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Fidessa on the turn

RESULTS: If the rotation into equities continues then, at this rate, Fidessa could be smiling later this year
February 11, 2013

A sharp drop in share dealing volumes in recent few years has seriously hampered growth at financial trading software group, Fidessa (FDSA). Both sales and earnings were flat in 2012 and this year might not be much better. Still, it's generating plenty of cash and, if the stock market rally is more than a flash in the pan, growth could pick-up in 2014.

IC TIP: Hold at 1586p

It does look increasingly likely that equity market volumes have reached a floor. Money is pouring into shares again and chief executive Chris Aspinwall says sentiment hasn't been this positive in five years. That’s reassuring, but Fidessa’s core cash equities business won't feel the benefits until everyone believes in the turnaround enough to begin buying new software and kit again. Smaller customers continue to merge or go bust and pricing remains competitive. At this rate Fidessa must deliver double-digit growth just to stand still. Europe is the big problem - revenue there fell 7 per cent to about £125m in 2012. Luckily, it’s being offset by growth of 12 per cent in Asia to over £47m and 5 per cent in the Americas to £106m. Fidessa’s new derivatives business is growing fast, too. Still, while contracts with Citi, Nomura and NewEdge are promising, revenue from these was little more than £8m last year.

Broker Jefferies has upgraded forecasts for both 2013 and 2014 by 3 per cent and now expects adjusted EPS of 81.8p and 85.6p, respectively (2012: 82p).

FIDESSA (FDSA)

ORD PRICE:1,586pMARKET VALUE:£590m
TOUCH:1,585-1,592p12-MONTH HIGH:1,724pLOW:   1,255p   
DIVIDEND YIELD:

2.3%†

PE RATIO:19
NET ASSET VALUE 377p*NET CASH:£72.1m

Year to 31 DecTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
200818936.080.124.50
200923931.059.830.0†
201026239.777.833.0†
201127842.582.236.5†
201227942.082.537.0†
% change--1-+1

Ex-div: 8 May

Payment: 10 Jun

*Includes intangible assets of £85.7m, or 230p per share

†Excludes special dividends: 40p in 2009 and 45p in 2010, 2011 and 2012