NEX Group warns on lower first-half margins

Electronic trading services provider NEX Group has warned that first-half profit margins will be hit by increased investment in its Optimisations business and ongoing low volatility on its Reset business.

Formerly known as Icap, the company said revenue for the first six months increased by 13% on a reported basis and more than 7% on a constant currency basis, and that the margin effects should only be temporary, with operating profit margin in the Optimisations arm of roughly 20% in the first half that is expected to normalise in the second half.

Investment in sales and marketing has increased in the first half due as management aim to maximise what they see as a "significant short-term market share opportunity" to provide services to companies implementing new MiFID II reporting regulations from this coming January.

"These investments will enhance the potential for NEX Optimisation," said chief executive Michael Spencer.

"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."

Spencer has also identified further cost savings from the broader group transformation programme over and above the £25m previously announced, but held back on giving details until half year results on 20 November.