First Derivatives first half 2014 Revenues up 9%, Profit up 24%

British financial services software provider First Derivatives (AIM:FDP.L, ESM:FDP.L) has today announced its interim results for the period ended August 31, 2014, which show a considerably robust financial situation for the publicly listed company.

With First Derivatives’ core business being the provision of its Delta Suite set of enterprise components which includes automated surveillance systems which are used by not only executing venues and FX companies, but also national financial markets regulatory authorities including the Australian Securities and Investments Commission (ASIC), it is clear that diversification and intelligent corporate strategy in engaging with specific sectors can bear fruit at times of low FX volatility.

Indeed, whilst many companies whose income relies directly on the FX market itself experienced low revenues during the first six months of this year, First Derivatives made substantial progress, with investment in sales capacity delivering further revenue growth of 9% compared with the same period last year, notoriously a time of good fortunes for most firms. Indeed, market surveillance has heralded growth for First Derivatives, as ASIC has made several bi-annual enforcement reports, referring to the effectivity of the surveillance in ensuring good practice, therefore proving that even in times of low volumes, providing a solution of this nature to a regulator, which carries out its work regardless of market conditions, is a boon.

Strong growth in consulting was recorded for this period, with a 19% increase, bringing more new customers to the group, and the growing momentum in market surveillance with new contract wins during the period , one being Yieldbroker, and subsequently the newly founded IEX, as well as a strong pipeline of additional opportunities.

First Derivatives continued its investment in software products with new clients for Delta Flow, Delta Stream and Delta Algo. The company has also received commitment from Northern Ireland to support up to 484 new jobs at the company.

Financial Highlights:

– Revenue £37.5m (2013: £34.4m) +9%
– EBITDA £6.8m (2013: £5.8m) +17%
– Profit before tax £3.7m (2013: £3.0m) +24%
– Adjusted Profit before tax* £4.5m (2013: £3.8m) +18%
– Reported Diluted EPS 13.5p (2013: 12.4p) +9%
– Adjusted* Diluted EPS 16.5p (2013: 15.7p) +5%
– Interim dividend 3.3p per share (2013: 3.2p) +3%
– Net cash from operating activities £3.3m (2013: £3.2m) +2%
– Net debt £9.1m (2013: £15.0m)
– Performance remains in line with current market expectations for the full year

Seamus Keating, Chairman of First Derivatives, commented: “The high revenue visibility in our consulting division combined with the software deals we are working on or have signed during the first half of the year underpin our confidence in meeting market expectations for the full year. The second half has started strongly across the Group, both in terms of business performance and growth in our sales pipeline. We expect a modest enhancement to adjusted earnings in the current year from the Kx Systems transaction, with greater impact in the year to February 2016, despite increasing investment in Kx to maximize its growth potential.”

“In summary, the Group is well positioned to deliver in the current year and beyond with numerous business development opportunities to accelerate our growth. We view the future with confidence.”

An interesting matter of importance for First Derivatives is that it, along with many firms which provide software to electronic trading firms, has an interest in big data. The company states that big data continues to represent one of the most fundamental shifts in IT in recent decades, with 87% of enterprises believing its use will redefine the competitive landscapes of their industries within the next three years, according to a recent survey by General Electric.

“First Derivatives’ Delta platform, powered by kdb+, is a leader in one of the key challenges, namely the capture and analysis of high volumes of structured data in real time. We continue to develop our market position in Big Data and during the period have advanced our relationships with many of the key vendors including the leaders in handling unstructured data, who increasingly appreciate our ability to complement their solutions. We have also a number of new products in development which will take Delta to new industries” is Mr. Keating’s position on this matter.

To read the full report from First Derivatives, click here.

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