30th Jul 2007 07:01
Fidessa Group PLC30 July 2007 30th July 2007 Fidessa group plc Interim results for the period ended 30th June 2007 Fidessa reports strong organic growth and good progress following LatentZeroacquisition Organic Growth incl. 2007 2006 Growth LatentZeroRevenue £60.7m £44.4m +29% +37%Operating profit before amortisation £8.2m £5.6m +43% +46%Operating profit £7.8m £5.6m +43% +39%Pre-tax profit £8.2m £6.1m +41% +34%Adjusted diluted earnings per share* 18.3p 13.2p +35% +39%Dividend per share 6.0p 4.3p +40% +40% Numbers for 2007 include LatentZero for the period post completion. *EPS adjusted to remove the effect of acquisition intangibles amortisation and notional interest charge Highlights for the period ended 30th June 2007: • Strong organic growth; revenue up 29% and operating profit up 43%. • Completed the acquisition of LatentZero on 27th April 2007, the firstmajor acquisition since the group floated in 1997. • LatentZero performance in line with expectations with revenue growthexceeding 20% and trading profitably month-to-month. • Significant increase in usage across a range of Fidessa services. • First developments from Fidessa LatentZero integration already beingdelivered. • Completed name change to Fidessa, strengthening the product branding. Commenting on these results, Chris Aspinwall, Chief Executive, said: "2007 is shaping up to be a landmark year in the development of Fidessa. Whilstour existing business has continued to accelerate strongly across all theregions delivering strong organic growth in the first half, we have alsocompleted our first major strategic acquisition since the business floated in1997 through the purchase of LatentZero. This acquisition, which was completedat the end of April, has transformed the company into a major vendor to thebuy-side as well as to the sell-side thereby securing one of our key strategicobjectives. Across both the buy-side and sell-side business market conditions have remainedstrong with market activity, regulatory change and our own innovative productsall helping to develop momentum. The go-live of our first derivatives systems onboth the buy-side and sell-side, the increase in our user base to over 16,000users, the 65% increase in activity across our connectivity network and theexpansion of our hosted services into Canada, are all testament to the progresswe are making. In addition, we have completed two major regulatory/exchangeupgrades with the implementation of RegNMS in the US and support for the newLondon Stock Exchange trading platform, TradElect, in Europe. In the first halfof 2007 we have also won several awards for our technology including Futures andOptions World (FOW) derivative ISV of the year, the PLC Award for BestTechnology, Systems in the City Best Information Display Service and Fidessa wasalso cited by Financial News as one of the 21 technology firms with thepotential to shape the industry landscape in the new millennium. Although at an early stage, integration of the Fidessa and LatentZero productsis moving at a pace with the Fidessa LatentZero brand starting to becomeestablished in the market. We have already launched our first combined service,the LatentZero Trading Network (LTN), and the first customer using this servicewent live in June. LTN provides a fully managed connectivity service for thebuy-side, allowing buy-side firms to route order flow to numerous brokers andtrading venues around the world. LTN is underpinned by the Fidessa connectivitynetwork which operates from Fidessa's data centres around the world and has nowbecome one of the most comprehensive buy-side/sell-side connectivity networksavailable. We expect that the market will continue to be very active in the second halfwith strong demand for our products and services on both the buy-side andsell-side. This demand is anticipated to lead to the strong organic growthlevels experienced in the first half being maintained for the full year withLatentZero continuing to perform in line with expectations. Looking further ahead, we are excited about the possibilities resulting from ourvision to provide cross-asset trading, market data and connectivity across boththe buy-side and sell-side. As in previous years, we will be continuing ourinvestment programme to bring more product to market, and to increase the valuewe deliver to all our customers whilst developing further shareholder valuewithin the Fidessa group." Financial Summary The financial statements include the results of LatentZero subsequent to thecompletion of the acquisition on 27th April 2007. For the six months to 30th June 2007 strong growth in consolidated revenue hasbeen achieved, up 37% to £60.7 million, from £44.4 million for the same periodlast year. LatentZero's contribution to revenue was £3.4 million in the firsthalf. Organic revenue from the brought forward Fidessa business amounted to£57.3 million, a growth rate of 29%. The organic growth continued to be drivenby the momentum in recurring revenue which increased by 34% to £42.4 million,representing 74% of the revenue from the brought forward Fidessa business. Theyear-on-year growth in LatentZero revenue was in line with expectations, atgreater than 20% with recurring revenue approaching 50%. Looking at the breakdown of recurring revenue across our areas of focus,indicative values for the first six months of 2007 are that £28 million arosefrom sell-side trading, £2 million from buy-side trading, £9 million arose fromconnectivity and £5 million arose from market data. The organic consultancyrevenue has increased by 17% to £14.9 million, now representing 26% of the totalorganic revenue. Strong growth in operating profit was also achieved. The operating profit was upby 46% to £8.2 million from £5.6 million in the same period last year, beingmeasured before the amortisation of acquired intangibles. Operating profit(before LatentZero) was £8.0 million, representing growth of 43% over 2006 andan operating margin of 13.9%. The operating profit contribution from LatentZeroin the period since acquisition was £0.2 million, the business havingconsistently traded profitably since completion. The net interest income of £0.5 million was consistent with 2006. However,offsetting the interest income in 2007 was a notional interest charge based ondiscounting the contingent consideration for the LatentZero acquisition.Excluding the notional interest charge the interest income grew strongly as aresult of the healthy cash balance coming into the year. The effective tax rate of 31% represented an increase on the 28% reported for H12006. However, the tax rate was impacted by the notional interest charge andamortisation of acquisition intangibles, neither of which are allowable expensesfor tax, and excluding these items the effective tax rate was 29%. Diluted earnings per share, adjusted to exclude the notional interest charge andamortisation of acquisition intangibles, was 18.3 pence for the period, anincrease of 39% from 13.2 pence for H1 2006. The interim dividend has beenincreased by 40% to 6.0 pence and will be paid on 24th September 2007 toshareholders on the register at the close of business on 31st August 2007, withan ex-dividend date of 29th August 2007. The business continues to generate cash from operations overall although thefirst half of the year typically is less cash generative as the annual dividendand bonuses are paid. At the beginning of the period the cash balance was £40.1million and during the six months a net £26.3 million was paid for theacquisition of LatentZero so the closing cash balance of £14.5 millionrepresents a net cash generation of £0.7 million in the period. The operatingcash conversion rate continues to be strong at over 150%. Staff numbers have increased to service the revenue growth and the investmentprogrammes and also as a result of the acquisition. The staff numbers at 30thJune 2007 have increased to 1,059. Operations Sell-side Trading Market conditions remain strong for sell-side trading systems as brokers aroundthe world look to respond to regulatory and market changes, expanding theircapabilities into new markets, new regions and new asset-classes and offeringmore comprehensive services to their clients. This has driven demand for Fidessaaround the world with 24 new clients signing for our trading systems in thefirst half of 2007. In addition, many existing clients have extended theservices they take from us reinforcing our status as a preferred and trustedsupplier. The trend to embrace a broader geographic range of markets for trading as partof their business is a common theme for the sell-side throughout the world. Thisis driven in part by the demands of their buy-side clients who are looking forever more investment opportunities, as well as the broker's desire to be able tomeet their needs alone. A number of our European and North American clients whohave taken regional trading solutions from us have then seen their businessrequirements grow to embrace Japan and Asia. The ability of Fidessa's sell-sidetrading solutions to uniquely scale from an individual workstation through to aregional trading platform and on to a global trading solution, allows us toprovide clients with a future-proof product suite that can grow with theirbusiness. In Japan and Asia, many local domestic players are now looking attrading either across the region or on a fully global basis. Fidessa'sreputation as a leading supplier to the global broking community positions usparticularly strongly to provide this solution. In Canada we have achieved two sales of our new hosted Canadian trading platformwhich was launched at the end of last year. Canada presents an interestingopportunity for Fidessa as market changes appear to be mirroring those in the UScreating new liquidity venues, as well as opportunities for cross-border tradingbetween the two countries. Derivatives remains one of the fastest growing sectors within global capitalmarkets. Regulation such as the European UCITS III (Undertakings for CollectiveInvestment in Transferable Securities) is opening the door for greater usage ofthese instruments by the buy-side which drives the requirement to support themon the sell-side. Accelerated asset class convergence is also being seen amongstexchanges (NYSE/Euronext merger and Deutsche Borse/ISE merger) leading to thecreation of a number of global, multi-asset exchanges. This in turn fuels thedemand for derivatives capabilities by the sell-side, as brokers expand theirservices to take advantage of these new opportunities and to meet the evolvingbuy-side needs. Within the broking community the clear advantages of multi-asset solutions aregaining broader acceptance, whilst the equity options sector is now one of themost active with volumes growing at around 35-40% annually. There is a growingacceptance within the market that technology needs to be leveraged acrossmultiple business units and that trading across multiple asset classes willbecome the standard operating model of the future. The Fidessa multi-assetsolution was launched last year and in the first half of 2007 we signed 3 newcustomers for derivatives support across our sell-side trading solutions. Wehave received strong positive feedback, especially in terms of the level ofperformance and resilience we can provide. In June Fidessa was selected asDerivatives ISV of the year by Futures and Options World and the Fidessasell-side offering was also commended for its multi-asset innovation in the 2007Banker Technology awards shortly afterwards. Also launched late last year was our algorithmic trading solution FidessaBlueBox, and during the first half of this year we rolled this initiative outinternationally to each of the regions. Automated, and in particularAlgorithmic, trading remains a growth area of the market as more and morebrokers compete to offer faster and more intelligent trading solutions to anincreasingly sophisticated and demanding buy-side audience. In Japan and Asia inparticular the demand for algorithmic solutions is currently very high. WithFidessa BlueBox we now offer the world's first AMS (Algorithmic ManagementSystem) which combines a hosted and managed algorithmic trading solution that isfully-integrated with the client's trading and order management system. Demandfor Fidessa BlueBox has been high and we now have over 15 clients who are takingthe product. In the US the changes in regulations brought about by RegNMS (RegulationNational Market System) have brought in new trading rules and changed the marketlandscape. A key part of this change has been the explosion of new liquidityvenues, notably regional exchanges and dark pools. In Europe the regulatorystructure is also in the process of change as part of MiFID (Markets inFinancial Instruments Directive) which comes into effect in the second half ofthis year. Both of these changes mean that we are adding support for moretrading venues as well as more sophisticated order handling into Fidessa tosupport our clients' new requirements and obligations. Looking forward we expect many of these themes to continue throughout the restof 2007 and into 2008, and we plan to continue to develop and evolve oursell-side trading solutions accordingly. Buy-side Trading The market for buy-side software continues to look strong with a number ofdrivers generating demand. Regulatory changes, such as MiFID are increasing therequirements for operational control and best execution and this is in turngenerating demand for the implementation of Order Management System (OMS)functionality within European buy-side firms. However, requirements for MiFIDalso put pressure on buy-side firms to meet their compliance obligations withinthe context of all the trading activities they undertake. This requiresintegration between the compliance components, the OMS and Execution Management(EMS) functionality to ensure that there are no gaps in the work flow. The integrated Fidessa LatentZero product set now provides exactly thisfunctionality allowing the OMS and EMS to integrate together seamlessly bothwith each other and with the Fidessa LatentZero compliance components. TheFidessa LatentZero system is the first integrated "OEMS" on the market and thisability to provide a seamlessly integrated solution has been instrumental inwinning a number of new buy-side deals with some of these deals being closedsince the acquisition. The Fidessa LatentZero EMS can also be offered as astandalone workstation and this has continued to be a popular choice with anincrease of around 50% in the number of buy-side firms taking the product inthis way since last year. Another key aspect of the Fidessa LatentZero product set is its support formulti-asset trading and this has recently been extended to support OTCderivatives with the first customer already live and several others currently inimplementation. The Banker magazine commended Fidessa LatentZero's multi-assetstrategy saying: "So many firms talk about multi-asset class functionality" butFidessa LatentZero "demonstrated a true ability to achieve this." A further area where Fidessa LatentZero is able to take a lead in supporting theneeds of the buy-side is in the area of algorithmic trading. Fidessa already hasa wealth of experience in providing algorithmic trading functionality to brokersand representing broker's trading strategies through the Fidessa connectivitynetwork. With the introduction of LTN, Fidessa LatentZero is now able to offerthe easiest possible access to a wide range of algorithmic trading strategies,seamlessly delivered through an integrated front end. Market Data Market data has become a core part of our service offering as the demand forfast, comprehensive data, fully integrated within a trading solution, continuesto grow. This growth is being fuelled by a number of factors. The trend for moreand more automated and algorithmic trading systems within the marketplacecreates demand, as access to low-latency, reliable market data is a vitalingredient for many trading strategies. In addition, these algorithmic tradingsystems themselves generate high levels of trading that in turn helps to createa higher volume of market data. The ever-expanding derivatives markets andbroader use of different asset classes also fuel growth in global data volumes,whilst regulatory initiatives such as RegNMS and MiFID are causing a change inthe liquidity landscape as additional liquidity points, crossing venues, anddark pools appear. This growth in market data volumes and sources, coupled with the need for ultralow latency feeds, means that any data solution needs to employ leading edgetechnology and be capable of scaling with evolving market demands. The Fidessamarket data solution is built using the latest technology and high performanceticker-plants are now in operation in each of our regions handling an everincreasing range of high bandwidth feeds from markets around the world.Investment in this base continues reflecting the importance of the market dataoffering within our overall product set. In the first half of 2007 this investment has included extending the breadth ofour coverage with new US derivatives and commodity markets as well as a numberof additional Asian markets coming on stream. This expansion will continue overthe rest of the year as we add new European liquidity pools, additional easternEuropean markets and extend our Asian coverage into India. Once again the number of users taking a market data service from us grewstrongly with an increase of around 20% in the first half of the year. TheFidessa market data workstation product also won the "Systems in the City - BestInformation Display Service" award for the third successive year at their awardsceremony in April. The acquisition of LatentZero also presents us with a new opportunity to extendour market data offering further into the buy-side. The integration of ourmarket data service into the Fidessa LatentZero suite will allow us to addfurther value to our buy-side offering whilst also leveraging the investment wehave made in the data infrastructure. The provision of our own market data service integrated into our productsprovides us with a real differentiator against many of our competitors andallows us to ensure that the performance of the Fidessa and the FidessaLatentZero suites remains at the forefront of the solutions that are available. Connectivity With the continued growth in the number of liquidity venues available around theglobe, and the increase in the number of brokers offering new transactionalservices such as algorithmic trading, connectivity solutions are an ever moreimportant requirement for both the buy-side and sell-side. Within the buy-side, investment firms are taking an increasing global view andare investing in new markets and asset-classes, whilst the sell-side brokerscompete to offer either broader, more comprehensive coverage or specialisationin a particular region or instrument type. Regulatory initiatives such as RegNMSand MiFID are also fuelling this expansion by spawning new liquidity venues andservices across the marketplace as businesses look to leverage the opportunitiesthat the changes in regulation might present. This combines with the frequentsystem upgrades that take place across exchanges and other destinations tohandle increased trading volumes or extend the services that they offer, meaningthat there is an unrelenting expansion in connectivity demands. As a result webelieve that the days of buy-side and sell-side firms implementing and managingtheir own connectivity needs are a thing of the past, and that the demand forcomprehensive, proven connectivity solutions will continue to grow. The Fidessa connectivity network provides a fully managed, global solution whichlinks around 1,300 buy-sides, 230 brokers and 80 exchanges around the world.Based on FIX, the public-domain "Financial Information eXchange" protocol, andhoused in our own dedicated data centres, the Fidessa network now supports over4,000 individual client connections and is available fully integrated into ourown products or as a direct link to a client's own or third party system. Duringthe first half of 2007, the number of firms that use the Fidessa connectivitynetwork has grown by over a quarter, and the volume of transactions routedacross it by over 65%. We are also seeing significant growth in the derivativesflow across our network as part of our multi-asset initiative, with brokers suchas Deutsche Bank, Goldman Sachs, Merrill Lynch and UBS already supportingderivatives flow. In Europe and North America we have continued to see interest in connectivity tothe Japanese and Asian markets both from buy-sides wishing to extend theirportfolio of investments into the region and from sell-sides wishing to connectto local brokers to handle niche order flow. In the Japanese and Asian regionsthe demands for local trading connectivity, as well as connectivity to theoutside world, have also grown. During the first half of 2007 we have continued to extend our connectivitynetwork to encompass more brokers, more buy-sides and more trading venues andalso to support multi-asset flows. We have also increased the level of crossborder flow and strengthened the level of support we are able to offer whenhandling orders for instruments in different time zones. With the acquisition of LatentZero, we have also been able to develop LTN as aconveniently packaged, managed connectivity service for the buy-side. Thisleverages our experience as well as the infrastructure of the Fidessaconnectivity network which has enabled us to bring this service to marketextremely rapidly. The first customer for LTN has already gone live with theservice using it to route flow to a number of brokers. Going forward, weanticipate that LTN will be a popular route for the buy-side to gain access tothe destinations they require. As we bring these buy-side customers onto LTN,this will in turn encourage more brokers and liquidity providers to join theFidessa connectivity network. This will further help it to consolidate itsposition as a leading and valuable source of liquidity for participants in thefinancial markets around the world. LatentZero Acquisition On 27th April 2007 Fidessa completed the acquisition of LatentZero. Formed in1999 and headquartered in the UK, LatentZero is a leading supplier offront-office software to the asset management industry and counts several of theworld's largest asset management firms amongst its 75 clients. With offices inLondon, Boston, New York and Paris, LatentZero employs around 170 staff andprovides software for fund manager decision support, order management, executionmanagement and investment compliance. LatentZero has set new standards forinvestment systems through its unique combination of business knowledge, marketvision and technology innovation and its products are used to manage more than$8 trillion of assets, across equity, fixed income, foreign exchange andderivatives. This acquisition provides considerable strategic benefit toFidessa, LatentZero and their respective customers by providing, for the firsttime, the potential for true integration of multi-asset buy-side and sell-sidetrading flows on a significant scale. Furthermore, with the buy-sideincreasingly requiring sell-side style trading tools integrated into theirinvestment and order management processes and the sell-side striving to deliverenhanced execution solutions to their customers, both Fidessa and LatentZerowill be able to leverage the other's services within their own customer base. Progress with the integration of the businesses is already well advanced and weare establishing a buy-side brand under the Fidessa LatentZero name. This brandwill also be used for our new Execution Management System (EMS) which integratesFidessa technology with the LatentZero product set to deliver the first fullyintegrated OEMS within the buy-side. We have already launched LTN, a fullymanaged FIX connectivity network for buy-side firms which greatly simplifies theprocess of connecting to brokers and other liquidity venues from a buy-sideperspective. We are also establishing support for LatentZero products in Japanand throughout Asia where we already have a significant buy-side customer baseand are now able to leverage Fidessa's local presence to provide a high qualitysupport service for the buy-side product set. We are also looking at theextension of our data services for the buy-side and the possibilities ofleveraging our hosting facilities to provide a fully hosted offering for thebuy-side. Going forward we believe that the growing sophistication of trading and theincreasing regulatory burdens will continue to fuel demand for automation ofbusiness flows in both the buy-side and the sell-side. Additionally, we believethere will be a growing need for rapid communication and additional informationflow between the two sides as well as increasing access to alternative liquidityvenues and trading strategies by both sides. Through the strength of itsproducts on both the buy-side and sell-side, we believe that Fidessa will beideally placed to meet this demand. Lava Patent Lawsuit The Annual Report for the year ended 31st December 2006 included a summary ofthe history of the patent infringement claim brought by Lava Trading Inc1. In this summary we confirmed that our view from the outset remains unchanged inthat we believe the case brought by Lava is without merit and we re-affirmedthat we would continue to defend our position vigorously. The process ofdiscovery, which we noted in the Annual Report had re-started, is continuing andwe are advised that in cases of this nature this process can take a significantperiod of time. 1. Lava Trading Inc was acquired by Citigroup Inc in 2004. Outlook Looking ahead, we expect the market will continue to be active resulting infurther growth in both the buy-side and sell-side business. Further, we believethat the growing acceptance of Fidessa by both the buy-side and sell-side willhelp develop our business across the regions and will provide furtheropportunity for the development of new products and business services. Lookingforward to the second half, we expect that the market will continue to be veryactive and that demand for our products and services will be strong in both thebuy-side and sell-side. This demand is anticipated to lead to the strong organicgrowth levels experienced in the first half being maintained for the full yearwith LatentZero continuing to perform in line with expectations. Looking further ahead, we believe that our strategy of providing a globalintegrated solution for cross-asset trading, market data and connectivity acrossboth the buy-side and sell-side leaves us in a unique and valuable position inthe market. We remain very excited about the opportunities we see in both thebuy-side and sell-side as well as in the potential to develop new integratedservices which touch both sides of the business. In delivering against thisstrategy we will continue with our investment programmes which we believe willdeliver substantial opportunities well into the future. enquiries:Chris Aspinwall, Chief Executive Edward Bridges/Haya Chelhot, Financial DynamicsAndy Malpass, Finance Director Tel: 020 7831 3113 Fax: 020 7831 6341www.fidessa.comTel: 01483 206300Fax: 01483 206301 Condensed Consolidated Interim Income StatementFor the six months ended 30th June 2007 2007 2007 2007 2006 2006 6 months to Period to 6 months to 6 months to 12 months to 30th June 30th June 30th June 30th June 31st December Brought Acquisition Total Total Total forward activities unaudited unaudited unaudited unaudited audited Note £'000 £'000 £'000 £'000 £'000 Revenue 5 57,272 3,434 60,706 44,397 94,637Operating expensesbefore amortisation ofacquisition intangibles 6 (49,477) (3,231) (52,708) (39,037) (82,754)Other operating income 191 - 191 235 470Operating profit beforeamortisation of acquisitionintangibles 7,986 203 8,189 5,595 12,353Amortisation ofacquisition intangibles 6 (439) - -Operating profit 7,750 5,595 12,353 Finance income 7 637 479 1,941 Finance cost - bankand other (13)Finance cost - notionalinterest on contingentconsideration (149) - -Total finance cost (162) - - Profit before income tax 8,225 6,074 14,294Income tax expense 8 (2,542) (1,712) (3,983)Profit for the period 5,683 4,362 10,311 Earnings per share: 9Basic 17.0p 13.6p 31.9pDiluted 16.6p 13.2p 30.9p Dividend per share: 10Interim 6.0p 4.3p 4.3pFinal 8.8p Condensed Consolidated Interim Balance SheetAs at 30th June 2007 2007 2006 2006 30th June 30th June 31st December unaudited unaudited audited Note £'000 £'000 £'000AssetsNon-current assetsProperty, plant and equipment 13,126 9,570 9,828Intangible assets 13 75,119 8,839 9,922Deferred tax assets 4,239 2,711 3,711Other receivables 898 898 898Total non-current assets 93,382 22,018 24,359 Current assetsTrade and other receivables 11 34,538 20,738 20,940Income tax receivable 109 589 261Cash and cash equivalents 14,470 28,584 40,069Total current assets 49,117 49,911 61,270 Total assets 142,499 71,929 85,629 EquityIssued capital 3,457 3,284 3,356Share premium 25,555 12,106 15,715Cumulative translation adjustment (2,000) (376) (1,466)Retained earnings 39,880 30,135 36,841Total equity 66,892 45,149 54,446 LiabilitiesNon-current liabilitiesContingent consideration 13 11,903 - -Other payables 957 500 719Deferred tax liabilities 6,135 1,225 931Total non-current liabilities 18,995 1,725 1,650 Current liabilitiesContingent consideration 13 11,604 - -Trade and other payables 12 43,368 23,741 27,686Current income tax liabilities 1,640 1,314 1,847Total current liabilities 56,612 25,055 29,533 Total liabilities 75,607 26,780 31,183 Total equity and liabilities 142,499 71,929 85,629 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 2006(audited) 3,272 11,743 (51) 27,241 42,205 Profit for the period fromthe income statement - - - 4,362 4,362Currency translation adjustments - - (599) - (599)Total income and expense forthe period - - (599) 4,362 3,763 Issue of shares - exercise of options 12 363 - - 375Employee share incentive charges 6 - - - 370 370Current tax recognised direct to equity - - - 222 222Deferred tax recognised direct to equity - - - 162 162Sale of own shares by employeeshare trust - - - 298 298Dividends paid 10 - - - (2,246) (2,246)Balance at 30th June 2006(unaudited) 3,284 12,106 (650) 30,409 45,149 Profit for the period from theincome statement - - - 5,949 5,949Currency translation adjustments - - (816) - (816)Total income and expense for the period - - (816) 5,949 5,133 Issue of shares - exercise of options 72 3,609 - - 3,681Employee share incentive charges 6 - - - 365 365Current tax recognised direct to equity - - - 168 168Deferred tax recognised direct to equity - - - 1,266 1,266Sale of own shares by employeeshare trust - - - 93 93Dividends paid 10 - - - (1,409) (1,409)Balance at 31st December 2006(audited) 3,356 15,715 (1,466) 36,841 54,446 Profit for the period from theincome statement - - - 5,683 5,683Currency translation adjustments - - (534) - (534)Total income and expense for the period - - (534) 5,683 5,149 Issue of shares - acquisition 13 85 9,298 - - 9,383Issue of shares - exercise of options 16 542 - - 558Employee share incentive charges 6 - - - 372 372Current tax recognised direct to equity - - - 348 348Deferred tax recognised direct to equity - - - (399) (399)Sale of own shares by employeeshare trust - - - 28 28Dividends paid 10 - - - (2,993) (2,993)Balance at 30th June 2007(unaudited) 3,457 25,555 (2,000) 39,880 66,892 Condensed Consolidated Interim Cash Flow StatementFor the six months ended 30th June 2007 2007 2006 2006 6 months 6 months 12 months to 30th to 30th to 31st June June December unaudited unaudited audited Note £'000 £'000 £'000Cash flows from operating activitiesProfit before tax 8,225 6,074 14,294Adjustments for: Staff costs - share incentives 6 372 370 735 Product development amortised 6 3,187 2,428 5,026 Depreciation of property, plant and equipment 6 2,644 2,118 4,458 Amortisation of acquisition intangibles 6 439 - - Amortisation of other intangible assets 6 236 154 367 (Gain)/loss on sale of property, plant and equipment (41) 32 32 Interest payable 162 - - Interest receivable (637) (476) (1,941)Cash generated from operations before changes in working capital 14,587 10,700 22,971Movement in trade and other receivables (5,581) (3,095) (2,715)Movement in trade and other payables 5,055 4,292 8,031Cash generated from operations 14,061 11,897 28,287Income tax paid (1,458) (1,270) (2,801)Net cash generated from operating activities 12,603 10,627 25,486 Cash flows from investing activitiesAcquisition of subsidiaries (net of cash acquired) (26,261) - -Purchase of property, plant and equipment (4,917) (3,318) (6,210)Proceeds from sale of property, plant and equipment 50 8 8Purchase of other intangible assets (149) (234) (473)Product development 6 (4,970) (3,212) (6,874)Interest received 702 476 1,366Proceeds from capital repayment of Touchpaper "B" Loan Note - - 500Net cash used in investing activities (35,545) (6,280) (11,683) Cash flows from financing activitiesProceeds from shares issued 558 375 4,056Proceeds from sale of own shares by employee share trust 28 298 391Interest paid (13) - -Dividends paid 10 (2,993) (2,246) (3,655)Net cash (used)/generated in financing activities (2,420) (1,573) 792 Net (decrease)/increase in cash and cash equivalents (25,362) 2,774 14,595Cash and cash equivalents at 1st January 40,069 26,120 26,120Effect of exchange rate fluctuations on cash held (237) (310) (646)Cash and cash equivalents at end of period 14,470 28,584 40,069 Notes to the Condensed Consolidated Interim Financial Statements 1. Reporting entity Fidessa group plc (the "Company"), formerly called royalblue group plc, is acompany incorporated in England and Wales. These condensed consolidated interimfinancial statements of the Company as at and for the six months ended 30th June2007 comprise the Company and its subsidiaries (together the "Group"). Thesecondensed consolidated interim financial statements are presented in poundssterling, rounded to the nearest thousand. The comparative figures for the financial year ended 31st December 2006 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 2006 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 as adopted by the EU. They do not include all of theinformation required for full annual financial statements and should be read inconjunction with the consolidated financial statements of the Group as at andfor the year ended 31st December 2006. The condensed consolidated interim financial statements were approved by theBoard of Directors on 27th July 2007. 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 2006. 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 2006. 5. Segmental reporting The group operates in one business segment; that of supply of software andrelated services to financial institutions. For further details see theOperations Review. The operations are monitored by the geographic regions ofEurope, North America and Asia. Certain activities and costs are managed andmonitored centrally. The segment information in respect of the regions ispresented below. North For the six months ended 30th June 2007 Europe America Asia Total £'000 £'000 £'000 £'000 Segment revenue 30,925 22,227 7,554 60,706 Segment result 5,948 3,633 3,434 13,015 Product development amortised (3,187) Acquisition intangibles amortised (439) Central costs (1,639) Operating profit 7,750 North For the six months ended 30th June 2006 Europe America Asia Total £'000 £'000 £'000 £'000 Segment revenue 22,728 15,663 6,006 44,397 Segment result 4,759 2,029 2,696 9,484 Product development amortised (2,428) Central costs (1,461) Operating profit 5,595 North For the year ended 31st December 2006 Europe America Asia Total £'000 £'000 £'000 £'000 Segment revenue 48,746 32,610 13,281 94,637 Segment result 9,680 4,280 6,293 20,253 Product development amortised (5,026) Central costs (2,874) Operating profit 12,353 6. Operating expenses 6 months to 6 months to 12 months to 30th June 30th June 31st December 2007 2006 2006 unaudited unaudited audited £'000 £'000 £'000 Staff costs - salaries 27,584 20,377 43,161 Staff costs - social security 2,598 2,114 4,355 Staff costs - pension 233 - - Staff costs - share incentives 372 370 735 Total staff costs 30,787 22,861 48,251 Depreciation of property, plant and equipment 2,644 2,118 4,458 Amortisation of other intangible assets 236 154 367 Product development capitalised (4,970) (3,212) (6,874) Product development amortised 3,187 2,428 5,026 Other operating expenses 20,824 14,688 31,526 Operating expenses before amortisation of acquisition intangibles 52,708 39,037 82,754 Amortisation of acquisition intangibles 439 - - Total operating expenses 53,147 39,037 82,754 7. Finance income 6 months to 6 months to 12 months to 30th June 30th June 31st December 2007 2006 2006 Unaudited unaudited audited £'000 £'000 £'000 Interest receivable on cash and cash equivalents 637 479 1,132 Other interest receivable - - 19 Interest received on Touchpaper "A" and "B" Loan Notes - - 290 Capital repayment of Touchpaper "B" Loan Notes - - 500 Total interest receivable 637 479 1,941 8. Income tax expense The charge for tax for the six months ended 30th June 2007 has been calculatedbased on the best estimate of the weighted average annual income tax rateexpected for the full year. The change in the UK statutory tax rate has beenincorporated in the calculation of the carrying value of the deferred tax assetsand liabilities in the UK, the effect being a credit to the tax charge of£40,000 included in total in the tax charge for the six months to 30th June2007. Differences between the anticipated effective tax rate and the statutoryrate include, but are not limited to, the effect of tax rates in foreignjurisdictions, non-deductible expenses, tax incentives not recognised in theincome statement and under or 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 1083p (for six months to 30th June2006 816p, for 12 months to 31st December 2006 845p). 6 months to 6 months to 12 months to 30th June 30th June 31st December 2007 2006 2006 unaudited unaudited audited £'000 £'000 £'000 Profit attributable to shareholders 5,683 4,362 10,311 Add amortisation of acquisition intangibles 439 - - Add notional interest on contingent consideration 149 - - Less gain relating to capital repayment of Touchpaper "B" Loan Notes - - (500) Profit attributable to shareholders excluding amortisation of acquisition intangibles, notional interest and capital repayment 6,271 4,362 9,811 6 months to 6 months to 12 months to 30th June 30th June 31st December 2007 2006 2006 unaudited unaudited audited Number '000 Number '000 Number '000 Weighted average number of shares in issue 33,931 32,768 33,026 Weighted average number of shares held by the employee trusts (595) (751) (711) Shares used to calculate basic earnings per share 33,336 32,017 32,315 Dilution due to share options and warrants 965 1,131 1,037 Shares used to calculate diluted earnings per share 34,301 33,148 33,352 Basic earnings per share excluding amortisation of acquisition intangibles, notional interest and capital repayment 18.8p 13.6p 30.4p Diluted earnings per share excluding amortisation of acquisition intangibles, notional interest and capital repayment 18.3p 13.2p 29.4p Basic earnings per share on amortisation of acquisition intangibles, notional interest and gain relating to capital repayment of Touchpaper "B" Loan Notes (1.8)p - 1.5p Diluted earnings per share on amortisation of acquisition intangibles, notional interest and gain relating to capital repayment of Touchpaper "B" Loan Notes (1.7)p - 1.5p Basic earnings per share 17.0p 13.6p 31.9p Diluted earnings per share 16.6p 13.2p 30.9p 10. Dividends The dividends paid in the period covered by these condensed consolidated interimfinancial statements are detailed below. Dividend Dividend value per value share £'000 2005 final dividend paid 5th June 2006 7.0p 2,246 2006 interim dividend paid 25th September 2006 4.3p 1,409 2006 final dividend paid 4th June 2007 8.8p 2,993 An interim dividend in respect of 2007 of 6.0p per share, amounting to anexpected dividend of £2,036,000, was declared by the directors at their meetingon 27th July 2007. This interim dividend will be payable on 24th September 2007to shareholders on the register at the close of business on 31st August 2007,with an ex-dividend date of 29th August 2007. These condensed consolidatedinterim financial statements do not reflect this dividend payable. 11. Trade and other receivables As at: 30th June 30th June 31st December 2007 2006 2006 unaudited unaudited audited £'000 £'000 £'000 Trade receivables 28,010 16,070 16,739 Prepayments 2,842 1,546 1,973 Accrued revenue 2,304 1,618 1,184 Other receivables 1,382 1,504 1,044 Total trade and other receivables 34,538 20,738 20,940 12. Current liabilities; trade and other payables As at: 30th June 30th June 31st December 2007 2006 2006 unaudited unaudited audited £'000 £'000 £'000 Trade payables 4,792 3,181 2,176 Accrued expenses 14,188 8,481 11,084 Deferred revenue 21,993 10,404 12,276 Other taxes and social security 2,395 1,675 2,150 Total trade and other payables 43,368 23,741 27,686 13. Acquisition On 27th April 2007 the Group completed the acquisition of 100% of LatentZeroLimited for a total consideration of up to £62.3 million (including £1.5 millionof related costs and net of £1.6 million of discounting of the contingentconsideration). Consideration of £37.4 million was paid on completion,comprising £28.0 million of cash and £9.4 million of ordinary shares in Fidessagroup plc; 852,239 shares were issued at a fair value of 1101p each, being theclosing mid-price on 27th April 2007. Further contingent consideration of £25.0million is expected to be paid and is dependent on the achievement ofperformance objectives related to revenue, operating profit and order intake in2007 and 2008. The total contingent consideration comprises £15.5 million ofcash and £9.5 million of ordinary shares in Fidessa group plc. The contingentconsideration has been discounted by £1.6 million, the unwinding of which willbe charged as notional interest in the income statement over the period up tosettlement. If this acquisition had completed on 1st January 2007, the start of the periodbeing reported in the condensed consolidated interim financial statements, theunaudited consolidated results for the Group would have been revenue of£67,113,000, operating profit before share incentive charges in LatentZero andamortisation of acquisition intangibles of £8,310,000 and an overall operatingprofit before any adjustments of £7,615,000. The goodwill arising on the acquisition results from the value of the assembledworkforce, the synergistic nature of the acquisition due to cross-sellingopportunities between the buy-side and sell-side clients, potential costsavings, and the expected future growth, the earn out being a function of futurefinancial performance which cannot be entirely attributable to existingidentifiable intangibles. Identifiable intangibles relate to the value of LatentZero's customerrelationships, marketing related intangibles and intellectual property and arebeing amortised over their estimated useful lives of between five and ten years. The investment in LatentZero has been consolidated into the balance sheet at itsfair value at the date of acquisition. These fair values are provisional andwill be amended as necessary in light of subsequent knowledge or events to theextent that these reflect conditions as at the date of acquisition. Fair value to Book values Group £'000 £'000 Intangible assets (excluding goodwill) 2,704 17,600 Property, plant and equipment 919 1,186 Deferred tax assets/(liabilities) 1,505 (3,423) Current assets 8,016 8,016 Cash and cash equivalents 3,286 3,286 Liabilities (10,719) (10,719) Net assets 5,711 15,946 Goodwill arising on acquisition 46,342 Total consideration 62,288 Satisfied by: Cash consideration 28,023 Shares issued 9,383 Provision for future consideration payable 23,358 Directly attributable costs 1,524 62,288 Net cash outflow arising on acquisition: Cash consideration paid 28,023 Directly attributable costs paid 1,524 Cash and cash equivalents acquired (3,286) 26,261 The intangible assets acquired as part of the acquisition of LatentZero can beanalysed as follows: £'000 Customer relationships 7,300 Marketing related 2,100 Intellectual property 8,200 17,600 14. Contingent liability The Annual Report for the year ended 31st December 2006 included a summary ofthe history of the patent infringement claim brought by Lava Trading Inc. Inthis summary we confirmed that our view from the outset remains unchanged inthat we believe the case brought by Lava is without merit and we re-affirmedthat we would continue to defend our position vigorously. The process ofdiscovery, which we noted in the Annual Report had re-started, is continuing andwe are advised that in cases of this nature this process can take a significantperiod of time. Due to the uncertainty of the eventual outcome of this case, noprovision is being made in accordance with the requirements of IAS 37 'Provisions, Contingent Liabilities and Contingent Assets'. 15. 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 Fidessa group plc Introduction We have been instructed by the Company to review the financial information forthe six months ended 30th June 2007 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 2007. KPMG Audit PlcChartered AccountantsCrawley27th July 2007 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Fidessa Group