Fidessa hikes dividend after solid growth

Fidessa has hiked its dividend after solid growth in the year to the end of December.

Fidessa achieved revenue of £331.9m which represents growth on a reported basis of 12% (2015: £295.5m and 7% growth).

On a constant currency basis, revenue growth of 3% compares with 4% in 2015. Recurring revenue of £287.8m grew 14% and represents 87% of total revenue (2015: £252.5m, 85% of total revenue). Revenue for the sell-side business of £308.9m grew 13% (2015: £273.6m and 4% growth) and for the buy-side business revenue of £23.1m grew 5% (2015: £21.9m and a decline of 3%).

The group said: "Foreign currency exchange rates have been significantly more volatile during 2016 than in 2015. Sterling was 12% weaker against the US dollar and currencies pegged to the US dollar and 20% weaker against the Japanese yen.

"This has resulted in an increased variance between headline growth rates and constant currency growth rates. During 2016, 73% of revenue was denominated in foreign currencies, predominantly US dollars which accounted for 57% of revenue in the period.

"As anticipated, the revenue impact from consolidation and closures across the customer base increased to 4% during 2016 (from 2% in 2015).

"During 2016 there have continued to be further consolidations and closures, but Fidessa's current expectation is that these will have a reduced impact on revenue in 2017."

It continued: "During 2017 we plan to relocate our main US office from New York to Jersey City.

"The strength of our balance sheet enables us to fund the fit out of this facility ourselves, rather than using financing. We anticipate a cash outflow, net of landlord incentives, of approximately £12m in relation to this fit out during 2017 and approximately a 1% reduction in profit after tax margin as a result of duplicate and one-off costs associated with the move.

"The reduction in profit after tax margin is expected to impact both the first and second halves of 2017.

"Development expenditure capitalised of £30.4m was broadly unchanged from £30.3m in 2015 while net capitalisation of development expenditure of £2.9m increased from £2.5m in 2015.

"Following changes in legislation, Fidessa has implemented the research and development expenditure credit regime (RDEC) during the period.

"As a result, research and development tax credits previously offset against income tax expense are replaced by research and development grants that will be offset against operating expenses.

"The new treatment was adopted with effect from 1st January 2015 and during 2016, operating expenses have been reduced by grants totalling £1.7m."

Profit before tax for 2016 increased 25% to £48.8m, being a profit before tax margin of 14.7% (2015: 13.2%).

The profit before tax growth benefited from the positive impact of foreign currency exchange rate movements and from the RDEC grants.

Diluted earnings per share increased by 21% to 92.3 pence (2015: 76.5 pence).

The final dividend, if approved by shareholders, will be 28.2 pence and payable on 8 June to shareholders on the register on 12 May, with an ex-dividend date of 11th May 2017.

In addition, a special dividend of 50.0 pence (2015: 45.0 pence) is proposed and, if approved by shareholders, will be paid at the same time as the final dividend and brings total dividends for the year to 92.5 pence, an 11% increase from 83.5 pence in 2015.

Chief executive Chris Aspinwall said: "2016 has seen a period of exceptional change and uncertainty for our customers.

"During the year, structural and regulatory drivers have started to impact across the market and, at the same time, customers have been faced with uncertainty around how the political environment might affect their business.

"For Fidessa, however, although there was some evidence of stress during the second half of the year as firms took stock of the impact of the Brexit decision and the US election, levels of new business activity generally remained high and, when combined with the weakness of sterling, this enabled us to deliver solid growth for the year as a whole.

"As anticipated in the 2015 preliminary results announcement, we saw an increased headwind in 2016 as a result of consolidations and closures within our customer base, with this having the largest effect in the second half, particularly with regard to our sell-side derivatives business. However, based on what we can currently see, we expect that this headwind will now start to reduce.