Flow Traders' 'black-box' business weighs on results, shares

By Juliette Portala and Lina Golovnya

(Reuters) -Shares in Flow Traders tumbled on Friday after the Dutch trading services provider reported a sharp drop in quarterly earnings, dampened by lower-than-expected trading income and costs of a strategic review.

"Once again this quarter demonstrates the black-box nature of the trading business," KBC Securities analyst Thomas Couvreur wrote, noting a decline in the business' visibility due to the firm's many strategic projects.

Flow Traders, which listed on Euronext Amsterdam in 2015, recorded a 8.5-million-euro ($8.61 million) one-off in strategic advisory costs in the quarter for the optimisation of the group's legal entity and regulatory structure and further balance sheet review efforts.

Best known for market making in exchange-traded products (ETPs), the company posted a net trading income of 84.0 million euros, which ING analyst Reg Watson said was 7.4% lower than in a company-compiled consensus as Europe, Middle East and Africa fell short.

According to Couvreur, Flow Traders' second-quarter net income also came in "at less than half of expectation", dropping by 79% from the first quarter to 11.2 million euros.

The company's shares were down by 10.5% as of 0935 GMT, hitting their lowest level since March 2020.

However, Couvreur said "We continue to see structural growth trends at Flow Traders," citing its investment portfolio and shortly expected approvals to open an office in Shanghai, a door to mainland China's ETP market.

The company, which is seeking to build up a presence in crypto and digital assets, fixed income markets and single bond market making, said the recent volatility in the crypto markets had not altered its conviction around its long-term potential and that of decentralised finance.

The overall crypto market has slumped to around $900 billion, down from a record $3 trillion in November, with losses mounting after U.S. crypto lender Celsius Network in June froze the accounts of its 1.7 million customers.

($1 = 0.9870 euros)

(Reporting by Juliette Portala and Lina Golovnya, editing by Clarence Fernandez and Kim Coghill)