The growth levels that have been declining at Fidessa since FY10 are set to reach a low point in FY12. Management warns that full year revenue will be flat year on year as already slowing equity market volumes dropped further in Q3, and it sees no improvement in market conditions in the short term. Revenue for FY11 came in at £278m, which was a 6% yoy lift (see here). The worry is that with the financial market in its current state, a flat forecast can all too easily drop into negative territory. The UK has been a particulalrly tough market so we would not be suprised to see the UK drop into negative territory by the end of the financial year. Fortunately for Fidessa, it is increasing the proportion of business from outside the UK.
As a financial services specialist, the trading, investment management and information solutions provider has little room for manoeuvre. It is already diversifying into the multi-asset arena however and expects to close further derivatives deals in Q4, but growth in this area will not offset the decline elsewhere. The cost of expansion means its margin will be lower than in recent years – it managed 15.3% in H1 (see here). The company is debt-free, has high levels of recurring revenue and is still generating cash so in contrast to Patsystems (see Patsystems joins Dearly Departed) appears to have the resources to stay the course in anticipation of a longer term market upswing.