Highlights

• Revenue up by 22% to £2.277m (30 September 2004: £1.867m)
• Revenue from continuing operations up by 44%
• Loss on ordinary activities before taxation was £1.566m (30 September 2004: £1.594m)
• Cash at 30 September 2005 was £2.465m (31 March 2005: £911k).

During the period the company has:

• Continued to invest in the company's application services offering and increased our investment in our new software architecture and functionality to provide a modern, flexible software service platform.
• Won two new major institutional customers: Bear Stearns and JP Morgan.
• Won the contract for the CBOT new order management system based on our FFastTrack system.
• Made further progress in migrating the Future Dynamics customer base to the FFastFill application service.
• Established our first partnership, with Trading Technologies, to deliver their front-end trading screen as a service, initially from our Chicago data centre.
• Restructured our development teams in London and Prague as an integrated software development business and won further development contracts.

Commenting on the results, Keith Todd, Executive Chairman and CEO of FFastFill, said: "This has been a period of solid progress, during which we have continued to invest to consolidate our position as the leading provider of application services to the global derivatives community. We are expecting further progress during the second half of the year."

Chairman's statement

Introduction

It has been a period of solid progress during which we have continued to invest to consolidate our position as the leading provider of application services to the derivatives industry. We have now laid the foundations to support the sales and the financial success that we set out to achieve when we first refocused the company as an Application Service Provider.

In the six months to 30 September 2005 we have:

• Grown total revenue to £2.277m (30 September 2004: £1.867m) up 22%, with revenue from continuing operations up 44%
• Grown our application services revenue to £1.069m (30 September 2004: £342k), up 213%
• Grown the 12 months committed revenue to £4.57m (30 September 2004: £3.764m), up 21%
• Won two new major institutional customers: Bear Stearns and JP Morgan
• Won the contract for the CBOT new order management system based on our FFastTrack system
• Made further progress in migrating the Future Dynamics customer base to the FFastFill application service
• Established our first partnership, with Trading Technologies, to deliver their front-end trading screen as a service, initially from our Chicago data centre
• Increased our investment in our new software architecture and functionality to provide a modern, flexible software service platform

Financial review

Revenue grew to £2.277m (30 September 2004: £1.867m ), a growth of 22%. Our continuing operations revenue growth was 44%. The PBT loss was £1.566m (30 September 2004: £1.594m).

Operating costs were £2.981m, (30 September 2004: £2.429m) as a result of our decision to increase discretionary development cost, and also due to the addition of our data centre in Chicago, our second data centre in London, and because of the inclusion of six months of Future Dynamics costs compared with three months last year. Despite this investment, operating costs were maintained at a level slightly below the second half of last year (£3.010m). The decision to increase the discretionary development investment was to ensure that we complete the functionality transfer from our existing products and add new features to our new generation software offering.

The Future Dynamics acquisition has been fully integrated into FFastFill and has contributed a profit in the twelve months since the acquisition.

The cash balance at 30 September 2005 was £2.465m compared to £911k at 31 March 2005. A Placing of £3.1m was approved at an EGM on 23 May 2005. We also took out a finance lease (£398k) on the equipment for one of our major customers. Cash outflow from operating activities was £989k which was similar to last year. Capital expenditure, at £902k, is significantly higher than the first half of last year as we have been building our second UK data centre and installing our first major Application Services customer.

Operational review

Strategy: The core strategy of delivering application services has not changed. As a result of our continuing investment programme, we will soon be one of the only companies in the industry to successfully complete the development of software based on modern technology and a service-oriented architecture. This will put us in an excellent position to grow in the months and years ahead as our architecture is both scaleable and flexible.

We have established the first third party software service with the announcement of the Trading Technologies distribution agreement. We expect to announce more of these agreements in the future. We have always intended that our application service would integrate our own functionality with that of other ISVs who have a strong presence in a particular market segment.

We have expanded the role of our software development team by integrating them with our software consulting business. This enables us to provide a bespoke software development service for our key customers that is integrated with our standard functionality. This capability complements our application services offering by providing our key customers with flexible development resources that can meet their specific functionality requirements. It enhances our overall reputation with these key customers and builds up our development team's knowledge base.

Business development: We are continuing to win new business and migrate existing customers to the new FFastFill application service. It has, however, taken longer than we anticipated to sign contracts after the initial verbal agreement to proceed. This has had a short-term impact on our revenue growth. This situation is not unique to us when dealing with large institutional customers, and we are optimistic that we will improve the pace of closure as we gain more experience of the practical issues of dealing with the procurement processes of these large institutions.

We now have six institutional customers signed and are in negotiations with two more for the Reuters CME FX service. The overall project rollout has been slower than expected. Whilst some of the delays have been due to "bedding down" issues with the new technology, there have been challenges, as institutions have needed to change their back office processes so as to exploit this new capability. Growth in this area is expected to pick up in the second half of the financial year and we are still expecting to see a good rate of return on this project over the coming years.

The CBOT order management win in October in a highly competitive bid has not only enhanced our reputation with CBOT but is opening up a new market opportunity for order management systems within other exchanges. These opportunities will not have any immediate impact on this financial year but provides us with good opportunities for 2006/7.

USA: Hamish Purdey was appointed President of FFastFill Inc in June after 4 years in FFastFill Europe and Asia. We now have the Chicago data centre fully operational and the first TT customer is "live". We have made the US our centre of excellence for the initial delivery of third party software services. The combination of the CBOT win, our traditional application services and the delivery of the TT service will provide the basis for the US business moving into profitability.

Asia: We are continuing to evaluate prospects in Asia including China. We are implementing plans to make available the Sydney, Singapore and Hong Kong Futures exchanges on our application service during next year. We are currently trialling our application service delivered from Chicago into Singapore and Hong Kong to assess what local infrastructure is required to optimise the service. This evaluation will be completed by 31 March 2006 and will determine the service offering in Asia for the next financial year. China is the big prize in the region and we agree with the industry view that in the medium to long term China will become a significant Futures market particularly with the moves towards a floating currency. We have invested our knowledge, experience and some limited cash in order that we can take advantage of the opportunity when it opens up.

Staff: We have continued to see remarkable commitment from our staff in support of our customers and business objectives. We continue to keep a tight reign on the numbers of staff in order to hold costs down. However, we will need to add some critical skills as we grow to cover the increasing workloads, this will include additional resources to expand shift working by our support teams. We will also be adding up to 20 additional software developers by 31 March 2006 since the demand for our software development activity is growing significantly. Contracted revenues will cover all these costs.

Corporate development: Following the successful integration of Future Dynamics, we continue to look for further value-enhancing acquisitions. The board believes there are consolidation opportunities in the sector and the management have the experience to evaluate and implement appropriate opportunities.

Outlook
The company continues to make good progress against its business goals. We have chosen to continue to invest, at the expense of short-term profitability, because of the potential increased shareholder value that is being created over the medium to long term. As a result of this investment and the timing of contract signings and user growth, we are now expecting to report a small reduction in the losses for the full year compared to last year. However, we are expecting to be able to move into profit as we exit this financial year provided we are able to grow user numbers within our existing customers and to sign a relatively few more new customers.

Keith Todd
Executive Chairman
17 November 2005Download the document now 102.5 kb (Adobe Acrobat Document)