Financial Highlights

• Turnover up 6% to £10.0m (H1 2009: £9.5m)
  
• Adjusted pre-tax profit* up 37% to £1.0m (H1 2009: £752k)
  
• Net cash inflow from operating activities for the period was £1.3m (2009: £2.2m). Cash balance at 30 June 2010 was £9.2m (£7.0m at 30 June 2009)
• Interim dividend increased by 38% to 0.2p per share (H1 2009: 0.145p), reflecting strong cash generation and confidence in future growth opportunities

* 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

• Bursa Malaysia selects Patsystems to provide a new order management system to support regional growth plans
  
• Patsystems new global ASP solution, XConnect, gains immediate traction with Terra Futuros in Brazil, Unicom and Phoenix Securities in Japan and Okachi in Hong Kong adopting the hosting service
  
• The number of new business opportunities and the overall value of the sales pipeline is significantly ahead of the prior year

Richard Last, Chairman, of Patsystems, commented: "I am delighted by our achievements in the first half of this year. Bursa Malaysia selecting our order management system and the Indonesian Commodity and Derivatives Exchange successfully launching new contracts with our exchange solution are both testament to our strength in the Asia Pacific region.

Our continued growth in emerging markets, a strong sales pipeline and this year's deployment of our new global ASP solution, XConnect, will support sustained growth in 2011 and beyond."

Introduction

In the first six months of 2010 we have seen the volume and value of sales prospects grow in all areas of our business and conversion of these f these into revenue opportunities in the second half of 2010 will benefit both this year and next.

It is particularly pleasing that discussions with a number of large global banking organisations are progressing well with respect to our Risk Informer product.

The continuing strong cash generation from the business has led the Board to decide that a further increase in our interim dividend compared to that paid last year is appropriate. A dividend of 0.2p is to be paid on 24th September 2010 to shareholders on the register as at 27th August 2010.

Revenue

Revenue for the first six months of 2010 was £10.0m (H1 2009: £9.5m), an overall increase of 6%. On a geographical basis revenue grew by 25% in Europe, declined by 20% in the US and grew by 16% in Asia. The main driver for growth in Europe was the Turkdex Exchange project won last year. US revenues have declined, as expected, because of the closure of one of our clients and less bespoke work than in previous years. Revenues in Asia have continued to grow despite the impact of the Tokyo Grain Exchange mainly as a result of new revenue from the Bursa Malaysia and general growth across existing clients.

On a product basis, revenue generated from trading systems was in line with our expectations and accounted for £8.7m of total revenue which was an increase of 4% on 2009.

With revenue from new contract wins in 2009 benefiting the first half of this year, risk systems revenue was £0.4m (H1 2009: £0.3m).

Revenue generated from exchange systems accounted for the remaining £0.9m (H1 2009: £0.8m).

Costs

Cost of sales was £0.2m for the first six months of 2010 against £0.3m for the corresponding period in 2009.

Operating expenses for the first half of 2010 were £9.2m (H1 2009: £7.7m). Excluding the impact of the marking to market of financial instruments, a loss of £0.3m (2009: gain £0.9m), underlying operating costs amount to £8.9m (H1 2009: £8.7m).

Operating Profit

The Company made an operating profit before interest and taxation of £0.6m for the first half of 2010 compared to a profit of £1.4m in H1 2009.

Adjusted Pre-Tax Profit

The adjusted pre-tax profit for the six months was £1,029k (H1 2009: £752k). A reconciliation of operating profit to adjusted pre-tax profit is given in note 3.

Taxation

The taxation charge for the period of £368k (H1 2009: £244k) comprises £367k (H1 2009: £174k) in relation to the movement in the deferred tax asset as the Company continues to utilise its taxation losses and £1k (H1 2009: £70k) relating to foreign corporation tax.

Cash

During the first six months of 2010 the Company generated operating cash flows of £1.3m. The major non-operating cash expenses were capital expenditure of £0.7m and a dividend payment of £0.5m. The Company had a cash balance of £9.2m at 30 June 2010 (30 June 2009: £7.0m) and no borrowings.

Foreign Exchange Rates

The average rate used to translate the US dollar during the period was 1.52 (2009: 1.50).

Trading Systems

Revenue has grown 4% overall in 2010 compared to 2009 with growth mainly driven from Asia as the new customers added in 2009 deliver recurring revenue growth and the revenue associated with Bursa Malaysia.

Further geographical expansion into emerging markets is one of our key objectives in 2010 and we were delighted in March 2010 to have been selected by Bursa Malaysia Derivatives to provide them with a complete order management system to support their growth plans in the Asia region.

Hosted Services

A key objective for the business in 2010 is to extend our existing hosting capability to deliver a global ASP proposition across all the regions in which we operate.

This global ASP proposition will leverage Patsystems' XLink technology, which allows for seamless exchange connectivity and order routing between any Patsystems' hub or client site.

This new global ASP offering is being marketed as XConnect and is already gaining significant traction.

During the first half of 2010 the existing ASP infrastructure in Tokyo was upgraded, with Unicom signing a license to utilise the service. The first XConnect infrastructure was deployed in Hong Kong, with Okachi being the first customer to sign on. New client, Phoenix Securities, also signed on for the Tokyo ASP.

During the second half of the year, XConnect hubs will be deployed at our data centres in Singapore and Sydney.

The availability of XConnect has also generated considerable interest in Brazil, with an XConnect hub scheduled for deployment in Sao Paulo in September 2010. Terra Futuros, a BM&FBOVESPA brokerage firm in Sao Paulo, has selected Patsystems' XConnect platform as the foundation of its "north-south" expansion plans.

Patsystems' next generation "Global Trading" platform will be deployed through XConnect to bring the benefits of the new trading platform to ASP customers during 2010 and 2011.

Risk Systems

During the first half of the year, we concluded the implementations of Risk Informer, our market leading real-time, multi-asset, post trade risk margining product at J.P. Morgan and Prudential Bache.

Risk Informer will also form a key component of a feature rich clearing and risk solution that will be implemented at Turkdex's clearing bank in Turkey as part of the overall project with the Turkish Derivatives Exchange, TurkDEX.

The Risk Alert product, our low latency pre-trade risk product, will be deployed both in the TurkDEX project and as part of our XConnect deployment.

Revenue from the Risk Informer product is ahead of that in the same period last year as the contribution from projects sold in 2009 is realised.

Exchange Systems

As we commented in last year's preliminary annoucement, the revenue earned from the exchange systems project with TurkDEX, has compensated for the loss of revenue from The Tokyo Grain Exchange curtailing its activities.

Our project with TurkDEX will continue during the remainder of 2010 and into 2011, with Phase 1 of the project scheduled to go live early in 2011.

In May 2010 the Indonesian Commodity and Derivatives Exchange successfully launched their second product - a crude palm oil contract that will act as a vital reference point for Indonesia's local commodity producers. Indonesia is one of the world's largest producers of crude palm oil.

We are continually excited by the opportunities within emerging markets for our matching engine when deployed in combination with our trading and risk system offerings.

Business Objectives and Outlook

Our key objectives for 2010 are to:

• Become the premier provider of risk margin systems within the top 10 global banks
  
• Extend our sales penetration in new countries with additional sales in Malaysia, Indonesia and Brazil
  
• Deliver hosted ASP services to new and existing customers within all the regions in which we operate
  
• Continue the sales success for our exchange system offering

I am pleased there has been positive progress on each of our objectives in the first half of 2010 and will comment on these fully in our annual report for 2010.

We remain confident that the business will achieve its targets for 2010 and that solid business growth opportunities exist for 2011 and beyond.