(Adds detail, CEO, analyst, share price)
By Esha Vaish and Noor Zainab Hussain
Feb 15 British financial broker NEX Group's
gave a cautious assessment of its 2017 prospects on
Wednesday, with muted January trading volumes casting a shadow
over better than expected third-quarter revenue.
Shares in the company fell 4 percent to 551.5 pence after it
said that an initial jump in volumes on market volatility after
Donald Trump's U.S. election victory had tailed off, with
analysts also pointing to a drag on profit from the acquisition
of two loss-making businesses.
"Trump did give a big boost to volumes in the last quarter
of last year and we're not seen that particularly follow through
in January," CEO Michael Spencer said after the Wednesday's
"It is still too early to assume with any confidence that
the previous and prolonged period of subdued market conditions
has come to a permanent end."
NEX's like-for-like reported revenue for the three months to
Dec. 31 jumped 26 percent, excluding the impact of its
acquisition of data analytics platform ENSO and regulatory
reporting specialist Abide Financial to bolster NEX
Optimisation, its post trade and information services operation.
ENSO and Abide are expected to remain loss-making for up to
Interdealer brokers, which match buyers and sellers of
currencies, bonds and other tradeable instruments, have
benefited from increased market volatility after unexpected
outcomes in global politics, such as Trump's victory and
Britain's decision to leave the European Union.
However, the sector has long struggled with declining
volumes, hit by regulation designed to rein in the riskier
trading activities of traditional investment bank clients.
NEX's investment in its optimisation operation was in
response to that trend and Spencer told reporters that he does
not expect Trump's intention to repeal some parts of U.S.
financial reform law to dampen demand for its products.
The company reported revenue at NEX Optimisation up 21
percent rise, beating analysts' expectations, but said that
operating margins were being squeezed by investment in new
products, acquisitions and a change in the product mix.
Morgan Stanley analysts said that NEX would bring only
"muted benefit to profit" from the increased revenue because of
the impact of the company's acquisitions.
Liberum analyst Justin Bates offered a similar assessment,
saying: "Comments around muted trading in January and ongoing
investment had probably dampened spirits a bit."
(Editing by David Holmes and David Goodman)