Strong year for First Derivatives despite pandemic threat

Newry-headquartered technology company First Derivatives (FD) said it expected its financial performance for the year ended February 29th, 2020 would be in line with expectations, despite the outbreak of coronavirus.

But the company said it had taken a number of measures to ensure the group’s liquidity and to protect the business, including halting business travel and suspending bonus payments to executive directors. It will not recommend a dividend for the year.

FD said trade in the second half of the year was positive, with the group showing solid growth for the full year. Its consensus forecasts predicted £241 million (€275 million) of revenue and £46 million of adjusted earnings before interest, tax, depreciation and amortisation, which the company expects to meet.

Net debt at the period end was £50 million, ahead of the consensus forecast of £56 million.

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FD said it had not taken a financial hit from the Covid-19 pandemic, and was confident it could remain profitable and cash generative in a severe economic downturn, but it was monitoring the situation.

It implemented its pandemic plan at the beginning of February, with remote working and other measures introduced to ensure there was no significant disruption to the business.

“To date we have seen no financial impact from the effects of Covid-19. All our services delivery is now being conducted remotely, with no impact on revenue,” the company said in a s statement. “In our managed services and consulting business the services that we provided prior to Covid-19 are now being delivered remotely with utilisation rates in March 2020 remaining in line with the prior month.”

Software sales

Looking ahead to the coming months, the company said it was expecting a lengthening of software sales cycles, at least until the impact of Covid-19 is clearer.

“The group is protected to some extent by the breadth of its sales pipeline across multiple industries and geographies, while further reassurance is provided by the repeat and recurring nature of the majority of our software revenue,” the company said.

The company said it had high levels of repeat revenue from capital markets clients, but was monitoring the impact of the outbreak on new business.

At the end of March, the group had £64 million gross cash available to it, including £35 million of funds drawn down from its finance facilities, and a further £15 million in undrawn revolving credit facilities.

“The strength of our business model and liquidity position provide us with the confidence to continue to invest across the group, in line with our strategy,” FD said. “We believe that the group has acted prudently to mitigate any potential impact through a range of measures aimed at ensuring its ongoing financial liquidity.”