Five years on from the financial markets collapse of 2009 and Fidessa (FDSA) is still licking its wounds, but at least there are definite signs of the healing process. Half-year to end June figures show welcome improvement for the financial trading software supplier, with underlying revenues up 4% to £137.1 million and a 7% rise in core earnings, to 40.1p per share on an adjusted and diluted basis.

Woking-based Fidessa has had much to contend with recent years, with its core customer base of banks, investment managers, brokers and hedge funds either consolidating, restructuring and/or closing down altogether. Having built its business on equity trading floors, selling very high-spec buy-side, sell-side and data tools to global financial institutions, now joins the ever lengthening list of UK firms facing a pummeling from the pound. During this six month period sterling has strengthened 7% against the the US dollar, 16% against the Japanese yen.

FIDESSA GROUP - Comparison Line Chart (Rebased to first)

There's not much management can do about that, but the £775 million cap did also miss on margins expectations thanks to greater amortisation of research and development (R&D) investment. Operating margins come out at 14.5%, almost a full 1% behind the 15.4% forecast by analyst at Investec.

One particularly bright area is the company's derivatives sales. Sceptics have been doubtful in the past that a largely equities-based business could make meaningful progress in the CFDs, options and futures space yet it seems to be doing rather well. This part of the business saw revenues double, although separate figures are not broken out from overall sell-side operations. But its derivatives arm is now worth 8% of overall sales and 6% of the wider group's 85% recurring revenues.

Geographically there are clears winners (Asia up 11%, US 6% ahead) and losers, where Europe is still a sticky wicket with revenues down 2%.

'Talking to management we believe improving market conditions are broad-based, with a particular increase in confidence from some of the smaller customers, greater acceptance of price rises and interest in new functionality,' says analyst at broker Numis this morning. However, Investec's number crunchers expect to reduce full year 2014 earnnings before interest, tax, depreciation and amortisation (EBITA) estimates 'by 5% to 10% to take into account FX and also the impact of more amortisation than previous years.'

Issue Date: 04 Aug 2014