Big spending will cut profits, Michael Spencer warns

Michael Spencer saw shares in his trading venture Nex Group come under serious pressure today after an unexpected trading update spooked the market.

Spencer, the Tory grandee and City trading guru, warned he is spending much more than planned on the Nex Optimisation arm of the business, which provides post-trade services.

That extra spend, estimated by analysts at £8 million or so, will cut profit margins from towards 30% to 20%.

The shares fell 45p, 7%, to 617p.

BAML, Bank of America Merrill Lynch, responded by slashing profit estimates for this year and next though it told clients the shares are still a buy. BAML said: “In our view, the company will need to show sure-footed delivery on its cost base from now on, as the market may well be sceptical initially.”

Nex said business is good, noting sales in the past six months are up 7%. It thinks trading opportunities ahead of MiFID II in January will be “significant”.