NEX Group sees solid revenue growth in first quarter
Nex Group
1,129.00p
09:36 02/11/18
Financial technology company NEX Group saw group revenue rise 10% on a constant currency basis in its first quarter, it reported in a trading update on Wednesday morning, with revenue for the three months to 30 June improving 20% on a reported basis.
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The FTSE 250 company said its ‘transformation programme’ remained on track, and as previously indicated the costs to achieve the promised savings would be approximately £10m, which would not be treated as an exceptional item.
“NEX has established itself as a financial technology company providing the industry with products and services that underpin the entire transaction lifecycle, pre-, during and post execution,” said group chief executive Michael Spencer.
“We have made good progress towards our medium term aspirations, which will deliver value for our clients and shareholders - a group revenue CAGR of 7-10%, an increase in NEXs subscription based products, drive profitable growth, and create efficiencies to increase divisional operating margins to at least 40%.”
At its foreign exchange electronic trading technology division, NEX Markets, revenue increased by 11% on a constant currency basis and 20% on a reported basis during the first quarter, which the board said was principally driven by the CFETS partnership.
Trading activity was held back by low volatility, NEX claimed, albeit with episodic activity around macro events such as the French election and a US rate rise.
“While maintaining its leading market position, average daily volume in US Treasuries on the BrokerTec platform increased by 7% to $168bn in the first quarter compared to the same period last year,” the NEX board said in its statement.
“Average daily volume for the first quarter in both US and EU repos increased by 6% and 27% respectively compared to the same period last year.”
Since the start of the year FX volatility had waned, NEX claimed, especially in G3 currency pairs despite the Federal Reserve increasing rates.
Average daily volume on EBS decreased by 3% to $80bn, and average daily volume on EBS Direct - the platform that allows liquidity providers to stream tailored prices directly to customers - was flat at $21bn in the first quarter.
The company said the launch of EBS Live Ultra, which it claimed was its “fastest” FX data product to-date, continued to “significantly improve” price discovery and increased market transparency, efficiency and liquidity.
At its transaction resource optimisation division, NEX Optimisation, revenue increased by 8% on a constant currency basis and 19% on a reported basis, which the board said was underpinned by client growth and innovation.
It said the triResolve reconciliation service continued to perform strongly, with the expansion of its services to include triResolve Margin.
“The business continues to have a steady increase in the number of participants, up 14% on the same period last year to more than 1,980,” the board’s statement added.
“Since launch, 85 subscribers have joined the triResolve Margin service which is underpinned by new margin rules for non-cleared trades.
“Compression services provided by triReduce, continued to see buoyant client demand for interest swaps and increased demand for new cross currency compression services.”
The NEX Data division continued to see client growth, NEX claimed, and was leveraging its direct client contracts and new distribution deal to enable closer relationships and increased opportunities to cross-sell a variety of data services.
Reset, the basis risk mitigation service, had been held back by low short-dated interest rate volatility in Europe.
The ENSO unit reported “robust” revenue growth during the first quarter compared to the same period last year, which the board said was driven by increased client demand from hedge funds and asset managers for its portfolio of analytical solutions.
NEX Regulatory Reporting experienced increased client demand for MiFID and EMIR services, NEX said, and had been working “extensively” with clients in support of MiFID II rules which go live in January 2018.
“Despite ongoing low volatility and a flat yield curve, financial markets have started the long and slow journey to more normalised conditions with further interest rate rises in the US and early signs of improved economic conditions in Europe,” Spencer claimed.
“We continue to deliver best-in-class solutions for our customers and last month achieved a remarkable milestone when our compression service, triReduce, announced that it had eliminated more than $1,000,000,000,000,000 (one quadrillion) in OTC derivative notional principal since launch.
“We are proud to have worked with our clients and other infrastructure providers to achieve this goal.”