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Interim Results

ICAP resilient despite ongoing headwinds

16 November 2016 07:44

ICAP, a leading markets operator and provider of post trade risk mitigation and information services, reports a resilient first half performance despite ongoing market headwinds.

The Group reported continuing revenue of £254 million, 11% ahead of the prior period on a reported basis and flat on a constant currency basis. A 6% increase in Post Trade Risk and Information (PTRI) revenue to £113 million, on a constant currency basis, was partly offset by a 2% decrease in Electronic Markets revenue to £139 million, on a constant currency basis. The group said its continuing trading performance was hit by the ongoing combination of structural and cyclical factors including historically low and negative interest rates, low levels of volatility and bank deleveraging resulting in reduced risk appetite from bank customers.

This was partly offset by the increase in trading activity in emerging market currency pairs on EBS Market, and a greater demand for post trade products such as triReduce and triResolve. Consistent with NEX's growth strategy, ICAP 's ongoing investment in new products and services continues to affect the Group's continuing trading operating profit margin which fell to 26% (H1 2015/16: 29%).

In addition, this was also hit by changes in the product mix within the PTRI business, the consolidation of ENSO for the first time and a change to direct billing within Information Services. The Group's continuing trading profit before tax of £51 million was 7% down on the prior year mainly due to an increase in net finance costs. Consistent with previous practice, ICAP's interim dividend per share has been calculated at 30% of the prior year's full year dividend. An interim dividend of 6.6p per share (H1 2015/16 - 6.6p per share) covering the six month period to 30 September 2016 will be paid on 25 January 2017 to shareholders on the register at 9 December 2016. The shares will be quoted ex-dividend from 8 December 2016.

Group chief executive Michael Spencer said: "Throughout ICAP's 30 year history, we have always prided ourselves on being forward thinking for the benefit of our customers. Our strategic advantage lies in our unique networks, our strong product pipeline and our compelling value proposition. That is why we recently won the CFETS mandate and we continue to see market share gains at BrokerTec and EBS Direct. We have recently added both ENSO and Abide to the Group, complementing our ability to support our customers across the transaction lifecycle.

"These are uncertain times for global financial markets as we try to understand the impact of both the Brexit vote and the very recent US election. Despite this uncertainty, it is important that we continue to invest wisely in our product portfolio and financial technology incubator, Euclid Opportunities, to achieve long term profitable growth. In the absence of unforeseen circumstances, we plan to hold the dividend at 22.0p for this year.

"I am excited to be in the final phase of the Transaction before the launch of NEX Group plc. We are pleased that the FCA has recently cleared the Transaction with Tullett Prebon. We remain optimistic that the Transaction will complete by the end of the year, however the Transaction requires other change of control consents to be received before completion can occur. Tullett Prebon is responsible for and working to secure those outstanding clearances.

"While we continue along the slow journey to more normal market conditions I am confident that the fundamental strengths of the business will provide an excellent platform for NEX Group plc's long term growth and success."

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