TIDMFDSA
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 GBP331.9m GBP295.5m +12% +3%
Profit before tax GBP48.8m GBP39.1m +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 GBP95.2m GBP78.3m +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 31(st) 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 GBP95.2 million cash balance
after dividend payments of GBP32.5 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 GBP331.9 million which
represents growth on a reported basis of 12% (2015: GBP295.5
million and 7% growth). On a constant currency basis, revenue
growth of 3% compares with 4% in 2015.
Recurring revenue of GBP287.8 million grew 14% and represents
87% of total revenue (2015: GBP252.5 million, 85% of total
revenue).
Revenue for the sell-side business of GBP308.9 million grew 13%
(2015: GBP273.6 million and 4% growth) and for the buy-side
business revenue of GBP23.1 million grew 5% (2015: GBP21.9 million
and a decline of 3%). Within the sell-side business, equities
revenue of GBP267.5 million grew 13% (2015: GBP237.6 million) and
derivatives revenue of GBP41.3 million grew 15% (2015: GBP36.0
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 GBP61.8 million and represents 19% of annualised revenue
(31(st) December 2015: GBP54.6 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 GBP283.9 million
(2015: GBP257.1 million) with over half of the increase
attributable to foreign currency exchange rate movements. The
GBP26.8 million increase in operating expenses primarily relates to
a GBP15.9 million increase in total staff costs and a GBP10.3
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 GBP12 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 GBP30.4 million was
broadly unchanged from GBP30.3 million in 2015 while net
capitalisation of development expenditure of GBP2.9 million
increased from GBP2.5 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
1(st) January 2015 and during 2016, operating expenses have been
reduced by grants totalling GBP1.7 million.
Profit before tax for 2016 has increased 25% to GBP48.8 million
(2015: GBP39.1 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 GBP95.2 million (2015: GBP78.3
million) and no debt. Cash generated from operations increased by
15% to GBP92.4 million (2015: GBP80.4 million). During the period,
dividends of GBP32.5 million (2015: GBP31.7 million) have been
paid.
The final dividend, if approved by shareholders, will be 28.2
pence and payable on 8(th) June 2017 to shareholders on the
register on 12(th) May 2017, with an ex-dividend date of 11(th) 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 1(st) 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 31(st) December 2016
2016 2015
Note GBP'000 GBP'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 31(st) December 2016
2016 2015
GBP'000 GBP'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 GBP'000 GBP'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
Issued Share Merger Translation Retained Total
Note capital premium reserve reserve earnings equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'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 GBP'000 GBP'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 31(st)
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 31(st) December 2016
and 2015 does not constitute statutory accounts and has been
extracted from the Company's consolidated accounts for the year to
31(st) 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
Fidessa is structured into two business units: Sell-side and
Buy-side. The Sell-side business unit provides solutions and tools
to support the trading of cash equities and derivatives globally.
The solutions are scalable from the largest to the smallest
operations in the sector. The Buy-side business unit provides the
systems to cover every stage of the investment process for all
asset classes. The systems are used by the largest investment
managers in the world, as well as some of the boutique and hedge
funds. Both business units leverage the connectivity and market
data infrastructure.
The Operating Board monitors the performance of the business
units and the overall group. It monitors operating profit adjusted
to exclude amortisation of acquired intangibles, product
development capitalisation and amortisation and Research and
Development Expenditure Credits, which is not an IFRS measure.
Finance income and assets and liabilities are not reported by
business unit.
No single customer accounts for more than 5% of revenue.
Recurring revenue reflects the periodic fees for software and
related services that is charged on a rental or subscription basis.
Non-recurring revenue comprises the consultancy fees for
implementation, configuration and ongoing support activity.
For the year ended 31(st) December
2016 Sell-side Buy-side Total
GBP'000 GBP'000 GBP'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 31(st) December
2015 Sell-side Buy-side Total
GBP'000 GBP'000 GBP'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
---------
Other segmental disclosures:
Depreciation of property, plant and equipment and amortisation
of other intangible assets have been apportioned to the operating
segments as follows:
Sell-side Buy-side Total
GBP'000 GBP'000 GBP'000
------------- ------------ ------------
Year ended 31(st) December 2016 34,915 4,866 39,781
------------- ------------ ------------
Year ended 31(st) December 2015 33,840 5,749 39,589
------------- ------------ ------------
No information is provided for segment assets and liabilities as
these measures are not provided to the Operating Board.
Revenue is attributed to a country based on the ownership of the
customer contract and where the work is being performed. The
revenue by region is detailed below.
2016 2015
GBP'000 GBP'000
Europe 120,031 113,960
Americas 142,575 124,350
Asia 69,329 57,169
Total revenue 331,935 295,479
-------- --------
Within the regional analysis the following individual countries
have attributed revenue accounting for 10% or more of total
revenue.
2016 2015
GBP'000 GBP'000
UK 120,031 113,960
USA 125,347 109,476
Hong Kong 42,814 37,849
3 Operating expenses
2016 2015
GBP'000 GBP'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
The average number of people employed (including directors)
during the year was as follows:
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
------- -------
The number of people employed (including directors) at 31st
December each year was as follows:
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 31(st) December 1,736 1,757
------- -------
5 Income tax expense
2016 2015
GBP'000 GBP'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
-------- --------
Reconciliation of the effective tax rate:
2016 2016 2015 2015
GBP'000 GBP'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
------ -------- ------ --------
The UK corporation tax rate for the year was 20% (2015:
20.25%).
The effective tax rate is higher than the UK's headline tax rate
due to the geographic mix of countries in which Fidessa operates.
Several of these countries have headline tax rates that are greater
than that in the UK, the two resulting in the greatest variance for
Fidessa being the US and Japan. Fidessa continues to recognise
certain provisions and accruals in respect of tax which involve a
degree of estimation and uncertainty, including those related to
transfer pricing, when the tax treatment cannot finally be
determined until accepted by the relevant tax authority.
Adjustments relating to prior years arise from the resolution of
specific uncertainties and the remaining risks are appropriately
reflected in the recognised provisions and accruals.
The primary influences on Fidessa's effective tax rate are
changes in headline tax rates and tax disallowances or incentives
in the countries operated in. This is reflected by the correlation
between Fidessa's effective tax rate and the UK headline tax rate
over the last five years. From 2010 through 2016 Fidessa's
effective tax rate has reduced from 30.1% to 26.8% and in the same
time the UK headline tax rate has fallen from 28.0% to 20.0%. These
are expected to continue to be the primary influences on the
effective tax rate into the future.
The Group has adopted the research and development expenditure
credit regime 'RDEC'. As a result, research and development tax
credits previously reported within the income tax expense are
replaced by 'above the line' research and development grants. The
grants are shown as deferred income as they are earned and are
subsequently credited to income as a reduction in operating
expenses over the period that the related development costs are
amortised. A corresponding other receivable is recognised at the
time the grant is earned and will subsequently be offset against
tax payable.
The new treatment has been adopted with effect from 1(st)
January 2015 and in the year ended 31(st) December 2016, grants
totalling GBP1,650,000 (of which GBP1,357,000 relates to 2015) have
been credited to income as a reduction to operating expenses (note
6). The adoption of RDEC is also reflected in the income tax
expense for 31(st) December 2016 and the majority of the 2.3%
movement in the effective tax rate for the year ended 31(st)
December 2016 when compared to the previous year reflects the tax
impact of adopting RDEC for 2015 and 2016.
The UK corporation tax rate will reduce to 19% with effect from
1(st) April 2017 and to 17% with effect from 1(st) April 2020.
Tax recognised direct to equity: 2016 2015
GBP'000 GBP'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
Earnings per share have been calculated by dividing profit
attributable to owners by the weighted average number of shares in
issue during the year, details of which are below. The diluted
earnings per share have been calculated using an average share
price of 2299p (2015: 2143p) for the year.
2016 2015
GBP'000 GBP'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
GBP'000 GBP'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
-------- --------
The directors propose a final dividend of 28.2 pence per share,
amounting to an expected final dividend payment of GBP10,881,000
and a special dividend of 50.0 pence per share, amounting to an
expected special dividend payment of GBP19,292,000. These will be
payable on 8th June 2017 to shareholders on the register at the
close of business on 12th May 2017, with an ex-dividend date of
11th May 2017. These dividends are subject to approval by
shareholders at the Annual General Meeting and have not been
included as a liability in these financial statements.
8 Trade and other receivables
Current assets 2016 2015
GBP'000 GBP'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
GBP'000 GBP'000
Other receivables - deposits 2,000 2,405
-------- --------
9 Trade and other payables
Current liabilities 2016 2015
GBP'000 GBP'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
GBP'000 GBP'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
-------- --------
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR TMMPTMBTBBBR
(END) Dow Jones Newswires
February 13, 2017 02:00 ET (07:00 GMT)
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