Shares in foreign exchange provider Argentex (AGFX:AIM) dropped 25% to 102p after the company said it expected to report lower first half revenues due to a reduction in customer activity on the back of Covid-19.
'FRUSTRATING' FIRST HALF
Turnover for the six months to September is seen falling 14.7% to £11.8 million as some clients deferred their trading activity, although the firm stressed its underlying business ‘performed well during the period as the group added a significant number of new customers as it continued to focus on increasing the quality and diversification of its client book’.
The company also revealed it had taken a more cautious attitude to new business during the pandemic, turning down trades which exceeded its risk appetite ‘in order to maintain the integrity of its exposure profile’.
Taking a 'glass half-full' attitude, it expects the shortfall in first half activity to translate into stronger trading volumes in the second half thanks to the addition of new customers and new businesses, and to deliver ‘a material improvement on the first half results’.
Co-chief executive Harry Adams admitted to ‘frustrations’ over the drop in trading in the first half but said he expected ‘a significant backlog of client volumes to be realised, the timing of which will likely depend on market and geopolitical events’.
Broker Numis had pencilled in a slowdown in revenue growth this year ‘due to economic weakness impacting customer sales and therefore their need to hedge foreign exchange risk’.
However, after the near-15% drop in first half turnover analyst James Hamilton has cut his full year revenue target from £32.3 million – a 12% increase on last year – to £28.1 million, or a reduction of 3%, and slashed his earnings forecast by 31% to 6.3p per share instead of 9.3p per share.