Revenues soar 30% at First Derivatives

Revenues at Newry based financial technology firm First Derivatives soared by 30 per cent to £151.7 million (€178.8m) in the year to February 2017, on the back of an increased demand for its services as the regulatory burden rises in capital markets.

Revenue growth in the year to February 28th was driven by a sharp upturn in software revenue, up 47 per cent as a result of new contract wins and continued penetration of the existing customer base, the company said. Revenue on the fintech side advanced by 28 per cent to £117.4 million, while marketing technology revenue was up 39 per cent to £30.7 million, driven by the launch of its subscription-based marketing cloud platform.

Profits before tax rose by 20 per cent to £12.5 million, while adjusted earnings (EBITDA) increased by 24 per cent to £28.8 million.

On the back of the results Goodbody Stockbrokers has increased its full-year 2018 revenue and earnings expectations by 10 per cent and 4 per cent, respectively, to £177 million and £32 million.

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Increase in regulation

According to Brian Conlon, chief executive of First Derivatives (FD), an increase in regulation is behind much of the growth across the capital markets sector.

“Regulation is a clear driver,” he said. During the year FD signed contracts with the European operations of a Japanese investment bank, which involves the management of a number of the bank’s applications on a managed service basis, as well as an initial five-year deal with a Scandinavian asset manager to support its Murex platform, delivered through a hybrid near shore and on-site model.

One element of the company’s strategy now is to build on the capabilities it has developed in fintech to establish Kx in other high-value industries.

“We always thought we could bring it to a wider audience,” Mr Conlon said, “Technology is very strong for big data and has applications in many sectors, such as utilites, pharma. The challenge for us is to bring it to other sectors.”

The Newry-based company today employs about 1,700 people, but Mr Conlon expects this to top 2,000 once the company takes on 400 graduates this summer, up from 300 last year.

“Our investment [in talent] is going to continue to grow the company,” he said.

Potential risks

On the potential risks ahead, Mr Conlon notes that FD operates in a “ very competitive market”, and that the big tech players such as Amazon and Google could look to develop something themselves in the space.

“Our lead in big fast data is not always going to be there ,” he said, adding that this is why the company invests in R&D, to try and “stay ahead of the curve”.

Last year all the company’s growth was organic, but an acquisition could be on the cards in the future. “We’re not going to rule it out,” Mr Conlon said.

On Brexit, Mr Conlon says so far it’s been a case of “business as usual”.

“We’re like everyone else waiting to see what the outcome will be. We’re a global business so we’re confident that we can react to whatever pans out.”

First Derivatives recommended a final dividend of 14.00p per share (2016: 12.00p per share) which, together with the interim dividend of 6.00p per share paid in December 2016, gives a total dividend for the year of 20.00p per share, an increase of 18 per cent compared to the prior year.