• Turnover up 14.8% to £9.5m (H1 2008: £8.3m) with recurring revenue 95% of turnover (H1 2008: 96%)
• Adjusted pre-tax profit* up 82% to £752k (H1 2008: £413k)
• Operating profit of £1.4m (H1 2008: loss £0.1m)
• Net cash inflow from operating activities for the period was £2.2m compared to £977k in the first half of 2008 with a cash balance at 30 June 2009 of £7.0m (£3.4m at 30 June 2008)
• Improved interim dividend declared of 0.145p per share (H1 2008: 0.126p), reflecting strong cash generation and confidence from recurring revenue base
• profit before tax after adjusting for share option costs, marking to market of derivatives used to hedge cash flows and amortisation of intangibles other than internally developed software

Operational Highlights

• Sales success for the Exchange business with the Indonesian Commodity & Derivative Exchange selecting Patsystems to provide matching, clearing and trading systems and a further exchange expected to select Patsystems
• Continued sales success for the Risk Informer product with a strong sales pipeline and contracts signed post half year end with Prudential Bache and J P Morgan to benefit the second half
• Sales success in both Malaysia and Brazil; both new markets targeted by Patsystems in 2009
• Billable Pro-Mark trading screen user numbers have risen to 751 at the end of the period from 571 at the start of 2009 with healthy growth in trading systems revenue

Richard Last, Chairman, of Patsystems, commented:

'Patsystems has continued to demonstrate the robustness of its business model with strong cash generation and continued revenue growth.

I stated at our AGM in April that the business has delivered sales success in each region in which it operates. This momentum has continued into the start of the third quarter, with growth in each of our three business units. As well as being selected as the exchange systems partner for two projects that will commence in the second half of 2009 and continue through 2010, we also continue to see revenue growth in trading systems and have secured new customer wins for our risk products.

The Board anticipates that the business will meet its expectations for 2009 and remains ideally placed for future growth.'

Commentary

Introduction

In the first six months of 2009 we have seen the conversion of sales prospects identified in 2008 into signed contracts and delivered sales success in each of our business areas: trading, exchanges and risk, although the benefit of these new business wins will be realised in our second half results.

This continued success has been coupled with strong cash generation and the robustness of our business model has been clearly demonstrated through the most challenging of economic periods.

Our strong cash position has led the Board to decide that a further increase on our interim dividend compared to that paid last year is appropriate. A dividend of 0.145p is to be paid on 25 September 2009 to shareholders on the register as at 28 August 2009.

Revenue

Revenue for the first six months of 2009 was £9.5m (H1 2008 - £8.3m), an increase of 14.8%.

Revenue generated from trading systems was in line with our expectations and accounted for £8.3m of total revenue which was an increase of 15.4% on 2008.

With new contract wins benefiting the second half of this year, Risk systems revenue remained flat at £0.3m (H1 2008 - £0.3m.)

Revenue generated from exchange systems accounted for the remaining £0.8m (H1 2008 - £0.7m).

Costs

Cost of sales was £0.32m for the first six months of 2009 against £0.20m for the corresponding period in 2008.

Operating expenses for the first half of 2009 were £7.7m (H1 2008: £8.2m). Excluding the impact of the marking to market of financial instruments, a gain of £938k and the realised loss of £405k on the settlement of forward contracts used to hedge cash flow, underlying operating costs amount to £8.3m (H1 2008: £8.2m).

Operating Profit

The Company made an operating profit before interest and taxation of £1.4m for the first half of 2009 compared to a loss of £166k in H1 2008.

Adjusted Pre-Tax Profit

The adjusted pre-tax profit for the six months was £752k (H1 2008: £413k). A reconciliation of operating profit to adjusted pre-tax profit is given in note 3.

Taxation

The taxation charge for the period of £244k (H1 2008: £249k) comprises £174k (H1 2008: £149k) in relation to the movement in the deferred tax asset and £70k (H1 2008: £100k) corporation tax, primarily in Asia.

Cash

During the first six months of 2009 the Company generated operating cash flows of £2.25m. The major non-operating cash expenses were capital expenditure of £645k and a dividend payment of £428k. The Company has a cash balance of £7.0m at 30 June 2009 (31 December 2008: £5.9m) and no borrowings.

Trading Systems

During the period exchange connectivity has been developed for the BM&FBOVESPA, the Brazilian Futures Exchange, and also Bursa Malaysia. Philip Futures was the first Patsystems customer to establish a further installation in Kuala Lumpur to take advantage of this connectivity; further adoption across the Asia region is anticipated. Flow Corretora has become our first customer in Brazil and has signed a contract for a full installation of the Patsystems trading system. In the second half of the financial year we expect to sell additional trading systems in Brazil now that we can provide local market connectivity. During the period Mizuho Securities added an additional Patsystems installation in Singapore.

Revenue has grown 15.4% when compared to the same period last year with growth in Pro-Mark user numbers from 571 billable users at the start of 2009 to 751 at 30 June 2009 being a contributing factor.

Risk Systems

Risk Informer is our market leading multi-asset post trade risk margining product that has been installed at a breadth of organisations including Deutsche Bank, MF Global and Newedge. During the period the product has been selected by both J P Morgan and Prudential Bache to risk manage their exchange traded derivatives business and GH Financials has taken the product live.

Our Risk Monitor product has been rebranded globally as Risk Alert due to a conflict in the United States of America over the use of that product name.

Risk Alert is a low latency, pre-trade risk management system designed to monitor proposed trades across a range of markets ahead of the exchange and, if necessary, prevent, restrict or provide alerts in respect of individual electronic trades.

Revenues from the Risk Informer product are constant when compared to the same period last year and we anticipate growth opportunities from the Risk Alert product in 2010 and beyond.

Exchange Systems

As we had anticipated, our exchange systems business in Asia contributed a level consistent with the corresponding period in 2008. The Tokyo Grain Exchange has provided notice that it will curtail its activities in 2010 due to their challenging trading conditions and we anticipate that this will reduce exchange revenues by £600k in 2010.

However our selection to provide the Patsystems matching engine to two exchanges, will more than compensate for the revenue reduction from the Tokyo Grain Exchange.

Operations

The marketing strategy for 2009 has been focused on using targeted online and contextual advertising. This has achieved results that can be both measured and benchmarked providing clear benefits on return on investment.

As part of the continued investment to improve customer service, the support capability within Chicago, to serve the Americas, and the support capability within Sydney, to serve Asia, has been extended. In addition there has been capital investment to improve the Patsystems internal global communications network.

An offshore development centre has been established in Beijing that will provide development capacity to support future growth plans and the flexibility to execute development work where it can most productively be executed.

Business Objectives and Outlook

Our key objectives for 2009 are to consolidate our position within our existing market, generate new revenue streams from our range of new products, identify potential acquisition targets and develop opportunities for further expansion particularly in South America and the Asia Pacific region.

I am pleased there has been positive progress on each of our objectives in the first half of 2009 and will comment on these fully in our annual report for 2009. A number of potential acquisition targets were identified during the first half of the year but none of these have concluded due diligence.

We remain confident that the business will achieve its targets for 2009 and that the opportunities for business growth for 2010 and beyond are excellent.

David Webber

Chief Executive

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