled
capabilities of kdb Insights and managed services provided by AWS.
We have also made progress with other hyperscalers and established a dedicated
partner team to develop and close these opportunities. This team is engaged
with cloud hyperscale platforms, systems integrators, OEMs and independent
software vendors (ISVs) seeking to integrate our kdb technology into their
data and AI-driven applications.
Product development
At the heart of our products is kdb+, the world's fastest time-series and
real-time analytics engine. The launch of kdb Insights Enterprise on Microsoft
Azure has significantly expanded our ability to provide our technology's
performance advantages to a wider audience. Among other benefits, it offers
the versatility of microservices and cloud resources, enables Python and SQL
developers to programme without knowing our proprietary language, q, and
provides free trial and development resources for solution-building. This
leads to broader adoption and faster value realisation for customers.
We continue to focus on making our technology more accessible and
user-friendly, implementing a continuous development strategy with reusable
services deployable across OEMs and ISVs.
Commercial progress
FY23 was our strongest year ever for incremental ACV, which increased by 93%
from the prior year to £19m. We also delivered an improvement In Net Revenue
Retention (NRR) to 119% (FY22: 106%) indicating that our strategy to increase
our growth from existing customers is delivering results.
During the year we made a number of senior appointments to drive growth at KX.
In August Ashok Reddy was appointed CEO, bringing a track record of
successfully driving AI product innovation, revenue growth and commercial
strategies at enterprise technology companies (including IBM, CA
Technologies/Broadcom and Digital.ai). KX also recently appointed a Chief
Revenue Officer, John Hoffman, with extensive experience in building and
scaling revenue at data analytics providers.
We continue to invest in sales and marketing, expanding our go-to-market team
to target opportunities across industries. Our strategy emphasises partnering
to win new customers and growing our direct sales capability.
While financial services customers remain our largest revenue source, we are
growing at a faster rate in other industries, validating our view of our
technology as a horizontal solution across industries. Example customer wins
in the period included:
· Syneos Health adopted KX to implement a Data Timehouse, using kdb Insights
Enterprise on Microsoft Azure to improve clinical trial efficiency, reduce
costs and speed time to market for life-changing therapies for patients.
· PSE, the Polish transmission system operator, selected KX to manage large
meter data volumes and complex analytics as part of its adoption of CGI's
Central Energy Market Information System in a multi-year deal.
· A leading investment bank adopted kdb Insights as part of its large-scale
cloud migration project, moving its KX on-premise workloads to the cloud with
no reduction in performance at a fraction of the total operating cost.
First Derivative - driving digital transformation in financial services and
capital markets
First Derivative delivered 18% revenue growth for the year, resulting from
structural demand drivers for our services across regulatory compliance and
digital transformation. Our performance was stronger than that of the market,
as a result of our strategy to deliver more value from our domain and
technology expertise and our push into areas such as software engineering.
During the year we saw strong demand for our core practice areas such as
transaction reporting and Know Your Customer compliance, while the move to the
cloud by our customers is creating opportunities as they look to completely
rebuild their core software architecture. This latter trend was a driver in
our decision to establish a software engineering practice, which delivered
impressive growth in the year and where we have a growing pipeline.
Our priorities for the current year are to continue to broaden our service
offerings and seek multi-year engagements with clients, to increase the
diversity and robustness of our revenues. We expect to continue the
internationalisation of our business, with good growth in the year in Asia and
a growing pipeline of opportunities. We also expect our clients to continue
their drive to get value from their technology spend by achieving the optimal
delivery structure and see continued demand for our near shore capabilities as
a result.
Our positivity about our growth prospects is tempered by the external
environment which has created a level of caution within some clients, with
projects taking longer to be approved than in recent periods. At the same
time, we are seeing an easing in the pressures of wage inflation and staff
attrition, which alongside our increasing scale should assist our expectation
of margin improvement in the current year as we move towards our FY26 goal of
15% EBITDA margin.
We continue to believe First Derivative is well positioned, with high levels
of repeat revenue, structural demand drivers assisting our growth and a
strategy to drive greater value from our considerable capital markets
expertise.
MRP - technology-enabled services for enterprise demand generation
MRP is our smallest business unit, representing 14% of revenue in FY23. It
provides global sales and marketing leaders with an account-based marketing
platform (Prelytix), powered by KX, and supporting products and services that
deliver high response rates and pipeline conversion. Prelytix tracks more than
1.5 billion intent signals per day, enabling MRP customers to identify and
engage targets earlier and more effectively. Its global presence is a further
differentiator, resulting in Forrester naming it as a leader in Account Based
Marketing (ABM) in its Q2 2022 report on the sector.
Throughout the year MRP's customer budgets remained under pressure, with
demand generation spend remaining weak in the economic environment. We have
seen a stabilisation in revenue run rate since the year end and coupled with
the steps taken to align its cost base, we expect to deliver an improved
EBITDA performance for the current year. We continue to believe MRP has the
opportunity to deliver double digit revenue growth when spending on demand
generation improves.
People
The Group currently employs 3,000 people, similar to the number employed at
the same time last year. Our employee policies are designed to enable us to
attract and retain top talent and during the year we implemented a number of
initiatives to assist these goals.
We continued to pay particular attention to learning and development, with a
strong focus on leadership, as well as the Group's culture. We introduced our
Aspiring Leadership programme, which offers a structured and practical path to
fast-track high potential individuals into leadership roles, and appointed
leaders to run our talent and people initiatives. We also evaluated and
benchmarked every employee across the Group to ensure everyone is paid
competitively.
We continue to evolve the ways in which our people connect and collaborate,
with our latest annual engagement survey which shows an increase in the number
of our employees that feel engaged to 82%. During the year we completed the
implementation of an Oracle Cloud Fusion ERP system that includes a Human
Resources Information System, enabling us to work more strategically.
Summary and outlook
KX and First Derivative both delivered strong growth in their KPIs for the
year and are well placed to deliver on their potential following a year of
execution of strategy. In KX the growing importance of real-time analytics and
our ability to accelerate AI workloads, combined with our product and
commercial strategies are establishing us as a key component of modern data
architecture. These factors are driving opportunities with customers and
partners that support our confidence in another year of strong growth in ARR,
of at least 35%. First Derivative continues to evolve its service offerings to
assist customers with their strategic objectives and we expect this to enable
growth ahead of its market, with revenue expected to increase in the range of
5% to 10% and margin improvement towards our three-year target of 15%. MRP's
EBITDA performance is expected to improve following the alignment of its cost
base, with growth expected to return when spending on demand generation
increases.
At the Group level we expect FY24 revenue in the range of £315m to £325m,
with adjusted EBITDA in the range of £38m to £40m.
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.
FY23 FY22
Group KX First MRP Group KX First MRP Group change
Derivative Derivative
£m £m £m £m £m £m £m £m
Revenue 296.0 80.2 174.3 41.5 263.5 64.4 148.0 51.1 12%
Cost of sales (173.7) (22.3) (127.0) (24.4) (157.3) (19.9) (108.6) (28.8) 10%
Gross profit 122.3 58.0 47.3 17.0 106.1 44.5 39.4 22.2 15%
Gross margin 41% 72% 27% 41% 40% 69% 27% 44%
R&D expenditure (27.1) (23.0) (0.4) (3.7) (21.1) (18.6) (0.2) (2.3) 28%
R&D capitalised 23.1 19.0 0.4 3.7 18.6 16.1 0.2 2.3 25%
Net R&D (4.0) (4.0) - - (2.6) (2.6) - - 54%
Sales and marketing costs (50.9) (26.3) (15.3) (9.4) (47.4) (23.6) (14.5) (9.3) 8%
Adjusted admin expenses (32.7) (11.1) (15.4) (6.2) (25.2) (8.6) (10.9) (5.7) 30%
Adjusted EBITDA 34.8 16.6 16.7 1.4 31.0 9.8 14.0 7.3 12%
Adjusted EBITDA margin 12% 21% 10% 3% 12% 15% 9% 14%
The Group delivered double-digit increases in both revenue and adjusted
EBITDA. Revenue growth was driven by strong growth in recurring revenue at KX
and good growth by First Derivative offset by a revenue decline in MRP as a
result of difficult market conditions. This drove 15% growth in gross profit
to £122.3m (FY22: £106.1m), with increasing scale and growth in higher
margin revenues resulting in gross margin of 41% (FY22: 40%). We continue to
invest in line with our strategic objectives, including investments in systems
and people. In addition, inflationary cost pressures which increased admin
expenses and the impact of MRP, resulted in adjusted EBITDA margin remaining
at 12%.
Revenue growth was boosted during the period by the strength of the dollar
against sterling, our reporting currency, with constant currency revenue
growth of 6%. Due to the natural hedge of our operations in the US the impact
on profitability was marginal.
KX
KX total Financial services Industry
FY23 FY22 Change FY23 FY22 Change FY23 FY22 Change
£m £m £m £m £m £m
Revenue 80.2 64.4 25% 67.9 55.4 23% 12.4 9.1 37%
Recurring 57.6 39.2 47% 50.2 35.5 41% 7.4 3.7 102%
Perpetual 1.6 3.6 (57%) 0.2 1.8 (88%) 1.3 1.8 (24%)
Total software 59.1 42.8 38% 50.4 37.4 35% 8.7 5.4 61%
Services 21.1 21.6 (2%) 17.5 18.0 (3%) 3.6 3.6 0%
Gross profit 58.0 44.5 30%
Adjusted EBITDA 16.6 9.8 70%
KX delivered a strong performance in the year, with 25% revenue growth driven
by 47% growth in recurring revenue to £57.6m, balanced by a 2% reduction in
services to £21.1m. The growth was enabled by an increase of 93% in annual
contract value added to £18.7m, resulting in 39% growth in ARR to £65.3m.
Services revenue, related to the implementation of our software, declined
marginally to £21.1m as we enabled our customers to achieve time to value
more quickly, reducing the cost and complexity of adopting KX and increasing
the return on investment for our customers. Revenue from perpetual license
sales continues to decline following 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 23% to £67.9m, with recurring revenue up
41%. 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.
Industry revenue grew by 37% to £12.4m with recurring revenue growing by 102%
to £7.4m. Growth was led by subscription contracts across the healthcare,
energy and manufacturing markets with both new and existing customers.
Alongside the growth in ARR our go-to-market team was also engaged with
partners, particularly Microsoft and AWS, on joint go-to-market initiatives to
support general availability of kdb Insights Enterprise on Microsoft Azure and
kdb Insights on AWS FinSpace.
Performance metrics FY23 FY22 Change
Annual recurring revenue (ARR) £m 65.3 47.0 39%
Net revenue retention (NRR) 119% 106%
Gross margin 72% 69%
R&D expenditure as % of revenue 29% 29%
Sales and marketing spend as % of revenue 33% 37%
Adjusted EBITDA margin 21% 15%
The annual contract value signed in the period was £18.7m, up 93% on the
prior year (FY22: £9.7m) and driven by the growth in new subscription deals
in the period and our work with partners. This resulted in ARR increasing by
39% to £65.3m. NRR of 119% is ahead of the 106% in FY22 and in line with our
mid-term target of 120%, with customer churn remaining at low levels.
First Derivative
FY23 FY22 Change
£m £m
Revenue 174.3 148.0 18%
Gross profit 47.3 39.4 20%
Adjusted EBITDA 16.7 14.0 20%
Revenue for the period was £174.3m, with growth of 18% ahead of our target
for the year of 15%. We saw the strongest growth in supporting our customers
in their near shore operations, which are expanding as they pull offshore
delivery work into centres such as Dublin. We believe our services are well
aligned with our customers' strategic priorities, with regulatory change,
digital transformation and cost efficiency consistent themes.
Attrition and wage inflation rates were challenges across the industry during
the year, which we managed effectively, although they did limit scope for
margin improvement. We see an easing of these pressures in the year ahead in
response to some caution from customers, as discussed in the business review.
This is reflected in our guidance for lower revenue growth during the year,
although reduced recruitment and onboarding costs and our growing scale should
enable EBITDA margin progress.
Performance metrics FY23 FY22
Gross margin 27% 27%
Adjusted EBITDA margin 10% 9%
Gross margin was maintained at 27% for the year. Underlying this were
increased costs in recruiting, training and deploying new consultants in
response to industry-wide attrition pressures, mitigated by our ability to
pass through wage inflation and the impact of delivering greater value from
our expertise and domain knowledge.
MRP
FY23 FY22
£m £m Change
Revenue 41.5 51.1 (19%)
Gross profit 17.0 22.2 (23%)
Adjusted EBITDA 1.4 7.3 (80%)
MRP derives revenue by combining cutting-edge predictive analytics with a full
suite of account-based sales and marketing solutions. Throughout the year,
concerns over the business outlook caused many of our customers to pause or
reduce their demand generation activity, leading to a decline in revenue at
MRP.
While we took action to align costs during the year, adjusted EBITDA decreased
to £1.4m (FY22: £7.3m). In response, MRP has implemented cost savings that
have reduced annualised operating costs by c. £6.0m and as a result we expect
an improved performance in adjusted EBITDA in FY24.
Performance metrics FY23 FY22
Gross margin 41% 44%
Adjusted EBITDA margin 3% 14%
Gross margin declined slightly to 41% (FY22: 44%) as a result of lower
services utilisation balanced by cost efficiencies in third-party costs
incurred in our display marketing offering. Admin expenses increased as we
invested in upgrading cybersecurity protection, improved legal capability and
incurred wage inflation.
Group Performance
Adjusted EBITDA
The reconciliation of operating (loss)/profit to adjusted EBITDA is provided
below:
FY23 FY22
£m £m
Operating (loss)/profit (1.5) 6.4
Restructure and non-operational costs 8.7 3.1
Non-operational other income - (2.5)
Non-operational IT expenses* 5.6 2.3
Share based payment and related costs 0.4 1.7
Depreciation and amortisation 21.6 20.1
Adjusted EBITDA 34.8 31.0
*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 increased to £12.1m, with the increase in adjusted
EBITDA balanced by higher depreciation and software amortisation charges.
Financing costs increased by £0.9m reflecting higher interest rates partially
offset as we continue to pay down debt.
The Group reported a loss before tax of £1.2m for the year, compared to a
profit of £9.0m in FY22. The major factors were restructuring costs,
particularly at MRP, the cost of implementing the Group's new Oracle ERP
system and one-off costs to address legacy employee tax liabilities while on
assignment.
The reconciliation of adjusted EBITDA to reported profit before tax is
provided below.
FY23 FY22
£m £m
Adjusted EBITDA 34.8 31.0
Adjustments for:
Depreciation (7.3) (6.8)
Amortisation of software development costs (11.5) (10.2)
Net financing costs (3.9) (3.0)
Adjusted profit before tax 12.1 11.0
Adjustments for:
Amortisation of acquired intangibles (2.8) (3.1)
Share based payment and related costs (0.4) (1.7)
Restructure and non-operational costs (8.7) (3.1)
Non-operational other income - 2.5
Non-operational IT expenses (5.6) (2.3)
Profit/(loss) on foreign currency translation 2.1 (1.8)
Share of profit of associate - 0.3
Profit on disposal of associate 3.0 6.9
Net financing costs (0.9) 0.2
Reported (loss)/profit before tax (1.2) 9.0
(Loss)/earnings per share
The Group reported a loss after tax of £4.0m for the year, compared to a
profit after tax of £6.4m in FY22. Adjusted profit after tax was £9.9m, an
8% increase on the prior year, resulting in a 9% increase in adjusted diluted
earnings per share for the period to 35.3p.
The calculation of adjusted profit after tax is detailed below:
FY23 FY22
£m £m
Reported (loss)/profit before tax (1.2) 9.0
Tax (2.8) (2.6)
Reported (loss)/profit after tax (4.0) 6.4
Adjustments from (loss)/profit before tax (as per the table above) 13.3 2.1
Tax effect of adjustments (2.4) (1.3)
Discrete tax items 3.0 1.9
Adjusted profit after tax 9.9 9.1
Weighted average number of ordinary shares (diluted) 28.0m 28.0m
Reported (LPS)/EPS (diluted) (14.4p) 22.9p
Adjusted EPS (diluted) 35.3p 32.3p
Cash generation and net cash (excluding lease liabilities)
The Group generated £33.5m of cash from operating activities before the
exceptional Oracle ERP implementation cash outlay incurred during the year of
£5.1m, representing a 96% conversion of adjusted EBITDA. We continued to
focus on cash collection and working capital improvements and the target for
the full year from operating activities, cash conversion was in the range of
80-85% of adjusted EBITDA.
At the year end we had a net cash position of £0.4m, broadly unchanged from
the prior year. The factors impacting the movement in net cash (excluding
lease liabilities) are summarised in the table below:
FY23 FY22
£m £m
Opening net cash/(debt) (excluding lease liabilities) 0.3 (9.9)
Cash generated from operating activities before non-operational IT expenses 33.5 29.9
Non-operational IT expenses (5.1) (1.0)
Cash generated from operating activities 28.5 28.9
Taxes paid (1.5) (0.4)
Capital expenditure: property, plant and equipment (2.9) (2.8)
Proceeds from sale of property, plant and equipment - 0.9
Capital expenditure: intangible assets (23.4) (18.9)
Sale of other investments and associates 0.1 11.0
Investments 8.1 0.1
Issue of new shares 3.1 0.8
Interest, foreign exchange and other (11.9) (9.3)
Closing net cash (excluding lease liabilities) 0.4 0.3
The drivers of cash performance in FY23 were the increasing spend on research
and development, of which £23.1m was capitalised, and the sale of our
investment in Quantile Technologies, following the completion of its sale to
LSEG during the year.
After the year-end we refinanced our banking facilities, which had been due to
expire in June 2024, on improved terms. The total facility remains at £130m
and is entirely comprised of a revolving credit facility, replacing a £65m
term loan and £65m revolving credit facility. The interest rate payable is
SONIA/SOFR plus a fixed margin that depends on the level of debt relative to
adjusted EBITDA. The margin on the new revolving credit facility is equal to
1.85% to 2.85%, this compares favourably to the previous margin of 2% to 3%.
The lead arranger for the facility remains Bank of Ireland, with continued
participation from Barclays and AIB and new participation from HSBC.
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,
formerly defined as "exit annual recurring revenue".
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 £66.6m (FY22: £51.9m) adjusted for depreciation and amortisation
of £21.6m (FY22: £20.1m), share based payments and related costs of £0.4m
(FY22: £1.7m) and, restructure and non-operational costs of £8.7m (FY22:
£3.1m), IT Systems implementation costs expensed £5.6m (FY22: £2.3m) and
other income £(2.4)m (FY22: £(0.5)m).
Consolidated statement of comprehensive income
Year ended 28 February 2023
2023 2022
Note £'000 £'000
Revenue 2 296,042 263,463
Cost of sales (173,701) (157,327)
Gross profit 2 122,341 106,136
Operating costs
Research and development costs (27,112) (21,125)
- of which capitalised 23,138 18,553
Sales and marketing costs (50,927) (47,355)
Administrative expenses (66,592) (51,949)
Impairment loss on trade and other receivables (2,645) (695)
Total operating costs (124,138) (102,571)
Other income 249 2,816
Operating (loss)/profit (1,548) 6,381
Finance income 24 262
Finance expense (4,777) (3,015)
Gain/(loss) on foreign currency translation 2,107 (1,834)
Net finance costs (2,646) (4,587)
Share of gain of associate, net of tax - 262
Profit on disposal of associate 3,017 6,943
(Loss)/profit before taxation (1,177) 8,999
Income tax expense (2,836) (2,572)
(Loss)/profit for the year (4,013) 6,427
(Loss)/profit for the year (4,013) 6,427
Other comprehensive income
Items that will not be reclassified subsequently to profit or loss
Equity investments at FVOCI - net change in fair value (522) (1,408)
Net gain on sale of FVOCI holding - 150
Items that will or may be reclassified subsequently to profit or loss
Net exchange gain on net investment in foreign subsidiaries 12,052 3,237
Net loss on hedge of net investment in foreign subsidiaries (3,124) (1,183)
Other comprehensive income for the year, net of tax 8,315 796
Total comprehensive income for the year attributable to owners of the parent 4,393 7,223
Note Pence Pence
(Loss)/earnings per share
Basic 3a (14.4) 23.1
Diluted 3a (14.4) 22.9
All profits are attributable to the owners of the Company and relate to
continuing activities.
Consolidated balance sheet
As at 28 February 2023
2023 2022
Note £'000 £'000
Assets
Property, plant and equipment 4 25,593 28,343
Intangible assets and goodwill 5 175,660 155,607
Other financial assets 9,356 19,676
Trade and other receivables 2,548 3,745
Deferred tax assets 21,313 17,998
Non-current assets 234,470 225,369
Trade and other receivables 96,749 74,029
Current tax receivable 6,114 4,172
Cash and cash equivalents 36,905 48,564
Current assets 139,768 126,765
Total assets 374,238 352,134
Equity
Share capital 140 139
Share premium 103,789 100,424
Share option reserve 18,974 18,404
Fair value reserve 3,002 9,755
Currency translation adjustment reserve 5,354 (3,574)
Retained earnings 69,609 67,391
Equity attributable to owners of the Company 200,868 192,539
Liabilities
Loans and borrowings 6 17,026 62,504
Trade and other payables 3,681 3,190
Deferred tax liabilities 15,758 15,307
Non-current liabilities 36,465 81,001
Loans and borrowings 39,911 9,054
Trade and other payables 41,466 33,606
Deferred income 48,407 26,990
Current tax payable 682 382
Employee benefits 6,439 8,562
Current liabilities 136,905 78,594
Total liabilities 173,370 159,595
Total equity and liabilities 374,238 352,134
Consolidated statement of changes in equity
Year ended 28 February 2023
Share Share Merger Share Fair value Currency Retained Total
capital premium reserve option reserve translation earnings equity
reserve adjustment
£'000 £'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 year
Loss for the year - - - - - - (4,013) (4,013)
Other comprehensive income
Net exchange gain on net investment in foreign subsidiaries - - - - - 12,052 - 12,052
Net exchange loss on hedge of net investment in foreign subsidiaries - - - - - (3,124) - (3,124)
Transfer of reserve of sale of equity investment - - - - (6,231) - 6,231 -
Net change in fair value of equity investments at FVOCI - - - - (522) - - (522)
Total comprehensive income for the year - - - - (6,753) 8,928 2,218 4,393
Transactions with owners of the Company
Tax relating to share options - - - 245 - - - 245
Exercise of share options 1 3,079 - - - - - 3,080
Issue of shares - 286 - - - - - 286
Share based payment charge - - - 325 - - - 325
Balance at 28 February 2023 140 103,789 - 18,974 3,002 5,354 69,609 200,868
Consolidated statement of changes in equity (continued)
Year ended 28 February 2022
Share Share Merger Share Fair value Currency Retained Total
capital premium reserve option reserve translation earnings equity
reserve adjustment
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Balance at 1 March 2021 139 99,396 8,118 16,790 10,682 (5,628) 53,177 182,674
Total comprehensive income for the year
Profit for the year - - - - - - 6,427 6,427
Other comprehensive income
Net exchange gain on net investment in foreign subsidiaries - - - - - 3,237 - 3,237
Net exchange loss on hedge of net investment in foreign subsidiaries - - - - - (1,183) - (1,183)
Net change in fair value of equity investments at FVOCI - - - - (1,408) - - (1,408)
Net gain/(loss) on sale of FVOCI holding - - - - 481 - (331) 150
Total comprehensive income for the year - - - - (927) 2,054 6,096 7,223
Transactions with owners of the Company
Tax relating to share options - - - 80 - - - 80
Exercise of share options - 773 - - - - - 773
Issue of shares - 255 - - - - - 255
Share based payment charge - - - 1,534 - - - 1,534
Transfer (see note 21) - - (8,118) - - - 8,118 -
Balance at 28 February 2022 139 100,424 - 18,404 9,755 (3,574) 67,391 192,539
Consolidated cash flow statement
Year ended 28 February 2023
2023 2022
£'000 £'000
Cash flows from operating activities
(Loss)/profit for the year (4,013) 6,427
Adjustments for:
Net finance costs 2,646 4,587
Depreciation of property, plant and equipment 7,265 6,308
Amortisation of intangible assets 14,331 13,817
Equity-settled share based payment transactions 325 1,534
Profit on disposal of associate (3,017) (6,943)
Loss/(profit) on disposal of fixed assets 5 (222)
Other income (9) (2,499)
Grant income (240) (317)
Share of profit of associate - (262)
Tax expense 2,836 2,572
20,129 25,002
Changes in:
Trade and other receivables (14,604) (1,585)
Trade and other payables and deferred income 22,970 5,473
Cash generated from operating activities 28,495 28,890
Taxes paid (1,467) (407)
Net cash from operating activities 27,028 28,483
Cash flows from investing activities
Interest received 24 19
Acquisition of subsidiaries - (118)
Acquisition of other investments - (95)
Sale of associate 100 11,001
Sale of other investments 8,139 175
Acquisition of property, plant and equipment (2,940) (2,777)
Proceeds from sale of property, plant and equipment 67 920
Acquisition of intangible assets (23,468) (18,931)
Net cash used in investing activities (18,078) (9,806)
Cash flows from financing activities
Proceeds from issue of share capital 3,080 773
Repayment of borrowings (17,823) (19,141)
Payment of lease liabilities (4,000) (3,598)
Interest paid (3,666) (2,932)
Net cash used in financing activities (22,409) (24,898)
Net decrease in cash and cash equivalents (13,459) (6,221)
Cash and cash equivalents at 1 March 48,564 55,198
Effects of exchange rate changes on cash held 1,800 (413)
Cash and cash equivalents at 28 February 36,905 48,564
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 28 February
2023 nor 28 February 2022 but is derived from those accounts. Statutory
accounts for 2022 have been delivered to the Registrar of Companies and those
for 2023 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 ("IFRSs").
2. Operating and business segments
Information about reportable segments
KX FD MRP Total
2023 2022 2023 2022 2023 2022 2023 2022
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Revenue by segment
Revenue 80,239 64,418 174,329 147,988 41,474 51,057 296,042 263,463
Gross profit 57,971 44,520 47,345 39,376 17,025 22,240 122,341 106,136
Adjusted EBITDA 16,621 9,782 16,712 13,982 1,429 7,283 34,762 31,047
Restructure and non-operational costs (8,716) (3,082)
IT systems implementation costs expensed (5,562) (2,287)
Non-operational other income - 2,499
Share based payment and related costs (436) (1,671)
Depreciation and amortisation (18,799) (16,994)
Amortisation of acquired intangibles (2,797) (3,131)
Operating (loss)/profit (1,548) 6,381
Net finance costs (2,646) (4,587)
Profit on disposal of associate 3,017 6,943
Share of profit of associate, net of tax - 262
(Loss)/profit before taxation (1,177) 8,999
Geographical location analysis
Revenues Non-current assets
2023 2022 2023 2022
£'000 £'000 £'000 £'000
UK 104,163 79,355 87,589 87,448
EMEA 55,062 46,463 17,028 16,826
The Americas 114,848 110,697 106,317 118,576
Asia Pacific 21,969 26,948 2,223 2,952
Total 296,042 263,463 213,157 225,802
Disaggregation of revenue
KX FD MRP Total
2023 2022 2023 2022 2023 2022 2023 2022
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Type of good or service
Sale of goods - perpetual 1,556 3,589 - - - - 1,556 3,589
Sale of goods - recurring 58,326 39,192 - - 22,446 27,015 80,772 66,207
Rendering of services 20,357 21,637 174,329 147,988 19,028 24,042 213,714 193,667
80,239 64,418 174,329 147,988 41,474 51,057 296,042 263,463
Timing of revenue recognition
At a point in time 1,556 3,589 - - - - 1,556 3,589
Over time 78,683 60,829 174,329 147,988 41,474 51,057 294,486 259,874
80,239 64,418 174,329 147,988 41,474 51,057 296,042 263,463
3. a) (Loss)/earnings per ordinary share
Basic
The calculation of basic (loss)/earnings per share at 28 February 2023 was
based on the loss attributable to ordinary shareholders of £4,013k (2022:
profit £6,427k), and a weighted average number of ordinary shares in issue of
27,962k (2022: 27,782k).
2023 2022
Pence Pence
per share per share
Basic (loss)/earnings per share (14.4) 23.1
Weighted average number of ordinary shares
2023 2022
Number Number
'000 '000
Issued ordinary shares at 1 March 27,826 27,717
Effect of share options exercised 124 58
Effect of shares issued as remuneration 12 7
Weighted average number of ordinary shares at 28 February 27,962 27,782
Diluted
The calculation of diluted (loss)/earnings per share at 28 February 2023 was
based on the loss attributable to ordinary shareholders of £4,013k (2022:
profit £6,427k) and a weighted average number of ordinary shares after
adjustment for the effects of all dilutive potential ordinary shares of
27,962k (2022: 28,036k).
2023 2022
Pence Pence
per share per share
Diluted (loss)/earnings per share (14.4) 22.9
Weighted average number of ordinary shares (diluted)
2023 2022
Number Number
'000 '000
Weighted average number of ordinary shares (basic) 27,962 27,782
Effect of dilutive share options in issue - 254
Weighted average number of ordinary shares (diluted) at 28 February 27,962 28,036
At 28 February 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. In the prior year
518,137 shares were excluded from the diluted weighted average 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.
3. b) (Loss)/ earnings before tax per ordinary share
(Loss)/earnings before tax per share are based on loss before taxation of
£1,177k (2022: profit £8,999k). The number of shares used in this
calculation is consistent with note 3(a) above.
2023 2022
Pence Pence
per share per share
Basic (loss)/earnings before tax per ordinary share (4.3) 32.4
Diluted (loss)/earnings before tax per ordinary share (4.3) 32.1
Reconciliation from (loss)/earnings per ordinary share to (loss)/ earnings
before tax per ordinary share:
2023 2022
Pence Pence
per share per share
Basic (loss)/earnings per share (14.4) 23.1
Impact of taxation charge 10.1 9.3
Basic (loss)/earnings before tax per share (4.3) 32.4
Diluted (loss)/earnings per share (14.4) 22.9
Impact of taxation charge 10.1 9.2
Diluted (loss)/earnings before tax per share (4.3) 32.1
(Loss)/earnings before tax per share is presented to facilitate pre-tax
comparison returns on comparable investments.
3. c) Adjusted earnings after tax per ordinary share
Adjusted earnings after tax per share is based on an adjusted profit after
taxation of £9,864k (2022: £9,051k). The adjusted profit after tax has been
calculated by adjusting the loss after tax £4,013k (2022: profit £6,427k)
for the amortisation of acquired intangibles after tax effect of £2,565k
(2022: £2,715k), share based payment and related charges after tax effect of
£353k (2022: £1,353k), restructure and non-operational costs after tax
effect of £14,781k (2022: £4,473k), profit on disposal of associate after
tax and share of profit of associate after tax effect of £3,017k (2022:
£7,206k), the profit on foreign currency translation after tax effect of
£1,707k (2022: loss £1,485k), finance costs after tax effect of £902k
(2022: £nil) and finance income from sale of investment after tax effect of
£nil (2022: £197k). The number of shares used in this calculation is
consistent with note 3(a) above.
2023 2022
Pence Pence
per share per share
Adjusted basic earnings after tax per ordinary share 35.3 32.6
Adjusted diluted earnings after tax per ordinary share 35.3 32.3
4. Property, plant and equipment
Group
Leasehold Plant and Office Right-of-use Total
improvements equipment furniture assets £'000
£'000 £'000 £'000 £'000
Cost
At 1 March 2022 5,444 14,372 1,366 30,171 51,353
Additions 441 2,362 137 1,035 3,975
Disposals (104) (34) - (880) (1,018)
Reclass 1,468 (1,468) - - -
Exchange adjustments 230 624 89 1,443 2,386
At 28 February 2023 7,479 15,856 1,592 31,769 56,696
Depreciation
At 1 March 2022 3,544 8,544 1,116 9,806 23,010
Charge for the year 671 2,257 171 4,166 7,265
Disposals (32) - - (451) (483)
Reclass (38) (9) 47 - -
Exchange adjustments 116 539 28 628 1,311
At 28 February 2023 4,261 11,331 1,362 14,149 31,103
Leasehold Plant and Office Right-of-use Total
improvements equipment furniture assets £'000
£'000 £'000 £'000 £'000
Cost
At 1 March 2021 6,224 11,886 1,349 32,590 52,049
Additions 318 2,442 17 377 3,154
Disposals (1,144) (10) - (3,131) (4,285)
Exchange adjustments 46 54 - 335 435
At 28 February 2022 5,444 14,372 1,366 30,171 51,353
Depreciation
At 1 March 2021 3,321 6,845 894 7,448 18,508
Charge for the year 531 1,673 219 3,885 6,308
Disposals (337) (10) - (1,636) (1,983)
Exchange adjustments 29 36 3 109 177
At 28 February 2022 3,544 8,544 1,116 9,806 23,010
Carrying amounts
At 1 March 2021 2,903 5,041 455 25,142 33,541
At 28 February 2022 1,900 5,828 250 20,365 28,343
At 28 February 2023 3,218 4,525 230 17,620 25,593
5. Intangible assets and goodwill
Group
Goodwill Customer Acquired Brand Internally Total
£'000 lists software name developed £'000
£'000 £'000 £'000 software
£'000
Cost
Balance at 1 March 2022 106,501 12,834 29,769 743 101,540 251,387
Additions - - 330 - - 330
Development costs - - - - 23,138 23,138
Exchange adjustments 10,141 1,083 2,877 59 978 15,138
At 28 February 2023 116,642 13,917 32,976 802 125,656 289,993
Amortisation
Balance at 1 March 2022 - 11,832 26,106 703 57,139 95,780
Amortisation for the year - 944 1,816 37 11,534 14,331
Exchange adjustment - 1,003 2,527 55 637 4,222
At 28 February 2023 - 13,779 30,449 795 69,310 114,333
Goodwill Customer Acquired Brand Internally Total
£'000 lists software name developed £'000
£'000 £'000 £'000 software
£'000
Cost
Balance at 1 March 2021 103,527 12,467 28,535 733 83,531 228,793
Development costs - - - - 18,553 18,553
Additions - - 378 - - 378
Exchange adjustments 2,974 367 856 10 (544) 3,663
At 28 February 2022 106,501 12,834 29,769 743 101,540 251,387
Amortisation
Balance at 1 March 2021 - 10,426 22,619 652 47,583 81,280
Amortisation for the year - 1,083 2,475 42 10,217 13,817
Exchange adjustment - 323 1,012 9 (661) 683
At 28 February 2022 - 11,832 26,106 703 57,139 95,780
Carrying amounts
At 1 March 2021 103,527 2,041 5,916 81 35,948 147,513
At 28 February 2022 106,501 1,002 3,663 40 44,401 155,607
At 28 February 2023 116,642 138 2,527 7 56,346 175,660
6.Loans and borrowings
This note provides information about the contractual terms of the Group and
Company's interest-bearing loans and borrowings, which are measured at
amortised cost.
Group Company
2023 2022 2023 2022
£'000 £'000 £'000 £'000
Current liabilities
Secured bank loans 36,499 5,311 36,499 5,311
Lease liabilities 3,412 3,743 1,007 1,445
39,911 9,054 37,506 6,756
Non-current liabilities
Secured bank loans - 42,925 - 42,926
Lease liabilities 17,026 19,579 7,522 8,549
17,026 62,504 7,522 51,475
Terms and repayment schedule
After the year end, we refinanced our banking facilities, which had been due
to expire in June 2024, on improved terms. The total facility remains at
£130m and is entirely comprised of a revolving credit facility, replacing a
£65m term loan and £65m revolving credit facility. The interest rate payable
is SONIA/SOFR plus a fixed margin that depends on the level of debt relative
to adjusted EBITDA. The margin on the new revolving credit facility is equal
to 1.85% to 2.85%, this compares favourably to the previous margin of 2% to
3%. The lead arranger for the facility remains Bank of Ireland, with continued
participation from Barclays and AIB and new participation from HSBC.
7. Subsequent events
On 19 May 2023 the parent company FD Technologies plc renewed its banking
facilities, which had been due to expire in June 2024. Further details of the
loan financing arrangement are included in note 6.
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