Fidessa makes 'steady progress' as it cautiously eyes market opportunities
City software and services company Fidessa reported “steady progress” in its first half on Monday, with solid revenue growth said to carry across all business lines and regions as revenue grew 12% to £177.6m, or 2% at constant currencies.
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The FTSE 250 firm’s profit before tax was ahead 14% in the six months to 30 June when compared to the same time last year, although that became a fall of 2% when measured at constant currencies.
Diluted earnings per share were ahead 18%, and the board declared an interim dividend per share up 7% at 15.3p.
Cash at period end stood at £71m, an improvement of 6% over the first half of 2016.
“The first half of 2017 has seen little change in the market conditions being faced by our customers, with political uncertainty, structural and regulatory changes all continuing to have an impact,” said chief executive Chris Aspinwall.
“However, many of these structural and regulatory drivers are also generating opportunities for Fidessa, and the delays in customer decision making noted during the first quarter started to ease slightly during the second quarter.”
Aspinwall said that overall, while there remained “clear evidence” of stress within the market, levels of new business activity remained “generally high” and - when combined with the continued weakness of sterling - it enabled the company to deliver “solid growth” during the half.
“As noted in the 2016 preliminary announcement, Fidessa incurred some one-time and duplicate costs in respect of the relocation of its main US office from New York to Jersey City, and this reduced the profit after tax margin by approximately 0.5% during the first half.
“In line with previous guidance we expect these costs to reduce the profit after tax margin by around 1% for the full year.”
Fidessa said it saw continued “strong growth” in multi-asset revenue during the half with five new derivatives deals signed, while recurring revenue now generated 88% of total revenue.
It also claimed to have a “good international spread”, with 66% of total revenue accounted for outside of Europe.
“Moving into the second half, whilst it remains unclear exactly how our customers will be affected by the regulatory, structural and political changes, we expect the opportunities we are seeing will continue to develop,” Aspinwall added.
“This is particularly in the areas of derivatives trading, electronic trading and our customers' use of equity correlated assets.
“We also expect that MiFID II will go ahead as planned although we believe there will be some phasing in the way it is implemented during 2018.”
Overall, Aspinwall said the company would continue to believe that it was “well positioned” to benefit from the opportunities that would arise in the markets as a result of regulatory and structural change.
He noted that the company remained cash generative, providing strong support for its dividend policy, and continued to expect that 2017 constant currency revenue growth would be around the levels seen during 2016.
“Looking further ahead, although it is clear that uncertainty is going to be a strong theme within our market for some time, we believe that we are entering a period where opportunity is returning,” Chris Aspinwall explained.
“We expect this opportunity to arise both from customers developing their businesses in response to market changes and also as a result of other vendors struggling with the scale needed to operate successfully in the increasingly complex environment.
“We believe we will see further progress with our multi-asset initiative and will continue to look at the possibility of extending our asset class coverage further.”
The board also reportedly believed that across all asset classes, the market was moving towards the increased use of service-based solutions and that few vendors had the depth of applications, operational expertise and the scale of infrastructure needed to deliver those solutions.
“We are committed to playing an increasingly important role in the markets as customers focus on efficiency, transparency, compliance and performance, and expect that this will provide us with significant opportunities for further growth.”