First Derivatives plc
Directors’ report and consolidated
financial statements
Registered number: NI 30731
28 February 2013
First Derivatives plc
Contents
Chairman’s statement
Chief Executive’s statement
Directors and advisers
Directors’ report
Statement of directors’ responsibilities in respect of the directors’ report and
the financial statements
Report of the Remuneration Committee
Corporate governance
Independent auditor’s report to the members of First Derivatives plc
Consolidated statement of comprehensive income
Consolidated balance sheet
Company balance sheet
Consolidated statement of changes in equity
Company statement of changes in equity
Consolidated cash flow statement
Company cash flow statement
Notes forming part of the financial statements
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First Derivatives plc
Chairman’s statement
The increasing regulatory requirements and the challenging environment for financial markets have
presented us with further business opportunities. It is satisfying to report another year of strong growth
for the Group. Our ongoing investment into the Group’s technology, infrastructure and operations has
seen the creation of a strong organisation well positioned for future growth.
Financial summary
Revenue for the year ended 28 February 2013 increased by 22.5% to £56.5 million from £46.1 million in
the previous year. Normalised pre-tax profits1 recorded growth of 6.7% to £7.8 million compared to £7.3
million in 2012. Operating margins were impacted by a rise in administration costs due primarily to
investment in the expansion of our global presence in response to customer demands. We have also
invested in significant growth in our sales resources for both software and consulting to assist with our
growth ambitions. Reported pre-tax profits decreased by 11.3% to £6.2 million (2012: £6.9 million).
Dividend
The Group continues to generate positive operating cash flows and this has allowed the Board to
recommend payment of a final dividend of 8.40p per share which, together with the interim dividend of
3.1p per share paid on 6 December 2012, gives a total dividend for the year of 11.50p.
The final dividend, if approved at the AGM, will be paid on 26 July 2013 to those shareholders on the
register on 28 June 2013. The shares will be marked ex-dividend on 26 June 2013.
Operational Review - Software
Software sales of £15.0 million (2012: £13.5 million) represented an increase of 11.4%. The growth in
total software revenues belies the progress made by the Group in developing a strong recurring source of
income. The increase of 36.2% in transactional and recurring revenues over the previous year gives a
more appropriate indication of the strong underlying growth in software across the Group. This was in
part offset by a reduction of 62.4% in one off license fee income. Total software sales growth was further
impacted by the planned and continuing decline in legacy technology income which arose from the
migration of the clients who came to FDP through the acquisition of Cognotec in 2010.
The expansion of computing on a global basis is seeing data volumes grow exponentially, this along with
the complexity of the financial markets, creates a significant IT challenge for the industry generically
known as the “Big Data” problem. Changes in the regulatory landscape, ever more complex trading
strategies, increased data sources for data mining and a need for global risk management, among others, is
driving the need to converge data sources to enable examination of all the data across a financial entity's
organisation. Given the data volume, the need for timely examination of the data and varying types of
data sources, incumbent technologies are struggling to store and analyse the data for efficient use. Our
Delta suite products, developed on the Delta technology platform, are specifically engineered to meet the
complex calculations and large volumes of data that exist in the capital markets sector. Our software,
along with the investment we have made to establish the physical infrastructure necessary to operate the
software in the ‘cloud’ or on a Software as a Service (“SaaS”) model gives us the ability to meet the
growing need and desire of our clients to address their problems.
1 In our pre close trading statement on 2 April 2013 we advised the company had made a provision for a potential bad debt
relating to a legacy contract from the acquisition of Cognotec which was acquired in February 2010. As this is a non recurring
item the increase in provision has been removed from normalised profit. In addition normalised profit does not include currency
translation loss, acquisition costs and effects of associate’s income.
2
First Derivatives plc
Chairman’s statement (continued)
On 13 December 2012 we announced a sale of Delta Stream to the Australian Securities and Investment
Commission to meet its statutory obligation to oversee Australia’s licensed financial markets. This sale
demonstrates Delta Stream’s Big Data capabilities in handling large volumes of data at high velocity, as
the system will be monitoring various instrument types in differing asset classes such as equities and fixed
income, across multiple exchanges. With this reference site, along with our win at the Singapore Stock
Exchange, we consider our Big Data capabilities in the area of surveillance, positions us well to attack the
exchange market. We anticipate that we will announce a number of new contracts in this area over the
coming months.
We achieved a number of contract wins for our flagship products during the period, including sales of
Delta Stream and Delta Algo to some of the world’s largest banks. Also, the launch of the latest version
of our foreign exchange trading platform Delta Flow, which is focused on management of the ever
increasing data volumes and volatility in the FX market, has secured further new broker clients in the
year. Delta Flow has also been selected and implemented by a large Japanese Bank, demonstrating the
product's capabilities for the banking segment. In the coming year we plan to add forwards, swaps and
request-for-quote to Delta Flow. We will continue to target the traditional FX spot trading broker market
while these new applications will give us the ability to cross-sell to our more traditional banking client
base.
We have focused our sales efforts in establishing license contracts with our software customers on a
recurring and, when hosted, on a transactional revenue basis. While this creates high revenue visibility for
future periods it does mean contributions in initial periods are lower than would be achieved under more
traditional models. In addition, as with any cloud application, building confidence takes time and this
bedding down period is underway with the Delta suite. This year we have focused our efforts on
developing the sales organisation to increase our market presence. In October we announced the
appointment of a Head of Product Sales which has been followed by further appointments to strengthen
our sales team. This has allowed us to develop a healthy pipeline of prospects across our range of
potential customers – banks, content providers, brokers, exchanges and regulators - which give us
confidence that we can deliver continued growth in software revenues.
Operational Review - Consulting
Consulting revenues increased 27.1% to £41.5 million from £32.6 million in the previous year. In a
market that is subject to increasing pressure on customer budgets, this level of growth continues to
demonstrate the strength of our offering. The contracting by our customers’ procurement departments of
preferred supplier lists in order to target economies of scale further demonstrates the pressure on budgets
within our market, yet we have continued to penetrate into new customers, adding a further fifteen major
financial institutions as clients this year.
The success of our core consulting business continues to be built on the quality of our people, our
commitment to training, the flexibility of our service and our focus on being responsive to the changing
market. Over the last few years the Group has expanded its capabilities in key technologies, such as
Calypso, Murex and Wall Street Systems; in order to meet our customers' ever growing need to develop
and expand their core technologies to meet regulatory, compliance and business requirements. By
deepening our domain knowledge in these technologies we have been able to offer more comprehensive
services allowing our customers to maximise efforts within the budget constraints they may have. We
will continue to seek to develop our knowledge and experience in these key technologies and enhance our
overall capabilities to allow our customers to benefit.
3
First Derivatives plc
Chairman’s statement (continued)
One of our core strategies is to focus on complex assignments being undertaken by many of our larger
clients. This generally leads to repeat business thereby establishing a recurring revenue stream, as our
inherent knowledge of their eco system becomes key for future upgrades, ongoing development and
support. An example of our ability to develop recurring revenue streams from consulting is demonstrated
by our launch of a centre of excellence for one of our major global investment bank clients which has
operated out of First Derivatives' head office premises since October 2012. This is a multi-year
agreement to provide development and support services for parts of the client’s capital markets
infrastructure, the opportunity for which arose following the previous successful delivery of services on a
component of the system. The success of this project has led to further assignments being undertaken
with this client and similar discussions are ongoing with certain other global banking groups.
We consider a flexible service model is critical in the current market to allow customers to achieve their
goals. Our ability to flex our delivery is resonating with customers with a number of assignments now
being run with multi resource teams operating on-site and from our premises on either a full or part time
basis. Utilising this we can provide the relevant market or domain expertise across multiple assignments
while maintaining a competitive cost operating model for our customers.
Acquisitions
On 27 September 2012 the Company acquired Cowrie Financial Limited (“Cowrie”), Redshift Horizons
Limited (“Redshift”) and Redshift Horisons LLP. These acquisitions were focused on expanding our
knowledge base of the key technologies in our sector. Cowrie brought key domain knowledge and
expertise in the delivery and management of Murex Technology, software which is widely used across
asset classes for trading, risk management and processing. Redshift deepened our expertise in the
provision of managed services for data and trading systems. Since acquisition these services have been
fully integrated into the Group’s suite of service offerings and have assisted in the provision of overall
services to the Group’s customer base.
Property
The Board acknowledged some time ago that the retention of a large property portfolio within the Group
Balance Sheet was no longer entirely appropriate. The programme of disposals has continued over the
year with the sale of seven individual properties generating a profit on sale of £0.7 million. The Group
will continue its strategy of disposing of further properties as suitable, profitable opportunities arise. At
28 February 2013 six properties were listed for sale with selling agents and have been classified as such in
the accounts.
Board changes
The Company announced on 9 May 2013 the creation of an Executive Management Committee with
responsibility for the organisational structure and central management functions of the Group. The Group
Board remains responsible for strategic development and all matters of corporate governance, shareholder
responsibilities and for meeting the Group's obligations to the public markets. At the same time the
retirement of Michael O’Neill from his role as a Non-Executive Director was announced. I would like to
thank Michael for his substantial contribution in both an Executive and Non-Executive capacity during his
time with the group.
The Company also announced the appointment of Seamus Keating to the Board as a Non-Executive
Director on 10 December 2012. Seamus was a director of Logica Group PLC from 2002 until 2012 and
we are delighted to have him on the Board.
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First Derivatives plc
Chairman’s statement (continued)
I have been Chairman since the Company's flotation on the AIM Market in 2002. During that time the
market capitalisation has increased from £5 million to over £100 million today. As the final part of the
Board re-structuring I intend to step down from my role as Non-Executive Chairman following the AGM
in July but will continue as a Non-Executive Director. I would like to thank those who have worked with
me and supported me during my Chairmanship. It is proposed that Seamus Keating will take on the role
of Non-Executive Chairman.
Outlook
This year has seen positive growth across the Group’s activities with total revenues up over 22.5%. We
expect the coming year to provide challenging market conditions with continued customer budgetary
constraints. The investment we have made in all the Groups activities has been to ensure that we build a
robust organisation with a strong asset base and service offering to ensure future growth. With the
improvements to the Delta suite, its increasingly visible revenue stream along with the positioning of our
service offerings, we feel that the group is well positioned to continue to grow. In addition to our
traditional pipeline we have a strong pipeline of larger prospects arising from our push into the Big Data
arena though given our revenue model these if successful are unlikely to have a material impact in our
year to 2014. We remain excited by the potential of our software and consulting offerings and expect to
be able to report further progress in the year to 28 February 2014.
I would like to thank Brian Conlon and his team for achieving another successful year of growth for the
Group.
David Anderson
Chairman
17 June 2013
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First Derivatives plc
Chief Executive’s statement
It has been another interesting year in the financial markets with widespread co-ordinated quantitative
easing being the policy response of many major governments to continued recession. Regulation
continues to be a dominant theme for our customers with banks under continued pressure to shore up their
capital bases and to cut costs. Against this challenging market backdrop I am pleased to report that First
Derivatives has had another successful year. We continue to invest for expansion and I believe that we
have never been better placed to grow our operations and to expand our customer base.
Review of activities
First Derivatives sells software products to the capital markets and provides a range of associated
consulting services. Our customer base continues to grow and this year we provided services to more than
100 different investment banks, brokers, exchanges, regulators and hedge funds. Whilst the majority of
our customer assignments are undertaken in major financial centres such as New York, London, Toronto,
Chicago, Singapore, Hong Kong, Tokyo and Sydney, we also have engagements underway in locations
such as Dubai, Johannesburg, Stockholm and Mexico City.
We operate in a vast market with thousands of potential customers, many of whom spend billions of
pounds annually on technology and associated services. We differentiate ourselves by providing a
combination of domain knowledge and technical expertise. This is relatively unique in the industry and
First Derivatives has strong brand recognition. We are focussed on building visible recurring revenue and
in our consulting business we target assignments that last for many years. We sell software on a
subscription model which reduces earnings volatility and provides more determinism for our investment
decisions.
Software
Our Delta technology platform is designed around volume and velocity – the analysis of large volumes of
data in small time periods. We build ecosystems in the cloud to allow our customers to co-operate and to
share data and liquidity management functionality. Big Data, as it is known, is the major growth area in
software at the moment. Our platform is designed to meet the challenges of Big Data and recent product
wins and interest from prospective customers gives us confidence that we have a product poised to
challenge some of the major players in the technology arena.
We announced in December that the body charged with overseeing Australia’s financial markets, the
Australian Securities and Investment Commission, had chosen Delta Stream to help monitor the markets.
Our software will help them analyse trading in real-time to spot anomalies indicating insider trading,
market abuse and “flash crash” conditions. We displaced the incumbent software provider and this win
has put us on the radar of many of the world’s leading regulators and exchanges who have a regulatory
imperative to upgrade their surveillance systems. We are currently in discussions with a number of
exchanges and regulators throughout the world who have an interest in our software and we expect to
announce further wins in the coming months.
The FX market continues to grow with $4.7 trillion traded daily in 2012. Our foreign exchange product,
Delta Flow, was successfully deployed into production in late 2012 and we have signed up a number of
new customers in the period. We are working on a strategic initiative with one of the biggest banks in
Japan to replicate our North American trading ecosystem to allow them to expand their franchise in Asia.
This is an exciting new initiative and should pave the way for further expansion in the region which
accounts for much of the world’s trading volume.
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First Derivatives plc
Chief Executive’s statement (continued)
Unlike some of our competitors, we have a firm commitment to investing in our product suite to exploit
advances in general technology and to improve and enhance existing product lines. Our common
technology platform makes it easier to develop new products and bring them quickly to market – this
“quick to fail” approach promotes innovation and enables us to respond quickly to new opportunities. Our
consulting engagements also allow us to keep abreast of, and respond to, trends in the market.
We continue to work closely with our sister company Kx Systems, and with their customers, who had
another successful year last year. As a 20% shareholder we will continue to benefit from their success and
their passion in making their technology the world’s leading time series database. Their product is used by
some of the world’s largest financial institutions and Kx Systems lists organisations such as Goldman
Sachs, JP Morgan, Zurich Financial Group, Morgan Stanley, Fidelity Investments and Total Gas & Power
as customers.
I am pleased to report that our recurring software revenue increased by 36.2% this year and the trend has
continued into the new financial year. Commitment to this annual recurring/transactional model is key to
building a sustainable and profitable software business.
Consulting
First Derivatives is now well established as one of the world’s premium providers of specialised
consulting services to the capital markets. In a fragmented market our increasing scale means that we are
bidding for larger projects and competing (and indeed sometimes co-operating on joint bids) with global
powerhouses such as IBM. We have ongoing contracts with many of the leading global banks, supporting
their activities across a range of asset classes including credit, interest rate, foreign exchange, equity cash
and derivatives markets. The Group has been working in this area for seventeen years and our areas of
expertise continue to broaden and deepen.
In response to increased regulation, the dearth of availability of equity capital and more stringent capital
adequacy requirements many of our customers are looking at creative ways of reducing their cost bases.
The trend towards outsourcing to ostensibly cheaper locations such as India has not been universally
successful. We have developed a compelling competing alternative in the form of a hybrid nearshore
model. This involves deploying a team of consultants onsite at the customer supplemented by similar
expertise at a lower cost in our headquarters. This model addresses some of the concerns around
outsourcing – cultural dissonance, domain expertise, face to face relationships, governance and supply and
sustainability – and is proving popular with our customers. One of our biggest successes last year was the
awarding of a competitive tender to us by a major US investment bank, having beaten off competition
from some of the world’s largest technology companies. We were tasked with setting up a nearshore
Centre of Excellence in Newry supported by consultants onsite in London, Hong Kong and New York.
This multi-year project has the potential to grow to 100 people over time and is indicative of the size of
the opportunities we are working on.
We have had significant success in establishing expertise across a range of widely used third party
technologies. This has helped us to significantly broaden our customer base, with new opportunities
opening up across the globe. Implementing and supporting these technologies on a managed services basis
helps us secure significant visible recurring revenue.
Our consultants continue to work closely with our development team by providing market intelligence and
competitor analysis. They can also assist the product team with business analyst work and testing. The
fungible nature of our resource pool helps maintain operational efficiencies.
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First Derivatives plc
Chief Executive’s statement (continued)
Management and Personnel
The Group now employs over 750 people and our success in retaining staff and senior management means
that the experience profile of our consultants continues to improve. The strength of the First Derivatives
brand means that we can attract top talent in the industry and we are seen as an exciting and progressive
company to work for. This is evidenced by having leading industry personnel such as Keith McDonald,
Seamus Keating and Pat Brazel on our Board and Gerry Buggy and Tom Kozlowski on our Executive
Management team. Once again I would like to pay tribute to all First Derivatives employees who are hard
working, talented, flexible and dedicated. Our customer retention rates are evidence of this.
Financial Review
Post-tax profit for the year was £5.1 million (2012: £5.9 million) on turnover of £56.5 million (2012:
£46.1 million). Gross margin was broadly maintained (data centre costs were reclassified from
administrative expenses to cost of sales). Our balance sheet is strong with equity attributable to
shareholders up to £39.4 million (2012: £32.2 million), an increase of 22.4%. This, and our confidence in
the Group’s ability to generate cash, enables the Board to recommend a final dividend of 8.40p per share
(2012: 8.15p) which means that we will have paid a total dividend of 11.50p (2012: 11.15p) per share for
the full year.
Outlook
Based on the health of our current sales pipeline we anticipate reporting further growth in the year to 28
February 2014. As well as organic growth the Board will continue to pursue acquisition opportunities
where we see a strategic fit and have access to the necessary sources of finance. On a macro level we are
confident that we have positioned ourselves to benefit from global trends in technology and consulting
and that with our recurring revenue model and continued reinvestment in the business we will deliver
further significant benefits in the years ahead
Brian Conlon
Chief Executive Officer
17 June 2013
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First Derivatives plc
Directors and advisers
Directors
Secretary
Registered Office
Auditors
Solicitors
Bankers
R D Anderson
B G Conlon
R G Ferguson
P Brazel
K MacDonald
S Keating
– Non-executive chairman+
– Chief Executive Officer
– Chief Financial Officer
– Non-executive director*+
– Non-executive director*
– Non-executive director*+
Richard Fulton LLB
3 Canal Quay
Newry
Co Down
BT35 6BP
KPMG
Chartered Accountants
Stokes House
17/25 College Square East
Belfast
BT1 6DH
Mills Selig
21 Arthur Street
Belfast
BT1 4GA
Bank of Ireland
Corporate Headquarters
Donegall Place
Belfast
BT1 5LU
Nominated Advisor/EMI Advisor and
Joint Brokers
Charles Stanley Securities
131 Finsbury Pavement
London
EC2A 1NT
Goodbody Corporate Finance
Ballsbridge Park
Ballsbridge
Dublin 4
Company registration number
NI 30731
Registrar and Transfer Office
* Members of the audit committee
+ Members of the remuneration committee
Neville Registrars Limited
Neville House
18 Laurel Lane
Halesowen
West Midlands
B63 3DA
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First Derivatives plc
Directors’ report
The directors have pleasure in submitting to the shareholders their annual report and the audited financial
statements of the group and company for the year ended 28 February 2013.
Results and dividend
The group’s profit after taxation attributable to the shareholders for the year to 28 February 2013 was
£5,145k (2012: £5,946k).
The directors propose the payment of a final dividend of 8.40 pence per share (previous year: 8.15 pence
which, together with the interim dividend of 3.1 pence per share (2012: 3.00 pence), totals 11.50 pence
(2012: 11.15 pence) per share. The final dividend has not been included in payables as it was not
approved before the year end.
Dividends paid during the year comprised of a final dividend of 8.15 pence per share for the year ended
29 February 2012 and an interim dividend of 3.1 pence per share for the year ended 28 February 2013.
Principal activities and review of the business
The principal activities of First Derivatives plc are the provision of a range of software and consulting
services to the investment bank market, the derivatives technology industry, the foreign exchange market
and the provision of technology sales services to the IT sector.
The group offers a range of services to various clients across the world. These services interlink and
complement each other, which enables the group to be managed on an overall basis.
Reviews of the business and likely future developments are set out below and in the Chairman’s and Chief
Executive’s statements on pages 2 to 8.
Investments
In recent periods a number of investments have been made to establish subsidiary entities or strategic
associate holdings.
First Derivatives will continue to try to identify acquisitions or investments to expand its range of services
and offerings available to its various clients. The focus of these acquisitions or investments remain to be
that the new services or offerings interlink and complement each other, which enables the group to be
managed on an unified basis.
Principal risks and uncertainties
The group operates in a changing economic and technological environment.
The key business risks affecting the group are set out below and in the Chairman’s statement on pages 2 to
5 and Chief Executive’s statement on pages 6 to 8. Risks are formally reviewed by the board and
appropriate processes put in place to monitor and mitigate them. If more than one event occurs, it is
possible that the overall effect of such events would compound the possible adverse effects on the group.
10
First Derivatives plc
Directors’ report (continued)
Personnel
As a software and services provider, the group is a people based business and its growth depends largely
on growing staff numbers and training staff to meet the diverse requirements of our customer base. The
group continues to refine its recruitment process to ensure a constant intake of suitable new staff and the
internal training programme for each company is constantly evolving. Staff retention remains a key focus
with initiatives such as mentoring programmes being employed, in addition to incentives schemes which
include share options that are geared towards rewarding and motivating staff.
Market risk
The group operates in a competitive and often cyclical market environment. We address these risks by
focusing sales campaigns on generating assignments with long-term visibility, continuing to increase the
human capital of our consultants and diversifying our software and services portfolio offerings.
Technological changes
Technology in the software industry can change rapidly. It is important that our products remain up to
date and that our development plans are flexible. We make a significant ongoing investment in research
and development to allow us to identify and adapt to any technological changes that do occur, thereby
ensuring that our products continue to meet the demands of our customers.
Financial risk management
The group’s financial risk management objective is broadly to seek to make neither a profit nor loss from
exposure to currency or interest rate risk. The policy is to finance working capital and the acquisitions of
property, plant and equipment through retained earnings and through borrowings at prevailing market
interest rates.
The group does not use derivatives to manage its financial risk investment. The group’s main cash flow,
credit and liquidity risks are those associated with selling on credit. This is managed through credit
control procedures. The group is also exposed to the impact of fluctuations in exchange rates as it
generates income and incurs expenses in currencies other than Sterling (GBP). The group has exposure to
the US Dollar (USD), Euro (EUR) and Canadian Dollar (CAD). In addition, the group has financial risk
exposure as a result of mortgage financing apartment purchases, trade receivables and activities carried on
by subsidiary undertakings. The group’s financial position is structured to take advantage of a natural
foreign currency hedge using excess cash generated from operations to repay the associated capital and
interest on US Dollar borrowings. In addition, by funding the acquisitions of Market Resource Partners
LLC (MRP), Reference Data Factory Inc (RDF) and the investment in Kx Systems in US Dollars, the
group can achieve a net investment hedge against a significant portion of its translation exposure on the
net assets of its foreign operations.
Key relationships with partners and customers
First Derivatives maintains successful relationships with Kx Systems, a key partner, and several key
customers. Its relationship with Kx Systems is governed by a partnership agreement for the marketing of
the kdb+ database to end customers, whilst the use of this database within the First Derivatives product
suite is governed by a perpetual OEM agreement. A small number of key customers are important to the
success of the group, our continued expansion will reduce this reliance.
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First Derivatives plc
Directors’ report (continued)
Other information
The other information required to be disclosed in respect of the review of the group’s business as required
under Section 417 of the Companies Act 2006 is given in the Chairman’s statement on pages 2 to 5 and
the Chief Executive’s statement under the heading ‘Financial Review’ on page 8.
The directors do not consider any other risks attaching to the use of financial instruments to be material to
an assessment of its financial position or profit. Further information is set out in note 39.
Property, plant and equipment
The details of property, plant and equipment are given in note 16 of the financial statements. During the
year the group disposed of seven properties with a net book value of £4,281k. The properties were sold at
a total profit of £717k.
Directors and secretary
The directors and secretary who held office during the year were as follows:
R D Anderson
B G Conlon
R G Ferguson
A Toner (resigned 09 May 2013)
K Cunningham (resigned 09 May 2013)
M G O’Neill (resigned 09 May 2013)
P Brazel
K MacDonald
S Keating (appointed 10 December 2012)
Richard Fulton (Company Secretary)
Directors and their interests
The interests held in shares of the company by the directors who held office at the end of the financial
year, all of which are beneficial holdings, were as follows:
R D Anderson
B G Conlon
R G Ferguson
A Toner
K Cunningham
M G O’Neill
P Brazel
K MacDonald
S Keating
Ordinary shares of
£0.005 each
2013
number
Ordinary shares of
£0.005 each
2012
number
140,000
7,853,953
117,647
-
281,710
300,000
-
10,000
-
140,000
7,853,953
117,647
10,000
341,710
640,000
-
-
-
The directors interests in the contracts with the company is disclosed in note 38.
Details of share options granted to directors of the company are disclosed at note 12.
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First Derivatives plc
Directors’ report (continued)
Substantial shareholdings
At 14 June 2013, the group had received no notification of any interests in 3% or more of the ordinary
share capital, other than those disclosed by B G Conlon (44.01%), Standard life Investments Limited
(9.15%), and Investec Asset Management (4.76%).
Research and development
The group’s policy is to invest in product innovation and engage in research and development activities
geared toward the development of products primarily for the use of the financial services industry. During
the year costs of £5,608k (2012: £4,819k) were capitalised in respect of activities which were deemed to
be development activities in accordance with the group’s accounting policies. Research and development
costs of £1,428k (2012: £1,360k) were expensed during the year.
Employees
It is the group’s policy to ensure that equal opportunity is given for the employment, training and career
development of disabled persons, including persons who become disabled whilst in the group’s
employment.
The group is committed to keeping employees as fully informed as possible, on matters which affect them
as employees. The group’s policy on employees remains to adopt a very open management style, keeping
employees informed of all matters affecting them as employees including key financial and economic
factors affecting the group’s performance. This is achieved through meetings and informal consultation at
all levels.
Market value of land and buildings
The directors consider that the market value of land and buildings is significantly higher than its carrying
value. The estimated market value is £18.9 million based on independent valuations performed in the
prior year by external market valuers on an open market basis.
Political and charitable donations
The group and company made charitable donations of £nil (2012: £41k) during the period. The group and
company made no political donations during the year (2012: £Nil).
Supplier payment policy
The group does not have a standard code which deals specifically with the payment of suppliers.
However, suppliers are made aware of payment terms and how any disputes are to be settled and payment
is made in accordance with those terms. At 28 February 2013 the group had 36.7 days purchases
outstanding (29 February 2012: 33.5 days).
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First Derivatives plc
Directors’ report (continued)
Disclosure of information to auditors
The directors who held office at the date of approval of this directors’ report confirm that, so far as they
are each aware, there is no relevant audit information of which the company’s auditor is unaware; and
each director has taken all the steps that he ought to have taken as a director to make himself aware of any
relevant audit information and to establish that the company’s auditor is aware of that information.
Auditors
In accordance with Section 489 of the Companies Act 2006, a resolution for the re-appointment of KPMG
as auditors of the company is to be proposed at the forthcoming Annual General Meeting.
By order of the board
Richard Fulton
Secretary
17 June 2013
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First Derivatives plc
Statement of directors’ responsibilities in respect of the directors’ report and the
financial statements
The directors are responsible for preparing the directors' report and the financial statements in accordance
with applicable law and regulations.
Company law requires the directors to prepare consolidated and company financial statements for each
financial year. As required by the AIM Rules of the London Stock Exchange they are required to prepare
the group financial statements in accordance with International Financial Reporting Standards (IFRSs) as
adopted by the EU and applicable law and have elected to prepare the company financial statements on
the same basis.
Under company law the directors must not approve the financial statements unless they are satisfied that
they give a true and fair view of the state of affairs of the group and company and of the profit or loss of
the group for that period. In preparing each of the consolidated and company financial statements, the
directors are required to:
select suitable accounting policies and then apply them consistently;
make judgments and estimates that are reasonable and prudent;
state whether they have been prepared in accordance with IFRSs as adopted by the EU; and
prepare the financial statements on the going concern basis unless it is inappropriate to presume that
the group and the company will continue in business.
The directors are responsible for keeping adequate accounting records that are sufficient to show and
explain the company's transactions and disclose with reasonable accuracy at any time the financial
position of the company and enable them to ensure that its financial statements comply with the
Companies Act 2006. They have general responsibility for taking such steps as are reasonably open to
them to safeguard the assets of the group and to prevent and detect fraud and other irregularities.
The directors are responsible for the maintenance and integrity of the corporate and financial information
included on the company's website. Legislation in the UK governing the preparation and dissemination of
financial statements may differ from legislation in other jurisdictions.
On behalf of the board
Richard Fulton
Secretary
17 June 2013
15
First Derivatives plc
Report of the Remuneration Committee
Remuneration Committee
The Remuneration Committee operates within defined terms of reference. The Remuneration Committee
comprises the Chairman and two Non-Executive Directors. It is chaired by Patrick Brazel.
Remuneration Policy
The policy of the Group is to set levels of remuneration to attract, retain and motivate Executive Directors
and key staff. The packages are designed to be competitive in value to those offered to the Directors of
similar sized public companies in related sectors. It is the Board’s policy to align the interests of managers
with those of our shareholders in the grant of option and other equity rewards which underlying securities
grantees are very much encouraged to retain over the longer term.
The components of the Executive Directors’ remuneration packages are currently a basic salary, bonus,
money purchase pension contributions and benefits in kind. The bonus elements are dependent on the
Executive Directors achieving performance criteria set out by the Remuneration Committee. The criteria
include targets for revenue, profits and earnings per share. In addition, the Group operates share option
schemes for the Executive Directors. Details of the Directors remuneration is set out in note 12 of the
financial statements.
Non-Executive Directors
The Board, based on a recommendation by the Chairman of the Remuneration Committee or, in the case
of the Chairman, the remainder of the Board, determines the remuneration of the Non-Executive
Directors. The Non-Executive Directors are not eligible to join the pension scheme.
Service Contracts
The Executive Directors have entered into service contracts with the Group that are terminable by either
party on not less than three months prior notice.
Share Options
The Directors believe it is important to incentivise key management and employees.
Share options granted to the Directors over ordinary 0.05p shares in the Company are set out in note 12.
The mid-market price of the Company’s shares at close of business on 28 February 2013 was £5.88 and
the high and low share prices during the year were £6.30 and £4.68 respectively.
The Company recognised total expenses of £576k (2012: £486k) related to equity-settled share-based
payment transactions during the year. Expenses of £257k (2012: £225k) related to share options granted to
the Directors. No share options were exercised by the directors during the current year (2012: Nil).
Directors’ Share Interests
The Directors’ shareholdings in the Company are listed in the Directors’ Report on page 12.
16
First Derivatives plc
Corporate governance
As an AIM-quoted company, the group is not required to produce a corporate governance report that
satisfies all the requirements of the UK Corporate Governance Code 2010. However, certain corporate
governance procedures have been put in place which reflects the group’s size and structure.
The main features of the group’s corporate governance procedures are:
The board meets on a regular basis and brings independent judgement to bear. It approves budgets,
long term plans and significant contracts. There is a formal schedule of matters reserved for decision
by the board in place.
The board has three non-executive directors; they all take an active role in board matters.
The group has an audit committee and a remuneration committee. These committees consist of the
non-executive directors. They have written constitutions and terms of reference.
The audit committee meets twice each year, prior to the publication of the half-yearly and final results.
The auditors attend the audit committee meeting prior to the publication of the final results.
The remuneration committee meets annually to determine the remuneration of the senior executives.
Levels of remuneration are set in order to attract and retain the senior executives needed to run the
company without paying more than is necessary for this purpose.
The board of directors recognises its overall responsibility for the group’s system of internal control
and for monitoring its effectiveness. All activity is organised within a defined structure with formal
lines of responsibility and delegation of authority. The group produces information packs on a weekly
and monthly basis. These packs, together with annual budgets, enable the board to monitor
operational performance and cash position each month and allocate the group’s resources.
Share options have been granted to certain non-executive directors (see note 12).
17
First Derivatives plc
Independent auditor’s report to the members of First Derivatives plc
We have audited the financial statements of First Derivatives plc for the year ended 28 February 2013
which comprise the consolidated statement of comprehensive income, the consolidated and company
balance sheets, the consolidated and company statements of changes in equity, the consolidated and
company cash flow statements and the related notes. The financial reporting framework that has been
applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as
adopted by the EU and, as regards the company financial statements, as applied in accordance with the
provisions of the Companies Act 2006.
This report is made solely to the company's members, as a body, in accordance with Chapter 3 of Part 16
of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company's
members those matters we are required to state to them in an auditors' 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 and the company's members, as a body, for our audit work, for this report, or for the opinions we
have formed.
Respective responsibilities of directors and auditors
As explained more fully in the Directors' Responsibilities Statement set out on page 15, the directors are
responsible for the preparation of the financial statements and for being satisfied that they give a true and
fair view. Our responsibility is to audit the financial statements in accordance with applicable law and
International Standards on Auditing (UK and Ireland). Those standards require us to comply with the
Auditing Practices Board's (APB's) Ethical Standards for Auditors.
Scope of the audit of the financial statements
An audit involves obtaining evidence about the amounts and disclosures in the financial statements
sufficient to give reasonable assurance that the financial statements are free from material misstatement,
whether caused by fraud or error. This includes an assessment of: whether the accounting policies are
appropriate to the group and company’s circumstances and have been consistently applied and adequately
disclosed; the reasonableness of significant accounting estimates made by the directors; and the overall
presentation of the financial statements. In addition, we read all the financial and non-financial
information in the annual report to identify material inconsistencies with the audited financial statements.
If we become aware of any apparent material misstatements or inconsistencies we consider the
implications for our report.
Opinion on financial statements
In our opinion:
the financial statements give a true and fair view of the state of the group’s and of the company's
affairs as at 28 February 2013 and of the group’s profit for the year then ended;
the consolidated financial statements have been properly prepared in accordance with IFRSs as
adopted by the EU;
the company financial statements have been properly prepared in accordance with IFRSs as adopted
by the EU and as applied in accordance with the provisions of the Companies Act 2006; and
the financial statements have been prepared in accordance with the requirements of the Companies
Act 2006.
18
First Derivatives plc
Independent auditor’s report to the members of First Derivatives plc (continued)
Opinion on other matter prescribed by the Companies Act 2006
In our opinion the information given in the Directors' Report for the financial year for which the financial
statements are prepared is consistent with the financial statements.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters where the Companies Act 2006 requires us
to report to you if, in our opinion:
adequate accounting records have not been kept by the company, or returns adequate for our audit
have not been received from branches not visited by us; or
the company financial statements are not in agreement with the accounting records and returns; or
certain disclosures of directors' remuneration specified by law are not made; or
we have not received all the information and explanations we require for our audit.
Arthur O’Brien (Senior Statutory Auditor)
For and on behalf of KPMG, Statutory Auditor
Chartered Accountants
Stokes House
17/25 College Square East
Belfast
BT1 6DH
17 June 2013
19
First Derivatives plc
Consolidated statement of comprehensive income
Year ended 28 February 2013
Continuing operations
Revenue
Cost of sales
Gross profit
Other operating income
Administrative expenses
Results from operating activities
Finance income
Finance expense
Loss on foreign currency translation
Net financing expense
Share of profit of associate using the equity method, net of tax
Loss on dilution in associate using the equity method
Profit before tax
Tax expense
Profit for the year
2013
£’000
Note
42
5
6
7
9
9
9
18
18
56,469
(38,951)
17,518
1,616
(11,982)
7,152
1
(661)
(538)
(1,198)
249
(43)
6,160
2012
£’000
Restated
46,087
(31,127)
14,960
1,414
(8,413)
7,961
2
(648)
(455)
(1,101)
458
(371)
6,947
11
(1,015)
(1,001)
5,145
5,946
Other comprehensive income
Deferred tax on share options outstanding
Net exchange gains on net investment in foreign subsidiaries
and associate
Net loss on hedge of net investment in foreign subsidiaries and
associate
Other comprehensive income for the period, net of tax
Total comprehensive income for the period attributable to
equity holders’ of the company
Earnings per share
Basic
Diluted
24
27
27
15a
15a
461
905
(214)
1,152
6,297
Pence
30.2
27.9
32.
All profits are attributable to the owners of the company and relate to continuing activities.
The notes on pages 29 to 87 form part of these financial statements.
20
(309)
214
(121)
(216)
5,730
Pence
36.0
32.8
32
32.
First Derivatives plc
Consolidated balance sheet
Year ended 28 February 2013
Assets
Property, plant and equipment
Intangible assets and goodwill
Investment in associate
Trade and other receivables
Deferred tax asset
Non current assets
Trade and other receivables
Cash and cash equivalents
Assets held for sale
Current assets
Total assets
Equity
Share capital
Share premium
Share option reserve
Revaluation reserve
Currency translation adjustment reserve
Retained earnings
Equity attributable to shareholders
Liabilities
Loans and borrowings
Deferred tax liabilities
Trade and other payables
Non-current liabilities
Loans and borrowings
Trade and other payables
Current tax payable
Employee benefits
Contingent deferred consideration
Deferred consideration
Current liabilities
Total liabilities
Total equity and liabilities
Note
2013
£’000
2012
£’000
16
17
18
19
29
19
20
21
22
23
24
26
27
28
29
32
28
32
33
35
30
31
9,094
37,545
6,295
1,673
1,969
56,576
19,837
1,902
3,364
25,103
81,679
87
12,895
3,341
167
981
21,903
39,374
17,842
2,622
2,224
22,688
6,213
8,505
649
3,038
762
450
19,617
42,305
81,679
14,738
30,053
7,059
437
1,750
54,037
13,767
1,318
1,598
16,683
70,720
83
10,502
2,673
167
290
18,521
32,236
18,598
2,224
2,901
23,723
3,603
7,456
702
2,110
890
-
14,761
38,484
70,720
These financial statements were approved by the board of directors on 17 June 2013.
David Anderson
Chairman
Brian Conlon
Chief Executive Officer
Graham Ferguson
Chief Financial Officer
Registered company number: NI 30731
The notes on pages 29 to 87 form part of these financial statements.
21
First Derivatives plc
Company balance sheet
Year ended 28 February 2013
Assets
Property, plant and equipment
Intangible assets
Investment in subsidiaries
Investment in associate
Trade and other receivables
Deferred tax asset
Non current assets
Trade and other receivables
Cash and cash equivalents
Assets held for sale
Current assets
Total assets
Equity
Share capital
Share premium
Share option reserve
Fair value reserve
Retained earnings
Equity attributable to shareholders
Liabilities
Loans and borrowings
Deferred tax liabilities
Trade and other payables
Non-current liabilities
Loans and borrowings
Trade and other payables
Current tax payable
Employee benefits
Contingent deferred consideration
Deferred consideration
Current liabilities
Total liabilities
Total equity and liabilities
Note
2013
£’000
2012
£’000
16
17
18
18
19
29
19
20
21
22
23
24
25
28
29
32
28
32
33
35
30
31
7,738
9,383
17,864
7,196
3,369
1,379
46,929
17,514
1,397
3,364
22,275
69,204
87
12,895
3,341
133
17,615
34,071
16,812
1,473
1,010
19,295
5,762
5,756
336
2,776
758
450
15,838
35,133
69,204
13,849
5,933
14,549
7,196
2,198
1,084
44,809
14,787
962
1,598
17,347
62,156
83
10,502
2,673
131
16,266
29,655
17,147
1,539
1,820
20,506
3,447
5,590
798
1,901
259
-
11,995
32,501
62,156
These financial statements were approved by the board of directors on 17 June 2013.
David Anderson
Chairman
Brian Conlon
Chief Executive Officer
Graham Ferguson
Chief Financial Officer
Registered company number: NI 30731
The notes on pages 29 to 87 form part of these financial statements.
22
First Derivatives plc
Consolidated statement of changes in equity
Year ended 28 February 2013
Share
capital
Share
premium
Share option
reserve
Revaluation
reserve
Balance at 1 March 2012
Total comprehensive income for the year
Profit for the year
Other comprehensive income
Deferred tax on share options outstanding
Change in effective rate of deferred tax
Net exchange gains on net investment in
foreign subsidiaries and associate
Net exchange loss on hedge of net investment
in foreign subsidiaries and associate
Transfer on dilution of investment in associate
Total other comprehensive income
Total comprehensive income for the year
Transactions with owners of the company,
recorded directly in equity
Exercise of share options
Issue of shares as purchase consideration
Share based payment charge
Transfer on forfeit of share options
Dividends
Total contributions by and distributions to
owners of the company
Balance at 28 February 2013
£000
£000
83
10,502
-
-
-
-
-
-
-
-
3
1
-
-
-
4
87
-
-
-
-
-
-
-
-
1,294
1,099
-
-
-
2,393
12,895
The notes on pages 29 to 87 form part of these financial statements.
£000
2,673
-
461
-
-
-
-
461
461
(334)
-
686
(145)
-
207
3,341
23
Currency
translation
adjustment
£000
Retained
earnings
Total equity
£000
£000
290
18,521
32,236
5,145
5,145
-
-
-
905
(214)
-
691
691
-
-
-
-
-
-
-
(2)
-
-
2
-
5,145
-
-
-
145
(1,908)
(1,763)
461
-
905
(214)
-
1,152
6,297
963
1,100
686
-
(1,908)
841
39,374
£000
167
-
-
2
-
-
(2)
-
-
-
-
-
-
-
-
167
981
21,903
First Derivatives plc
Consolidated statement of changes in equity
Year ended 29 February 2012
Share
capital
Share
premium
£000
£000
Share
option
reserve
£000
Fair
value
reserve
£000
Balance at 1 March 2011
Total comprehensive income for the year
Profit for the year
Other comprehensive income
Deferred tax on share options outstanding
Change in effective rate of deferred tax
Net exchange gains on net investment in
foreign subsidiaries and associate
Net exchange loss on hedge of net investment
in foreign subsidiaries and associate
Transfer on dilution of investment in associate
Total other comprehensive income
Total comprehensive income for the year
Transactions with owners of the company,
recorded directly in equity
Exercise of share options
Issue of shares as purchase consideration
Share based payment charge
Transfer on forfeit of share options
Dividends
Total contributions by and distributions to
owners of the company
Balance at 29 February 2012
80
7,846
2,384
-
-
-
-
-
-
-
-
1
2
-
-
-
3
-
-
-
-
-
-
-
-
442
2,214
-
-
-
2,656
-
(309)
-
-
-
-
(309)
(309)
(83)
-
725
(44)
-
598
83
10,502
2,673
The notes on pages 29 to 87 form part of these financial statements.
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Revaluation
reserve
£000
174
-
-
5
-
-
(12)
(7)
(7)
-
-
-
-
-
-
Currency
translation
adjustment
£000
Retained
earnings
£000
Total
equity
£000
197
-
-
-
214
(121)
-
93
93
-
-
-
-
-
-
14,207
24,888
5,946
5,946
-
(5)
-
-
12
7
5,953
-
-
-
44
(1,683)
(1,639)
(309)
-
214
(121)
-
(216)
5,730
360
2,216
725
-
(1,683)
1,618
167
290
18,521
32,236
24
First Derivatives plc
Company statement of changes in equity
Year ended 28 February 2013
Balance at 1 March 2012
Total comprehensive income for the year
Profit for the year
Other comprehensive income
Change in effective rate of deferred tax
Deferred tax on share options outstanding
Total other comprehensive income
Total comprehensive income for the year
Transactions with owners of the company, recorded
directly in equity
Exercise of share options
Issue of shares as purchase consideration
Share based payment charge
Transfer on forfeit of share options
Dividends to equity holders
Total contributions by and distributions to owners of
the company
Balance at 28 February 2013
Share capital
Share premium
£000
£000
Share option
reserve
£000
Fair value
reserve
£000
Retained
earnings
£000
Total equity
£000
83
10,502
2,673
131
16,266
29,655
-
-
-
-
-
3
1
-
-
-
4
87
-
-
-
-
-
1,294
1,099
-
-
-
2,393
12,895
-
-
461
461
461
(334)
-
686
(145)
-
207
3,341
-
2
-
2
2
-
-
-
-
-
-
133
3,114
3,114
(2)
-
(2)
(2)
-
-
-
145
(1,908)
(1,763)
17,615
-
461
461
3,575
963
1,100
686
-
(1,908)
841
34,071
The notes on pages 29 to 87 form part of these financial statements.
25
First Derivatives plc
Consolidated statement of changes in equity
Year ended 29 February 2012
Share capital
Share premium
Balance at 1 March 2011
Total comprehensive income for the year
Profit for the year
Other comprehensive income
Change in effective rate of deferred tax
Deferred tax on share options outstanding
Total other comprehensive income
Total comprehensive income for the year
Transactions with owners of the company, recorded
directly in equity
Exercise of share options
Issue of shares as purchase consideration
Share based payment charge
Transfer on forfeit of share options
Dividends
Total contributions by and distributions to owners of
the company
Balance at 29 February 2012
£000
80
-
-
-
-
-
1
2
-
-
-
3
Share option
reserve
£000
Fair value
reserve
£000
Retained
earnings
£000
Total equity
£000
£000
7,846
2.384
126
13,406
23,842
-
-
-
-
-
442
2,214
-
-
-
2,656
-
-
(309)
(309)
(309)
(83)
-
725
(44)
-
598
-
5
-
5
5
-
-
-
-
-
-
4,504
4,504
(5)
-
(5)
4,499
-
-
-
44
(1,683)
(1,639)
-
(309)
(309)
4,195
360
2,216
725
-
(1,683)
1,618
83
10,502
2,673
131
16,266
29,655
The notes on pages 29 to 87 form part of these financial statements.
26
First Derivatives plc
Consolidated cash flow statement
Year ended 28 February 2013
Cashflows from operating activities
Profit for the year
Adjustments for:
Net finance costs
Share of profit of associate
Share of loss on dilution in associate
Provision release
Depreciation
Amortisation of intangible assets
Gain on sale of property, plant & equipment
Equity settled share-based payment transactions
Grant income
Tax expense
Changes in:
Trade and other receivables
Trade and other payables
Onerous provisions
Taxes paid
Net cash from operating activities
Cash flows from investing activities
Interest received
Acquisition of subsidiaries, net of cash acquired
Acquisition of property, plant and equipment
Disposal of property, plant and equipment
Acquisition of intangible assets
Dividend received from associate
Payment of deferred consideration
Net cash used in investing activities
Cash flows from financing activities
Proceeds from issue of share capital
Receipt of new long term loan
Repayment of borrowings
Payment of finance lease liabilities
Interest paid
Dividends paid
Net cash from financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at 1 March
Effects of exchange rate changes on cash held
Cash and cash equivalents at 28 February
2013
£’000
5,145
1,198
(249)
43
-
699
2,527
(717)
576
(1,589)
1,015
8,648
(6,058)
1,372
-
(765)
3,197
1
(811)
(1,098)
5,046
(6,054)
1,267
(471)
(2,120)
963
3,131
(1,835)
(126)
(565)
(1,804)
(236)
841
(235)
(928)
(322)
The notes on pages 29 to 87 form part of these financial statements.
27
2012
£’000
5,946
1,101
(458)
371
(266)
592
1,821
(528)
486
(1,411)
1,001
8,655
(1,331)
1,607
(78)
(699)
8,154
2
-
(866)
2,705
(4,636)
570
(3,316)
(5,541)
360
1,553
(5,155)
(26)
(767)
(1,683)
(5,718)
(3,105)
3,501
(631)
(235)
First Derivatives plc
Company cash flow statement
Year ended 28 February 2013
Cashflows from operating activities
Profit for the year
Adjustments for:
Finance expense and foreign exchange loss
Depreciation
Amortisation of intangible assets
Dividend from associate
Equity settled share-based payment transactions
Profit on disposal
Grant income
Tax expense
Changes in:
Trade and other receivables
Trade and other payables
Taxes paid
Net cash from operating activities
Cash flows from investing activities
Acquisition of subsidiaries
Acquisition of property, plant and equipment
Disposal of property, plant and equipment
Acquisition of intangible assets
Dividend received from associate
Payment of deferred consideration
Net cash used in investing activities
Cash flows from financing activities
Proceeds from issue of share capital
Receipt of new long term loan
Repayment of borrowings
Interest paid
Dividends paid
Net cash from financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at 1 March
Effects of exchange rate changes on cash held
Cash and cash equivalents at 28 February
2013
£’000
3,114
1,523
324
733
(1,267)
494
(717)
(1,053)
414
3,565
(4,073)
1,160
(775)
(123)
(958)
(260)
5,046
(4,076)
1,267
(158)
861
963
3,131
(1,835)
(501)
(1,804)
(46)
692
(591)
(928)
(827)
The notes on pages 29 to 87 form part of these financial statements.
28
2012
£’000
4,504
1,279
293
277
(570)
392
(528)
(1,178)
918
5,387
(1,442)
2,598
(830)
5,713
-
(268)
2,705
(2,844)
570
(3,100)
(2,937)
360
1,553
(5,155)
(767)
(1,683)
(5,692)
(2,916)
2,956
(631)
(591)
First Derivatives plc
Notes
(forming part of the consolidated financial statements)
1
Significant accounting policies
First Derivatives plc (“FDP” or the “company”) is a company incorporated and domiciled in Northern
Ireland. The address of the company’s registered office is 3 Canal Quay, Newry, BT35 6BP. The
company is primarily involved in the provision of a range of software and consulting services to the
investment bank market, the derivatives technology industry and the provision of technology sales
services to the IT sector.
The financial statements were authorised by the Board of Directors for issuance on 17 June 2013.
(a) Basis of preparation
The consolidated financial statements consolidate those of the company and its subsidiaries
(together referred to as the “group”) and equity account for the group’s interest in associates. The
company financial statements present information about the company as a separate entity and not
about the group.
Both the consolidated financial statements and the company financial statements have been prepared
and approved by the directors in accordance with International Financial Reporting Standards as
adopted by the EU (“IFRSs”). On publishing the group financial statements together with the
company financial statements, the company is taking advantage of the exemption in Section 408 of
the Companies Act 2006 not to present its individual income statement and related notes that form a
part of those approved financial statements.
The accounting policies set out below have, unless otherwise stated, been applied consistently to all
periods presented in these consolidated financial statements and have been applied consistently by
the group and company except for the reclassification of certain comparable balances (see note 42).
The financial statements are presented in GBP, rounded to the nearest thousand, which is also the
company’s functional currency. They are prepared on the historical cost basis, except that financial
instruments classified as available-for-sale are stated at their fair value where this can be reliably
measured.
Going concern
The group’s business activities, together with the factors likely to affect its future development,
performance and position are set out in the directors’ report on pages 10 to 14. The financial
position of the group, its cash flows, liquidity position and borrowing facilities are described in the
Chief Executive’s Review on pages 6 to 8 and below. In addition, note 2 to the financial statements
includes the group’s objectives, policies and processes for managing its capital; its financial risk
management objectives; details of its financial instruments and hedging activities; and its exposures
to credit risk, liquidity risk and market risk.
The group meets its day to day working capital requirements through generated cash flows and loan
facilities most of which are due for renewal in 2015. The group’s forecasts and projections, taking
account of reasonably possible changes in trading performance, show that the group should be able
to operate within the level of its facilities.
29
First Derivatives plc
Notes (continued)
1
Significant accounting policies (continued)
Going concern (continued)
After making enquiries, the directors have a reasonable expectation that the company and the group
have adequate resources to continue in operational existence for the foreseeable future. Accordingly,
they continue to adopt the going concern basis in preparing the annual report and financial
statements.
Critical accounting estimates and judgements
The preparation of financial statements in conformity with IFRSs requires management to make
judgements, estimates and assumptions that affect the application of policies and reported amounts
of assets and liabilities, income and expenses. Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed and revised on an ongoing basis. Revisions to
accounting estimates are recognised in the period in which the estimates are revised and in any
future periods affected.
Information about critical judgements in applying accounting policies that have the most significant
impact on the amounts recognised in the financial statements are as follows:
It is noted that management have assessed that all residences owned by the group are held for
use within the business (except those classified as held for sale) and as such are classified as
property, plant and equipment, rather than investment property.
Management have estimated the amount of deferred consideration payable on the acquisitions of
subsidiaries which is based on forecast results and certain other criteria as required by the terms
of the sale and purchase agreements. Management have made prudent estimates of deferred
consideration payable based on the relevant share purchase agreements.
Management have estimated the fair value of intangibles (including goodwill) acquired on
acquisitions based on the projected profitability expected to be generated. The useful economic
lives of the intangibles are assessed as being critical and are based on management’s estimate of
the life over which revenue can be generated and taking cognisance of the useful economic lives
of similar competitor products.
Where an intangible asset has been created by the group, the value has been derived by
establishing the current cost associated with generating this asset based on direct costs and
reasonable allocations of indirect costs. Useful economic lives of internally generated
intangibles are assessed as being critical and are based on management’s estimate of the life
over which revenue can be generated and taking cognisance of the useful economic lives of
similar competitor products.
Goodwill on acquisitions is not amortised but is tested for impairment on an annual basis.
Management have assessed goodwill for impairment based on the projected profitability of the
individual cash generating unit to which the goodwill relates. No impairments have been
identified. Other intangibles are tested for impairment if an indicator of impairment is
identified.
30
First Derivatives plc
Notes (continued)
1
Significant accounting policies (continued)
Critical accounting estimates and judgements (continued)
Management have assessed that there are no other estimates or judgements that have a significant risk
of causing a material adjustment to the carrying amounts of assets and liabilities recognised in the
financial statements.
New standards and interpretations not adopted
A number of new standards, amendments to standards and interpretations are effective for annual
periods beginning after 1 March 2012 and have not been applied in preparing these financial
statements. None of these is expected to have a significant effect on the financial statements except
for IFRS 9 Financial Instruments, which becomes mandatory for the group’s and company’s 2016
financial statements and could change the classification and measurement of financial assets. The
group does not plan to adopt this standard early and the extent of this impact has not yet been
determined. The standard and interpretations not adopted are outlined below:
Amendments to IFRS 9 Financial Instruments (mandatory for the year commencing on or after 1
January 2015).
Amendments to IFRS 7 disclosures: Offsetting assets and liabilities (mandatory for the year
commencing on or after 1 January 2013).
Amendments to IFRS10 Investment entities (mandatory for the year commencing on or after 1
January 2014).
IFRS 13 Fair Value Measurement (mandatory for the year commencing on or after 1 January
2013).
IFRS 10 Consolidated Financial Statements, IFRS 11 Joint Arrangements, IFRS 12 Disclosure of
Interest in other Entities, IAS 27 Separate Financial Statements (2012) which supercedes IAS 27
(2008) and IAS 28 Investments in Associates and Joint Ventures (2012) which supercedes IAS 28
(2008) (mandatory for the year commencing on or after 1 January 2014).
Amendments to IAS 19 Employee Benefits (mandatory for the year commencing on or after
1 January 2013).
Amendments to IAS 1 Presentation of Financial Statements – Presentation of Items of other
comprehensive Income (mandatory for the year commencing on or after 1 July 2012).
Amendments to IAS 32 Financial Instruments – Offsetting financial assets and financial
liabilities (mandatory for the year commencing on or after 1 January 2014).
31
First Derivatives plc
Notes (continued)
1
Significant accounting policies (continued)
(b) Basis of consolidation
Business combinations
i)
Business combinations are accounted for using the acquisition method as at the acquisition date,
which is the date on which control is transferred to the group. Control is the power to govern the
financial and operating policies of an entity so as to obtain benefits from its activities. In assessing
control, the group takes into consideration potential voting rights that currently are exercisable.
The group measures goodwill at the acquisition date as:
the fair value of the consideration transferred; plus
the recognised amount of any non-controlling interests in the acquiree; plus
if the business combination is achieved in stages, the fair value of the existing equity interest in
the acquiree; less
the net recognised amount (generally fair value) of the identifiable assets acquired and liabilities
assumed. Identifiable intangibles are those which can be sold separately or which arise from
legal rights regardless of whether those rights are separable.
When the excess is negative, a bargain purchase gain is recognised immediately in profit or loss.
The consideration transferred does not include amounts related to the settlement of a pre-existing
relationship. Such amounts are generally recognised in profit or loss.
Costs related to the acquisition, other than those associated with the issue of debt or equity
securities, that the group incurs in connection with a business combination are expensed as incurred.
Any contingent consideration payable is recognised at fair value at the acquisition date. If the
contingent consideration is classified as equity, it is not remeasured and settlement is accounted for
within equity. Otherwise, subsequent changes to the fair value of the contingent consideration are
recognised in profit or loss.
Subsidiaries
ii)
Subsidiaries are entities controlled by the group. Control exists when the group has the power,
directly or indirectly, to govern the financial and operating policies of an entity so as to obtain
benefits from its activities. In assessing control, potential voting rights that are currently exercisable
or convertible are taken into account. The financial statements of subsidiaries are included in the
consolidated financial statements from the date that control commences until the date that control
ceases. The accounting policies of subsidiaries have been changed when necessary to align them
with the policies adopted by the group.
In the company’s financial statements, investments in subsidiaries are carried at cost less any
provision made for impairment.
32
First Derivatives plc
Notes (continued)
1
Significant accounting policies (continued)
(c) Basis of consolidation (continued)
Investments in associates (equity accounted investees)
iii)
Associates are those entities in which the group has significant influence, but not control, over the
financial and operating policies. Significant influence is presumed to exist when the group holds
between 20 and 50 percent of the voting power of another entity. Associates are accounted for using
the equity method (equity accounted investees) and are initially recognised at cost. The group’s
investment includes goodwill identified on acquisition, net of any subsequent accumulated
impairment losses and fair value of intangibles (these amounts are not recognised separately in the
consolidated financial statements but included in the group’s net investment in the associate (note
18)). The consolidated financial statements include the group’s share of the profit or loss and other
comprehensive income, after adjustments to align the accounting policies with those of the group,
from the date that significant influence commences until the date that significant influence ceases.
When the group’s share of losses exceeds its interest in an equity accounted investee, the carrying
amount of that interest, including any long-term investments is reduced to nil and the recognition of
further losses is discontinued except to the extent that the group has incurred legal or has
constructive obligations or has made payments on behalf of an investee.
In the company’s financial statements, investments in associates are carried at cost less any
provision made for impairment.
Transactions eliminated on consolidation
iv)
Intra-group balances and transactions and any unrealised income and expenses arising from intra-
group transactions, are eliminated in preparing the consolidated financial statements. Unrealised
gains arising from transactions with equity-accounted investees are eliminated against the
investment to the extent of the group’s interest in the investee. Unrealised losses are eliminated in
the same way as unrealised gains, but only to the extent that there is no evidence of impairment.
(c) Foreign currency
Foreign currency transactions
i)
Transactions in foreign currencies are translated to the respective functional currency of the group
entities at the exchange rate ruling at the date of the transactions. Monetary assets and liabilities
denominated in foreign currencies at the reporting date are retranslated to the functional currency at
the exchange rate at that date. Monetary liabilities designated as a hedge of net investments are
treated as set out in note 1(c)(ii) below.
Non-monetary assets and liabilities denominated in foreign currencies that are measured at historical
cost are translated using the exchange rate ruling at the date of the transaction. Non-monetary assets
and liabilities denominated in foreign currencies that are measured at fair value are translated to the
functional currency at the exchange rate ruling at the date the fair value was determined.
Foreign exchange differences arising on retranslation are recognised in profit or loss, except for
differences arising on the retranslation of a financial liability designated as a hedge of the net
investment in a foreign operation to the extent that the hedge is effective, which is recognised in
other comprehensive income.
Gains or losses arising on the retranslation of foreign currency contingent deferred consideration
estimated as payable at the year end on acquisitions prior to 1 March 2012 are accounted as an
adjustment to goodwill. On acquisitions on or after 1 March 2012 the retranslation gain or loss is
accounted for in profit or loss.
33
First Derivatives plc
Notes (continued)
1
Significant accounting policies (continued)
(c) Foreign currency (continued)
Foreign operations
ii)
The assets and liabilities of foreign subsidiaries, including goodwill and fair value adjustments arising
on consolidation, are translated to the group’s presentational currency, GBP, at foreign exchange rates
ruling at the balance sheet date. The revenues and expenses of foreign operations are translated at the
foreign exchange rates ruling at the dates of the transactions.
Foreign currency differences are recognised in other comprehensive income and presented in the
currency translation adjustment reserve in equity. However, if the operation is a non-wholly owned
subsidiary, then the relevant proportionate share of the translation difference is allocated to the non-
controlling interests.
When a foreign operation is disposed of, such that control, significant influence or joint control is lost,
the cumulative amount in the translation reserve related to that foreign operation is reclassified to
profit or loss as part of the gain or loss on disposal. When the group disposes of only part of its
interest in a subsidiary that includes a foreign operation while retaining control, the relevant
proportion of the cumulative amount is reattributed to non-controlling interests. When the group
disposes of only part of its investment in an associate or joint venture that includes a foreign operation
while retaining significant influence or joint control, the relevant proportion of the cumulative amount
is reclassified to profit or loss.
Certain exchange differences arising from a monetary item receivable from or payable to a foreign
operation, the settlement of which is neither planned nor likely in the foreseeable future, are
considered to form part of a net investment in a foreign operation and are recognised in other
comprehensive income and presented in the currency translation adjustment reserve in equity.
Foreign currency differences arising on the retranslation of foreign currency loans designated as a
hedge of net investments in a foreign operation are recognised in other comprehensive income to the
extent the hedge, when designated in a hedge relationship which has been formally documented in
line with IAS 39 (Recognition and Measurement), is effective and are presented within other
comprehensive income in the currency translation adjustment reserve. To the extent that the hedge is
ineffective, such differences are recognised in profit or loss. When the hedged part of a net
investment is disposed of, the associated cumulative amount in equity is transferred to profit or loss as
an adjustment to the profit or loss on disposal.
(d)
Owned assets
Property, plant and equipment
(i)
Items of property, plant and equipment are measured at cost less accumulated depreciation (see
below) and accumulated impairment losses (see accounting policy on impairment, note 1(i) below).
Cost includes expenditure that is directly attributable to the acquisition of the asset.
When parts of an item of property, plant and equipment have different useful lives, those
components are accounted for as separate items of property, plant and equipment.
34
First Derivatives plc
Notes (continued)
1
Significant accounting policies (continued)
(d)
Owned assets (continued)
Property, plant and equipment (continued)
(i)
Any gain or loss on disposal of an item of property, plant and equipment is determined by
comparing the proceeds from disposal with the carrying amount of the property, plant and
equipment and is recognised net within other expenses in profit or loss. When revalued assets are
sold, any related amount included in the revaluation reserve is transferred to retained earnings.
Leased assets
(ii)
Leases in terms of which the group assumes substantially all the risks and rewards of ownership are
classified as finance leases. Upon initial recognition the leased asset is measured at an amount
equal to the lower of its fair value and the present value of the minimum lease payments.
Subsequent to initial recognition, the asset is accounted for in accordance with the accounting
policy applicable to that asset.
Other leases are operating leases and are not recognised in the group’s statement of financial
position.
Subsequent costs
(iii)
The group recognises in the carrying amount of an item of property, plant and equipment the cost of
replacing part of such an item when that cost is incurred if it is probable that the future economic
benefits embodied within the item will flow to the group and the cost of the item can be measured
reliably. All other costs are recognised in profit or loss as an expense as incurred.
Depreciation
(iv)
Depreciation is calculated to write down the costs of parts of items to their residual values and is
charged to profit or loss on a straight-line basis over the estimated useful lives of each part of an item
of property, plant and equipment. Leased assets are depreciated over the shorter of the lease term and
their useful lives unless it is reasonably certain that the group will obtain ownership by the end of the
lease term. Land is not depreciated. The estimated useful lives are as follows:
Office furniture and equipment
Plant and equipment
Buildings – long leasehold and freehold
-
-
-
25% straight line
25-50% straight line
2% straight line
Items of property, plant and equipment are depreciated from the date that the asset is completed and
ready for use.
Depreciation methods, useful lives and residual values are reviewed at each reporting date and
adjusted if appropriate.
35
First Derivatives plc
Notes (continued)
1
Significant accounting policies (continued)
(e) Assets held for sale
Non-current assets that are expected to be recovered primarily through sale or distribution rather than
through continuing use, are classified as held for sale or distribution. Immediately before
classification as held for sale or distribution, the assets or components of a disposal group, are
remeasured in accordance with the group’s accounting policies. Thereafter, generally the assets are
measured at the lower of their carrying value and fair value less costs to sell. Impairment losses on
initial classification as held for sale or distribution and subsequent gains and losses on remeasurement
are recognised in profit or loss. Gains are not recognised in excess of any cumulative impairment loss.
Intangible assets and property plant and equipment once classified as held for sale or distribution are
no longer amortised or depreciated.
(f)
Goodwill
Intangible assets and goodwill
i)
Goodwill that arises on the acquisition of subsidiaries is presented with intangible assets. For the
measurement of goodwill at initial recognition see note 1(b). Goodwill represents the difference
between the fair value of consideration transferred and the net recognised amount of the identifiable
assets acquired and the liabilities assumed. Identifiable intangibles are those which can be sold
separately or which arise from legal rights regardless of whether those rights are separable.
Goodwill is measured at cost less any accumulated impairment losses. Goodwill is allocated to cash-
generating units and is not amortised but is tested annually for impairment. In respect of equity
accounted investees, the carrying amount of goodwill is included in the carrying amount of the
investment in the investee. Goodwill arising on subsidiaries and associates is not amortised.
Negative goodwill arising on an acquisition is recognised immediately in profit or loss.
Research and development
ii)
Expenditure on research activities undertaken with the prospect of gaining new technical knowledge
and understanding, is recognised in profit or loss as an expense as incurred.
Expenditure on development activities, whereby research findings are applied to a plan or design for
the production of new or substantially improved products and processes, is capitalised only if
development costs can be measured reliably, the product or process is technically and commercially
feasible, future economic benefits are probable and the group intends to and has sufficient resources
to complete development and to use or sell the asset.
The expenditure capitalised in respect of software assets includes the cost of materials, direct labour
and an appropriate proportion of overheads that are directly attributable to preparing the asset for its
intended use. Other development expenditure is recognised in the income statement as an expense
as incurred. Capitalised development expenditure is measured at cost less accumulated amortisation
(see below) and impairment losses (see accounting policy impairment note 1(i)).
Tax credits for research and development are recognised at their fair value based on amounts
recoverable from the tax authorities in current and future years. A credit is recognised in the income
statement against the related expense or recognised in the period in which the expenditure is
amortised where the related expenditure is capitalised.
36
First Derivatives plc
Notes (continued)
1
Significant accounting policies (continued)
(f)
Intangible assets and goodwill (continued)
iii) Other intangible assets
Intangible assets other than goodwill that are acquired by the group are stated at cost less
accumulated amortisation (see (v) below) and impairment losses (see accounting policy on
impairment note 1(i)). The fair value of customer relationships acquired in a business combination
is determined using the multi-period excess earnings method, whereby the subject asset is valued
after deducting a fair return of all other assets that are part of creating the related cash flows. The
fair value of other intangible assets acquired in a business combination is based on the discounted
cash flows expected to be derived from the use and eventual sale of the assets.
Subsequent expenditure
iv)
Subsequent expenditure on capitalised intangible assets is capitalised only when it increases the
future economic benefits embodied in the specific asset to which it relates. All other expenditure is
recognised in profit or loss as incurred.
Amortisation
v)
Except for goodwill, intangible assets are amortised based on the cost of an asset less its residual
value. Amortisation is charged to the income statement on a straight-line basis over the estimated
useful lives of intangible assets, from the date that the asset is available for use as follows:
Customer lists
Acquired software
Brands
Developed software
-
-
-
-
12.5% straight line
12.5% straight line
12.5% straight line
12.5% straight line
Amortisation methods, useful lives and residual values reviewed at each reporting dates and
adjusted if appropriate.
(g) Trade and other receivables
The fair value of trade and other receivables are estimated at the present value of future cash flows,
discounted at the market rate of interest at the measurement date. Short-term receivables with no
stated interest rate are measured at the original invoice amount if the effect of discounting is
immaterial. Fair value is determined at initial recognition and, for disclosure purposes, at each
annual reporting date. Trade and other receivables are stated at amortised cost less impairment
losses (see accounting policy impairment note 1(i)).
(h) Cash and cash equivalents
Cash and cash equivalents comprises cash balances and call deposits with an original maturity of
three months or less. Bank overdrafts that are repayable on demand and form an integral part of the
group’s cash management are included as a component of cash and cash equivalents for the
purpose of the statement of cash flows.
37
First Derivatives plc
Notes (continued)
1
Significant accounting policies (continued)
(i)
Impairment
Non-derivative financial assets
(i)
A financial asset not carried at fair value through profit or loss is assessed at each reporting date to
determine whether there is any objective evidence that it is impaired. A financial asset is
considered to be impaired if objective evidence indicates that a loss event has occurred after the
initial recognition of the assets and that the loss event had a negative effect on the estimated future
cash flows of that asset that can be estimated reliably.
Objective evidence that financial assets (including equity securities) are impaired can include
default or delinquency by a debtor, restructuring of an amount due to the group on terms that the
group would not consider otherwise, indications that a debtor or issuer will enter bankruptcy,
adverse changes in the payment status of borrowers or issuers in the group, economic conditions
that correlate with defaults or the disappearance of an active market for a security. In addition, for
an investment in an equity security, a significant or prolonged decline in its fair value below its
cost is objective evidence of impairment.
Loans and receivables
(ii)
The group considers evidence of impairment for loans and receivables at both a specific asset and
collective level. All individually significant receivables are assessed for specific impairment. All
individually significant loans and receivables found not to be specifically impaired are then
collectively assessed for any impairment that has been incurred but not yet identified. Loans and
receivables that are not individually significant are collectively assessed for impairment by
grouping together loans and receivables with similar risk characteristics.
In assessing collective impairment the group uses historical trends of the probability of default, the
timing of recoveries and the amount of loss incurred, adjusted for management’s judgement as to
whether current economic and credit conditions are such that the actual losses are likely to be
greater or less than suggested by historical trends.
(iii) Non-financial assets
The carrying amounts of the group’s non-financial assets, other than deferred tax assets, are
reviewed at each reporting date to determine whether there is any indication of impairment. If any
such indication exists, then the asset’s recoverable amount is estimated.
For goodwill and assets that have an indefinite useful life or that are not yet available for use, the
recoverable amount is estimated at each balance sheet date. An impairment loss is recognised if the
carrying amount of an asset or its related cash-generating unit (CGU) exceeds its estimated
recoverable amount.
38
First Derivatives plc
Notes (continued)
1
Significant accounting policies (continued)
(i)
Impairment (continued)
(iii) Non-financial assets (continued)
The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less
costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present
value using a pre-tax discount rate that reflects current market assessments of the time value of
money and the risks specific to the asset or CGU. For the purpose of impairment testing, assets that
cannot be individually tested are grouped together into the smallest group of assets that generates
cash inflows from continuing use that are largely independent of the cash inflows of other assets or
CGU. Subject to an operating segment ceiling test, for the purposes of goodwill impairment testing,
CGU’s to which goodwill has been allocated are aggregated so that the level at which impairment
testing is performed reflects the lowest level at which goodwill is monitored for internal reporting
purposes. Goodwill acquired in a business combination, is allocated to the legal entity or business
that has been acquired in a business combination.
Impairment losses are recognised in profit or loss. Impairment losses recognised in respect of CGUs
are allocated first to reduce the carrying amount of any goodwill allocated to the CGU and (group of
CGUs) and then to reduce the carrying amount of the other assets in the CGU (group of CGUs) on a
pro rata basis.
An impairment loss in respect of goodwill is not reversed. In respect of other assets, impairment
losses recognised in prior periods are assessed at each reporting date for any indications that the loss
has decreased or no longer exists. An impairment loss is reversed if there has been a change in the
estimates used to determine the recoverable amount. An impairment loss is reversed only to the
extent that the asset’s carrying amount does not exceed the carrying amount that would have been
determined, net of depreciation or amortisation, if no impairment loss had been recognised.
(j) Earnings per share
The group presents basic and diluted earnings per share (EPS) data for its ordinary shares. Basic
EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the group by
the weighted average number of ordinary shares outstanding during the period. Diluted EPS is
determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted
average number of ordinary shares outstanding for the effects of all dilutive potential ordinary
shares, which comprise share options granted to employees, directors and as part of business
combinations.
(k) Loans and borrowings
Loans and borrowings are recognised initially at fair value less attributable transaction costs.
Subsequent to initial recognition, loans and borrowings are stated at amortised cost with any
difference between cost and redemption value being recognised in profit or loss over the period of
the borrowings on an effective interest basis.
39
First Derivatives plc
Notes (continued)
1
Significant accounting policies (continued)
(l) Employee benefits
(i) Defined contribution plans
The group operates a defined contribution (pension) plan for employees. A defined contribution
plan is a post-employment benefit plan under which the group pays fixed contributions into a
separate entity and will have no legal or constructive obligation to pay further amounts. Obligations
for contributions to defined contribution pension plans are recognised as an expense in the income
statement as incurred.
Share-based payment transactions
(ii)
The share option programme allows group employees to acquire shares of the company. The fair
value of options granted is recognised as an employee expense with a corresponding increase in
equity. The fair value is measured at grant date and spread over the period during which the
employees become unconditionally entitled to the options. The fair value of the options granted is
measured using an adjusted Black-Scholes model, taking into account the terms and conditions upon
which the options were granted. Measurement inputs include the share price on the measurement
date, the exercise price of the instrument, expected volatility (based on an evaluation of the
Company’s historic volatility, particularly over the historic period commensurate with the expected
term and adjusted for recent volatility changes) expected term of the instruments (based on
historical experience and general option holder behaviour), expected dividends and the risk-free
interest rate (based on government bonds). Service and non-market performance conditions
attached to the transactions are not taken into account in determining fair value. The amount
recognised as an expense is adjusted to reflect the actual number of share options that vest. On the
lapse of share options on the vesting date the amount recognised in shares to be issued is transferred
to retained earnings. On the exercise of share options, the amount recorded in shares to be issued is
transferred to the share premium reserve.
(iii) Short term benefits
Liabilities for employee benefits for wages, salaries and annual leave entitlements represent present
obligations resulting from employees’ services provided up to the reporting date and are calculated
at undiscounted amounts based on remuneration wage and salary rates that the group expects to pay
as at the reporting date.
A liability is recognised for the amount expected to be paid under short-term cash bonus plans if the
group has a present legal or constructive obligation to pay this amount as a result of past service
provided by the employee and the obligation can be estimated reliably.
(m) Provisions
A provision is recognised in the balance sheet when the group has a present legal or constructive
obligation as a result of a past event, that can be estimated reliably and it is probable that an
outflow of economic benefits will be required to settle the obligation. If the effect is material,
provisions are determined by discounting the expected future cash flows at a pre-tax rate that
reflects current market assessments of the time value of money and, when appropriate, the risks
specific to the liability. The unwinding of the discount is recognised as finance cost.
40
First Derivatives plc
Notes (continued)
1
Significant accounting policies (continued)
(n) Trade and other payables
Trade and other payables are stated at the discounted present value of the estimated outflows of
funds. Where the maturity is six months or less they are not discounted and are shown at cost.
(o) Revenue
(i) Products and Services rendered
Revenue from products and services rendered is measured at the fair value of the consideration
received or receivable and is recognised in profit or loss in proportion to the stage of completion of
the transaction at the balance sheet date. No revenue is recognised if there are significant
uncertainties regarding recovery of the consideration due. The group does not have contracts
involving a combination of products and services and negotiates prices separately for each
component. Revenue in respect of each product or service is as follows:
Revenue from perpetual software licensing is recognised upon delivery to the customer where
there are no significant vendor obligations remaining following delivery, the client has accepted
the software and the collection of the resulting receivable is considered probable.
Revenue from annual licensing is recognised over the period to which the contract relates.
Revenue from consulting services is recognised in the month the service is performed, upon
acceptance by the customer and the collection of the resulting receivable is considered
probable.
In respect of customisation of software, revenue is recognised upon acceptance by the customer
and the collection of the resulting receivable is considered probable.
Revenue from data management hosting, other hosting and transactional activities are
recognised over the period to which the contract relates or the transaction occurs which gives
rise to the receivable. In instances where a non-refundable fee is paid by the customer, the fair
value of any significant obligations are deferred and recognised over the life of the contract
and the remaining balance is recognised following delivery and the resulting receivable is
considered probable.
(ii) Commissions
When the group acts in the capacity of an agent rather than as the principal in a transaction, the
revenue recognised is the net amount of commission earned by the group. Revenue is recognised upon
acceptance by the customer of the sale.
(iii) Government grants
An unconditional government grant is recognised in the income statement as other operating income
when the grant becomes receivable. Any other government grant is recognised in the balance sheet
initially as deferred income and when there is reasonable assurance that it will be received and that the
group has complied with the conditions attaching to it, a release is then made to the profit and loss as
other income. Grants that compensate the group for expenses incurred are recognised as other
operating income in profit or loss on a systematic basis in the same periods in which the expenses are
incurred. Grants that compensate the group for the cost of an asset are recognised in profit or loss as
other operating income on a systematic basis over the useful life of the asset.
41
First Derivatives plc
Notes (continued)
1 Significant accounting policies (continued)
(p) Lease payments
(i) Operating lease payments
Payments made under operating leases are recognised in profit or loss on a straight-line basis over the
term of the lease. Lease incentives received are recognised in profit or loss as an integral part of the
total lease expense, over the terms of the lease.
(ii) Finance lease payments
Minimum lease payments made under finance leases are apportioned between the finance charge and
the reduction of the outstanding liability. The finance expense is allocated to each period during the
lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability.
(iii) Determining whether an arrangement contains a lease
At inception of an arrangement, the group determines whether such an arrangement is or contains a
lease. A specific asset is the subject of a lease if fulfilment of the arrangement is dependent on the
use of that specified asset. An arrangement conveys the right to use the asset if the arrangement
conveys to the group the right to control the use of the underlying asset.
At inception or upon reassessment of the arrangement, the group separates payments and other
consideration required by such an arrangement into those for the lease and those for other elements on
the basis of their relative fair values. If the group concludes for a finance lease that it is impracticable
to separate the payments reliably, then an asset and a liability are recognised at an amount equal to the
fair value of the underlying asset. Subsequently the liability is reduced as payments are made and an
imputed finance charge on the liability is recognised using the group’s incremental borrowing rate.
(q) Finance income and expenses
Finance income comprises interest receivable on funds invested and dividend income. Interest
income is recognised in profit or loss as it accrues, using the effective interest method. The interest
expense component of finance lease payments is recognised in profit or loss using the effective
interest rate method. When an available for sale asset is derecognised, the cumulative gain or loss in
equity is transferred to finance income or expense.
Financing expenses comprises interest payable on borrowings calculated using the effective interest
rate method, and foreign exchange gains and losses.
(r) Taxation
Tax expense on the profit or loss for the period presented comprises current and deferred tax.
Current and deferred tax is recognised in profit or loss except to the extent that it relates to a
business combination or items recognised directly in equity or in other comprehensive income.
Current tax is the expected tax payable or receivable on the taxable income for the year, using tax
rates enacted or substantially enacted at the balance sheet date, and any adjustment to tax payable in
respect of previous years.
42
First Derivatives plc
Notes (continued)
1
Significant accounting policies (continued)
(r) Taxation (continued)
Deferred tax is provided using the balance sheet liability method, providing for temporary differences
between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts
used for taxation purposes. The following temporary differences are not provided for: goodwill not
deductible for tax purposes, those arising from the initial recognition of assets or liabilities acquired in
a transaction that is not a business combination and that affects neither accounting nor taxable profit or
loss, and differences relating to investments in subsidiaries to the extent that it is probable they will
not reverse in the foreseeable future. The amount of deferred tax provided is based on the expected
manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates
enacted or substantively enacted at the reporting date.
In determining the amount of current and deferred tax the group takes into account the impact of
uncertain tax positions and whether additional taxes and interest may be due. The group believes that
its accruals for tax liabilities are adequate for all open tax years based on its assessment of many
factors, including interpretations of tax law and prior experience. This assessment relies on estimates
and assumptions and may involve a series of judgements about future events. New information may
become available that causes the company to change its judgement regarding the adequacy of existing
tax liabilities; such changes to tax liabilities will impact tax expense in the period that such a
determination is made.
Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax
liabilities and assets and they relate to income taxes levied by the same tax authority on the same
taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a
net basis or their tax assets and liabilities will be realised simultaneously.
A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will
be available against which the asset can be utilised. Deferred tax assets are reviewed at each reporting
date and reduced to the extent that it is no longer probable that the related tax benefit will be realised.
(s) Classification of financial instruments issued by the group
Following the adoption of IAS 32, financial instruments issued by the group are treated as equity only
to the extent that they meet the following two conditions:
a)
they include no contractual obligations upon the company (or group as the case may be) to
deliver cash or other financial assets or to exchange financial assets or financial liabilities with
another party under conditions that are potentially unfavourable to the company (or group); and
b) where the instrument will or may be settled in the company’s own equity instruments, it is either
a non-derivative that includes no obligation to deliver a variable number of the company’s own
equity instruments or is a derivative that will be settled by the company’s exchanging a fixed
amount of cash or other financial asset for a fixed number of its own equity instruments.
To the extent that this definition is not met, the proceeds of issue are classified as a financial liability.
Where the instrument so classified takes the legal form of the company’s own shares, the amounts
presented in these financial statements for called up share capital and share premium account exclude
amounts in relation to those shares.
.
43
First Derivatives plc
Notes (continued)
1
Significant accounting policies (continued)
(t) Share capital
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary
shares are recognised as a deduction from equity, net of any tax effects. The nominal value of shares
issued is recognised as share capital. The value of the consideration received in excess of the nominal
value is recognised as share premium.
(u) Segmental reporting
An operating segment is a component of the group that engages in business activities from which it
may earn revenues and incur expenses, including revenues and expenses that relate to transactions
with any of the group’s other components. The operating results are regularly reviewed by the board
and comprise one segment; however the information provided records revenue split between the
various consulting and software activities.
2
Financial risk management
Overview
The group has exposure to the following risks from its use of financial instruments:
Credit risk
Liquidity risk
Market risk
This note presents information about the group’s exposure to the above risks, the group’s objectives,
policies and processes for measuring and managing risk, and the group’s management of capital.
Further quantitative disclosures are included throughout these financial statements.
Risk management framework
The board of directors has overall responsibility for the establishment and oversight of the group’s risk
management framework. The board is responsible for monitoring the group’s risk management policies,
which are established to identify and analyse the risks faced by the group, to set appropriate risk limits
and to monitor adherence to those policies.
Credit risk
Credit risk is the risk of financial loss to the group if a counterparty fails to meet its contractual
obligation and principally arises from the group’s receivables from customers through selling on credit.
This is managed through credit control procedures. Regular contact is made with customers when debts
are overdue with follow up procedures carried out as required. Concentration of credit risk is disclosed
in note 39 to the financial statements.
Liquidity risk
Liquidity risk is the risk that the group will encounter difficulty in meeting the obligations associated
with its financial liabilities that are settled by delivering cash or other financial assets. The group’s
approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient
liquidity to meet its liabilities when due, under normal and stressed conditions, without incurring
unacceptable losses or risking damage to the group’s reputation.
The group generates positive operating cash flows, and is able to meet its liabilities as they fall due. In
addition the group has lines of credit identified in note 28 to the financial statements.
44
First Derivatives plc
Notes (continued)
2
Financial risk management (continued)
Market risk
Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and
equity prices will affect the group’s income or the value of its holdings of financial instruments. The
objective of market risk management is to manage and control market risk exposures within acceptable
parameters, while optimising the return.
The group currently does not use derivative financial instruments to hedge its exposure to currency or
interest rate risk. All loans are currently variable rate in nature, with the terms being at prevailing
market interest rates.
The level of trading and borrowings in foreign currency produces a natural hedge of a large proportion
of the group’s exposures to foreign currency movements on trading and investments. Certain borrowings
in foreign currencies are designated as net investment hedges of foreign operations.
Capital management
The Board’s policy is to maintain a strong capital base so as to maintain investor, creditor and market
confidence and to sustain future development of the business (capital is defined as share capital, share
premium, retained earnings and shares to be issued). The Board of Directors monitors the return on
capital as well as the level of dividends to ordinary shareholders. The group is not subject to external
requirements in respect of its capital, with the exception of the need to comply with the level of ordinary
shares available for trading on the Alternative Investment Market and Enterprise Securities Market, with
which the group has complied in the current year. Additional shares in the group are made available to
staff by the use of share option schemes as disclosed in the notes to the financial statements and as
purchase consideration in business combinations.
The Board seeks to maintain a balance between the higher returns that might be possible with higher
level of borrowings and the advantages and security afforded by a sound capital position.
45
First Derivatives plc
Notes (continued)
3 Acquisitions of subsidiaries
On 27 September 2012 the company obtained control of Redshift Horizons Limited, Cowrie Financial
Limited and Redshift Horizons LLP by acquiring all of the ordinary shares and membership of the
entities. Acquiring the entities has enabled the group to expand its managed services and real-time
infrastructure services. In the 5 months to 28 February 2013 the subsidiaries contributed revenue of
£1,900k and net profit of £187k to the consolidated net profit for the year. If the acquisition had
occurred on 1 March 2012, management estimates that revenue for the group would have been £59,129k
and net profit would have been an estimated £5,407k. In determining these amounts, management has
assumed that the fair value adjustments that arose on the date of acquisition would have been the same if
the acquisition occurred on 1 March 2012.
The following summarises the major classes of consideration transferred and the recognised amounts of
assets acquired and liabilities assumed at the acquisition date.
Effect of acquisitions
The acquisitions had the following effect on the group’s assets and liabilities.
Acquiree’s net assets at the acquisition date:
Intangible assets
Property, plant and equipment
Trade and other receivables
Cash and cash equivalents
Trade and other payables
Deferred tax liability
Pre-acquisition
carrying
amounts
£000
-
4
1,334
139
(1,179)
-
Fair value
adjustments
£000
1,422
-
-
-
-
(341)
Net identifiable assets and liabilities
298
1,081
Goodwill on acquisition
Consideration paid, satisfied as follows:
Cash
Deferred consideration
Shares issued (232,731 shares)
Contingent consideration
Cash consideration paid
Cash (acquired)
Net cash outflow
46
Recognised
values
on acquisition
£000
1,422
4
1,334
139
(1,179)
(341)
1,379
1,919
3,298
1,098
450
1,100
650
3,298
950
(139)
811
First Derivatives plc
Notes (continued)
3 Acquisitions of subsidiaries and associates (continued)
Effect of acquisitions(continued)
£148k of the cash consideration was outstanding at 28 February 2013. The trade and other receivables
comprised gross contractual amounts of £1,094k of which no amounts were expected to be
uncollectable at the acquisition date. Acquisition costs of £8k were capitalised by the company as part
of the investment and were expensed as profit and loss in the group.
Shares issued
The number of ordinary shares issued (232,731 shares) was derived based on the average price of shares
on the 20 days prior to 27 September 2012 (472.65 pence per share). The fair value of the ordinary
shares issued based on the listed share price on the 27 September 2012, the effective date of control
(472.5 pence per share) was not materially different. The impact would be to decrease goodwill by
£35k.
Goodwill
Goodwill has arisen on the acquisition and reflects the future economic benefits arising from assets that
are not capable of being identified individually and recognised as separate assets. The goodwill reflects
the anticipated profitability and synergistic benefits arising from the combination and the ability to
leverage off client relationships and knowhow. The group has carried out an impairment review of
goodwill as at 28 February 2013 and has not identified any impairment (see note 17). None of the
goodwill is expected to be deductible for tax purposes.
Contingent consideration
The group has agreed to pay the selling shareholders additional consideration of £650k if the acquirer’s
turnover exceeds £2,750k over the next 12 months. The group has included £650k as contingent
consideration related to the additional consideration, which represents its fair value at the acquisition
date. At 28 February 2013, the contingent consideration continues to be recognised at £650k and is
payable within 12 months.
Deferred consideration
The group has included £450k as deferred consideration which represents its fair value at the acquisition
date. At 28 February 2013, the deferred consideration continues to be recognised at £450k and is
payable within 12 months.
Acquisition related costs
The group incurred acquisition-related costs of £163k related to external legal fees and due diligence
costs. The legal fees and due diligence costs have been included in administrative expenses in the
group’s consolidated statement of comprehensive income.
2012 acquisitions
There were no acquisitions completed in financial year ended 29 February 2012.
47
First Derivatives plc
Notes (continued)
4 Operating segments
Business segments
The group’s board of directors reviews internal management reports on a monthly basis. The reports
provided to the board of directors focus on group performance. The information provided to the board
does not report performance on a segmented income statement basis, however, contained within the
group management accounts is a split of revenue, detailing the various consulting and software sales
revenue figures throughout the group. This level of information is consistent with the directors’ view of
the nature of the group’s business. Staff work in both areas of the business with substantial investment
being made by the group in developing highly technical training which is provided to all staff to allow
them to cover both software and consulting skills. Costs and assets are therefore not segmented nor
presented on a segmental basis to the board of directors.
The group has disclosed below certain information on its revenue by geographical location. Details
regarding total revenues are presented in note 5.
The group’s two revenue streams are separated as follows:
Consulting activities which includes services to capital markets; and
Software activities which includes the sale of intellectual property and related services.
Revenue by division
Consulting
Software
Total
2013
£’000
2012
£’000
2013
£’000
2012
£’000
2013
£’000
2012
£’000
41,475
32,629
14,994
13,458
56,469
46,087
Total Segment
Revenue
Geographical location analysis
UK
Rest of
Europe
America
Australasia
Total
2013
£’000
2012
£’000
2013
£’000
2012
2013
£’000 £’000
2012
£’000
2012
2013
2013
£’000 £’000 £’000
2012
£’000
Revenue
from
external
customers
Non Current
Assets
19,485
18,387
8,047
3,795
23,075
18,969
5,862
4,936
56,469
46,087
21,766
20,873
10,437
8,655
22,648
22,727
1,725
1,782
56,576
54,037
48
First Derivatives plc
Notes (continued)
4 Operating segments (continued)
Revenue generated and non-current assets located in Northern Ireland, the group’s country of domicile
are not material and as such, have not been separately disclosed for either the current or prior year.
Major customers
The group has a key customer who individually generated more than 10% of group revenue in 2013.
Revenue from this customer represents approximately £12,165k of the group’s total revenue. The
revenue from this customer has been derived from 32 different independent decision making business
units across seven global locations with no other unit accounting for more than 3.51%. In the prior year
the same key customer accounted for more than 10% of group revenue. Revenues from this customer
accounted for approximately £14,882k of the group’s total revenue in 2012.
5 Revenue
Sale of goods
Rendering of services
Commissions
6 Other operating income
Government grants
Other income
2013
£’000
2012
£’000
8,845
47,604
20
56,469
7,216
38,472
399
46,087
2013
£’000
1,589
27
1,616
2012
£’000
1,411
3
1,414
During the year, employment grant income of £435k (2012: £2,424k) was claimed from Invest Northern
Ireland.
49
First Derivatives plc
Notes (continued)
7 Administrative expenses
Rent, rates and insurance
Telephone
Accountancy, audit and legal expenses
Advertising and marketing
Depreciation and amortisation
Payroll costs
Research and development credit
Listing expenses
Bad debts written off /(recovered)
Profit on disposal of property, plant and equipment
Other
2013
£’000
2012
£’000
Restated
1,305
522
725
565
3,226
4,105
(364)
242
1,334
(717)
1,039
11,982
1,259
360
623
418
2,413
3,669
(532)
131
(60)
(528)
660
8,413
Certain comparable balances have been reclassified in the current year (see note 42).
8 Personnel expenses and numbers
The average weekly number of persons (including the directors) employed by the group during the year
is set out below:
Administration
Technical
The aggregate payroll costs of these persons were as follows:
Wages and salaries
Share based payments (see note 40)
Social security costs
Other pension costs
Less capitalised development costs
Disclosed as:
Cost of sales
Administrative expenses
50
2013
2012
Average no. Average no.
94
629
723
2013
£’000
30,310
683
2,940
860
(5,466)
29,327
2013
£’000
25,222
4,105
29,327
65
544
609
2012
£’000
24,699
669
2,459
650
(4,622)
23,855
2012
£’000
20,186
3,669
23,855
First Derivatives plc
Notes (continued)
9
Finance income and expense
Interest income on bank deposits
Finance income
Loss on foreign currency translation of monetary
assets
Interest expense on bank loans
Other interest
Finance expense
Net finance expense recognised in profit or loss
2013
£’000
2012
£’000
1
1
2
2
(538)
(455)
(595)
(66)
(661)
(1,198)
(620)
(28)
(648)
(1,101)
Exchange gains and losses on net investments in foreign subsidiaries and associates and related effective
hedges are recognised in the foreign currency translation reserve.
10 Statutory and other information
Depreciation on property, plant and equipment:
Owned assets
Provision for/(reversal of) impairment of trade
receivables
Amortisation of intangibles
Rents payable in respect of operating leases
Research and development costs expensed
Auditor’s remuneration:
KPMG Ireland
Audit of these financial statements
Audit of the subsidiary undertakings included in the
consolidation
Other services:
Amounts receivable by the auditor (KPMG Ireland) in
respect of:
Audit of financial statements of subsidiaries pursuant to legislation
All other services
Taxation compliance services
Other tax advisory services
2013
£’000
2012
£’000
699
1,334
2,527
486
1,428
592
(60)
1,821
513
1,360
59
16
16
2
40
84
52
15
11
-
37
93
Amounts receivable by the company’s auditor in relation to 2012/2013 activities are £91k.
51
First Derivatives plc
Notes (continued)
11 Tax expense
Income tax recognised in the income statement
Current tax expense
Current year
Adjustment for prior periods
Deferred tax expense
Origination and reversal of temporary differences
Adjustment for prior periods
Change in tax rates
2013
£’000
2012
£’000
1,289
(223)
1,066
81
(20)
(112)
(51)
757
(365)
392
542
159
(92)
609
Total tax expense in income statement
1,015
1,001
Reconciliation of effective tax rate
Profit excluding income tax
Income tax using the company’s domestic tax rate (24.2%) (2012:
26.2%)
Tax exempt income
Expenses not deductible for tax purposes
Over provision in prior year
Other differences
Profit of associate
Foreign tax rate differences
Reduction in tax rates
Unrelieved overseas taxes
6,160
1,489
(88)
(173)
(243)
154
(50)
(129)
(112)
167
1,015
6,947
1,818
(148)
34
(206)
4
(23)
(422)
(92)
36
1,001
Following the 2013 budget statement, the main rate of UK corporation tax was reduced from 24% directly to
23% with effect from the 1 April 2013. Thereafter the main rate of UK corporation tax will continue to
reduce to 21% by 2014 and to 20% from 1 April 2015. It is expected that this gradual fall in the main
corporation tax rate will result in a reduction of the groups future current tax charge.
52
First Derivatives plc
Notes (continued)
12 Remuneration of directors
The remuneration paid to the directors was:
Aggregate emoluments (including benefits in kind)
Company pension contributions
Share option payment charge
2013
£’000
915
47
257
1,219
2012
£’000
823
49
225
1,097
During the period there were 4 directors accruing benefits under a defined contribution pension scheme
(29 February 2012: 4).
The aggregate emoluments and company pension contributions of the highest paid director (excluding
fees paid for provision of services) amounted to £308k and £15k respectively during the year (2012:
£329k and £15k respectively).
The directors are deemed to be the key management of the group.
Directors emoluments
Salary
and
fees Benefits
£’000
-
-
-
-
-
-
-
-
-
-
£’000
50
161
150
120
151
10
35
6
26
709
Share
based
payment Bonus
£’000 £’000
-
100
60
40
6
-
-
-
-
206
15
-
98
136
-
-
8
-
-
257
2013
Total
excluding
pension
£’000
65
261
308
296
157
10
43
6
26
1,172
2013
2012
2012
Total
excluding
pension Pension Pension
£’000
£’000
-
-
21
16
15
15
12
12
1
4
-
-
-
-
-
-
-
-
49
47
£’000
47
210
329
247
135
50
30
-
-
1,048
R D Anderson
B G Conlon
R G Ferguson
A Toner
K Cunningham
M G O’Neill
P Brazel
S Keating
K MacDonald
Total
53
First Derivatives plc
Notes (continued)
12 Remuneration of directors (continued)
Directors interests
Directors’ rights to subscribe for shares in the company are indicated below:
At 01
March
2012
Granted
during the
year
Exercised/
Cancelled
during the
year
At 28
February
2013
Exercise
price
£
Exercise
period
Adrian Toner
David Anderson
Graham Ferguson
Pat Brazel
175,000
175,000
50,000
10,000
175,000
175,000
25,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
175,000
175,000
50,000
10,000
175,000
175,000
4.80
4.15
4.80
1.79
4.15
1.77
2014-2021
2014-2020
2014-2021
2013-2019
2014-2020
2013-2019
25,000
4.80
2014-2021
The average share price during the year was £5.04 (2012: £4.93) and the closing price at year end was
£5.88 (2012: £4.75).
54
First Derivatives plc
Notes (continued)
13 Dividends
Final dividend relating to the prior year
Interim dividend paid
2013
£’000
1,370
538
1,908
2012
£’000
1,187
496
1,683
The dividends recorded in each financial year represent the final dividend of the preceding financial year
and the interim dividend of the current financial year.
The final dividend relating to the prior year amounted to 8.15 (previous year: 7.25) pence per share and
the interim dividend paid during the year amounted to 3.1 (previous year: 3.00) pence per share. The
cumulative dividend paid during the year amounted to 11.25 (previous year: 10.25) pence per share.
After the respective reporting dates, the following dividends were proposed by the directors. The
dividends have not been provided for and there are no income tax consequences.
2013
£’000
2012
£’000
8.40 pence per ordinary share (2012: 8.15 pence)
1,499
1,370
14 Company result
Under Section 408 of the Companies Act 2006, the company is exempt from the requirement to present
its own income statement. The profit after tax (after subtraction of foreign currency loss of £928k
(2012: loss of £631k)) for the financial year of the company as approved by the Board was £3,114k
(2012: £4,504k).
15
(a) Earnings per ordinary share
Basic
The calculation of basic earnings per share at 28 February 2013 was based on the profit attributable to
ordinary shareholders of £5,145k (2012: £5,946k), and a weighted average number of ordinary shares
ranking for dividend of 17,048k (2012: 16,510k).
Basic earnings per share
2013
Pence per
share
2012
Pence per
share
30.2
36.0
55
First Derivatives plc
Notes (continued)
15
(a) Earnings per ordinary share (continued)
Weighted average number of ordinary shares
Issued ordinary shares at 1 March
Effect of share options exercised
Effect of shares issued as purchase consideration
Weighted average number of ordinary shares at 28 February
2012
Number ’000 Number ’000
2013
16,633
317
98
17,048
15,924
170
416
16,510
Diluted
The calculation of diluted earnings per share at 28 February 2013 was based on the profit attributable to
ordinary shareholders of £5,145k (2012: £5,946k) and a weighted average number of ordinary shares
after adjustment for the effects of all dilutive potential ordinary shares of 18,432k (2012: 18,128k).
Diluted earnings per share
Weighted average number of ordinary shares (diluted)
Weighted average number of ordinary shares (basic)
Effect of dilutive share options in issue
Weighted average number of ordinary shares (diluted) at 28 February
2013
Pence
per share
2012
Pence
per share
27.9
32.8
2013
Number
‘000
17,048
1,384
18,432
2012
Number
‘000
16,510
1,618
18,128
At 28 February 2013 1,183k options (2012: 600k) were excluded from the diluted weighted average
number of ordinary shares calculation as their effect would have been anti-dilutive.
The average market value of the group’s shares for purposes of calculating the dilutive effect of share
options was based on quoted market prices for the period the options were outstanding.
56
First Derivatives plc
Notes (continued)
15
(b) Earnings before tax per ordinary share
Earnings before tax per share are based on profit before taxation of £6,160k (2012: £6,947k). The
number of shares used in this calculation is consistent with note 15(a) above.
2013
Pence per
share
2012
Pence per
share
Basic earnings before tax per ordinary share
Diluted earnings before tax per ordinary share
36.1
33.4
42.1
38.3
Reconciliation from earnings per ordinary share to earnings before tax per ordinary share.
Basic earnings per share
Impact of taxation charge
Adjusted basic earnings before tax per share
Diluted earnings per share
Impact of taxation charge
Adjusted diluted earnings before tax per share
2013
Pence per
share
2012
Pence per
share
30.2
5.9
36.1
27.9
5.5
33.4
36.0
6.1
42.1
32.8
5.5
38.3
Earnings before tax per share has been presented to facilitate pre-tax comparison returns on comparable
investments.
(c) Normalised earnings after tax per ordinary share
Normalised earnings after tax per share are based on profit after taxation of £6,480k (2012: £6,195k).
The adjusted profit after tax has been calculated by adjusting for the Group’s share of loss on dilution of
investment in associate £43k (2012: £371k), share of profit of associate £249k (2012: £458k), an
increase in bad debt provision £1,009k (2012: £Nil), acquisition costs £124k (2012: £Nil) and loss on
foreign currency translation after tax effect £408k (2012: £336k). The number of shares used in this
calculation is consistent with note 15(a) above.
2013
Pence per
share
2012
Pence per
share
Basic earnings after tax per ordinary share
Diluted earnings after tax per ordinary share
38.0
35.2
37.5
34.2
57
First Derivatives plc
Notes (continued)
16 Property, plant and equipment
Group
Cost
At 1 March 2012
Additions
Acquisition through business
combinations
Disposals
Reclassification to assets held for sale
Exchange adjustments
At 28 February 2013
Depreciation
At 1 March 2012
Charge for the year
Disposals
Reclassification to assets held for sale
Exchange adjustments
At 28 February 2013
Cost
At 1 March 2011
Additions
Disposals
Reclassification to assets held for sale
Exchange adjustments
At 29 February 2012
Depreciation
At 1 March 2011
Charge for the year
Disposals
Reclassification to assets held for sale
Exchange adjustments
At 29 February 2012
Carrying amounts
At 1 March 2011
At 29 February 2012
At 28 February 2013
Land and
buildings
£’000
Plant and
equipment
£’000
Office
furniture
£’000
14,855
134
-
(2,843)
(3,630)
(22)
8,494
929
254
(160)
(266)
5
762
1,688
928
4
-
-
76
2,696
919
420
-
-
49
1,388
128
36
-
-
-
1
165
85
25
-
-
1
111
Land and
buildings
£’000
Plant and
equipment
£’000
Office
furniture
£’000
18,592
320
(2,352)
(1,734)
29
14,855
922
242
(99)
(136)
-
929
17,670
13,926
7,732
1,143
545
-
-
-
1,688
587
326
-
-
6
919
556
769
1,308
127
1
-
-
-
128
61
24
-
-
-
85
66
43
54
Total
£’000
16,671
1,098
4
(2,843)
(3,630)
55
11,355
1,933
699
(160)
(266)
55
2,261
Total
£’000
19,862
866
(2,352)
(1,734)
29
16,671
1,570
592
(99)
(136)
6
1,933
18,292
14,738
9,094
The basis by which depreciation is calculated is stated in note 1.
Details of security provided for borrowing in respect of property, plant and equipment are disclosed in
note 28.
58
First Derivatives plc
Notes (continued)
16 Property, plant and equipment (continued)
Company
Land and
Buildings
£’000
Plant and
equipment
£’000
Office
furniture and
equipment
£’000
Cost
At 1 March 2012
Additions
Disposals
Reclassification to assets held for sale
At 28 February 2013
Depreciation
At 1 March 2012
Charge for the year
Disposals
Reclassification to assets held for sale
At 28 February 2013
14,660
97
(2,843)
(3,630)
8,284
910
229
(160)
(266)
713
444
156
-
-
600
353
90
-
-
443
68
7
-
-
75
60
5
-
-
65
Land and
Buildings
£’000
Plant and
equipment
£’000
Office
furniture and
Equipment
£’000
Cost
At 1 March 2011
Additions
Disposals
Reclassification to assets held for
sale
At 29 February 2012
Depreciation
At 1 March 2011
Charge for the year
Disposals
Reclassification to assets held for
sale
At 29 February 2012
Carrying amounts
At 1 March 2011
At 29 February 2012
At 28 February 2013
18,567
179
(2,352)
(1,734)
14,660
908
237
(99)
(136)
910
17,659
13,750
7,571
356
88
-
-
444
305
48
-
-
353
51
91
157
67
1
-
-
68
52
8
-
-
60
15
8
10
The basis by which depreciation is calculated is stated in note 1.
No assets are held under finance leases.
Details of security in respect of property, plant and equipment are disclosed in note 28.
59
Total
£’000
15,172
260
(2,843)
(3,630)
8,959
1,323
324
(160)
(266)
1,221
Total
£’000
18,990
268
(2,352)
(1,734)
15,172
1,265
293
(99)
(136)
1,323
17,725
13,849
7,738
First Derivatives plc
Notes (continued)
17
Intangible assets and goodwill
Group
Cost
Balance at 1 March 2012
Development costs
Additions
Acquisition through
business combinations
Adjustment to deferred
consideration
Exchange adjustments
Balance at 28 February
2013
Amortisation and
impairment losses
Balance at 1 March 2012
Exchange adjustment
Amortisation for the year
Balance at 28 February
2013
Cost
Balance at 1 March 2011
Development costs
Additions
Adjustment to deferred
consideration
Exchange adjustments
Balance at 29 February
2012
Amortisation and
impairment losses
Balance at 1 March 2011
Exchange adjustment
Amortisation for the year
Balance at 29 February
2012
Carrying amounts
At 1 March 2011
At 29 February 2012
At 28 February 2013
Goodwill
Customer
lists
Acquired
Software
Brand name
£’000
£’000
£’000
£’000
12,890
-
-
2,362
-
-
1,919
1,350
(317)
451
-
98
8,645
-
553
-
-
316
304
-
-
72
-
11
Internally
developed
software
£’000
10,951
5,608
-
Total
£’000
35,152
5,608
553
-
3,341
-
202
(317)
1,078
14,943
3,810
9,514
387
16,761
45,415
-
-
-
-
924
51
381
2,433
157
1,063
1,356
3,653
107
6
43
156
1,635
30
1,040
5,099
244
2,527
2,705
7,870
Goodwill Customer
lists
Acquired
Software
Brand
name
£’000
£’000
£’000
£’000
13,941
-
-
(1,354)
303
2,327
-
-
-
35
7,252
-
1,340
-
53
302
-
-
-
2
Internally
developed
software
£’000
6,168
4,819
-
-
(36)
Total
£’000
29,990
4,819
1,340
(1,354)
357
12,890
2,362
8,645
304
10,951
35,152
1,424
6
1,003
2,433
5,828
6,212
5,861
65
4
38
107
237
197
231
1,152
(4)
487
3,258
20
1,821
1,635
5,099
5,016
9,316
14,056
26,732
30,053
37,545
-
-
-
-
13,941
12,890
14,943
617
14
293
924
1,710
1,438
2,454
60
First Derivatives plc
Notes (continued)
17 Intangible assets and goodwill (continued)
The basis by which amortisation is calculated is stated in note 1. Amortisation is recognised in
administration expenses in the income statement.
Included within development costs capitalised in the year is £5,466k (2012: £4,622k) of capitalised
employees costs, including £107k of capitalised share option costs (2012: £183k) together with £35k of
capitalised consultancy costs (2012: £197k) for the year. Developed software includes £2,235k (2012:
£4,414k) of software under development at 28 February 2013 not yet commissioned.
Impairment testing of goodwill
The group tests goodwill annually for impairment on 28/29 February, or more frequently if there are
indications that goodwill might be impaired. For the purposes of impairment testing, goodwill is
allocated to divisions which represent the lowest level within the group at which goodwill is monitored,
which is not higher than the statutory entity level summary. A statutory entity level summary of the
goodwill is presented below:
Subsidiaries
Market Resource Partners LLC
Reference Data Factory LLC
Lepton Pty Limited
First Derivatives (Ireland) Limited
LakeFront Data Ventures Inc.
Cowrie Financial Limited
Redshift Horizons Limited
Associate
Kx Systems Inc. (included in note 18)
2013
£’000
10,045
788
1,483
171
537
841
1,078
14,943
2012
£’000
9,602
1,100
1,493
166
529
-
-
12,890
4,186
4,008
The recoverable amount of each cash generating unit (CGU) has been determined based on a value-in-use
(VIU) calculation using cash flows derived from financial projections over a five year period, with cash
flows thereafter calculated using a terminal value methodology. A growth rate of 10% (2012: 10%) is
applied for years 2 to 5, followed by a growth rate of 2% (2012: 2%) thereafter. The pre-tax discount
rates applied to cash flow projections of the CGUs was 15% (2012: 15%).
61
First Derivatives plc
Notes (continued)
17
Intangible assets and goodwill (continued)
Projected cash flows are most sensitive to assumptions regarding future profitability and working capital
investment. The values applied to these key assumptions are derived from a combination of external
and internal factors, based on past experience together with management’s future expectations about
business performance.
Discount rates reflect the current market assessment of the risk specific to each CGU. The discount rate
was estimated based on past experience and industry average weighted average cost of capital adjusted
to reflect the market assessment of risks specific to each CGU for which the cash flow projections have
not been adjusted.
There was no impairment charge for the year ended 28 February 2013 (2012: Nil). For the purposes of
performing sensitivity analysis, a change in the assumption to increase the discount rate by 0.5% or,
separately, to reduce the terminal growth by 0.5% would not result in any indication of impairment.
No reasonable change in assumption would indicate any impairment.
Company
Cost
Balance at 1 March 2012
Development cost
Balance at 28 February 2013
Amortisation and impairment losses
Balance at 1 March 2012
Amortisation for the year
Balance at 28 February 2013
Cost
Balance at 1 March 2011
Development cost
Balance at 29 February 2012
Amortisation and impairment losses
Balance at 1 March 2011
Amortisation for the year
Balance at 29 February 2012
Carrying amounts
At 1 March 2011
At 29 February 2012
At 28 February 2013
Internally
developed
software
£’000
7,249
4,183
11,432
1,316
733
2,049
4,222
3,027
7,249
1,039
277
1,316
3,183
5,933
9,383
Included within development costs capitalised in the year is £4,076k (2012: £3,027k) of capitalised
employees costs including £107k of capitalised share option costs (2012: £183k) for the year.
Developed software includes £1,490k (2012: £2,784k) of software under development at 28 February
2013 not yet commissioned.
62
First Derivatives plc
Notes (continued)
18
Investment in subsidiaries and associate
The group and company have the following investments in subsidiaries:
Country of
incorporation
Class of
share held
Group
Market Resource Partners LLC
First Derivatives Holdings Pty Limited
First Derivatives Pty Limited
First Derivatives (Ireland) Limited
Reference Data Factory LLC
First Derivatives Holdings Inc
First Derivatives US Inc
First Derivatives No.1 Inc
LakeFront Data Ventures Inc
Market Resource Partners Limited
Cowrie Financial Limited
Redshift Horizons Limited
United States
Australia
Australia
Ireland
United States
United States
United States
United States
Canada
N. Ireland
UK
UK
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ownership
2013
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
Company
Market Resource Partners LLC
First Derivatives Holdings Pty Limited
First Derivatives (Ireland) Limited
First Derivatives Holdings Inc
First Derivatives No.1 Inc
LakeFront Data Ventures Inc
Market Resource Partners Limited
Cowrie Financial Limited
Redshift Horizons Limited
Country of
incorporation
Class of
share held
United States
Australia
Ireland
United States
United States
Canada
N. Ireland
UK
UK
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ownership
2013
100%
100%
100%
100%
100%
100%
100%
100%
100%
2012
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
-
-
2012
100%
100%
100%
100%
100%
100%
100%
-
-
First Derivatives Holdings Pty Limited holds 100% of the ordinary shares of First Derivatives Pty
Limited. First Derivatives Holdings Inc. holds 100% of the ordinary shares of Reference Data Factory
LLC and First Derivatives US Inc. First Derivatives Plc and Redshift Horizons Limited are the only
members of the subsidiary Redshift Horizons LLP.
Unlisted investments in subsidiaries at cost
At 1 March
Additions
Increase of contingent deferred consideration
Foreign exchange movement in contingent deferred consideration
At 28 February
63
Company
2013
£’000
2012
£’000
14,549
3,306
-
9
14,217
-
133
199
17,864
14,549
First Derivatives plc
Notes (continued)
18
Investment in subsidiaries and associate (continued)
Associate
The group has the following investment in an associate:
Group and Company
Kx Systems Inc
Country of
incorporation
Class of
share held
Ownership
2013
2012
United States
Ordinary
20.1%
20.4%
The group’s share of profit in associates for the year was £249k (2012: £458k). The associate is not
publicly listed and consequently does not have a published share price. During the year, the group
received dividends of £1,267k (2012: £570k) from its associate. Summary financial information for the
year to 28 February 2013 for the associate for total assets, total liabilities, revenue and net profit was
£9,984k (2012: £11,345k), £7,185k (2012: £5,748k), £8,367k (2012: £9,586k) and £3,221k (2012:
£3,329k) respectively.
Group
At 1 March
Dividends received
Share of associate profit
Loss on dilution in associate using the equity method
Exchange adjustment
At 28 February
Company
At 29 February 2012 and 28 February 2013
2013
£’000
7,059
(1,267)
249
(43)
297
2012
£’000
7,447
(570)
458
(371)
95
6,295
7,059
£’000
7,196
The directors are of the view that the fair value of the investment in Kx Systems is substantially in
excess of its carrying value. The loss on dilution arises on the exercise of share options in Kx Systems at
an exercise price less than the carrying value per share at which the group acquired its investment.
Goodwill arising on the associate was tested for impairment, see note 17.
64
First Derivatives plc
Notes (continued)
19 Trade and other receivables
Current assets
Trade receivables
Receivables from associates
Receivables from subsidiaries
Sundry receivables
Prepayments
Grant income receivable
Non current assets
Receivables from subsidiaries
Trade and other receivables
Grant income receivable
Group
2013
£’000
14,672
43
-
2,665
1,807
650
19,837
2012
£’000
9,299
64
-
2,379
1,159
866
13,767
Company
2013
£’000
2012
£’000
7,541
43
7,803
302
1,562
263
17,514
4,871
64
7,832
180
753
1,087
14,787
Group
2013
£’000
-
737
936
1,673
2012
£’000
-
-
437
437
Company
2013
£’000
2,632
737
-
3,369
2012
£’000
2,198
-
-
2,198
The repayment terms of the receivable from subsidiaries has been agreed as falling due after more than
one year.
At 28 February 2013 group and company trade receivables are shown net of an allowance for doubtful
debts of £1,532k and £211k respectively (2012: group £379k; company £230k) arising from on-going
invoice disputes and the risk of companies defaulting. The impairment charge in the year was £1,334k
(2012: charge £60k) for group and £128k (2012: charge £120k) for the company.
The group’s and company’s exposure to credit and currency risks and impairment losses related to trade
and other receivables is disclosed in note 39.
20 Cash and cash equivalents
Bank balances
Group
Company
2013
£’000
1,902
2012
£’000
1,318
2013
£’000
1,397
2012
£’000
962
See note 39 for discussion of interest rate risk and sensitivity analysis.
For the purposes of the Statement of Cashflows, cash and cash equivalents compromises bank balances
less the bank overdraft (see note 28).
65
First Derivatives plc
Notes (continued)
21 Assets held for resale
The three properties presented as held for sale in the prior year were disposed off during the current
year. Six properties are presented as held for sale following the commitment of management to a plan
to dispose of the properties. Efforts to sell the properties have commenced and are expected to be
concluded by August 2013. No impairment loss has been recognised as management expect to dispose
of the properties at a profit.
Property, plant and Equipment
3,364
1,598
Group
2013
£’000
2012
£’000
Company
2013
£’000
3,364
2012
£’000
1,598
22
Share capital
In issue at 1 March
Exercise of share options (Note 40)
Issued in business combinations (Note 3)
Issued as payment of deferred consideration
In issue at 28 February – fully paid
Ordinary shares
2013
Number
16,633,036
618,302
232,731
-
17,484,069
2012
Number
15,923,953
258,168
-
450,915
16,633,036
Equity shares
Issued, allotted and fully paid
Ordinary shares of £0.005 each
2013
Number
2013
£’000
2012
Number
17,484,069
_________
87
___
16,633,036
_________
2012
£’000
83
___
The holders of ordinary shares are entitled to receive dividends as declared from time to time and
are entitled to one vote per share at meetings of the company.
Shares increased in the year due to the exercise of 618,302 share options (2012: 258,168) for
consideration of £963k (2012: £360k) together with an associated transfer from the share option reserve
of £334k (2012: £83k), the issue of nil shares (2012: 450,915) at £nil (2012: £2,216k) purchase
consideration for outstanding deferred consideration on subsidiaries and the issue of 232,731 shares at
£1,100k (2012: Nil) as purchase consideration in business combinations.
23 Share premium account
Opening balance
Premium on shares issued
Group
2013
£’000
10,502
2,393
Company
2012
£’000
7,846
2,656
2013
£’000
10,502
2,393
2012
£’000
7,846
2,656
Closing balance
12,895
10,502
12,895
10,502
66
First Derivatives plc
Notes (continued)
24
Share option reserve
Group
2013
£’000
Company
2012
£’000
2013
£’000
2012
£’000
Opening balance
Fair value of share based
payments cost (note 40)
Options exercised in the period
Effect of share option forfeits
Deferred tax on share based payments
2,673
2,384
2,673
2,384
686
(334)
(145)
461
725
(83)
(44)
(309)
686
(334)
(145)
461
725
(83)
(44)
(309)
Closing balance
3,341
2,673
3,341
2,673
The share option reserve comprises the charge for unexercised share options granted to employees and
includes share options granted in consideration for the acquisition of business combinations net of
deferred tax assets relating to the tax deduction receivable when the options are exercised.
25 Fair Value reserve
Opening balance
Effect of corporation tax rate reduction on deferred tax liability
Closing balance
Company
2013
£’000
131
2
133
2012
£’000
126
5
131
The fair value reserve includes the cumulative net change in the fair value of available-for-sale financial
assets until the investment is derecognised or impaired. The amount is retained in the company as the
original investment was included at fair value in the carrying value of the associate when significant
influence was obtained.
26 Revaluation reserve
Opening balance
Transfer to retained earnings on loss of interest in associate
Effect of corporation tax rate reduction on deferred tax liability
Closing balance
Group
2013
£’000
167
(2)
2
167
2012
£’000
174
(12)
5
167
For the purposes of the group, the revaluation of the available for sale asset prior to its reclassification as
an associate has been transferred to the revaluation reserve.
67
First Derivatives plc
Notes (continued)
27
Currency translation adjustment reserve
Opening balance
Net gain / (loss) on net investment in foreign subsidiaries
Net gain / (loss) on net investment in associate
Net (loss) /gain on hedge of net investment in foreign subsidiaries
Net (loss) / gain on hedge of investment in associate
Closing balance
Group
2013
£’000
2012
£’000
290
608
297
(97)
(117)
981
197
119
95
(63)
(58)
290
The translation reserve comprises all foreign exchange differences arising from the translation of the
financial statements of foreign operations and intercompany loans that are determined to form part of the
net investment, as well as from the translation of liabilities that hedge the group’s net investment in a
foreign subsidiary.
28 Loans and borrowings
This note provides information about the contractual terms of the group’s and company’s interest-
bearing loans and borrowings, which are measured at amortised costs. For more information about the
group’s and company’s exposure to interest rate, foreign currency and liquidity risk arising from these
loans and borrowings see note 39.
Group
Company
Current liabilities
Secured bank loans
Finance lease liabilities
Non-current liabilities
Secured bank loans
Less: Capital arrangement fee
Finance lease liabilities
2013
£’000
5,762
451
6,213
16,838
(26)
1,030
17,842
2012
£’000
3,447
156
3,603
17,178
(31)
1,451
18,598
2013
£’000
5,762
-
5,762
16,838
(26)
-
16,812
2012
£’000
3,447
-
3,447
17,178
(31)
-
17,147
Terms and debt repayment schedule
The group had the following loan facilities with Bank of Ireland at the end of the year:
£11,500,000 multi currency loan (Facility A)
£9,000,000 multi currency loan (Facility B)
£2,500,000 sterling overdraft (Facility C)
68
First Derivatives plc
Notes (continued)
28 Loans and borrowings (continued)
The terms and conditions of outstanding loans were as follows:
Currency
Nominal
interest rate
Year of
maturity
Multi
Multi
GBP
USD
EUR
3.00%+LIBOR
2.50%+LIBOR*
2.00%+LIBOR
3%+ LIBOR
4.375%
2015
2017
-
2016
2015
28 February 2013
Face
value
£000
Carrying
amount
£000
29 February 2012
Carrying
amount
£000
Face
value
£000
11,376
9,000
2,224
-
1,481
24,081
11,350
9,000
2,224
-
1,481
24,055
9,652
8,542
1,553
878
1,607
22,232
9,621
8,542
1,553
878
1,607
22,201
Facility A
Facility B
Facility C
Loan A
Finance lease liabilities
Total interest-bearing
* The nominal interest rate varies as the group meets financial targets and these have been assessed as
being closely linked to the underlying contract with a minimum rate available of 2.0%+LIBOR.
The bank loans are secured over property, plant and equipment including assets held for sale with a
carrying amount of £11,096k (2012: £15,524k). All outstanding loans have interest charged at 2%,
2.50% or 3% (2012: 2%, 2.25% or 3%) above LIBOR.
Finance lease liabilities
Finance lease liabilities are payable as follows:
Group
Future
minimum
lease
payments
2013
£’000
511
1,054
1,565
Interest
2013
Principal
2013
£’000
60
24
84
£’000
451
1,030
1,481
Future
minimum
lease
payments
2012
£’000
224
1,531
1,755
Interest
2012
Principal
2012
£’000
68
80
148
£’000
156
1,451
1,607
Less than one year
Between one and
five years
The finance leases are secured over the leased equipment.
69
First Derivatives plc
Notes (continued)
29 Deferred taxation
Group
Deferred tax assets and liabilities are attributable to the following:
Property, plant and equipment
Share based payments
Trading Losses
Net fair value movement on
available for sale assets
Intangible assets
Other
Net tax assets/(liabilities)
Assets
Liabilities
2012
£000
-
1,048
302
-
-
400
1,750
2013
£000
(1,530)
-
-
(40)
(1,052)
-
(2,622)
2012
£000
(1,633)
-
-
(42)
(549)
-
(2,224)
2013
£000
-
1,211
323
-
-
435
1,969
Net
2013
£000
(1,530)
1,211
323
(40)
(1,052)
435
(653)
2012
£000
(1,633)
1,048
302
(42)
(549)
400
(474)
Movement in deferred tax balances differences during the year:
Property, plant and
equipment
Share based payments
Trading losses
Net fair value movement on
available for sale assets
Intangible assets
Other
Balance at
1 March 2011
£000
(881)
Recognised in
income
£000
(752)
Recognised
in equity
£000
-
Share options
exercised
£000
-
Balance at
29 Feb 2012
£000
(1,633)
Recognised in
income
£000
103
Recognised in
equity
£000
-
1,427
228
(47)
(387)
201
541
32
74
-
(162)
199
(609)
(309)
-
5
-
-
(304)
(102)
-
-
-
-
(102)
1,048
302
(42)
(549)
400
(474)
28
21
-
(136)
35
51
461
-
2
(26)
-
437
Recognised on
acquisition
£000
-
-
-
-
(341)
-
(341)
Share options
exercised
£000
-
(326)
-
-
-
(326)
Balance at
28 Feb 2013
£000
(1,530)
1,211
323
(40)
(1,052)
435
(653)
The basis by which taxation is calculated is stated in note 1. There is no unprovided or unrecognised deferred tax balances.
70
First Derivatives plc
Notes (continued)
29 Deferred taxation (continued)
Company
Deferred tax assets and liabilities are attributable to the following:
Assets
Liabilities
Net
Property, plant and equipment
Share based payments
Net fair value movement on
available for sale assets
Trading losses
Other
Net tax assets/(liabilities)
2013
£000
-
1,211
-
131
37
1,379
2012
£000
-
1,048
-
-
36
1,084
Movement in deferred tax balances during the year:
Property, plant and
equipment
Share based payments
Net fair value movement on
available for sale assets
Trading losses
Other
Balance at
1 March 2011
Recognised in profit
and loss
Recognised in equity
£000
(867)
1,427
(47)
-
41
554
£000
(630)
32
-
-
(5)
(603)
£000
-
(309)
5
-
-
(304)
2013
£000
(1,433)
-
(40)
-
-
(1,473)
Share
options
exercised
£000
-
(102)
-
-
-
(102)
2012
£000
(1,497)
-
(42)
-
-
(1,539)
2013
£000
(1,433)
1,211
(40)
131
37
(94)
2012
£000
(1,497)
1,048
(42)
-
36
(455)
Balance at
29 Feb 2012
Recognised in
profit and loss
Recognised in
equity
£000
(1,497)
1,048
(42)
-
36
(455)
£000
64
28
-
131
1
224
£000
-
461
2
-
-
463
Share
options
exercised
Balance at
28 Feb 2013
£000
-
£000
(1,433)
(326)
-
-
-
(326)
1,211
(40)
131
37
(94)
The basis by which taxation is calculated is stated in note 1. There is no unprovided or unrecognised deferred tax balances.
71
First Derivatives plc
Notes (continued)
30 Contingent deferred consideration
Contingent deferred consideration liabilities are payable as follows:
Group
2013
£’000
Company
2012
£’000
2013
£’000
2012
£’000
At 1 March
Additions
(Decrease)/Increase in contingent deferred
consideration
Foreign exchange movement in contingent deferred
consideration
Settled in year – cash
Settled in year – shares issued
Settled in year – share option charge
At 28 February
890
650
7,610
-
259
650
5,268
-
(317)
(1,354)
-
133
13
(471)
-
(3)
762
222
(3,316)
(2,216)
(56)
890
10
(158)
-
(3)
758
199
(3,100)
(2,216)
(25)
259
The payment of contingent deferred consideration was paid in cash together with a share option charge in
respect of share options issued as part of purchase consideration. The (decrease)/increase in contingent
deferred consideration arises from a reassessment of contingent deferred consideration in line with
(decreased)/increased performance of the subsidiary as per the terms of the relevant sale and purchase
agreement. As at 28 February 2013 the maximum total amount payable under the terms of the sale and
purchase agreements is £762k (2012: £4,772k) and the minimum total amount payable is £112k (2012:
£335k).
Less than one year
Between one and five years
Group
2013
£’000
762
-
2012
£’000
890
-
Company
2013
£’000
2012
£’000
758
-
259
-
762
890
758
259
The amount of contingent deferred consideration is variable depending on the future performance of the
relevant subsidiary. £762k (2012: £859k) of the group contingent deferred consideration is payable in
cash and £Nil (2012: £31k) unamortised share option charge.
72
First Derivatives plc
Notes (continued)
31 Deferred consideration
Deferred consideration liabilities are payable as follows:
Group
2013
£’000
2012
£’000
Company
2013
£’000
2012
£’000
At 1 March
Additions in deferred consideration
-
450
450
-
-
-
-
450
450
-
-
-
The deferred consideration is loan notes which are redeemable from 28 March 2013 in either a variable
number of shares or cash.
32 Trade and other payables
Current liabilities
Trade payables
Other payables
Accruals
Deferred income including
government grants
Payables to subsidiaries
Non current liabilities
Group
Company
2013
£’000
2012
£’000
2013
£’000
2012
£’000
1,922
1,990
729
3,864
-
8,505
1,265
1,801
692
3,698
-
7,456
826
1,614
464
1,887
965
5,756
707
1,405
535
1,978
965
5,590
Group
Company
2013
£’000
2012
£’000
2013
£’000
2012
£’000
Deferred income in respect of
government grants
2,224
2,901
1,010
1,820
The group and company’s exposure to currency and liquidity risk related to trade and other payables is
disclosed in note 39.
73
First Derivatives plc
Notes (continued)
32 Trade and other payables (continued)
The group has claimed three government grants to date as follows:
Grant amounting to £5,522k (2012: £5,122k), conditional on recruitment of additional staff. The
grant is recognised as deferred income as additional staff are recruited and is being amortised over
the period of the grant.
Grant amounting to £468k (2012: £468k), conditional on the provision of staff training. It is
recognised as other income as training is provided.
Grant amounting to £1,656k (2012: £1,744k), conditional upon research and development
expenditure. This is recognised as deferred income as expenditure is incurred and is being amortised
over the useful life of the generated intangible.
33 Current tax payable
Group
Company
2013
£’000
2012
£’000
2013
£’000
2012
£’000
Current tax payable
649
702
336
798
34 Provisions
At 28 February 2013 and 29 February 2012
At 1 March 2011
Payments
Release to income statement
At 29 February 2012
At 28 February 2013
Group
£’000
-
344
(78)
(266)
-
-
On the acquisition of the trade and assets of Cognotec Holdings Ltd in 2010 certain contracts were
identified that were deemed to be onerous in nature due to the requirement to deliver services for no
additional income. This related to a prepayment made by a third party prior to the group’s purchase of
the trade and assets of the business. The contracted service to be delivered for this payment had not been
delivered at the time of the acquisition. The group had an obligation to refund the prepayment and
subsequently reached a settlement with the third party in the prior year.
35 Employee benefits
Accrued holiday pay
Employee taxes
Group
Company
2012
£’000
632
1,478
2,110
2013
£’000
625
2,151
2,776
2012
£’000
517
1,384
1,901
2013
£’000
775
2,263
3,038
74
First Derivatives plc
Notes (continued)
36 Commitments
There was no capital or other commitments at the current or prior year end.
Non-cancellable operating lease rentals are payable as follows:
Less than one year
Between one and five years
More than five years
Group
2013
£’000
447
1,376
821
2,644
2012
£’000
572
1,466
1,121
3,159
Company
2013
£’000
140
560
700
1,400
2012
£’000
140
560
840
1,540
The group leases four premises under operating lease arrangements.
Group
During the year £486k was recognised as an expense in the income statement in respect of operating
leases (2012: £513k).
Company
During the year £140k was recognised as an expense in the income statement in respect of operating
leases (2012: £140k).
37 Pension contributions
The group makes contributions to the personal pension schemes of certain employees. The pension
charge for the year amounted to £860k (2012: £650k). Contributions amounting to £124k (2012: £101k)
were payable to the schemes at the year end and are included in creditors.
38 Related parties transactions
Parent and ultimate controlling party
There is no one party who is the ultimate controlling party of the group and company.
Group
Key management personnel compensation
The remuneration of the directors and rights to subscribe for shares as set out in note 12 is deemed to be
the remuneration of key management personnel.
Key management personnel and director transactions
The Group is charged rent monthly for the use of apartments located in London owned by Brian Conlon.
The charge incurred during the financial year amounted to £53k (2012: £53k). Rent deposits of £26k
(2012: £26k) have been paid to the Brian Conlon in respect of these apartments. The balance owed to
Brian Conlon at 28 February is £Nil (2012: £Nil).
During the year the group incurred £Nil (2012: £40k) expenditure with Glenmount Limited, a
consultancy services company in which M O’Neill is a director. The balance owed to Glenmount at
28 February 2013 is £Nil (2012: £6k).
75
First Derivatives plc
Notes (continued)
38 Related parties transactions (continued)
A 15 year lease was entered into for the rental of office space for the head office in Newry. The lessor is
Oncon Properties, a partnership owned by B Conlon and M O’Neill. £140k (2012: £140k) rental charge
was incurred in the year. The balance owed to Oncon at 28 February 2013 is £Nil (2012: £Nil).
Other related party transactions
Commission earned
Associate
Associate
Company
Other related party transactions
Subsidiaries
Associate
2013
£000
20
20
2012
£000
458
458
Administrative expenses
incurred from
2012
£000
2013
£000
-
-
121
121
Receivables outstanding
2012
£000
2013
£000
Payables outstanding
2012
£000
2013
£000
148
148
106
106
-
-
-
-
Revenue
2013
£000
1,741
98
Administrative expenses
incurred from
2012
£000
2013
£000
6,153
-
4,317
121
2012
£000
1,783
458
1,839 2,241
6,153
4,438
76
First Derivatives plc
Notes (continued)
38 Related parties transactions (continued)
Subsidiaries
Associates
Receivables outstanding
2013
£000
2012
£000
Payables outstanding
2012
£000
2013
£000
10,435
148
10,030
106
10,583
10,136
965
-
965
965
-
965
The above associate receivables balances outstanding for group and company includes a trade receivable
balance of £43k (2012: £64k) and a prepayment of £105k (2012: £42k).
All outstanding trade receivable balances with the associate are on an arm’s length basis and are due to
be settled in cash within six months of the reporting date. The balances are not secured. The group has a
perpetual OEM agreement for the kdb+ software.
During the year development costs of £nil (2012: £328k) were recharged from a subsidiary to the
company.
Interest is charged on inter-company loans at market rates.
39 Financial instruments
Fair values
Group
The fair values of financial assets and liabilities, together with the carrying amounts shown in the balance
sheet, are as follows:
2013
Trade and other receivables
Cash and cash equivalents
Secured bank loans
Finance leases
Trade, accruals and other
payables
Employee benefits
Deferred consideration
Contingent deferred
consideration
Carrying
amount
Fair
value
£’000
19,703
1,902
(22,574)
(1,481)
(4,641)
(3,038)
(450)
(762)
£’000
19,703
1,902
(22,574)
(1,481)
(4,641)
(3,038)
(450)
(762)
Loans and
receivables
£’000
19,703
1,902
-
-
Liabilities at
amortised
cost
£’000
-
-
(22,574)
(1,481)
(4,641)
(3,038)
(450)
(762)
-
-
-
77
First Derivatives plc
Notes (continued)
39
Financial instruments (continued)
Fair values (continued)
2012
Loans and
receivables
£’000
13,045
1,318
-
-
-
Liabilities at
amortised
cost
£’000
-
-
(20,594)
(1,607)
(3,758)
Carrying
amount
Fair
value
£’000
13,045
1,318
(20,594)
(1,607)
(3,758)
£’000
13,045
1,318
(20,594)
(1,607)
(3,758)
-
-
(2,110)
(859)
(2,110)
(859)
(2,110)
(859)
Trade and other receivables
Cash and cash equivalents
Secured bank loans
Finance leases
Trade, accruals and other
payables
Employee benefits
Contingent deferred
consideration
Company
The fair values of financial assets and liabilities, together with the carrying amounts shown in the balance
sheet, are as follows:
2013
Loans and
receivables
£’000
19,321
1,397
-
-
-
-
-
Liabilities at
amortised
cost
£’000
-
-
(22,574)
(3,869)
(2,776)
(450)
(758)
Carrying
amount
Fair value
£’000
£’000
19,321
1,397
(22,574)
(3,869)
(2,776)
(450)
(758)
19,321
1,397
(22,574)
(3,869)
(2,776)
(450)
(758)
Trade and other receivables
Cash and cash equivalents
Secured bank loans
Trade, accruals and other
payables
Employee benefits
Deferred consideration
Contingent deferred
consideration
78
First Derivatives plc
Notes (continued)
39 Financial instruments (continued)
Fair values (continued)
2012
Loans and
receivables
£’000
16,232
962
-
-
-
-
Liabilities at
amortised
cost
£’000
-
-
(20,594)
(3,612)
(1,901)
(259)
Carrying
amount
Fair value
£’000
£’000
16,232
962
(20,594)
(3,612)
16,232
962
(20,594)
(3,612)
(1,901)
(259)
(1,901)
(259)
Trade and other receivables
Cash and cash equivalents
Secured bank loans
Trade, accruals and other
payables
Employee benefits
Contingent deferred
consideration
Licence agreement
During the year the Group entered into a licence agreement which upon termination or expiry of the
licence, it will receive a termination fee based on 30% of enterprise value of the licensee. This is
considered to be a level 3 fair value instrument. The Group and the licensee both have the option to
the
terminate the agreement after an initial contract period of five years. At
termination fee was fair valued at £Nil as the provision of the licensed services had not commenced until
subsequent to the year end and the agreement was therefore not considered to have commenced. No fair
value gain or loss has been recognised in the Consolidated Statement of Comprehensive Income during
the period (2012: £Nil).
February
2013,
28
Exposure to credit risk
The carrying amount of financial assets represents the maximum credit exposure. The maximum
exposure to credit risk at the reporting date was:
Trade and other receivables
Cash and cash equivalents
Group
Carrying amount
2013
£’000
2012
£’000
Company
Carrying amount
2013
£’000
2012
£’000
19,703
1,902
21,605
____
13,045
1,318
14,363
_____
19,321
1,397
20,718
____
16,232
962
17,194
_____
All financial assets which are subject to credit risk are held at amortised cost.
79
First Derivatives plc
Notes (continued)
39 Financial instruments (continued)
Exposure to credit risk (continued)
The maximum exposure to credit risk for trade and other receivables at the reporting date by
geographical region was:
Europe
America
United Kingdom
Australasia
Group
Company
2013
£’000
4,585
7,621
4,934
2,563
2012
£’000
2,667
4,949
3,666
1,763
2013
£’000
8,054
6,630
3,906
731
2012
£’000
6,861
4,899
3,759
713
19,703
13,045
19,321
16,232
The maximum exposure to credit risk for trade and other receivables at the reporting date by type of
counterparty was:
End-user customer
Other
Group
Company
2013
£’000
14,948
4,755
2012
£’000
9,337
3,708
2013
£’000
7,585
11,736
2012
£’000
5,040
11,192
19,703
13,045
19,321
16,232
The group’s most significant customer is an investment bank which accounts for £2,103k of the trade and
other receivables carrying amount at 28 February 2013 (2012: £1,472k). No other customers had
receivable balances in excess of 10% of the group’s total balance at the year end. In addition £650k
(2012: £1,303k) is receivable from Invest Northern Ireland in respect of grants receivable.
Impairment losses
The ageing of trade receivables at the reporting date was:
Group
Not past due
Past due 0-30 days
Past due 31-120 days
Past due 120 days +
Total
Impairment
2013
£’000
-
-
-
1,532
1,532
Gross
2012
£’000
4,612
1,464
761
2,841
9,678
Impairment
2012
£’000
-
-
-
379
379
Gross
2013
£’000
7,628
1,769
1,023
5,784
16,204
80
First Derivatives plc
Notes (continued)
39 Financial instruments (continued)
Impairment losses (continued)
Company
Not past due
Past due 0-30 days
Past due 31-120 days
Past due 120 days +
Total
Gross
2013
£’000
4,784
1,256
563
1,149
7,752
Impairment
2013
£’000
-
-
-
211
211
Gross
2012
£’000
3,192
757
425
727
5,101
Impairment
2012
£’000
-
-
-
230
230
The movement in the specific allowance for impairment in respect of trade receivables during the year
was as follows:
Group
Company
Balance at 1 March
Impairment loss (reversed)
/charged
Amounts written off
Balance at 28 February
2013
£’000
379
1,334
(181)
1,532
2012
£’000
440
(60)
(1)
379
2013
£’000
230
128
(147)
211
2012
£’000
350
(120)
-
230
A review of debt outstanding led to the increase of £1,334k in the impairment provision. A specific
impairment loss was incurred during the prior year with regard to concerns over the recoverability of debt
various customers mainly due to the economic circumstances of the customers. The group and company
believe that the unimpaired amounts that are past due by more than 30 days are still collectible, based on
historic payment behaviours.
The above allowance for impairment for the group includes a collective based provision of £nil (2012:
£112k). The allowance for impairment for the company is entirely specific.
The group and company held cash and cash equivalents of £1,902k (2012: £1,318k) and £1,397k (2012:
£962k) respectively at 28 February 2013 which represents their maximum exposure on the assets. The
cash and cash equivalents are held with bank and institutional counter parties which are rated AA- to AA+
based on credit agency ratings.
81
First Derivatives plc
Notes (continued)
39 Financial instruments (continued)
Liquidity risk
Group
The following are contractual maturities of financial liabilities, including estimated interest payments.
28 February 2013
Secured bank loans
Finance leases
Trade and other payables
Deferred consideration
29 February 2012
Secured bank loans
Finance leases
Trade and other payables
Deferred consideration
Carrying
amount
£’000
(22,574)
(1,481)
(4,641)
(1,212)
(29,908)
Contractual
cash flows
£’000
(24,113)
(1,565)
(4,641)
(1,212)
(31,531)
Carrying
amount
£’000
(20,594)
(1,607)
(3,758)
(859)
(26,818)
Contractual
cash flows
£’000
(25,475)
(1,755)
(3,758)
(859)
(31,847)
6 mths
or less
£’000
(3,517)
(205)
(4,641)
(562)
(8,925)
6 mths
or less
£’000
(2,881)
(87)
(3,758)
(438)
(7,164)
6-12 mths
1-2 years
£’000
(2,978)
(306)
-
(650)
(3,934)
£’000
(4,042)
(1,054)
-
-
(5,096)
2-5 years More than
5 years
£’000
-
-
-
-
-
£’000
(13,576)
-
-
-
(13,576)
6-12 mths
1-2 years
£’000
(1,589)
(137)
-
(421)
(2,147)
£’000
(3,045)
(498)
-
-
(3,543)
2-5 years More than
5 years
£’000
-
-
-
-
-
£’000
(17,960)
(1,033)
-
-
(18,993)
The above contracted cash flows include interest on secured bank loans the terms of which are set out in
note 28.
Company
The following are contractual maturities of financial liabilities, including estimated interest payments.
28 February 2013
Secured bank loans
Trade and other payables
Deferred consideration
29 February 2012
Secured bank loans
Trade and other payables
Deferred consideration
Carrying
amount
£’000
(22,574)
(3,869)
(1,208)
(27,651)
Carrying
amount
£’000
(20,594)
(3,612)
(259)
(24,465)
Contractual
cash flows
£’000
(24,113)
(3,869)
(1,208)
(29,190)
Contractual
cash flows
£’000
(25,475)
(3,612)
(259)
(29,346)
6 mths
or less
£’000
(3,517)
(3,869)
(558)
(7,944)
6 mths
or less
£’000
(2,881)
(3,612)
(259)
(6,752)
6-12 mths
1-2 years
£’000
(2,978)
-
(650)
(3,628)
£’000
(4,042)
-
-
(4,042)
6-12 mths
1-2 years
£’000
(1,589)
-
-
(1,589)
£’000
(3,045)
-
-
(3,045)
2-5 years More than
5 years
£’000
-
-
-
-
£’000
(13,586)
-
-
(13,576)
2-5 years More than
5 years
£’000
-
-
-
-
£’000
(17,960)
-
-
(17,960)
The above contracted cash flows include interest on secured bank loans the terms of which are set out in
note 28.
It is not expected that the cash flows included in the maturity analysis could occur significantly earlier, or
at significantly different amounts.
82
First Derivatives plc
Notes (continued)
39 Financial instruments (continued)
Currency risk
Group
The group’s exposure to currency risk was as follows:
28 February 2013
Euro
£’000
938
-
-
938
CAD
£000’s
697
-
-
697
USD
£’000
7,527
-
-
7,527
29 February 2012
CAD
£000’s
947
-
-
947
Euro
£’000
249
-
-
249
USD
£’000
4,091
(453)
-
3,638
Trade receivables
Secured bank loans
Trade payables
Gross balance sheet
exposure
The secured bank loan above excludes bank loans designated in a net investment hedge of £9,356k
(2012: £10,631k).
Company
The company’s exposure to currency risk was as follows:
28 February 2013
29 February 2012
CAD
£000’s
697
-
-
697
Euro
£’000
886
-
-
886
USD
£’000
3,209
(9,356)
-
(6,147)
CAD
£000’s
947
-
-
947
Euro
£’000
215
-
-
215
USD
£’000
1,679
(11,084)
-
(9,405)
Trade receivables
Secured bank loans
Trade payables
Gross balance sheet
exposure
The following significant exchange rates applied during the year:
USD 1
EUR 1
CAD 1
Average rate
Reporting date
spot rate
2013
1.57
1.23
1.57
2012
1.60
1.16
1.59
2013
1.51
1.15
1.55
2012
1.58
1.18
1.58
Sensitivity analysis
A 10% strengthening of Sterling against the above currencies at the end of the period would decrease
group equity and profit or loss by approximately £1,407k (2012: £762k). A 10% weakening of Sterling
against the above currencies at the end of the period would increase group equity and profit or loss by
approximately £1,407k (2012: £762k). The movement on the net investment hedge would be offset by
the movement in the net investment. This analysis assumes that all other variables, in particular interest
rates, remain constant.
83
First Derivatives plc
Notes (continued)
39 Financial instruments (continued)
Interest rate risks
At the reporting date the interest profile of the group’s and company’s interest bearing financial
instruments was:
Variable rate instruments
- Financial assets
- Financial liabilities
Fixed rate instruments
- Financial assets
- Financial liabilities
Group
2013
£’000
2012
£’000
Company
2013
£’000
2012
£’000
-
(22,600)
(22,600)
-
(1,481)
(1,481)
-
(20,625)
(20,625)
-
(1,607)
(1,607)
-
(22,600)
(22,600)
-
(20,625)
(20,625)
-
-
-
-
-
-
A 10% reduction in interest rates at the end of the period would increase group equity and profit and
loss by approximately £72k (2012: £116k). A 10% increase in interest rates at the end of the period
would decrease group equity and profit or loss by approximately £72k (2012: £116k). This analysis
assumes that all other variables remain constant.
40 Share based payments
Options have been granted as set out below under the group’s two equity-settled share option schemes
which are open to all directors and employees of the group. The key terms of all options issued are
consistent, with all options subject to the completion of one, two, three and four years of service as set by
the group prior to the grant of the option, with the exception of options issued as purchase consideration
which include conditions relating to performance. As the options vest at annual intervals over a three
year period, they are deemed to consist of three separate options for valuation purposes. Vested options
are exercisable following the satisfaction of the service criteria for a period not exceeding 10 years from
the date of grant. It is noted that share options which pre-date the scope of IFRS 2 (Share Based
Payment), are not accounted for under this standard.
84
First Derivatives plc
Notes (continued)
40 Share based payments (continued)
Reconciliation of outstanding share options
The number and weighted average exercise prices of share options have been analysed into three exercise
price ranges as follows:
Weighted
average
exercise
price
2013
Number
of options
Weighted
average
exercise price
Number
of options
2013
2012
2012
1.32
-
1.27
-
1.35
1.35
1,482,667
-
(456,500)
-
1,026,167
1,026,167
1.31
1.04
1.30
-
1.32
1.24
1,790,375
(79,875)
(227,833)
-
1,482,667
630,000
Maximum options outstanding at
beginning of period
Lapsed during the period
Exercised during the period
Granted during the period
Maximum options outstanding at
end of period
Exercisable at end of period
The options outstanding at 28 February 2013 above have an exercise price in the range of £0.510 to
£1.785 (2012: £0.510 to £1.785) and a weighted average contractual life of 4.8 phyears (2012: 5.6 years).
Weighted
average
exercise
price
2013
Number
of options
Weighted
average
exercise price
Number
of options
2013
2012
2012
2.49
2.67
2.36
-
2.46
2.51
931,665
(225,033)
(161,802)
-
544,830
445,387
2.51
2.64
2.50
-
2.49
2.69
1,087,000
(125,000)
(30,335)
-
931,665
195,120
Maximum options outstanding at
beginning of period
Lapsed during the period
Exercised during the period
Granted during the period
Maximum options outstanding at
end of period
Exercisable at end of period
The options outstanding at 28 February 2013 above have an exercise price in the range of £2.270 to
£2.735 (2012: £2.270 to £2.735) and a weighted average contractual life of 6.0 years (2012: 7.1 years).
85
First Derivatives plc
Notes (continued)
40 Share based payments (continued)
Weighted
average
exercise
price
2013
4.33
4.55
-
4.74
4.50
4.30
Number
of options
2013
1,361,600
(80,000)
-
983,000
2,264,600
560,533
Weighted
average
exercise
price
2012
4.15
-
-
4.40
4.33
-
Number
of options
2012
350,000
-
-
1,011,600
1,361,600
-
Maximum options outstanding at
beginning of period
Lapsed during the period
Exercised during the period
Granted during the period
Maximum options outstanding at
end of period
Exercisable at end of period
The options outstanding at 28 February 2013 above have an exercise price in the range of £4.15 to £5.05
(2012: £4.150 to £4.800) and a weighted average contractual life of 7.7 years (2012: 9.7 years).
The weighted average share price at the date of exercise for share options exercised for the year ending
28 February 2013 was £5.00 per share (2012: £4.95).
Measurement of fair values
The fair value of services received in return for share options granted is based on the fair value of share
options granted, measured using an adjusted Black Scholes model, with the following inputs:
Grant of options during the year ended 28 February 2013
Grant date
Fair value at grant date
Share price at grant date
Exercise price
Number of options
Expected volatility (weighted average volatility)
Option life (expected weighted average life)
Expected dividends
Risk-free interest rate (based on government bonds)
25/06/12
0.81
4.72
4.72
394,000
20%
2.5 years
0.1%
4.0%
Grant of options during the year ended 29 February 2012
Grant date
Fair value at grant date
Share price at grant date
Exercise price
Number of options
Expected volatility (weighted average volatility)
Option life (expected weighted average life)
Expected dividends
Risk-free interest rate (based on government bonds)
20/12/11
1.22
4.80
4.80
250,000
30%
3 years
0.1%
4.0%
27/09/12
0.91
4.73
4.73
550,000
20%
3 years
0.1%
4.0%
03/03/11
1.19
4.27
4.27
90,000
30%
3.5 years
0.1%
4.0%
12/12/12
0.86
5.05
5.05
39,000
20%
2.5 years
0.1%
4.0%
03/03/11
0.98
4.27
4.27
671,600
30%
2.5 years
0.1%
4.0%
The adjustments made to the standard Black Scholes model are those required to reflect more clearly the
company’s experience relating to key assumptions.
86
First Derivatives plc
Notes (continued)
40 Share based payment (continued)
Employee expenses – equity settled
Expense relating to:
Share options granted in 2009/10 – equity settled
Share options granted in 2010/11 – equity settled
Share options granted in 2011/12 – equity settled
Share options granted in 2012/13 – equity settled
Total expense recognised as employee benefit expense
Capitalised expenses – equity settled
Amounts relating to:
Share options granted in 2011/12- equity settled
Share options granted in 2012/13- equity settled
Total amount recognised as software development cost
Business combinations – equity settled
Amount relating to:
Share options granted in 2009/10 – equity settled
Total amount recognised in share based payment reserve
2013
£’000
2012
£’000
-
273
140
163
576
96
11
107
3
686
64
296
126
-
486
183
-
183
56
725
41 Contingent liabilities
Government grants
A portion of grants may become repayable should the conditions of offer cease to be met. The
repayment of the employment grant is contingent on the maintenance of employment levels to May
2014, February 2016 and October 2016 in relation to the respective grants.
42 Comparative amounts
Certain comparable amounts have been restated in the current year to ensure comparability. A
comparative amount of £955k in respect of computer and data centre costs has been reclassified from
administrative expense to cost of sales in the current year.
87
Registrars
Neville Registrars Ltd.
Neville House
18 Laurel Lane
Halesowen
West Midlands
B63 3DA
Telephone: +44 121-585 1131
Fax: +44 121 585 1132
PR
Walbrook Public Relations
4 Lombard Street,
London
EC3V 9HD
Telephone:+44 (0)20 7933 8780
Email: info@walbrookpr.com
Website: www.walbrookpr.com
First Derivatives plc
Corporate directory
Brokers
Charles Stanley Securities
25 Luke Street
London
EC2A 4AR
United Kingdom
Telephone: +44 (0) 207 149 6000
Fax: +44 (0) 207 149 6777
Website: www.csysecurities.com
IEX Brokers
Goodbody Stockbrokers
Ballsbridge Park
Ballsbridge
Dublin
Ireland
Telephone: +353 1 614 0600
Fax: +353 1 667 2111
Email: support@goodbody.ie
Website: www.goodbody.ie
Solicitors
Mills Selig
21 Arthur Street
Belfast
BT1 4GA
Northern Ireland
Telephone: +44 28 9024 3878
Fax: +44 28 9023 1956
Email: info@nilaw.com
Website: www.millselig.com
Auditors
KPMG
Stokes House
17-25 College Square East
Belfast
BT1 6DH
Telephone: +44 (0)28 90243377
Fax: +44 (0)28 90893893
Website: www.kpmg.ie
88
First Derivatives plc
Global directory
UK & Ireland
Head Office
First Derivatives plc
3 Canal Quay
Newry
Co. Down
N.Ireland
BT35 6BP
Telephone: +44 28 3025 2242
Fax: +44 28 3025 2060
London
Fifth Floor,
100 Cannon Street,
London,
EC4N 6EU
UK
USA & Canada
New York
45 Broadway
Suite 2040
New York
NY 10006
USA
Telephone: +1 888 290 3525
Philadelphia
1650 Arch Street
22nd Floor
Suite 2210
Philadelphia
PA 19103
Asia Pacific
Sydney
Suite 201,
22 Pitt Street,
Sydney,
NSW 2000
Australia
Belfast
Suite B
First Floor
11-13 Gloucester Street
Belfast
Co. Antrim
N. Ireland
BT1 4LS
Dublin
1st Floor
Fleming Court
Flemings Place
Mespil Road
Dublin 4
Eire
New Jersey
14 Vervalen Street
Closter
NJ 07624
USA
Toronto
First Canadian Place
100 King Street West
Suite 5600
Toronto
M5X 1C9
Canada
89