31st Jul 2006 07:01
Royalblue Group PLC31 July 2006 31st July 2006 royalblue group plcinterim results for the six months ended 30th June 2006 royalblue reports strong progress and outlook. 2006 2005 ChangeRevenue £44.4m £34.1m +30%Operating profit £5.6m £4.3m +30%Pre-tax profit £6.1m £4.8m +27%Diluted earnings per share 13.2p 10.8p +22%Dividend per share 4.3p 3.3p +30% Highlights for the six months ended 30th June 2006: • Strong organic growth across the business.• Customer base increased by over 30% as a result of new product initiatives.• Fidessa connectivity network subscriber base gains strength.• Recurring revenue up 40%, now representing 71% of total revenue. Commenting on these results and current trading, Chris Aspinwall, ChiefExecutive, said: "2006 has opened strongly with last year's strong momentum continuing throughoutthe business. Progress with the new initiatives developing through ourpreviously announced investment programmes has combined with the underlyingstrength in the core business to deliver a strong performance throughout theregions. This has been reflected in the trading performance with revenue up by30%, operating profit up 30% and recurring revenue up by 40%, now representing71% of overall revenue. The company has continued to be cash generative with thecash balance increasing to £28.6 million, up from £21.9 million at the samepoint last year. One particular feature of the results for this half is that thenew propositions we are offering through the Fidessa connectivity network andFidessa workstation are enabling us to significantly expand our customer base.This has been reflected in us signing over 60 new customers during the half,representing an increase of roughly 30% in the total number of customers weserve. We expect this trend to continue and, whilst the initial order value formany of these customers is small compared to our traditional propositions, webelieve that this expansion of our customer base is strategically important andwill play a key role in providing opportunities in the future. Looking ahead to the second-half, we expect the current conditions to continue,driven by the increasing acceptance of Fidessa within the global markets, newbusiness opportunities and regulatory and market changes across the regions. Inparallel, we will continue with our investment programmes, increasing the globalcoverage of our data services, expanding the connectivity network, extending ourproduct offerings in the buy-side and adding derivative functionality across theproduct set. As a result, we expect that we will continue to see strong growthacross 2006 and believe there is scope for this growth to modestly exceed thatseen in 2005. Looking further ahead, we believe that our strategy of providing an integratedsolution for cross-asset trading, market data and connectivity leaves us in aunique and valuable position in the market. There is still substantialinvestment to be completed in order to achieve our vision and we envisage thatour investment programmes will continue throughout 2006, 2007 and beyond.However we anticipate that, as we are already seeing, these programmes willbring incremental benefits in the short-term and, coupled with the changes weare seeing in the markets, will also continue to deliver opportunities well intothe future." Financial Summary In the six months to 30th June 2006 strong growth in revenue has been achieved,up 30% to £44.4 million, from £34.1 million for the same period last year. Thisheadline growth continues to be driven by the momentum in recurring revenuewhich has increased by 40% to £31.7 million, now representing 71% of totalrevenue. Looking at the breakdown of recurring revenue across our three areas offocus, indicative values for the first six months of 2006 are that £23 millionarose from trading, £5 million arose from connectivity and £3 million arose frommarket data. The consultancy revenue has increased by 15% to £12.7 million, nowrepresenting 29% of total revenue. Strong growth in operating profit has also been achieved. The operating profitis up by 30% to £5.6 million from £4.3 million in the same period last year.This is an operating margin of 12.6%, consistent with that in the prior year.The effective tax rate is expected to be slightly higher than in 2005 resultingin a profit after tax of £4.4 million, a growth rate of 26%. Diluted earnings per share have increased by 22% to 13.2 pence, up from 10.8pence. The interim dividend is being increased by 30% to 4.3 pence and will bepaid on 25th September 2006 to shareholders on the register at the close ofbusiness on 25th August 2006, with an ex-dividend date of 23rd August 2006. Staff numbers have increased to service the revenue growth and the investmentprogrammes. The average headcount in the period was 665, up 19% from 561 in2005. The staff numbers at 30th June 2006 had increased to 684. The business continues to be cash generative and the cash balance has increasedto £28.6 million, up from £21.9 million at the same point last year. Within thecash movements £10.6 million net cash has been generated from operatingactivities. This represents an operating cash conversion rate of 190%. Operations Introduction During the first-half of 2006 we have seen strong progress across all ourbusiness lines. Sales of hosted and enterprise Fidessa are continuing to bedriven by our customers' need for an industrial strength trading platformcoupled with the market leading and continually expanding level of functionalityoffered by Fidessa. In parallel to this, we have started to see benefits flowingthrough as a result of our investment programmes. Our Fidessa workstation business has gained strength with our buy-side ExecutionManagement (EMS) product gaining an additional 12 customers in Europe. In Julythis product will be launched in the US as a first stage of moving the Fidessaworkstation into the US market and later in the year we plan to launch theproduct in Asia. Across the world the total number of active Fidessa screens hasnow increased to in excess of 9,000 over 10% up on the number at the end of2005. The Fidessa connectivity network has continued to expand both geographically,with the opening of our Asian hubs and functionally, with extensions to supportallocations and Indications of Interest (IoIs). The expansion of the Fidessa connectivity network and Fidessa workstation aredramatically increasing the global presence of Fidessa. These services haveenabled us to increase our total customer base by 60 customers which representsan increase of approximately 30%. We believe this expansion of our customer baseis an exciting development and that we will be able to leverage these additionalcustomer relationships to develop the business still further. We plan to continue our investment programmes as we extend our capability acrossall areas of the business. These extensions, which form part of our vision toprovide an integrated solution for cross-asset trading, market data andconnectivity, involve development of new exchange gateways, extension of ourdata coverage and the implementation of whole new functional areas. In parallel,in order to facilitate growth, we are extending our own infrastructure andduring 2006 expect to have opened new larger offices in Hong Kong, increased thenetwork capacity between the regions and opened new data centres in Hong Kongand Europe. Further expansion of our entire infrastructure will continue as arolling programme as the scale of our operations develops. Fidessa Trading During the first-half of 2006 we have continued to make progress across ourentire range of trading services. More than 20 sales of our hosted and enterprise trading platform have been madeacross the regions, including a number to tier 1 firms who are either newcustomers or existing customers significantly extending their use of Fidessaacross their business. The sales to tier 1 firms include a new sale toMitsubishi UFJ Securities Co., Ltd. which, combined with the sale reported inJapan last year, firmly establishes Fidessa as the leading product within thetier 1 Japanese domestic sell-side market. The new sales also include, Insinger de Beaufort, the first customer for ourcombined equity and derivative trading platform. The new sale builds on thedevelopment of our connectivity to the big four derivatives exchanges (EuroNextLIFFE, EUREX, the Chicago Board of Trade and the Chicago Mercantile Exchange)which was announced last year and represents another key milestone in thedevelopment of our derivative strategy. Fidessa's multiple asset capability willenable Insinger de Beaufort to replace a number of existing disparate systemsand so streamline and integrate its different activities to capitalise ontrading opportunities. During the first-half of 2006 extensions have continued to our services,including support for new markets and new areas of functionality such as pre-and post-trade analytics. The rate of new development will continue to increase,with support for a number of new markets planned as well as initiatives in newareas such as support for a new algorithmic trading framework. In addition tothe development of new functionality we are also investing in the development ofour service delivery models to ensure we optimise the way in which new productsare delivered to our customers. Our streamlined business service deliveries havealready demonstrated that they are capable of delivering several completely newimplementations of the trading platform each month and further optimisations ofour processes will ensure that new functionality can be delivered across theentire customer base in the shortest possible timescale. Our EMS product which is delivered from within the Fidessa workstation hascontinued to make progress with an additional 12 customers signed. We havecontinued to extend the functionality of this product, adding facilities fororder management, extending the range of pre-trade analytics available throughour data services and increasing the number of brokers that may be accessedthrough the service. As a result of these extensions, we are seeing significantincreases in the level of revenue we are generating from the existing EMScustomer base as well as the incremental revenue generated from new customers.During the second-half of 2006 we will continue to extend the functional line ofour EMS product adding support for IoIs and also for derivative products withboth of these services being supported through the Fidessa connectivity network. During the first-half of 2006 we have also seen increasing interest in the EMSproduct from across the regions. The strength of the Fidessa connectivitynetwork and the work already completed in providing market data, means that wealready have in place much of the infrastructure required to deliver thisproduct on a global basis. During Q3 we plan to launch the first version of EMStargeted at the US domestic market and this represents the first foray for theFidessa workstation in this market. This will be followed with a launch of theproduct in the Japanese market. In addition to the developments that we are driving, we expect thatopportunities will be created by the rapid pace of change within the marketsthemselves. It is clear that there are still many ways in which the markets candevelop further and these are being driven both by regulatory changes andcustomer pressure. Just some of the many developments currently happening in themarket are: • Significantly increased volumes across the markets caused by new ways of trading. • Market consolidation such as NYSE's proposed acquisition of EuroNext. • The introduction of new central market systems such as the new LSE Trading System planned for Q2 2007. • Regulatory changes such as Regulation National Market System (RegNMS) in the US and the Markets in Financial Instruments Directive (MiFid) in Europe. • The trend within exchanges to move towards providing support for multiple asset classes. • Increases in the number of Alternative Trading Systems (ATSs), crossing-networks and regional exchanges challenging the dominance of the traditional exchanges. • Exchanges creating new specialised data products that may require specialist functionality to support the ways in which they are traded. Fidessa Market Data During the first-half of 2006 we have continued to grow our market data businessand now have over 3,000 users across 200 clients receiving data through theFidessa product suite. We have also extended our market data service into Asiawith our first client in Japan going live. Our coverage has been extendedthrough the first-half of the year with the addition of real-time coverage forthe Estonian, Latvian and Lithuanian Eastern European markets, along withAustralia, Hong Kong, Japan and Thailand in the Asia Pacific region. We havealso extended our financial news content to include local language feeds for theDutch, French and German markets. This data expansion will continue in thesecond-half of the year with a further 10 global markets due for release,including exchanges in Iceland, Indonesia and Malaysia. Delivering on our initiative to support multiple asset trading within Fidessa wehave also added data for our first derivatives exchanges in Europe withreal-time coverage of the EuroNext markets in London and Paris. Further Europeanand US derivatives exchanges will become available during the remainder of 2006with the addition of the Chicago Board of Trade, the Chicago MercantileExchange, Eurex and the International Securities Exchange. In support of our ongoing plans to expand the breadth of exchanges available fortrading through Fidessa, we have further extended our static trading datacoverage with the addition of 15 markets across Eastern Europe, the Middle Eastand South America. This expansion will continue with a further 13 markets beingsupported by the end of the year. The ability to offer our own fully-managed, comprehensive and integrated marketdata service within the Fidessa solution is now a key feature of our product setand provides us with a strong differentiator against many of our competitors,particularly those incumbent in the new market segments we are targeting. As wedevelop our market data solutions these will be gradually linked through ourglobal infrastructure to provide high quality trading data throughout theregions. Fidessa Connectivity With our own data centres located across Europe, North America, Japan and Asia,the Fidessa connectivity network provides genuinely global connections betweenthe buy-side and sell-side, between sell-sides and exchanges, to third party IoIand order routing networks, as well as to our own growing, remote broking andRetail Service Provider (RSP) networks. In addition to being fully integratedinto the Fidessa suite of trading products, this connectivity network alsosupports direct links to clients running a variety of other system solutions. Over 2,000 individual client connections now run across this global network,serving over 170 sell-side brokers and 750 buy-side firms. Demand from brokersall around the world continues to grow as the Fidessa connectivity networkbecomes a vital source of liquidity for participants in the world's financialmarkets. With most of the blue-chip brokers already available on the network,the focus of expansion has been on smaller domestic players who provide a highlyspecialised service for their local markets and on broadening support intomarkets such as Japan. The number of brokers signed up to our remote broking solution has more thandoubled in the first-half of 2006 with the total available now exceeding 160. Ofthese, 45 are now participating in and are available on the Fidessa buy-sideEMS, increased from 20 since the beginning of the year. The services offered bythese brokers include Direct Market Access (DMA) trading, where the buy-side cantrade a market directly under the broker's membership, as well as the expandingproprietary algorithmic trading services that a growing number of these brokersnow offer. We continue to see interest in the ability to trade Asian markets both fromwithin the region and outside. To satisfy this demand we have expanded thenumber of local Asian brokers on the Fidessa connectivity network by 14 duringthe first-half and now offer 34 specialist brokers across this region. With the growing adoption of electronic connectivity by buy-side firms forrouting their executions and order flow, we have now extended the capabilitiesof our network to allow them to also transmit allocations information to theirbrokers. Many buy-side firms place orders for large tranches of stock which needto be allocated across a number of the funds they manage. This allocationsinformation can now be sent electronically by buy-side firms across the sameFidessa connectivity network they are using for their order flow. The automationof this process is a key part of our straight-through-processing solution toclients and offers improved efficiencies for them by eliminating re-keying ofdata, streamlining operational procedures and reducing the risk of human error. For sell-side brokers trading financial markets as member firms, we haveincreased the number of trading gateways available through Fidessa to 60. Keynew gateways include Dubai, our first trading interface for the Middle East, andour first European derivatives exchange interfaces for Eurex and EuroNext.LIFFE.Our European RSP network also continues to offer one of the broadest choices ofdestinations available from one service, with the total number of RSP systemsnow standing at 20. The second-half of 2006 will see the further expansion of the Fidessaconnectivity network globally, particularly with brokers who offer solutions forderivatives and those that specialise in the new markets for which we are addingstatic trading data to Fidessa. We will also launch our own pre-trade IoIdistribution and display service across the Fidessa connectivity network. Thiswill allow sell-side brokers to transmit pre-trade liquidity information toselected buy-side firms who will be able to view the available broker IoIs, allwithin the Fidessa solution and thus without the need for external third-partyIoI network connections. We see the role for connectivity in the market continuing to increase inimportance as more and more services are offered this way. The Fidessaconnectivity network is a key element of our strategy to provide thisconnectivity in a way that is seamlessly integrated into the trading process andwe believe that our network will become an important element within the globaltrading environment. Lava Patent Lawsuit In June 2003 we noted the announcement released by Lava Trading Inc. (Lava) thatit had filed a patent infringement claim in the US against royalblue. The patentrelates to the concept of displaying prices from more than one source (ECN) on asingle screen in the US. In December 2003 Lava filed an amendment to its lawsuitalleging unfair trade practices on the part of royalblue, in particular inrelation to the pricing of products and associated services. In June 2004 we announced that the United States District Court for the SouthernDistrict of New York had made its ruling on the first stage of the patentinfringement case. This first stage, known as a Markman claims constructionhearing, defines the technical terms in the patent, which will be used insubsequent hearings and is instrumental in establishing whether patentinfringement has occurred. The ruling confirmed our definition of all the majorterms and strengthened our position that the case brought by Lava is withoutmerit. In December 2004 we announced that a Stipulated Judgment had been entered intothe record in the United States District Court for the Southern District of NewYork. This formally recorded that, based on the findings of the earlier Markmanhearing, royalblue does not infringe Lava's patent. In both this announcementand the one in June 2004, royalblue noted that it expected Lava to lodge anappeal. Lava lodged the appeal which was heard in December 2005. In April 2006 the United States Court of Appeals for the Federal Circuitannounced its determination in the appeal. It determined that the lower courtdid not correctly interpret all the technical terms in the Markman claimsconstruction hearing and has referred the case back to the lower court. A newMarkman hearing will now be required, which means that the patent proceedings,started in June 2003, are for the most part restarted from the beginning and allprevious judgements no longer stand. The Court of Appeals ruling refers to the definition of detailed technicalpoints and does not discuss the merits of the patent itself. The ruling does notaffect royalblue's view from the outset, that the case brought by Lava iswithout merit and royalblue will continue to defend its position vigorously. Outlook Looking ahead, we expect the current market conditions will continue, driven bythe increasing acceptance of Fidessa within the global markets, new businessopportunities and regulatory and market changes across the regions. As a result,we expect that we will continue to see strong growth across 2006 and believethere is scope for this growth to modestly exceed that seen in 2005. Looking further ahead, we believe that our strategy of providing an integratedsolution for cross-asset trading, market data and connectivity leaves us in aunique and valuable position in the market. In order to deliver against thisstrategy we will continue with our investment programmes, increasing the globalcoverage of our data services, expanding the connectivity network, extending ourproduct offerings in the buy-side and adding derivative functionality across theproduct set. There is still substantial investment to be completed in order toachieve our vision and we envisage that our investment programmes will continuethroughout 2006, 2007 and beyond. Whilst, as we are already seeing, ourinvestment programmes provide incremental benefits at each stage enabling us togenerate growth in the short-term, we believe that the true value of ourstrategy will be realised when all the elements of our vision are complete. As aresult, we expect that development of this vision, coupled with the changes weare seeing in the markets, will deliver opportunities well into the future. enquiries:John Hamer, Chairman Edward Bridges, Financial DynamicsChris Aspinwall, Chief Executive Tel: 020 7831 3113Andy Malpass, Finance Director Fax: 020 7831 6341www.fidessa.comTel: 01483 206300Fax: 01483 206301 Condensed Consolidated Interim Income StatementFor the six months ended 30th June 2006 2006 2005 2005 6 months to 6 months to 12 months to 30th June 30th June 31st December unaudited unaudited audited Note £'000 £'000 £'000 Revenue 5 44,397 34,082 74,234Operating expenses 6 (39,037) (30,079) (65,199)Other operating income 235 298 594Operating profit 5,595 4,301 9,629Interest receivable 7 479 454 1,707Interest payable - (1) -Profit before income tax 6,074 4,754 11,336Income tax expense 8 (1,712) (1,242) (1,240)Profit for the period 4,362 3,512 10,096 Earnings per share: 9Basic 13.6p 11.0p 31.6pDiluted 13.2p 10.8p 31.0p Dividend per share: 10Interim 4.3p 3.3p 3.3pFinal 7.0p Condensed Consolidated Interim Balance SheetAs at 30th June 2006 2006 2005 2005 30th June 30th June 31st December unaudited unaudited audited Note £'000 £'000 £'000AssetsNon-current assetsProperty, plant and equipment 9,570 8,039 8,757Intangible assets 8,839 7,206 7,984Deferred tax assets 2,711 1,606 3,165Other receivables 898 898 898Total non-current assets 22,018 17,749 20,804 Current assetsTrade and other receivables 11 20,738 15,399 18,615Income tax receivable 589 883 672Cash and cash equivalents 28,584 21,888 26,120Total current assets 49,911 38,170 45,407 Total assets 71,929 55,919 66,211 EquityIssued capital 3,284 3,268 3,272Share premium 12,106 11,610 11,743Cumulative translation adjustment (376) (164) (51)Retained earnings 30,135 21,092 27,241Total equity 45,149 35,806 42,205 LiabilitiesNon-current liabilitiesOther payables 500 306 548Deferred tax liabilities 1,225 1,229 1,264Total non-current liabilities 1,725 1,535 1,812 Current liabilitiesTrade and other payables 12 23,741 15,557 20,676Current income tax liabilities 1,314 3,021 1,518Total current liabilities 25,055 18,578 22,194 Total liabilities 26,780 20,113 24,006 Total equity and liabilities 71,929 55,919 66,211 Condensed Consolidated Interim Statement of Changes in Shareholders' Equity Cumulative Issued Share Translation Retained Total capital premium adjustment earnings equity Note £'000 £'000 £'000 £'000 £'000 Balance at 1st January 2005 3,268 11,610 (206) 18,838 33,510 Gain on sale of own shares byemployee share trust - - - 7 7Deferred tax recogniseddirect to equity - - - 321 321Currency translation adjustments - - 42 - 42 - - 42 328 370Profit for the period from the incomestatement - - - 3,512 3,512Total income and expensefor the period - - 42 3,840 3,882 Employee share incentive charges - - - 254 254Capital proceeds from sale of ownshares by employee share trust - - - 15 15Dividends paid - - - (1,855) (1,855)Balance at 30th June 2005 3,268 11,610 (164) 21,092 35,806 Gain on sale of own sharesby employee share trust - - - 82 82Income tax deduction recogniseddirect to equity - - - 39 39Deferred tax recogniseddirect to equity - - - 473 473Currency translation adjustments - - 113 - 113 - - 113 594 707Profit for the period from theincome statement - - - 6,584 6,584Total income and expensefor the period - - 113 7,178 7,291 Exercise of share options 4 133 - - 137Employee share incentive charges - - - 284 284Purchase of shares byemployee share trust - - - (312) (312)Capital proceeds from sale of ownshares by employee share trust - - - 52 52Dividends paid - - - (1,053) (1,053)Balance at 31st December 2005 3,272 11,743 (51) 27,241 42,205 Gain on sale of own shares byemployee share trust - - - 167 167Income tax deduction recogniseddirect to equity - - - 222 222Deferred tax recognised direct to equity - - - 162 162Currency translation adjustments - - (325) (274) (599) - - (325) 277 (48)Profit for the period from the incomestatement - - - 4,362 4,362Total income and expense forthe period - - (325) 4,639 4,314 Exercise of share options 12 363 - - 375Employee share incentive charges - - - 370 370Capital proceeds from sale of ownshares by employee share trust - - - 131 131Dividends paid - - - (2,246) (2,246)Balance at 30th June 2006 3,284 12,106 (376) 30,135 45,149 Condensed Consolidated Interim Cash Flow StatementFor the six months ended 30th June 2006 2006 2005 2005 6 months 6 months 12 months to 30th to 30th to 31st June June December unaudited unaudited audited Note £'000 £'000 £'000 Cash flows from operating activitiesProfit before tax 6,074 4,754 11,336Adjustments for: Staff costs - share incentives 6 370 254 538 Product development amortised 6 2,428 2,113 4,373 Depreciation of property, plant and equipment 6 2,118 1,705 3,604 Amortisation of other intangible assets 6 154 55 152 Loss on sale of property, plant and equipment 32 4 4 Interest receivable (476) (453) (1,707)Cash generated from operations before changes inworking capital 10,700 8,432 18,300Movement in trade and other receivables (3,095) (2,406) (5,653)Movement in trade and other payables 4,292 111 5,223Cash generated from operations 11,897 6,137 17,870Income tax paid (1,270) (1,653) (3,808)Net cash generated from operating activities 10,627 4,484 14,062 Cash flows from investing activitiesPurchase of property, plant and equipment (3,318) (3,214) (5,641)Proceeds from sale of property, plant and equipment 8 19 20Purchase of other intangible assets (234) (46) (403)Product development 6 (3,212) (2,644) (5,418)Interest received 476 442 1,197Proceeds from capital repayment ofTouchpaper "B" Loan Note - - 500Net cash used in investing activities (6,280) (5,443) (9,745) Cash flows from financing activitiesProceeds from shares issued 375 - 137Purchase of own shares by employee share trust - - (312)Proceeds from sale of own shares by employee share trust 298 22 156Dividends paid (2,246) (1,855) (2,908)Net cash used in financing activities (1,573) (1,833) (2,927) Net increase/(decrease) in cash and cash equivalents 2,774 (2,792) 1,390Cash and cash equivalents at 1st January 26,120 24,590 24,590Effect of exchange rate fluctuations on cash held (310) 90 140Cash and cash equivalents at end of period 28,584 21,888 26,120 Notes to the condensed consolidated interim financial statements 1. Reporting entity royalblue group plc (the "Company") is a company incorporated in England andWales. These condensed consolidated interim financial statements of the Companyas at and for the six months ended 30th June 2006 comprise the Company and itssubsidiaries (together the "Group"). These condensed consolidated interimfinancial statements are presented in pounds sterling, rounded to the nearestthousand. The comparative figures for the financial year ended 31st December 2005 are notthe Company's statutory accounts for that financial year. Those accounts havebeen reported on by the Company's auditors and delivered to the Registrar ofCompanies. The report of the auditors was (i) unqualified, (ii) did not includea reference to any matters to which the auditors drew attention by way ofemphasis without qualifying their report, and (iii) did not contain a statementunder section 237(2) or (3) of the Companies Act 1985. The consolidated financial statements of the Group as at and for the year ended31st December 2005 are available upon request from the Company's registeredoffice at Dukes Court, Duke Street, Woking, Surrey GU21 5BH or atwww.fidessa.com. These condensed consolidated interim financial statements are unaudited but havebeen reviewed by KPMG Audit Plc and their report is set out below. 2. Statement of compliance These condensed consolidated interim financial statements have been prepared inaccordance with International Financial Reporting Standard (IFRS) IAS 34 InterimFinancial Reporting. They do not include all of the information required forfull annual financial statements and should be read in conjunction with theconsolidated financial statements of the Group as at and for the year ended 31stDecember 2005. The condensed consolidated interim financial statements were approved by theBoard of Directors on 28th July 2006. 3. Significant accounting policies The accounting policies and presentation applied by the Group in these condensedconsolidated interim financial statements are the same as those applied by theGroup in its consolidated financial statements as at and for the year ended 31stDecember 2005. 4. Estimates The preparation of condensed consolidated interim financial statements requiresmanagement to make judgements, estimates and assumptions that affect theapplication of accounting policies and the reported amounts of assets andliabilities, income and expenses. The estimates and associated assumptions arebased on historical experience and various other factors that are believed to bereasonable under the circumstances, the results for which form the basis ofmaking the judgements about carrying values of assets and liabilities that arenot readily available from other sources. Actual results may differ from theseestimates. In preparing these condensed consolidated interim financial statements, thesignificant judgements made by management in applying the Group's accountingpolicies and the key sources of estimation uncertainty were the same as thosethat applied to the consolidated financial statements as at and for the yearended 31st December 2005. 5. Segmental reporting The group operates in one business segment; that of supply of software tofinancial institutions. For further details see the Operations Review. Theoperations are monitored by the geographic regions of Europe, North America andAsia. Certain activities and costs are managed and monitored centrally. Thesegment information in respect of the regions is presented below. For the six months ended 30th June 2006 Europe North America Asia Total £'000 £'000 £'000 £'000 Segment revenue 22,728 15,663 6,006 44,397Segment result 4,759 2,029 2,696 9,484Product development amortised (2,428)Central costs (1,461)Operating profit 5,595 For the six months ended 30th June 2005 Europe North America Asia Total £'000 £'000 £'000 £'000 Segment revenue 18,749 10,738 4,595 34,082Segment result 5,068 68 2,520 7,656Product development amortised (2,113)Central costs (1,242)Operating profit 4,301 For the year ended 31st December 2005 Europe North America Asia Total £'000 £'000 £'000 £'000 Segment revenue 40,391 23,754 10,089 74,234Segment result 10,395 810 5,255 16,460Product development amortised (4,373)Central costs (2,458)Operating profit 9,629 6. Operating expenses 6 months to 6 months to 12 months to 30th June 30th June 31st December 2006 2005 2005 unaudited unaudited audited £'000 £'000 £'000 Staff costs - salaries 20,377 16,664 35,527Staff costs - social security 2,114 1,740 3,625Staff costs - share incentives 370 254 538Total staff costs 22,861 18,658 39,690Depreciation of property, plant and equipment 2,118 1,705 3,604Amortisation of other intangible assets 154 55 152Product development capitalised (3,212) (2,644) (5,418)Product development amortised 2,428 2,113 4,373Other operating expenses 14,688 10,192 22,798Total operating expenses 39,037 30,079 65,199 7. Interest receivable 6 months to 6 months to 12 months to 30th June 30th June 31st December 2006 2005 2005 unaudited unaudited audited £'000 £'000 £'000 Interest receivable 479 454 877Interest received on Touchpaper "A" and "B" Loan Notes - - 330Capital repayment of Touchpaper "B" Loan Notes - - 500Total interest receivable 479 454 1,707 8. Income tax expense The charge for tax for the six months ended 30th June 2006 has been calculatedbased on the best estimate of the weighted average annual income tax rateexpected for the full year. Differences between the anticipated effective taxrate and the statutory rate include, but are not limited to, the effect of taxrates in foreign jurisdictions, non-deductible expenses, tax incentives notrecognised in the income statement, the effect of tax losses utilised and underor over provisions in previous periods. 9. Earnings per share Earnings per share have been calculated by dividing profit attributable toshareholders by the weighted average number of shares in issue during theperiod, details of which are below. The diluted earnings per share have beencalculated using an average share price of 816p (for six months to 30th June2005 527p, for 12 months to 31st December 2005 587p). 6 months to 6 months to 12 months to 30th June 30th June 31st December 2006 2005 2005 unaudited unaudited audited £'000 £'000 £'000 Profit attributable to shareholders 4,362 3,512 10,096Less gain relating to capital repayment of Touchpaper"B" Loan Notes - - (500)Profit attributable to shareholders excluding gain 4,362 3,512 9,596Less tax adjustment from prior years - - (1,492)Profit attributable to shareholders excluding gain andtax adjustment from prior years 4,362 3,512 8,104 6 months to 6 months to 12 months to 30th June 30th June 31st December 2006 2005 2005 unaudited unaudited audited Number '000 Number '000 Number '000 Weighted average number of shares in issue 32,768 32,679 32,687Weighted average number of shares held by theemployee trusts (751) (767) (761)Shares used to calculate basic earnings per share 32,017 31,912 31,926Dilution due to share options and warrants 1,131 584 691Shares used to calculate diluted earnings per share 33,148 32,496 32,617Basic earnings per share excluding gain and taxadjustment from prior years 13.6p 11.0p 25.4pDiluted earnings per share excluding gain and taxadjustment from prior years 13.2p 10.8p 24.8pBasic earnings per share from tax adjustment from prioryears - - 4.7pDiluted earnings per share from tax adjustment fromprior years - - 4.6pBasic earnings per share excluding capital repayment 13.6p 11.0p 30.1pDiluted earnings per share excluding capital repayment 13.2p 10.8p 29.4pBasic earnings per share on gain relating to capitalrepayment of Touchpaper "B" Loan Notes - - 1.5pDiluted earnings per share on gain relating to capitalrepayment of Touchpaper "B" Loan Notes - - 1.6pBasic earnings per share 13.6p 11.0p 31.6pDiluted earnings per share 13.2p 10.8p 31.0p 10. Dividends The dividends paid in the period covered by these condensed consolidated interimfinancial statements are detailed below. Dividend value Dividend value per share £'000 2004 final dividend paid 6th June 2005 5.8p 1,8552005 interim dividend paid 26th September 2005 3.3p 1,0532005 final dividend paid 5th June 2006 7.0p 2,246 An interim dividend in respect of 2006 of 4.3p per share, amounting to a totaldividend of £1,382,000, was declared by the directors at their meeting on 26thJuly 2006. This interim dividend will be payable on 25th September 2006 toshareholders on the register at the close of business on 25th August 2006, withan ex-dividend date of 23rd August 2006. These condensed consolidated interimfinancial statements do not reflect this dividend payable. 11. Trade and other receivables As at: 30th June 30th June 31st December 2006 2005 2005 unaudited unaudited audited £'000 £'000 £'000 Trade receivables 16,070 12,093 14,657Prepayments 1,546 1,086 1,639Accrued revenue 1,618 1,430 1,262Other receivables 1,504 790 1,057Total trade and other receivables 20,738 15,399 18,615 12. Current liabilities; trade and other payables As at: 30th June 30th June 31st December 2006 2005 2005 unaudited unaudited audited £'000 £'000 £'000 Trade payables 3,181 1,756 1,640Accrued expenses 8,481 6,180 9,064Deferred revenue 10,404 6,233 8,327Other taxes and social security 1,675 1,388 1,645Total trade and other payables 23,741 15,557 20,676 13. Share-based payments The Extraordinary General Meeting held on 21st February 2006 approved theadoption of the Exceptional Growth Rate Incentive Plan (EGRIP) and the CompanyShare Option Plan 2006. The first awards under the EGRIP were made on 6th March2006. The award is over a total of 523,512 ordinary shares in royalblue groupplc. The fair value of the award has been measured using a Monte Carlosimulation model. The expected volatility is based on the historic volatilityadjusted for any expected changes to future volatility. The inputs to and outputfrom this model are listed below. There have been no other grants or awards ofshare incentives in the six months to 30th June 2006. Share options EGRIP award March 2006Fair value 153pShare price at grant 896pExercise price 10pExpected volatility 25%Expected life 5 yearsExpected dividends 3.43%Risk-free rate of return 4.36% 14. Related party transactions During the period a loan of £590,000 has been made to a member of the keymanagement to assist with relocation. The loan is on commercial terms and isexpected to be repaid within a year. 15. Contingent liability As disclosed in the 2005 Annual Report and this Interim Statement, Lava TradingInc. has filed a patent infringement claim in the US against the Group. Due tothe uncertainty of the eventual outcome of this case, no provision is being madein accordance with the requirements of IAS 37 'Provisions, ContingentLiabilities and Contingent Assets'. 16. Circulation to shareholders Copies of this interim report will be sent to shareholders and copies will beavailable to the public at the Company's registered office; Dukes Court, DukeStreet, Woking, Surrey GU21 5BH. Independent Review Report to royalblue group plc Introduction We have been instructed by the Company to review the financial information forthe six months ended 30th June 2006 which comprises the Condensed ConsolidatedInterim Income Statement, the Condensed Consolidated Interim Balance Sheet, theCondensed Consolidated Interim Statement of Changes in Shareholders' Equity, theCondensed Consolidated Interim Cash Flow Statement and the related notes. Wehave read the other information contained in the interim report and consideredwhether it contains any apparent misstatements or material inconsistencies withthe financial information. This report is made solely to the Company in accordance with the terms of ourengagement to assist the Company in meeting the requirements of the ListingRules of the Financial Services Authority. Our review has been undertaken sothat we might state to the Company those matters we are required to state to itin this report and for no other purpose. To the fullest extent permitted by law,we do not accept or assume responsibility to anyone other than the Company forour review work, for this report, or for the conclusions we have reached. Directors' responsibilities The interim report, including the financial information contained therein, isthe responsibility of, and has been approved by, the directors. The directorsare responsible for preparing the interim report in accordance with the ListingRules of the Financial Services Authority which require that the accountingpolicies and presentation applied to the interim figures should be consistentwith those applied in preparing the preceding annual accounts except where anychanges, and the reasons for them, are disclosed. Review work performed We conducted our review in accordance with guidance contained in Bulletin 1999/4issued by the Auditing Practices Board for use in the UK. A review consistsprincipally of making enquiries of group management and applying analyticalprocedures to the financial information and underlying financial data and, basedthereon, assessing whether the accounting policies and presentation have beenconsistently applied unless otherwise disclosed. A review excludes auditprocedures such as tests of controls and verification of assets, liabilities andtransactions. It is substantially less in scope than an audit performed inaccordance with International Statements on Auditing (UK and Ireland) andtherefore provides a lower level of assurance than an audit. Accordingly, we donot express an audit opinion on the financial information. Review conclusion On the basis of our review we are not aware of any material modifications thatshould be made to the financial information as presented for the six monthsended 30th June 2006. KPMG Audit PlcChartered AccountantsCrawley28th July 2006 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Fidessa Group