NEX Group Sees Increased Revenues

NEX Group (Nex) has unveiled increased revenues for the six months to September 2017, however operating profit has dipped. Nex Markets performed well, however, and contributed to the increased revenues.

Nex says that revenue was £287 million, up from £254 million in the same period last year, a 13% increase that is trimmed to 7% on a constant currency basis. Meanwhile, trading operating profit fell from £75 million to £63 million and its trading operating profit margin fell from 30% to 22%.

Reduced profitability was expected as the company last month flagged increased investment in its post-trade services arm, NEX Optimisation.

Nex Markets saw an increase in revenue from £143 million (£149 million at constant currency) to £161 million, with EBS providing the largest boost, providing revenue of £75 million up from £67 million in the same period last year. This can partly be explained away by increased activity on the platform – spot volumes are up – but probably also reflects new products coming online such as forwards.

Nex’ three year deal with China’s CFETS provided £9 million in revenue, up from £4 million, while BrokerTec, the firm’s fixed income arm, reported revenues of £77 million, up from £72 million in the same period in 2016.

Nex says that EBS’ revenue growth was underpinned by emerging markets currency pairs, while revenue trends in G10 currency pairs “were mixed”. Average daily volume (ADV) in NDFs rose 25% in the period, something the firm partly attributes to the introduction of non-bank participants to the product offering.

EBS Direct saw a 5% increase in ADV to $21 billion, while FX forwards saw ADV rise 177% to $9 billion per day and eFix, the benchmark execution matching service, saw ADV increase to more than $2 billion per day. There were also nods to more recent development in EBS Live Ultra, the firm’s 5ms market data service and the recently launched Nex Quant Analytics.

In spite of the aforementioned increased investment in Nex Optimisation, the unit delivered a 12% (5% at constant currency) increase in revenues at £126 million, however trading operating profit was 22% lower at £25 million from £32 million. The firm highlighted the increased spend in the first six months of its financial year and says it expects this to be a temporary impact and that profit will “normalise in the second half of the year”.

“Now more than ever before we’re focused on execution and delivering growth in revenue and earnings,’ says Michael Spencer, chief executive of Nex Group. “Nevertheless, when necessary, we’ll invest to ensure that Nex is best positioned to take advantage of the significant opportunities ahead of us, as we recently did in Nex Optimisation. The combination of our agile organisation, market leading products, investment in innovation and our experienced management team, will lead us to further success.

“We have identified a further £15 million of annualised cost savings in addition to the £25 million previously announced,” he continues. “Since the acquisition of Abide in October 2016, the rebranded Regulatory Reporting business has signed more than 300 new contracts and is on track to profitability.

“Despite market conditions remaining challenging, we see many opportunities ahead,” he adds. “We have a diverse global business, an expanding client base and a robust balance sheet. This is a transitional and transformational year for Nex and we are committed to our financial aspirations of achieving compound annual revenue growth of 7% – 10% and operating margins for Nex Optimisation and Nex Markets of more than 40% by FY 2019/20.”

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Colin Lambert

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