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RNS
Fidessa Group PLC  -  FDSA   

Final Results

Released 07:00 13-Feb-2017

RNS Number : 6662W
Fidessa Group PLC
13 February 2017
 

13th February 2017

 

 

Fidessa group plc

Preliminary results for the year ended 31st December 2016

 

Fidessa reports solid growth and raised dividend

 

 

2016

2015

Change

At constant currencies *

Revenue

£331.9m

£295.5m

+12%

+3%

Profit before tax

£48.8m

£39.1m

+25%

+1%

Diluted earnings per share

92.3p

76.5p

+21%

 

Final dividend per share

28.2p

25.4p

+11%

 

Special dividend per share

50.0p

45.0p

+11%

 

Cash

£95.2m

£78.3m

+22%

 

* Constant currency growth is calculated by comparing 2016 results with 2015 results retranslated at the rates of exchange prevailing during 2016.

 

 

Highlights for the period ended 31st December 2016:

 

·      Solid revenue growth across all regions.

·      Good international spread providing stability against uncertainty following the Brexit vote and the US election.

·     64% of total revenue accounted for outside of Europe, with 73% denominated in non-sterling currency.

·      Increasing opportunities for new Fidessa services.

·      Derivatives programme continuing to build momentum.

·      Recurring revenue representing 87% of total revenue.

·      Strong cash generation, with £95.2 million cash balance after dividend payments of £32.5 million.

·      Final and special dividends declared, bringing the total 2016 payout to 92.5 pence per share.

 

Commenting on these results, Chris Aspinwall, Chief Executive, 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.

 

Moving into 2017, whilst we continue to see structural and regulatory drivers within the market, there is clearly a degree of uncertainty as a result of the Brexit vote and the US election and it is likely to be some time before we have a clear view of how these events will impact our customer base. In Europe, however, we continue to expect that MiFID II will be introduced as planned and that regardless of Brexit, this will include the UK. In the US there are signs that the regulatory environment may be loosened but, whilst early indications are that our customers see this as beneficial, at this stage it is too early to say how this might develop.

 

During 2017 we plan to relocate our main US office from New York to Jersey City. This will provide a first-class facility which will position us with the footprint we need to further expand in this important market. The strength of our balance sheet enables us to fund the fit out of this facility ourselves, rather than using financing. As a result of some one-time and duplicate move-related costs, we anticipate a small impact on profit after tax margin in 2017.

 

Overall, we continue to believe that we are well positioned to benefit from the opportunities that will arise in the markets as a result of regulatory and structural change. Furthermore, with over 60% of our revenue derived from outside of Europe, and over 70% in non-sterling currencies, we remain well positioned to benefit from any continued weakness in sterling, providing further support for our strong cash generation and dividend policy. We expect that 2017 constant currency revenue growth will be around the levels that we have seen during 2016, with further headline gains if sterling remains weak."

 

Commenting on the longer-term outlook, Chris Aspinwall continued:

 

"Looking further ahead, although it is clear that both the Brexit vote and the result of the US election will create some uncertainty, we believe that we are entering a period where opportunity is returning to the market. We expect to continue to make progress with our multi-asset initiative and will continue to investigate the possibility of extending our asset class coverage further. We believe that across all asset classes, the market is moving towards the increased use of service-based solutions and that few vendors have both the depth of applications and the scale of infrastructure needed to deliver these 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."

 

Finance review

 

In 2016 Fidessa achieved revenue of £331.9 million which represents growth on a reported basis of 12% (2015: £295.5 million and 7% growth). On a constant currency basis, revenue growth of 3% compares with 4% in 2015.

 

Recurring revenue of £287.8 million grew 14% and represents 87% of total revenue (2015: £252.5 million, 85% of total revenue).

 

Revenue for the sell-side business of £308.9 million grew 13% (2015: £273.6 million and 4% growth) and for the buy-side business revenue of £23.1 million grew 5% (2015: £21.9 million and a decline of 3%). Within the sell-side business, equities revenue of £267.5 million grew 13% (2015: £237.6 million) and derivatives revenue of £41.3 million grew 15% (2015: £36.0 million). Derivatives revenue represents 12% of total revenue (2015: 12%) and also accounts for 12% of recurring revenue.

 

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.

 

On a regional basis, 64% of total revenue was accounted for outside of Europe. The Americas grew 15% on a reported basis and 2% on a constant currency basis and was the largest region, accounting for 43% of total revenue. Asia grew 21% on a reported basis and 5% on a constant currency basis and accounted for 21% of total revenue. Europe grew 5% on a reported basis and 2% on a constant currency basis and accounted for 36% of total revenue. The currency tailwind in Europe reflects that over 25% of revenue for the region is denominated in currencies other than sterling.

 

The deferred revenue in the balance sheet at the end of the year was £61.8 million and represents 19% of annualised revenue (31st December 2015: £54.6 million and 18% of annualised revenue) with the majority of it expected to be recognised as revenue during the first half of 2017. Consistent with previous years, the accrued revenue balance was minimal.

 

Total operating expenses for 2016 grew 10% to £283.9 million (2015: £257.1 million) with over half of the increase attributable to foreign currency exchange rate movements. The £26.8 million increase in operating expenses primarily relates to a £15.9 million increase in total staff costs and a £10.3 million increase in communications and data costs. The average number of people employed during 2016 of 1,739 was broadly unchanged from 1,741 in 2015.

 

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 £12 million 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 £30.4 million was broadly unchanged from £30.3 million in 2015 while net capitalisation of development expenditure of £2.9 million increased from £2.5 million 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 £1.7 million.

 

Profit before tax for 2016 has increased 25% to £48.8 million (2015: £39.1 million), being a profit before tax margin of 14.7% (2015: 13.2%). The profit before tax growth benefits from the positive impact of foreign currency exchange rate movements and from the RDEC grants noted above.

 

The effective rate of tax for 2016 is 26.8% (2015: 24.5%) with the movement primarily attributable to the implementation of the RDEC rules. The overall impact of RDEC during 2016 was a small reduction to profit after tax. From 2017, we anticipate adoption of RDEC will have a net benefit on profit after tax and will reduce cash tax payable.

 

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

 

Fidessa continued to be strongly cash generative, closing the period with a cash balance of £95.2 million (2015: £78.3 million) and no debt. Cash generated from operations increased by 15% to £92.4 million (2015: £80.4 million). During the period, dividends of £32.5 million (2015: £31.7 million) have been paid.

 

The final dividend, if approved by shareholders, will be 28.2 pence and payable on 8th June 2017 to shareholders on the register on 12th May 2017, 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.

 

Market review

 

Introduction

 

2016 was a challenging year for many of Fidessa's customers, with a slowdown in trading activity in the first half being followed by political uncertainty as a result of the Brexit vote and the US election. The continued crisis in the Chinese stock market meant that each region had its individual difficulties, creating a challenging backdrop. However, there were also positive elements within the market which are expected to feed through into 2017. These include the increasing clarity around regulation, improved sentiment amongst the Futures Commission Merchants (FCM) community, who now believe that they may have weathered the worst of the storm, and a view across the market that the new US presidency will herald a significant reduction in regulation and increased freedom within America's financial markets.

 

Despite the challenging backdrop, Fidessa continued to make progress as customers switched away from purely cost focused strategies towards a more strategic approach. This approach, which typically involves Fidessa's customers reviewing their positioning for the longer term, can result in some customers restructuring some areas of their business whilst strengthening their commitment in other key areas. As anticipated in the 2015 preliminary results announcement, this restructuring did result in an increase in the headwind that Fidessa saw from consolidations and closures within its customer base, but this was balanced out by customers committing to and investing in other areas of their business.

 

The investments Fidessa has made to extend the range of asset classes it supports, expand its regional coverage and build out its global infrastructure have positioned it well to help its customers to address the cost of their activities through a robust, multi-asset, service-based delivery platform. Fidessa has seen further customers adopting this approach during 2016 and believes that the value of this core platform, and the importance of Fidessa's multi-asset strategy, will become increasingly clear as the new MiFID II regulations are introduced and firms adapt to the new political landscape. Fidessa also believes that the global nature of its trading platforms means that it is less susceptible to the effects of regional changes such as Brexit and the US election, as trading infrastructure is likely to continue to operate on a cross-border basis.

 

In addition to investing in its core platform, Fidessa has also worked to help its customers achieve high levels of differentiation. One area in which these enhancements have been focused is in trade optimisation and measurement, where Fidessa's Optimized Trading initiative and Fidessa Prospector have been quick to win awards for innovation. Further initiatives address compliance, for both monitoring and reporting, as well as information security at all levels across both the buy-side and the sell-side. Fidessa has also put in place initiatives to enable its customers to extend their use of their Fidessa systems more widely across their organisations, automating more business processes and helping them to further improve efficiency. These initiatives, across both buy-side and sell-side, will help secure Fidessa's central position within the financial markets over the longer term and will provide a strong base for further growth.

 

Sell-side trading

 

During 2016 Fidessa has continued to develop its sell-side business. Fidessa's customers have seen challenges coming from several different directions, including new regulation and reporting requirements, increased capital requirements and cost pressures within their own customer bases. Additional uncertainly has been added to these challenges as a result of the Brexit vote and the US election. These challenges mean that many firms are continuing to review their business models in order to identify how their businesses need to be shaped to respond to future demand. Fidessa continues to believe that these challenges will create opportunities as firms seek a partner who can provide the applications they need for the future, integrated with the complex trading infrastructure they need, as a cost-effective service. This enables them to deal with the upcoming regulatory challenges and focus on the unique elements of their business model, whilst keeping a tight control on costs.

 

During 2016 Fidessa has seen continued progress with its service-based platform across Europe, the Americas and Asia. New deals included two sales of large/global platforms as well as a number of smaller platforms across all regions. The large deals included an equity platform for a large global bank as well as a substantial contract with ABN AMRO Clearing to provide a cross-asset execution service. The deal with ABN will allow it to offer its customers low-latency access to more than 110 futures, options, equities and FX markets worldwide. The platform will be delivered out of 11 key locations around the world and, in addition to low-latency market access, also includes frameworks around smart order routing, internalisation, algorithmic trading and risk management. Fidessa has also seen interest in smaller sales of this platform as measurable execution quality becomes an increasingly important requirement within the market. Fidessa believes that this trend will strengthen further with the introduction of MiFID II, as unbundling will make the cost and quality of execution increasingly visible. Fidessa is making some additional investment into its execution services as it builds towards a long-term vision of a global, scalable, fully managed platform that allows customers to plug in and trade nearly any listed instrument anywhere in the world in a systematic way.

 

Within the regions, despite the challenges in China, Asia has continued to deliver the strongest growth helped by a robust performance from Japan. Further Chinese brokers have been signed in Hong Kong and additional wins in Japan have helped further strengthen Fidessa's position in this market. During the second half of 2016, Shenzhen Connect went live allowing international investors to trade 881 Shenzhen listed stocks through Hong Kong brokers. It also allows mainland China-based investors to trade 417 Hong Kong stocks through local brokers there. This complements the Shanghai-Hong Kong Stock Connect solution which went live in 2014, and Fidessa has already connected around 15 brokers to the new Shenzhen service.

 

Across all regions, the overall theme of a market in transition is strongly in evidence with more focus around service differentiation and execution quality. Fidessa's Optimised Trading initiative, which provides a range of tools, aimed at helping brokers to work more effectively and efficiently, is targeted directly at this space. These include the Order Performance Monitor which gives brokers insight into their orders and executions in real time and Fidessa Prospector which monitors a range of live and historical data to provide context and help identify liquidity. These tools have been well received as they roll out to customers across the regions and were quick to win awards, with Prospector being voted best business intelligence and analytics service in the Banking Technology Readers' Choice Awards.

 

To further assist customers to differentiate, Fidessa established a partnership programme during 2015. This programme aims to enable carefully selected third parties to integrate their innovative applications and technology within the Fidessa environment, while Fidessa maintains control over the customer experience both technically and commercially. In this way Fidessa is able to offer a route for innovative companies to access the Fidessa community and to meet the complex compliance and information security requirements mandated by regulators. For Fidessa's customers they are able to benefit from an even greater diversity of applications within their Fidessa platform, helping them to differentiate their business. During 2016, the number of partners within this programme extended to three, with a further partner announced in early 2017.

 

Fidessa has continued to make good progress with deliveries of its derivatives platform during 2016, although as mentioned in previous results announcements, growth during 2016, and particularly the second half, was suppressed by the headwind resulting from the 2015 closure of the Jefferies Group's Bache futures unit. During 2016 there has continued to be considerable pressure on FCMs, but despite this Fidessa has seen continued demand for exchange-based derivatives trading, with deliveries in 2016 including a new platform for BNP Paribas. This platform will support the bank's futures and options agency trading operations for listed derivatives across Europe, Asia-Pacific and North America. Delivering order management, global order handover capabilities and execution across all the major derivatives markets around the world, Fidessa's platform will also provide BNP Paribas with specialised derivatives algorithms and advanced synthetic order types to normalise trading across markets. Fully-integrated risk functionality will manage BNP Paribas' client limits on a global basis. Fidessa is also seeing demand for platforms to support electronic execution of exchange-based derivatives, and this is illustrated by the deal with ABN which includes significant elements of derivatives functionality. Fidessa continues to broaden into further parts of the derivatives market by providing platforms for Commodity Trading Firms (CTFs) with another deal signed in this area during 2016. The pressure within the FCM market has made it a challenging area in which to deliver rapid progress; however, research published by the Tabb Group in Q4 '16 indicates that the FCM community now believe they have weathered the worst of the storm, and that the tide of the business will rise over time. This is expected to make market conditions more favourable, and Fidessa is already seeing some evidence of this within its current pipeline. The level of investment Fidessa is making in its derivatives platform has started to normalise as it achieves scale, and Fidessa's derivatives business remains on track to make a positive contribution to Fidessa's overall profitability within two years. In addition to being a valuable business in its own right, the derivatives business is also providing Fidessa with a natural entry point into further asset classes within the sell-side.

 

With the changing market conditions, Fidessa has been investigating the potential of further extensions to the asset classes it supports looking specifically at the rates segment of the fixed income market. This research is continuing, and additional resource has been brought in to assist with this exercise. In addition, a small amount of additional investment has been actioned around specific market gateways for fixed income instruments. Fidessa expects to continue its work in this area during 2017, but this is not expected to have a material financial impact.

 

Buy-side trading

 

Sentiment within the buy-side community remained relatively subdued throughout 2016, however Fidessa's buy-side business signed a number of new customers for its investment management, compliance and post-trade products and services, as well as establishing a growing forward pipeline. The business experienced a reduced impact from consolidations and closures compared to the previous year and this, as anticipated in the 2015 preliminary results, helped facilitate an improved performance. Throughout 2016 Fidessa continued to invest in its buy-side products and services, with a focus on specific areas to address particular challenges in the industry.

 

Compliance has always been a key part of Fidessa's offering to the buy-side, and Sentinel has historically been primarily seen as a leading portfolio compliance solution. However, in 2015 Sentinel's reach was significantly extended to provide trading compliance. The first customers for this went live during 2016, and this differentiating feature was also key in securing further new business. The active compliance features of Sentinel have now been further extended, adding counterparty exposure and more sophisticated algorithms within the transactional checks across mandates. This enables asset managers to evaluate gains and losses on distinct time horizons and establish controls that trigger notifications, or even suspend trading, if results are out of normal tolerance.

 

The buy-side's customers today are much more willing to move funds between asset managers, and mergers within the industry drive further shifting of account ownership. As a result, compliance teams are on-boarding new accounts and mandates in greater numbers, driving the requirement for new levels of operational efficiency. Sentinel's portfolio compliance capabilities meet this challenge by streamlining user workloads, making the on-boarding of new funds and the adoption of new mandates faster and more accurate with account cloning, bulk maintenance of rules and one-click account termination.

 

Fidessa's Sentinel compliance system continues to be recognised by the industry for its leading position in the market, receiving further accolades during the year. These included winning Best Buy-side Compliance Product in the Waters Buy-side Technology Awards for the seventh time, as well as winning Best Buy-side Compliance Product in the Hedge Fund Manager US Technology Awards.

 

Fidessa's Investment Management System (IMS) provides buy-side firms with a global, consistent, integrated workflow across all asset classes and geographic regions, whilst at the same time delivering powerful functionality to allow them to maximise returns and enforce controls. This allows the firms to pursue the twin goals of best execution and maximum efficiency, so they can take advantage of new opportunities while demonstrating tight operational controls. During 2016, Fidessa has continued to expand the capabilities of its IMS. The new Portfolio Studio provides customers with next generation investment decision making functionality fully integrated with Microsoft Excel. Enhanced order handling capabilities have been delivered across futures, options and swaps, as well as comprehensive support for complex interest rate products. Fidessa has also been working with Neptune, an open standards network utility for pre-trade indications in bond markets. This will improve information dissemination among market participants and aid in the search for liquidity in this increasingly fragmented market.

 

Fidessa's offerings in the post-trade space have continued to expand throughout 2016. Its Affirmation Management Service (AMS) is now being used by over 60 firms and usage has increased with the utility now handling around 40,000 transactions per month. During 2017, Fidessa intends to expand the service from equities and fixed income into derivatives and the number of firms using AMS and the volume handled by the service are both expected to continue rising.

 

Fidessa's Partnership Programme has provided new opportunities for expansion in the post-trade space, taking advantage of Fidessa's positioning across both the buy-side and the sell-side. Under MiFID II, firms must not only unbundle the fees paid by buy-side firms to brokers for research, but also implement an affirmation process to confirm these fees trade by trade. Commcise joined the Fidessa Partnership Programme in 2016, and its commission management solution enables firms to transform their processing of Commission Sharing Agreements by providing reconciliation, invoice management, broker voting, commission management and reporting. Integrating this into Fidessa's post-trade workflow allows buy-side firms to more easily meet these new regulatory requirements, and leveraging Fidessa's distribution in this way enables the process to be implemented in a very cost effective and seamless manner.

 

Regulation

 

Regulation continues to be an active topic around the world, with the main focus now shifted to the imminent implementation of MiFID II in Europe and the uncertainty in America following the US election. During 2016 Fidessa has been working closely with its customers to develop a comprehensive programme which will support them through the complex regulatory environment and help them maintain their compliance across all regions.

 

In Europe, Fidessa is continuing to develop its MiFID II programme on the basis that the rules will come into effect on 3rd January 2018 and will apply to all firms in the UK regardless of the outcome of the Brexit negotiations. The scope of Fidessa's MiFID II programme is wide ranging and covers:

 

·      Enhanced controls including pre-trade risk checks.

·      Increased transparency including enhanced trade reporting.

·      Support for downstream record keeping and transaction reporting including additional order and trade data.

·      IT infrastructure and cyber security requirements.

 

It is clear that in order to meet the new regulations, firms will be under increasing pressure to have tighter integration of all their electronic flow and to ensure that workflow across all the regulated asset classes is well managed. To support its customers through MiFID II, Fidessa is planning a number of major software releases during 2017 and expects that some customers will look to move to a service provider with scale, such as Fidessa, as the work required to comply becomes clearer.

 

In the US, Fidessa has successfully deployed new functionality to support the Securities and Exchange Commission's (SEC's) Tick Size Pilot study, which widens the minimum quoting increment for a subset of pilot stocks. This pilot, created in part as a result of the Jumpstart Our Business Startups Act ("JOBS Act"), is a programme aimed at studying whether liquidity in smaller companies can be improved by widening the quoting increment, thereby incentivising market makers. It also includes a "Trade-at" provision, the purpose of which is to encourage the routing of orders to "lit" markets. Fidessa is also continuing to prepare for the forthcoming CAT NMS plan, which was approved by the SEC in November. The plan aims to create a single, comprehensive database known as the Consolidated Audit Trail (CAT) that will enable regulators to more efficiently and thoroughly track all trading activity in the US equity and options markets. It is likely to expand in future phases to include US Fixed Income instruments and dealing activities related to Initial Public Offerings.

 

At the end of 2015 a proposal to move forward with Regulation Automated Trading (RegAT) was unanimously approved by the Commodity Futures Trading Commission (CFTC). Work on the definition of RegAT continued during 2016, but the regulation was not finalised before the US election as originally planned, and the comment period has now been extended to 1st May 2017. With the new US administration indicating a preference towards deregulation, there is now some uncertainty as to whether RegAT in its current form will continue. The new administration has also indicated a desire to make significant structural alterations to the Wall Street Reform and Consumer Protection Act of 2010 (the "Dodd-Frank Act"), and has indicated that it will be introducing detailed cost benefit analysis of any new proposed rules. As a result, Fidessa believes that in the short term, there may be a pause in regulatory drivers within the US market, although Fidessa may benefit from improved customer sentiment if growth opportunities are boosted. Fidessa also expects that despite any hiatus with regard to US regulation, most large firms will continue to look for best practice when managing their global risk and workflow.

 

Outlook

 

Whilst Fidessa continues to see structural and regulatory drivers within the market, there is clearly a degree of uncertainty as a result of the Brexit vote and the US election and it is likely to be some time before it has a clear view of how these events will impact its customer base. In Europe, however, Fidessa continues to expect that MiFID II will be introduced as planned and that regardless of Brexit, this will include the UK. In the US there are signs that the regulatory environment may be loosened but, whilst early indications are that Fidessa's customers see this as beneficial, at this stage it is too early to say how this might develop.

 

Overall, Fidessa continues to believe that it is well positioned to benefit from the opportunities that will arise in the markets as a result of regulatory and structural change. Furthermore, with over 60% of its revenue derived from outside of Europe, and over 70% in non-sterling currencies, Fidessa remains well positioned to benefit from any continued weakness in sterling, providing further support for its strong cash generation and dividend policy. Fidessa expects that 2017 constant currency revenue growth will be around the levels that it has seen during 2016, with further headline gains if sterling remains weak. Fidessa anticipates that one off and duplicate costs in respect of the relocation of its main US office from New York to Jersey City will reduce profit after tax margin by approximately 1% during 2017.

 

Looking further ahead, although it is clear that both the Brexit vote and the result of the US election will create some uncertainty, Fidessa believes that it is entering a period where opportunity is returning to the market. Fidessa expects to continue to make progress with its multi-asset initiative and will continue to investigate the possibility of extending its asset class coverage further. Fidessa believes that, across all asset classes, the market is moving towards the increased use of service-based solutions and that few vendors have both the depth of applications and the scale of infrastructure needed to deliver these solutions. Fidessa is committed to playing an increasingly important role in the markets as customers focus on efficiency, transparency, compliance and performance, and expects that this will provide it with significant opportunities for further growth.

 

 

Enquiries:

 

Chris Aspinwall, Chief Executive

Ed Bridges, FTI Consulting

Andy Skelton, Chief Financial Officer

 

www.fidessa.com

 

Tel:: +44 (0) 20 7105 1000

Tel: +44 (0) 20 3727 1000

Email: eu.info@fidessa.com

 

 

 

 

Consolidated income statement

for the year ended 31st December 2016

 

 

 

2016

2015

 

Note

£'000

£'000

 

 

 

 

Revenue

2

331,935

295,479

 

 

 

 

Operating expenses

 

3

(283,919)

(257,081)

Other operating income

 

454

367

 

 

 

 

Operating profit

 

48,470

38,765

 

 

 

 

Finance income

 

350

320

 

 

 

 

Profit before income tax

 

48,820

39,085

 

 

 

 

Total income tax expense

5

(13,066)

(9,563)

 

 

 

 

Profit for the year attributable to owners

 

35,754

29,522

 

 

 

 

 

 

 

 

Basic earnings per share

6

93.5p

77.6p

Diluted earnings per share

6

92.3p

76.5p

 

 

 

Consolidated statement of comprehensive income

for the year ended 31st December 2016

 

 

 

2016

2015

 

 

£'000

£'000

 

 

 

 

Profit for the year from the income statement

 

35,754

29,522

 

 

 

 

Other comprehensive income

Item that may be reclassified subsequently to profit or loss:

 

 

 

Exchange differences arising on translation of foreign operations

 

4,778

1,485

Total comprehensive income for the year

 

40,532

31,007

 

 

 

Consolidated balance sheet

at 31st December 2016

 

 

 

2016

2015

 

Note

£'000

£'000

Assets

 

 

 

Non-current assets

 

 

 

Property, plant and equipment

 

20,570

23,203

Intangible assets

 

93,465

91,283

Deferred tax assets

 

9,925

7,919

Other receivables

8

2,000

2,405

Total non-current assets

 

125,960

124,810

 

 

 

 

Current assets

 

 

 

Trade and other receivables

8

83,132

71,885

Cash and cash equivalents

 

95,152

78,314

Total current assets

 

178,284

150,199

 

 

 

 

Total assets

 

304,244

275,009

 

 

 

 

Equity

 

 

 

Issued capital

 

3,858

3,827

Share premium

 

34,153

31,825

Merger reserve

 

17,938

17,938

Cumulative translation adjustment

 

7,243

2,465

Retained earnings

 

101,885

97,395

Total equity

 

165,077

153,450

 

 

 

 

Liabilities

 

 

 

Non-current liabilities

 

 

 

Other payables

9

10,557

8,486

Provisions

 

2,078

1,990

Deferred tax liabilities

 

6,314

7,109

Total non-current liabilities

 

18,949

17,585

 

 

 

 

Current liabilities

 

 

 

Trade and other payables

9

113,169

96,374

Provisions

 

1,309

947

Current income tax liabilities

 

5,740

6,653

Total current liabilities

 

120,218

103,974

 

 

 

 

Total liabilities

 

139,167

121,559

 

 

 

 

Total equity and liabilities

 

304,244

275,009

 

 

 

Consolidated statement of changes in shareholders' equity

 

 

Note

Issued capital

Share premium

Merger reserve

Translation reserve

Retained earnings

Total equity

 

 

£'000

£'000

£'000

£'000

£'000

£'000

 

 

 

 

 

 

 

 

Balances at 1st January 2015

 

3,817

31,017

17,938

980

97,747

151,499

 

 

 

 

 

 

 

 

Total comprehensive income for the year

 

 

 

 

 

 

 

Profit for the year

 

-

-

-

-

29,522

29,522

Other comprehensive income

 

-

-

-

1,485

-

1,485

 

 

-

-

-

1,485

29,522

31,007

 

 

 

 

 

 

 

 

Transactions with owners

 

 

 

 

 

 

 

Issue of shares - exercise of options

 

10

808

-

-

-

818

Employee share incentive charges

3

-

-

-

-

2,744

2,744

Current tax recognised direct to equity

 

-

-

-

-

249

249

Deferred tax recognised direct to equity

 

-

-

-

-

(598)

(598)

Purchase of shares by employee share trusts

 

-

-

-

-

(630)

(630)

Sale of shares by employee share trusts

 

-

-

-

-

16

16

Dividends paid

7

-

-

-

-

(31,655)

(31,655)

Balances at 1st January 2016

 

3,827

31,825

17,938

2,465

97,395

153,450

 

 

 

 

 

 

 

 

Total comprehensive income for the year

 

 

 

 

 

 

 

Profit for the year

 

-

-

-

-

35,754

35,754

Other comprehensive income

 

-

-

-

4,778

-

4,778

 

 

-

-

-

4,778

35,754

40,532

 

 

 

 

 

 

 

 

Transactions with owners

 

 

 

 

 

 

 

Issue of shares - exercise of options

 

31

2,328

-

-

-

2,359

Employee share incentive charges

3

-

-

-

-

1,740

1,740

Current tax recognised direct to equity

 

-

-

-

-

695

695

Deferred tax recognised direct to equity

 

-

-

-

-

(194)

(194)

Purchase of shares by employee share trusts

 

-

-

-

-

(1,012)

(1,012)

Dividends paid

7

-

-

-

-

(32,493)

(32,493)

Balances at 31st December 2016

 

3,858

34,153

17,938

7,243

101,885

165,077

 

 

 

Consolidated cash flow statement

for the year ended 31st December 2016

 

 

 

2016

2015

 

Note

£'000

£'000

Cash flows from operating activities

 

 

 

Profit before income tax for the year               

 

48,820

39,085

Adjustments for:

 

 

 

      Staff costs - share incentives

3

1,740

2,744

      Depreciation of property, plant and equipment

3

12,085

10,732

      Amortisation of product development

3

27,477

27,844

      Research and development expenditure grant

3

(1,650)

-

      Amortisation of acquired intangibles

3

730

730

      Amortisation of other intangible assets

3

219

283

      Profit on sale of property, plant and equipment

3

(48)

(5)

      Finance income

 

(350)

(320)

Cash generated from operations before changes in working capital

 

89,023

81,093

Movement in trade and other receivables

 

(10,842)

(6,627)

Movement in trade and other payables

 

14,250

5,889

Cash generated from operations

 

92,431

80,355

Income tax paid

 

(12,065)

(4,895)

Net cash generated from operating activities

 

80,366

75,460

 

 

 

 

Cash flows from investing activities

 

 

 

Purchase of property, plant and equipment

 

(6,948)

(13,290)

Proceeds from sale of property, plant and equipment

 

94

57

Purchase of other intangible assets

 

(157)

(269)

Product development capitalised

 

(30,424)

(30,305)

Interest received on cash and cash equivalents

 

350

320

Net cash used in investing activities

 

(37,085)

(43,487)

 

 

 

 

Cash flows from financing activities

 

 

 

Proceeds from shares issued

 

2,359

818

Purchase of shares by employee share trusts

 

(1,012)

(630)

Proceeds from sale of shares by employee share trusts

 

-

16

Dividends paid

7

(32,493)

(31,655)

Net cash used in financing activities

 

(31,146)

(31,451)

 

 

 

 

Net increase in cash and cash equivalents

 

12,135

522

Cash and cash equivalents at 1st January

 

78,314

76,756

Effect of exchange rate fluctuations on cash held

 

4,703

1,036

Cash and cash equivalents at 31st December

 

95,152

78,314

 

 

 

Notes to the consolidated financial statements

 

 

1    Preparation of the preliminary announcement

The preliminary results announcement for the year ended 31st December 2016 has been prepared by the directors based upon the results and position which are reflected in the statutory accounts. The statutory accounts are prepared in accordance with International Financial Reporting Standards as adopted by the European Union (Adopted IFRS).

 

The financial information for the years to 31st December 2016 and 2015 does not constitute statutory accounts and has been extracted from the Company's consolidated accounts for the year to 31st December 2016.

 

Statutory accounts for 2015 have been delivered to the Registrar of Companies, and those for 2016 will be delivered following the Company's Annual General Meeting. The auditor has reported on those accounts; its report was unqualified, did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying its report, and did not contain statements under Section 498(2) or 498(3) of the Companies Act 2006.

 

 

2    Segment reporting

 

For the year ended 31st December 2016

Sell-side

Buy-side

Total

 

 

£'000

£'000

£'000

 

 

 

 

 

 

Recurring revenue

269,211

18,594

287,805

 

Non-recurring revenue

39,649

4,481

44,130

 

Total revenue from customers

308,860

23,075

331,935

 

Inter-business unit revenue

-

6,282

6,282

 

Operating profit as monitored by the Operating Board

39,588

5,015

44,603

 

 

 

 

 

 

Amortisation of acquired intangibles

 

 

(730)

 

Product development capitalised

 

 

30,424

 

Product development amortised

 

 

(27,477)

 

Research and development expenditure credit

 

 

1,650

 

Operating profit

 

 

48,470

 

Finance income

 

 

350

 

Profit before income tax

 

 

48,820

 

For the year ended 31st December 2015

Sell-side

Buy-side

Total

 

 

£'000

£'000

£'000

 

 

 

 

 

 

Recurring revenue

235,779

16,752

252,531

 

Non-recurring revenue

37,810

5,138

42,948

 

Total revenue from customers

273,589

21,890

295,479

 

Inter-business unit revenue

-

6,576

6,576

 

Operating profit as monitored by the Operating Board

33,707

3,327

37,034

 

 

 

 

 

 

Amortisation of acquired intangibles

 

 

(730)

 

Product development capitalised

 

 

30,305

 

Product development amortised

 

 

(27,844)

 

Operating profit

 

 

38,765

 

Finance income

 

 

320

 

Profit before income tax

 

 

39,085

 

Sell-side

£'000

Buy-side

£'000

Total

£'000

Year ended 31st December 2016

34,915

4,866

39,781

Year ended 31st December 2015

33,840

5,749

39,589

 

 

2016

2015

 

 

£'000

£'000

 

 

 

 

 

Europe

120,031

113,960

 

Americas

142,575

124,350

 

Asia

69,329

57,169

 

Total revenue

331,935

295,479

 

 

2016

2015

 

 

£'000

£'000

 

 

 

 

 

UK

120,031

113,960

 

USA

125,347

109,476

 

Hong Kong

42,814

37,849

 

 

3    Operating expenses

 

 

2016

2015

 

£'000

£'000

 

 

 

Staff costs - salaries

142,113

128,287

Staff costs - social security

11,121

10,390

Staff costs - pension

6,117

5,441

Staff costs - share incentives

1,740

2,744

Staff costs - medical insurance

8,112

6,487

Staff costs - other benefits

503

479

Total staff costs

169,706

153,828

Subcontractors

1,661

2,058

Depreciation of property, plant and equipment

12,085

10,732

Amortisation of other intangible assets

219

283

Amortisation of acquired intangible assets

730

730

Capitalisation of product development

(30,424)

(30,305)

Amortisation of product development

27,477

27,844

Research and development expenditure grant

(1,650)

-

Communications and data

53,474

43,145

Operating lease rentals - property

21,298

18,382

Operating lease rentals - plant and machinery

142

80

Profit on sale of property, plant and equipment

(48)

(5)

Exchange (gain)/loss

(1,149)

1,075

Other operating expenses

30,398

29,234

Total operating expenses

283,919

257,081

 

 

4    Staff numbers

 

 

2016

2015

 

 

Number

Number

 

 

 

 

 

Europe

851

851

 

The Americas

554

562

 

Asia

334

328

 

Total average staff numbers in the year

1,739

1,741

 

 

2016

2015

 

 

Number

Number

 

 

 

 

 

Delivery

497

538

 

Support

325

334

 

Core development and research

519

479

 

Operations

152

153

 

Sales

56

60

 

Marketing

37

41

 

Management and administration

150

152

 

Total staff numbers at 31st December

1,736

1,757

 

 

5    Income tax expense

 

 

 

2016

2015

 

 

£'000

£'000

 

Current tax

 

 

 

Current year domestic tax

5,411

2,376

 

Current year foreign tax

7,802

7,602

 

Adjustments for prior years

1,219

(870)

 

Total current tax

14,432

9,108

 

 

 

 

 

Deferred tax

 

 

 

Origination and reversal of temporary differences

(238)

366

 

Benefit and utilisation of tax losses

109

-

 

Adjustments for prior years - tax rate change

(205)

(36)

 

Adjustments for prior years - other

(1,032)

125

 

Total deferred tax

(1,366)

455

 

 

 

 

 

Total income tax in income statement

13,066

9,563

 

 

2016

2016

2015

2015

 

 

 

£'000

 

£'000

 

 

 

 

 

 

 

Profit before tax

 

48,820

 

39,085

 

Income tax using the domestic corporation tax rate

20.0%

9,764

20.3%

7,915

 

Effective tax rates in foreign jurisdictions

 

3,134

 

3,189

 

Expenses not deductible for tax purposes

 

169

 

471

 

Unutilised losses

 

98

 

451

 

Tax incentives

 

(23)

 

(1,664)

 

Non-taxable items

 

(13)

 

(18)

 

Adjustment relating to prior years

 

(63)

 

(781)

 

Total income tax and effective tax rate for the year

26.8%

13,066

24.5%

9,563

 

 

 

Tax recognised direct to equity:

2016

2015

 

 

£'000

£'000

 

 

 

 

 

Current tax credit relating to equity-settled share incentives

(695)

(249)

 

Deferred tax debit relating to equity-settled share incentives

194

598

 

 

6    Earnings per share

 

 

2016

2015

 

 

£'000

£'000

 

 

 

 

 

Profit attributable to owners

35,754

29,522

 

 

 

2016

2015

 

 

Number '000

Number '000

 

 

 

 

 

Weighted average number of shares in issue

38,455

38,224

 

Weighted average number of shares held by employee share trusts

(220)

(200)

 

Number of shares used to calculate basic earnings per share

38,235

38,024

 

Dilution due to share incentives

519

559

 

Number of shares used to calculate diluted earnings per share

38,754

38,583

 

 

 

2016

2015

 

 

Pence

Pence

 

 

 

 

 

Basic earnings per share

93.5p

77.6p

 

Diluted earnings per share

92.3p

76.5p

 

 

7    Dividends paid and proposed

 

 

 

2016

2015

 

 

£'000

£'000

 

Declared and paid during the year

 

 

 

Interim 2016 dividend of 14.3 pence per share (interim 2015 dividend of 13.1 pence per share)

5,489

4,991

 

Final 2015 dividend of 25.4 pence per share (final 2014 dividend of 25.0 pence per share)

9,742

9,523

 

Special 2015 dividend of 45.0 pence per share (special 2014 dividend of 45.0 pence per share)

17,262

17,141

 

 

32,493

31,655

 

 

8    Trade and other receivables

 

 

Current assets

2016

2015

 

 

£'000

£'000

 

 

 

 

 

Trade receivables

66,747

60,711

 

Prepayments

10,698

8,892

 

Accrued revenue

1,573

1,328

 

Other receivables - RDEC (note 5)

3,056

-

 

Other receivables

1,058

954

 

Total trade and other receivables

83,132

71,885

       Non-current assets

2016

2015

 

£'000

£'000

 

 

 

        Other receivables - deposits

2,000

2,405

 

 

9    Trade and other payables

 

 

Current liabilities

2016

2015

 

 

£'000

£'000

 

 

 

 

 

Trade payables

6,814

4,615

 

Accrued expenses

34,532

29,766

 

Other liabilities

3,518

2,436

 

Deferred revenue

61,812

54,646

 

Deferred income - RDEC (note 5)

1,878

-

 

Other taxes and social security

4,615

4,911

 

Total current trade and other payables

113,169

96,374

 

Non-current liabilities

2016

2015

 

 

£'000

£'000

 

 

 

 

 

Accrued expenses

1,260

698

 

Deferred income - RDEC (note 5)

2,336

-

 

Other liabilities - operating lease incentives

6,961

7,788

 

Total non-current trade and other payables

10,557

8,486

 


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