ARCONTECH GROUP PLC PRELIMINARY RESULTS FOR THE YEAR

ARCONTECH GROUP PLC PRELIMINARY RESULTS FOR THE YEAR

Arcontech Group PLC, providers of products and services for real-time financial market data processing and trading, reports its preliminary results for the year ended 30 June 2010.

 
Chairman Richard Last released the follwing statement:
I am pleased to report progress in the year ended 30 June 2011, with turnover increasing to £1,287,409 (2010: £1,068,776) and operating loss reduced to £817,855 (2010: £918,754). We did not, however, quite achieve the level of sales we had hoped for, due primarily to the increasingly long sales cycles of the major investment banks. The demand for AXE, the CfD and spread betting solution was disappointing and we have taken the decision to concentrate sales resource on our CityVision Vendor Contribution, including Excelerator, products for which the opportunities are proving exciting.
 
Where possible we enter into recurring annual licence fee contracts, typically for a minimum of three years duration. It is our aim to increase our annual recurring revenues each year. As at 30 June 2011 the contracted future annual recurring revenues of the business were £1,538,216 (2010: £1,081,668), an increase of 42%. This level of annual recurring revenues, now covers approximately 73% (2010: 54%) of our expected cost base.  Our level of recurring revenues now provide a sound base upon which to grow our business.
 
Whilst we continued to develop the AXE product, earlier in the year a lack of customer interest caused a change in focus to increasing the functionality, scope and capability, of our CityVision products. As in previous years, we have continued to write off all product development costs as they are incurred. The product developments completed during the year have been heavily influenced by prospective customers and have improved our competitive position significantly. We have invested notable sums, relative to our size to integrate our products with Bloomberg systems, which we believe will provide significant growth opportunities. We will continue to invest in product development, but in the future it is expected that this will increasingly be as a result of specific customer requirements. As our spend on pure product development declines we expect to increase resources in technical support, account management and sales and marketing. These additional costs, however, will not be incurred until increased revenues are secured.
 
Financing
As at 30 June 2011 Arcontech had cash balances of £841,204 (2010: £1,586,376). We believe, on the basis of current projections and expectations that the Group has sufficient resources to see it through to cash breakeven at the trading level and beyond.
 
Management and staff
Our management and staff are our key resource. They have continued to work with determination and dedication and I thank them for their continued support. As our customer base increases, particularly in overseas markets, the demands on our staff will undoubtedly increase. I am confident that they will continue to perform to the high standards that they have set in previous years.
 
Outlook
With the CityVision product developments completed since the year-end, we believe we are in a positive position to start to realise the sales opportunities identified previously for those products. Sales made since the year end for new products with international financial institutions, reinforce our belief that there is strong demand for our products in the market. It does, however, remain true that the sales cycles continue to be long and invariably involve pilot studies. Consequently it remains difficult to predict with any degree of certainty the precise timing of future sales. Accordingly we are maintaining a tight control over expenditure whilst continuing to develop opportunities for the business.  
 

The Chief Executive Andrew Miller gave the following review:
Significant progress has been made this year in terms of product development, pipeline improvement and restructuring to address the demands of increasingly complex sales in a market which remains difficult.  Whilst bottom-line financial performance is disappointing, due to the protracted sales cycle common in investment banking, there are strong signs that our efforts will pay off and I remain optimistic over forward revenues.
 
Engagement with several tier one international banks has lead to further refinement of the CityVision product suite for controlled, low latency market data distribution and systems integration.  Close working with data vendor systems including those from Thomson Reuters and Bloomberg has lead to new product development with considerable market potential. Some significant sales have already been achieved, with a promising and growing prospect list.
 
We have seen less demand for AXE, our retail trading system product and have decided to restructure to concentrate our resources on CityVision, our sell-side market data technology where we believe there are greater opportunities.
 
Tight cost-control has remained a primary objective for many of our major target customers.  Whilst this often reduces the immediate budget for our innovative solutions, it nonetheless provides opportunities for Arcontech as part of a vendor/technology replacement strategy. We have produced new products and re-engineered existing ones to provide compelling value propositions which are gaining considerable traction.
 
The main achievements and themes of the year have been:

  • Greatly increased pre-sales activity, including global evaluations
  • Pipeline progression leading to significant recently announced contracts
  • Continued focus on the major international investment banks
  • Expansion of global capability to provide follow-the-sun support in key regions
  • Further product development based on feedback from clients and prospects

 
Work this year has resulted in new contracts in excess of £1.4 million over three years, which will affect our future bottom line. These include further sales of our Excelerator real-time desktop product, displacement of competitive incumbent vendor contribution systems and, perhaps most significantly, green-field deployments for our innovative 'gateway' technology for cross-connectivity between the major data vendors such as Thomson Reuters and Bloomberg. This technology is at the heart of further opportunities we are progressing and we are excited about developments in this area.
 
The value of contracts achieved and in discussion continues to increase, with contractual recurring revenues as we enter the new financial year of £1,538,216, covering approximately 73% of our expenditure.  Further product evaluations are underway and seem on track to yield meaningful additional revenue in the short to medium term.
 
Overall, despite the figures for the year, sales progress is positive and the level of interest in our next generation of products bodes well for the future.  I would like to thank our staff, clients and prospects for their continued help and support and look forward to joint successes in the coming year.

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