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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 GBP69.3m; 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 GBP9-10m 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 GBP180m 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 GBP142.5m GBP147.4m (3%)
Gross profit GBP59.4m GBP60.2m (1%)
(Loss)/profit before tax (GBP4.5m) GBP1.1m N/A
Reported diluted (LPS)/EPS (22.2p) 2.9p N/A
Net debt* GBP7.2m GBP7.4m 2%
Adjusted performance measures
Adjusted EBITDA** GBP14.0m GBP16.0m (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 GBP143m (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 GBP37.7m (H1 FY23: GBP33.6m), 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 GBP4.6m of services revenue has been restated from KX to First
Derivative in this period, with H1 FY23 restated by GBP4.2m to enable a like-for-like
comparison. Further details are provided in the financial review]
- First Derivative revenue GBP89.1m, down 1% (H1 FY23: GBP90.4m), 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 GBP15.7m (H1 FY23: GBP23.4m), 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 GBP14.0m (H1 FY23: GBP16.0m), principally due to a weaker comparative performance at
MRP
- Net debt GBP7.2m (H1 FY23: GBP7.4m) 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
GBP285m to GBP295m. The additional investment in KX announced today
is expected to result in a GBP9-10m impact to adjusted EBITDA in
H2, resulting in FY24 adjusted EBITDA in the range of GBP24m to
GBP26m.
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
Ryan Preston, Chief Financial Officer
Ian Mitchell, Head of Investor Relations
Investec Bank plc
(Nominated Adviser and Broker)
Carlton Nelson
Virginia Bull +44 (0)20 7597 5970
Goodbody (Euronext Growth Adviser and Broker)
David Kearney
Don Harrington
Nick Donovan +353 1 667 0420
J.P. Morgan Cazenove (Broker)
James A. Kelly
Mose Adigun +44 (0)20 3493 8000
FTI Consulting
Matt Dixon
Dwight Burden
Victoria Caton +44 (0)20 3727 1000
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 and
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 i ndustry 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 GBP6.9m 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 GBP9-10m 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
GBP350m for FY28, representing a more than 5x increase over the
GBP65m 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 GBP2.8m 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/
.
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
Derivative Derivative change
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
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 GBP14.0m (H1 FY23:
GBP16.0m).
Reclassification of KX service revenue to First Derivativ e
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 GBP4.6m of KX
services revenue to First Derivative (H1 FY23: GBP4.2m), along with
GBP3.0m cost of sales (H1 FY23: GBP2.6m) resulting in an impact on
gross profit of GBP1.6m (H1 FY23: GBP1.7m). A GBP0.1m movement in
adjusted admin expenses (H1 FY23: GBP0.1m) resulted in a net
movement in adjusted EBITDA of GBP1.5m from KX to FD for the period
(H1 FY23: GBP1.6m).
KX
KX total Financial services Industry
H1 FY24 H1 FY23 Change H1 FY24 H1 FY23 Change H1 FY24 H1 FY23 Change
GBPm GBPm GBPm GBPm GBPm GBPm
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 GBP32.9m, balanced by a 30%
reduction in services to GBP4.2m. 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
GBP6.9m (H1 FY23: GBP11.4m), 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 GBP29.9m, 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 GBP7.8m with recurring revenue
growing by 85% to GBP6.0m. 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) GBPm 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 GBP69.3m 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
GBPm GBPm
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 GBP89.1m, 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.
I n response to lower activity levels we removed GBP2.8m 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
GBPm GBPm 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 GBP0.2m, 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 GBP1.4m 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 GBP1.7m in relation
to costs to implement efficiency measures at First Derivative and
MRP.
H1 FY24 H1 FY23
GBPm GBPm
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 GBP1.9m, 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 GBP4.5m for the period,
compared to a profit of GBP1.1m in H1 FY23. The major factor here
was a GBP5.3m 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
GBPm GBPm
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 GBP6.2m for the period,
compared to a profit after tax of GBP0.8m in H1 FY23. Adjusted loss
after tax was GBP1.2m, decreased from GBP4.0m 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
GBPm GBPm
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 GBP11.9m of cash from operating activities
before the Oracle ERP implementation cash outlay incurred during
the period of GBP2.5m, 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 GBP7.2m, 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
GBPm GBPm
Opening net cash (excluding lease liabilities) 0.4 0.3
Cash generated from operating activities before n
on-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 GBP16.3m
spend GBP13.7m (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 GBP130m 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 GBP34.1m (H1 FY23:
GBP31.2m) adjusted for depreciation and amortisation of GBP10.3m
(H1 FY23: GBP11.0m), share based payments and related costs of
GBP1.5m (H1 FY23: GBP0.9m), restructure and non-operational costs
of GBP2.3m (H1 FY23: GBP2.5m), IT systems implementation costs
expensed GBP0.6m (H1 FY23: GBP2.6m) and other GBP(0.8)m (H1 FY23:
GBP(1.1)m).
Consolidated income statement (unaudited)
Six months ended 31 August
2023 2022
Note GBP'000 GBP'000
3 &
Revenue 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 GBP'000 GBP'000 GBP'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 Currency
Share Share option Fair value translation Retained Total
capital premium reserve reserve adjustment earnings equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'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 Currency
Share Share option Fair value translation Retained Total
capital premium reserve reserve adjustment earnings equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'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
GBP'000 GBP'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
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'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 GBP4.6m of KX
services revenue to FD (H1 FY23: GBP4.2m), along with GBP3.0m cost
of sales (H1 FY23: GBP2.6m) resulting in an impact on gross profit
of GBP1.6m (H1 FY23: GBP1.7m). A GBP0.1m movement in adjusted admin
expenses (H1 FY23: GBP0.1m) resulted in a net movement in adjusted
EBITDA of GBP1.5m from KX to FD for the period (H1 FY23:
GBP1.6m).
Geographical location analysis H1 H1
2024 2023
GBP'000 GBP'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
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'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
GBP'000 GBP'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 GBP1.7m (H1 FY23: GBP0.3m). 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
GBP1.9m.
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
GBP 6.2m (H1 FY23: profit of GBP0.8m) 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 GBP 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 GBP1.2m (H1 FY23: Adjusted
earnings after tax GBP4.0m), which excludes the amortisation of
acquired intangibles after tax effect of GBP0.3m, (H1 FY23:
GBP1.4m) share-based payments after tax effect of GBP1.2m (H1 FY23:
GBP0.7m), restructure and non-operational costs after tax effect of
GBP1.8m (H1 FY23: GBP2.0m), IT systems implementation costs after
tax effect GBP0.5m (H1 FY23: GBP2.1m), loss on foreign currency
translation of GBP1.6m (H1 FY23: gain GBP3.0m), finance costs after
tax effect of GBP0.2m (H1 FY23: GBPnil), and profit on disposal of
associate after tax effect of GBP0.1m (H1 FY23: GBP0.1m) . 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 28 February
2023 2023
GBP'000 GBP'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 GBP130m 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 28 February
2023 2023
GBP'000 GBP'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
Financial
assets at Other
amortised financial Fair
FVPL FVOCI cost liabilities Total value
31 August 2023 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'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
Financial
assets
at Other
amortised financial Fair
FVPL FVOCI cost liabilities Total value
28 February 2023 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'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
GBP'000 GBP'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
GBP'000 GBP'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
.
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 .
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.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
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END
IR BCBDGCXDDGXX
(END) Dow Jones Newswires
October 24, 2023 02:05 ET (06:05 GMT)
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