FD Technologies agrees £230m sale of First Derivative business

7th Oct 2024 10:28

(Sharecast News) - FD Technologies announced an agreement to sell its First Derivative business to EPAM Systems on Monday, for £230m.

The AIM-traded firm said the sale, expected to complete in the fourth quarter, would mark a strategic shift as it aimed to focus on its AI-driven data analytics platform, KX, which it said had the largest growth potential within the company.

It said the divestment would also provide funding to accelerate KX's expansion in its target markets, and make it cash generative.

The sale, subject to shareholder approval, would be the culmination of a strategic review initiated in March to optimise the company's structure and drive value for stakeholders.

FD Technologies said it expected net proceeds of £205m after transaction costs and adjustments, which would be used to repay its net debt of £20m as of 31 August.

Additionally, the company said it was planning to return excess cash to shareholders, with further details to be announced alongside its interim results in November.

The divestment would enable the First Derivative business to grow under EPAM, a global professional services company with the scale and resources to support its ambitions, the FD Technologies board explained.

FD and EPAM would also form a partnership to provide professional services in key markets, creating synergies for KX.

Looking at its recent trading, FD Technologies confirmed that both KX and the First Derivative business performed in line with expectations for the first half of its financial year, to 31 August.

KX added £7.4m in annual contract value (ACV), within FD's guidance, and was on track to achieve £16m to £18m ACV growth in the 2025 financial year, with expected annual recurring revenue growth of 11% to 15%.

The First Derivative business meanwhile recorded revenue of £79m, consistent with the second half of 2024, amid cautious spending by its capital markets consulting customers.

FD Technologies said it would provide further details with its interim results in November, with a general meeting to approve the divestment set to take place in October.

"This divestment is positive for all stakeholders, benefitting our shareholders and the customers and employees of KX and the First Derivative business," said chief executive officer Seamus Keating.

"For shareholders, it enables the group to focus on KX, and provides the resources to deliver on our exciting growth plans while also enabling us to return excess cash.

"KX and its customers will benefit from a strengthened and broader partnership with EPAM that opens up opportunities in capital markets and beyond, while the First Derivative business customers will benefit from EPAM's scale and reach combined with the deep domain skills in capital markets within the First Derivative business."

At 1004 BST, shares in FD Technologies were up 4.96% at 1,692p.

Reporting by Josh White for Sharecast.com.