NEX Optimisation to Boost Spending as Parent Expects Financial Hit

NEX Group (Nex) has provided a trading update for investors, in which it has flagged increased spending at its Optimisation division under which umbrella the firm’s post-trade businesses operate.

The announcement, which is being read in some quarters as a profit warning, says Nex has chosen to increase its investment in the Optimisation business in the first six months to “ensure the business is best positioned to take advantage of the significant opportunities that it has identified”.

Nex Optimisation was responsible for just over 44% of group revenues in the financial year 2016/17 and within this the TriOptima and Traiana businesses brought in GBP 143 million of the GBP 240 million in Optimisation revenues. Both businesses have seen senior departures in 2017, in February Per Sjöberg, founder and CEO of TriOptima, left the firm, that was shortly followed by Jill Sigelbaum leaving Traiana where she was head of FX.

The firm explains the additional investment is part of an ongoing project to transform the business to a more client-centric structure based around solution pillars.

Nex Optimisation has also decided to increase its investment in its sales activities and associated marketing campaigns in relation to the MiFID II services provided by Nex Regulatory Reporting in order to maximise the significant short-term market share opportunity ahead of the implementation of these new regulations on 3 January 2018, the firm adds.

The combined effect of these investments together with the ongoing low volatility impacting the Reset business will have “a temporary impact” on Optimisation’s operating profit margin in the first half, Nex Group says, adding this is now expected to be approximately 20%. This compares to around the 30% area last year, although the firm says it expects the division’s operating profit margin to normalise in the second half of the year.

The broader Nex Group transformation programme, which includes Nex Optimisation, remains on track, the firm says, and additional cost savings have been identified over and above the £25 million previously announced.

“These investments will enhance the potential for Nex Optimisation,” says Michael Spencer, CEO of Nex Group. “We remain committed to the financial aspirations we set out earlier in the year to achieve compound revenue growth of 7%-10% and divisional operating margin for Nex Optimisation and Nex Markets of more than 40% by 2019/2020.

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Colin Lambert

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