Royalblue Group Plc, the small but innovative UK software company new to the London Stock Exchange just last year, is strengthening its niche position in the financial software market with contract wins from some of the biggest players in global banking. Eleven firms went live in London in 1997 with royalblue’s order driven electronic trading software (SETS) and the company now boasts that over 50% of orders transacted in this new electronic market place were made using royalblue software. Clients using the software include Goldman Sachs, Morgan Stanley and Dresdner Kleinwort Benson, which is an impressive client base for a company which only began developing its specialist software in 1991. Net profits for the year to December 31 were down 20% to ú1.0m but excluding floatation costs of ú1m, profits rose by 45% while revenues grew strongly by 77% to ú20.6m in the year. The figures were slightly ahead of market expectations, but the shares fell 25 pence to 342.5 pence, most likely a combination of profit taking following the stockÆs strong run since November and the news that growth for the current year will be lower than the 77% achieved in 1997. Royalblue is a regular home grown success story. Having decided in 1991 that it was to small to survive as an independent services company, it set about developing software products in the niche markets of equity trading, helpdesks and computer telephony integration. Remarkably, the development work was funded by a combination of existing cash flows and smart deals with big clients who part funded development work but allowed royalblue to retain the product rights. The upshot of which is that following last yearÆs floatation, employees still own 40% of the business. The financial trading systems division, which has the big banking clients on board, specializes in software and services for equity trading, growing revenues by 124% to around ú11m last year. And the group’s Helpdesk software division grew revenues by 65% to ú6.8m while signing a deal with Intel Corp to integrate Helpdesk within IntelÆs LANDesk suite. Chief executive John Hamer said the company’s success in grabbing the trophy clients comes from creating world class products. Proof, if ever it were needed, that throwing money into software development isnÆt necessarily the only route to success. Research and development spending last year amounted to just ú2.3m, aided by continuous feedback from the groupÆs services division. Looking to 1998, the companyÆs expects its ú1m acquisition of a New York-based operation to begin lifting profit margins as start up costs diminish. Royalblue is turning its equity trading expertise to the higher volume Nasdaq market and other North American exchanges. US clients already include Montgomery Securities and HSBC, the worldÆs biggest banking organization. The directors are recommending a final dividend of 1.5 pence per share, bringing the total for the year to 2.25 pence.
