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Fidessa buoyed by currency movements

The software group improved recurring revenue and enhanced its regional diversification
August 4, 2017

Recurring revenue now constitutes 88 per cent of Fidessa’s (FDSA) top line, having grown 15 per cent in the first half to £157m. But the trading software provider's operating margin was flat after the company incurred higher staff expenses and the one-off £1m cost of moving Fidessa’s US head office from New York to Jersey City, which also attracted capital expenditure of £3.2m.

IC TIP: Hold at 2197p

The company also saw greater geographical diversification of its revenue, with two-thirds of sales deriving from countries outside of Europe. Sterling’s weakness meant Fidessa’s strong growth in reported sales (see table) was a more modest 2 per cent at constant currencies.

While uncertainty continued to weigh on global markets, a regulatory drive towards greater trading transparency, and the structural growth in derivatives, mean there are still rich pickings for Fidessa. Its sell-side division grew revenue by 13 per cent to £166m, with derivatives growing fastest, although equity trading was also robust.

The Mifid II rules are due to come into effect in January, although management believes they will be phased in over the year. They will include a pressure on companies to clarify their pricing around research and execution. For management, Fidessa’s plan to provide a fully managed platform with “a range of execution tools” positions it well for this shift.

A rise in the cash balance from £66.9m to £71m allowed for the dividend lift. Analysts at Numis forecast pre-tax profit of £47.9m and EPS of 90.5p for 2017, down slightly from £48.8m and 92.4p in 2016.

FIDESSA (FDSA)   
ORD PRICE:2,197pMARKET VALUE:£850m
TOUCH:2,194p-2,198p12-MONTH HIGH:2,621pLOW: 2,098p
DIVIDEND YIELD:2%PE RATIO:22
NET ASSET VALUE:399p*NET CASH:£71m
Half-year to 30 JunTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)†
201615822.241.414.3
201717825.448.815.3
% change+12+14+18+7
Ex-div:24 Aug   
Payment:21 Sep   

*Includes intangible assets of £96m, or 248p a share

†Excludes special dividend of 50p paid on 8 Jun 2017