Fidessa paid the price for another year of falling equities market trading, ending FY12 with flat YoY revenue. Considered against a 20% fall in equities trading and a c7% churn rate as a result of consolidation among the customer base, that was something of an achievement.
Revenue for the year to December 31 was £278.6m (vs £278.3m), generating pre-tax profit that was down 1% to £42m. The company had previously warned of status quo on the revenue front (see Fidessa warns of flat 2012). As anticipated, performance in the European region (which is primarily the UK as this is where the bulk of trading takes places) took a tumble, with revenue down 7%. Europe now represents 45% of the business, compared to 49% at the end of 2011, due to a combination of international growth and lower regional performance.
Looking underneath the headline numbers, there are several positive indicators. International growth is going well - revenue from Asia and the America’s was up 12% and 5% respectively - as is the expansion into multi asset initiatives. In the derivatives area Fidessa signed notable deals with Citi, Nomura and NewEdge. Recurring revenue now stands at a reassuring 84% of total revenue while on-going investments in its SaaS products, managed services offerings and supporting data centres are providing a basis for future growth. And it is generating cash.
CEO Chris Aspinwall says there has been an uptick in the markets over the past two months but always cautious believes it is too early to say whether it represents a tipping point. He told us that there are no disruptor technologies in the equities space so it is case of waiting for the market to bottom out. However, even if the market improves noticeably over the coming months the company does not believe it will have a material effect on its FY13 results. This factor combined with its on-going investment programme means 2013 performance is likely to be similar to 2012.
The underlying business is sound but Fidessa has its work cut out for it over the coming year. As Aspinwall pointed out, it has to generate double digit underlying growth to counteract falling markets and customer churn, and that will not change during 2013.