Value of MDS stake set to increase.

The Merkin Group’s stake in ASX listed public company MDS Financial Group Ltd seems set to significantly increase in value post the release to the ASX yesterday of the 2009 Annual Financial Report/Annual Report to Shareholders of the Company for the financial year to 30 June, 2009 signed by MDS Chairman, Sean Rothsey, who also chairs The Merkin Group and the joint venture online trading company Trader Dealer Online Pty Limited .

“Highlights of the Report include

Future Developments, Prospects and Business Strategies

The Group has consolidated over a difficult trading period. It is now in a position to build on the transformation and integration of its businesses towards a more holistic product offering providing market data, analysis and charting tools, order placement, execution and settlement as a straight-through, seamless process.

Since 30 June 2009, Trader Dealer Online Pty Ltd has increased its client base by 27% with only limited marketing effort. The company continues to make sound month by month progress towards profitability with its revenue for the first two months of the 2010 financial year being twice that of the previous corresponding period.

Polling existing customers and prospects over the past 12 months indicates that they choose Trader Dealer Online Pty Ltd’s services over its competitors for two fundamental reasons: platform reliability and low fees.

Based on client feedback, the company has focused on improving the back-end infrastructure from which its solutions operate: improving stability and minimising the costs associated with adding new customers. On 1 September 2009, the company announced that it had entered into an agreement with ANZIEX Limited, a wholly owned subsidiary of InvestorFirst Limited (ASX: INQ), for the provision of wholesale broking services to Trader Dealer Online Pty Ltd. This facility will deliver further significant benefits in terms of functionality and cost savings. In addition, new solutions arising from in-house software development are expected to be launched into a beta environment in the fourth week of September 2009 and into full production as a robust and scalable service in December 2009.

In conjunction with these developments, throughout the year the company has taken the opportunity to develop a new Client Relationship Management (CRM) solution to address many legacy issues. This was identified as a priority to enable the company to continue to offer a high level of customer service to its existing customer base and to accommodate anticipated increases in client numbers and requirements as well as promoting the effective implementation of cross selling strategies. The company has commenced to roll this solution out though the Group and anticipate that by the end of the year, the whole Group will be running off one scalable, open source CRM.

The directors believe that the company is well positioned to return to profitability in the 2010 year.

Review of Operations

Overall revenue of $6,479,644 represents a 20% decline on that reported for the year ended 30 June 2008. In part this reflects the decision to cease unprofitable and marginal activities. The impact of the Global Financial Crisis on financial markets generally and, in particular, on the activity of retail investors contributed to a general decline in subscriptions revenue of 23% over the year. Conversely, brokerage and commissions revenue increased by 13% reflecting the underlying growth in the Group’s online trading and execution business, which increased by over 25% in the second half of the year.

Financial Position

The directors have announced their intention to seek shareholder approval at an Extraordinary General Meeting to be held on 14 October 2009 to raise additional share capital during the 2010 financial year in order to provide an additional $3,000,000 working capital to the Group.

The Group has no borrowings.

Dividends Paid or Recommended

No dividends have been paid or declared for payment during the financial year.

After Balance Date Events

On 15 September 2009, the Company issued a Notice of Extraordinary General Meeting to be held on 14 October 2009 together with an Explanatory Memorandum to seek approval from shareholders for:

• an issue of shares and options to Placement Investors;
• consent for certain Directors of the Company to participate in the Placements; and,
• the acquisition of all shares in Trader Dealer Online Pty Ltd held by BoxRed Pty Ltd.

Other than the above, no other matters or circumstances have arisen since the end of the financial year which significantly affected or could significantly affect the operations of the consolidated group, the results of those operations, or the state of affairs of the consolidated group in future financial years.”

For the full report see here