Exco Raises 1994 Pre-Tax Profits Despite "Subdued" Markets

Exco, the U.K. money broker, reported a 5 per cent increase in pre-tax profit for last year from £41.5 million in 1993 to £43.5 million in 1994, despite difficult markets, officials say. The group, which floated on the London Stock Exchange last year, is one of only a few publicly quoted foreign exchange brokers that release annual results.

Officials say that a volatile first quarter in 1994 gave way to subdued markets, particularly in the Far East. Chief executive Peter Edge says trading volumes dropped in Japan and quiet markets helped the three electronic brokers (EBS, Minex and Dealing 2000-2) to establish themselves and gain market share. "On busy days the matching services lose market share to the voice brokers, but when markets went quiet they picked up market share," says Edge.

He adds that the trade sizes for the electronic brokers are generally small. Edge argues that the electronic brokers cut less into Exco's market share than those of others. "Our market share is off only marginally while the matching services picked up a double-figure market share," he says. "Exco maintained its strong position in North America and the Far East."

London remains the company's weakest market in FX, he said, although a geographic breakdown of turnover and profit shows North America first, followed by Europe and Asia Pacific.

In his review of the results, Edge says that forwards broking made good progress last year, as a result of initiatives started in 1993 to upgrade staff and integrate forwards with money markets and enhance arbitrage broking. "Market volumes for derivatives in 1994 as a whole compared favourably with the previous year. The group maintained its leading position in currency options," he added.

Exco does not break down income by product in its annual statement, but a spokesperson says that the division given in the company's prospectus last year remains valid. The prospectus says that most of the company's spot broking revenue was in dollar/mark, dollar/yen, cable and dollar/Swiss.

Money broking contributes two-thirds of the group's profit and that is divided fairly equally among spot, money-market (including forwards) and derivatives (including FX options) broking.

For this year, says Edge, Exco is looking to broaden both its geographic spread and product base. It has applied for a licence in China and is evaluating possible joint ventures in India and Latin America, he says. Futures are a possible new product that the company is considering, says Edge.

The first two months of 1995 were better than the end of last year, although not as good as 1994's first quarter, according to Edge. There has been a larger increase in business over the past ten days, he adds, as market volatility has jumped.