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Fidessa freed up after Mifid II introduction

The group spies increasing capacity as Mifid II work tails off, enabling potential investment opportunities or margin improvement
February 19, 2018

Shares in Fidessa (FDSA) were marked up after the trading software group revealed strengthening full-year revenues and gave notice that it might invest in new opportunities in 2019. Now that Mifid II has been introduced, a reduction in associated work has given rise to “increasing capacity” – buoyed by an expected improvement from the group’s derivatives segment. Among potential areas for investment, chief executive Chris Aspinwall cites electronics execution, the correlated assets market or exchange trade funds (ETFs), which have recently seen huge inflows. That said, if the right opportunities don’t materialise, management anticipates margin expansion instead. A win-win scenario, one might venture – assuming all goes to plan.

IC TIP: Hold at 2,880pp

On an adjusted basis, pre-tax profits were up an impressive 10 per cent to £54.3m. This metric excludes costs stemming from the US office move to Jersey City, and provisions tied to property leases. In 2018, Fidessa expects the absence of such expenses to prompt a rise in the pre-tax profit margin, although this will be relatively modest due to expected negative currency translations.

The day after these results, Fidessa's shares rose almost a quarter on the news of a possible cash offer from Swiss company Temenos. Under the proposed terms, Fidessa shareholders would receive £36.467 per share including full-year final and special dividends, valuing the deal at around £1.4bn.*

Before the announcement of this potential acquisition, analysts at Numis forecast pre-tax profits of £49m and EPS of 96.4p for the year to December 2018, against £50m and 91.8p in 2017.

FIDESSA (FDSA)   
ORD PRICE:3,555pMARKET VALUE:£ 1.38bn
TOUCH:3,550-3,560p12-MONTH HIGH:3,635pLOW: 2,020p
DIVIDEND YIELD:1.3%PE RATIO:38
NET ASSET VALUE:431p*NET CASH:£92.4m
Year to Dec 31Turnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)†
201327943.185.537.0
201427539.177.138.0
201529539.177.635.8
201633248.893.542.5
201735450.092.945.0
% change+7+2-1+6
Ex-div:10 May   
Payment:7 Jun   
*Includes intangible assets of £98.1m, or 253p a share. †Excludes special dividends worth 45p between 2012-15, and 50p in 2016-17 (same dates apply)