October 2, 2017 / 8:40 AM / 9 months ago

NEX Group warns on profits at post-trade business

(Reuters) - British financial trading technology company NEX Group Plc (NXGN.L) said increased spending at its post-trade and information services operations would dent the division’s profitability, sending its stock lower on Monday.

Shares in NEX, which was known as ICAP before it sold its voice broking business to TP ICAP (TCAPI.L) in 2016, were down 5.3 percent at 0755 GMT, making them second biggest faller on FTSE Mid-cap .FTMC index.

The company said it expects NEX Optimisation’s operating profit margin to come in at 20 percent in the first half, down from the 29 percent in the prior year.

The division accounts for around 44 percent of NEX’s annual revenue.

The company benefited last year from increased market volatility after unexpected outcomes in global politics, such as Donald Trump’s victory in the U.S. presidential election and Britain’s decision to leave the European Union.

However, the wider sector has long struggled with declining volumes, hit by regulation designed to rein in the riskier trading activities of traditional investment bank clients.

NEX, which matches buyers and sellers of bonds, swaps and currencies, said the effect of the increased investment on its profit margin is seen returning to normal in the second half of the year.

Revenue for the period rose 7 percent in the first half.

“We remain committed to the financial aspirations we set out earlier in the year to achieve compound revenue growth of 7-10 percent and divisional operating margin for NEX Optimisation and NEX Markets of more than 40 percent by 2019/2020,” Chief Executive Michael Spencer said.

Reporting by Rahul B in Bengaluru, editing by Louise Heavens

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