Despite having completed the sale of its voice-broking business at the end of December, Nex Group (NXG) - formerly trading as ICAP - has further to go in restructuring for growth. Investment is focused on its post-trade risk and information business, Nex Optimisation. Management is trying to more closely match its structure to the way in which clients use their services. This means grouping its the segment's products and services into six divisions - trade and portfolio management, analytics, regulatory reporting, financial resource optimisation, data insights, and investment arm Nex Opportunities.
Management also beefed up the post-trade division by acquiring (through Nex Opportunities) the remaining stakes in regulatory reporting company Abide Financial and Enso, which provides data and tools to hedge funds and other investors to manage their prime broker relationships. Both businesses are expected to reach break-even within the next 18 months. It also continued to build the Nex Infinity platform, which aims to reduce costs by removing duplicated functions and putting in place a single data interface with clients.
However, increased investment across the post-trade business segment meant underlying operating margins declined seven percentage points to 29 per cent, pulling down the group margin to 27 per cent. That's against a target of 40 per cent by 2020. The good news was that revenue grew 9 per cent for the segment at constant currency, to £240m. This was driven by pricing and analytics provider Nex Data, and TriOptima, which reconciles clients' outstanding derivatives positions.
The markets business put in a more solid performance. Like its peers, Nex benefited from the market volatility surrounding major political events last year. This led to increases of 6 per cent and 3 per cent, respectively, in European and US repo trading volumes, respectively, for the BrokerTec bond trading platform. However, its currency trading service EBS reported flat revenues at constant currency, with increased trading during the five weeks following the US election unable to offset a 7 per cent decline in average daily volumes.
Analysts at Shore Capital expect adjusted EPS of 31p during the 12 months to March 2018, up from 23.2p the previous year.
NEX GROUP (NXG) | ||||
|---|---|---|---|---|
| ORD PRICE: | 598p | MARKET VALUE: | £2.27bn | |
| TOUCH: | 597-598p | 12-MONTH HIGH: | 635p | LOW: 364p |
| DIVIDEND YIELD: | 6.4% | PE RATIO: | 23 | |
| NET ASSET VALUE: | 251p* | NET DEBT: | 8% | |
| Year to 31 Mar | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2016 | 460 | 27 | 6 | 38.5 |
| 2017 | 543 | 120 | 26.4 | 38.5 |
| % change | +18 | +344 | +340 | - |
Ex-div: 29 Jun Payment: 21 Jul *Includes intangible assets of £1.15bn, or 304p a share | ||||
