First Derivatives

Financial software specialist First Derivatives (FDP) has notched up its fifteenth year of continued growth, driven by strong demand from investment banks.

Leveraging from an overseas network of offices, FDP provides solutions to a wide range of blue chip names, many of which rely on its expertise to monitor masses of volume. Driven by both organic growth and acquisitions, sales in the year to February leapt 44% to £36.7m as pre-tax profits increased 15% to £6.5m.

Software sales more than doubled to £12.5m, with more than 40 customers on the books for its core Delta product, which is used in trading and risk management. Though investment banks provided the foundation for FDP when it was formed, the client base now spans stock exchanges, commodity brokers and foreign exchange dealers.

A key point is that all the products sold are developed on a common technology platform, which allows new software to be easily implemented. Delta is sold on an annual license basis, providing good visibility - indeed repeat revenue is a massive 80% of overall sales. In consultancy it boosted consultant numbers by 30% to 271, this will increase during the year, not least thanks to a £4.3m grant from Investment Northern Ireland. Daily consulting is up 57% to £110,000 and the outlook is positive.

Broker Arbuthnot forecasts 2012 pre-tax profits of £7.8m, and EPS of 32.4p and a dividend of 13.25p. The shares have soared over recent months, due to increasing investor interest. Given the strong start to the year, FDP has further to run. Long-term buy.