Patsystems to take £500,000 hit

UK-based derivatives trading software vendor Patsystems will take a £500,000 hit in redundancy costs in its end-of-year results. It is also likely to trim staff further in spite of encouraging figures for the third quarter and ongoing cost-cutting measures.

To cut costs, the vendor has outsourced development work to IT programmers in Bombay and shrunk its workforce by 26% in the past year to less than 100 - a process that newly appointed chief executive Kevin Ashby said is not yet over.

The latest staff cuts included six departures in Chicago as Ashby reorganised support functions down to a four- to five-person, 24-hour operation from London. While the vendor ended the eight-hour support effort in Chicago, it increased its London support by only two hours. Ashby said the remaining 20 support staff in Chicago will have more time to spend with clients.

As for the £500,000 in redundancy costs, Ashby said it will not hurt the London provider's balance sheet because revenue is rising and outgoings are falling, due partly to the cost-cutting programme, which is intended to save £1.2 million a year. Ashby said he expects his programme to begin bearing fruit during the current quarter.

Third-quarter revenues did show a rise of 11% over the previous quarter to more than £2 million for the first time, while cash outflows fell from £650,000 a month in the second quarter to £405,000 amonth in the third quarter, and operating costs fell for the fourth quarter in succession. However, the vendor still had an operating loss of £1.67 million for the third quarter.

The vendor signed five clients in the first half of the year and added another two in September. One of the new customers, US broker-dealer Pax Clearing, will use Patsystems software to give equity traders access to futures and equity index futures on the Chicago Mercantile Exchange and the Chicago Board of Trade.

Overall, the number of trades via Patsystems technology grew by 19% over the second quarter to 32.7 million, while the number of billable end-users was up as well.

Billable end-users are charged either a fixed monthly fee or a per-transaction fee by the bank or broker that has bought and rolled-out the Patsystems trading software. The banks and brokers then pass that fee to Patsystems.