TIDMTCAP
RNS Number : 4342V
TP ICAP PLC
07 August 2020
7 August 2020
TP ICAP plc
Financial and Interim Management Report - for the six months
ended 30 June 2020 (the "period")
TP ICAP plc (the "Company") announces its group (the "Group")
results for the six months ended 30 June 2020 today. Commentary on
year-on-year performance is on a reported and constant currency
basis. Despite the unprecedented macroeconomic backdrop,
characterised by the emergence of the COVID-19 pandemic, the Group
took rapid and effective action to safeguard its staff and
operations. In so doing, the Group delivered continuous service to
its clients, essential liquidity to the markets and strong revenue
growth.
Nicolas Breteau, CEO of TP ICAP plc, said:
"Against the COVID-19 backdrop, our primary focus has been to
protect the wellbeing of our staff and ensure continuity of service
excellence for our clients. We achieved this by deploying new
technology and workflows that enabled the majority of our staff to
work from home while maintaining seamless, global client
coverage.
Despite the challenges posed by the pandemic, we have grown
revenues and underlying profitability whilst advancing our
strategic priorities of aggregating liquidity across our brands,
increasing electronification and diversifying our revenue streams.
We paid our full year dividend and have declared an interim
dividend. Our performance is a testament to our operational
strength, scale and diversified business portfolio, as well as the
hard work and dedication of our teams.
We will update the market on our strategic priorities and
medium-term growth plan at our Investor Update on 8 October
2020."
Response to COVID-19 pandemic:
-- The Group fundamentally re-engineered its operations during lockdown to maintain continuous global client service
and liquidity across all asset classes and desks.
-- Tactical deployment of new digital solutions and new workflows enabled the vast majority of the Group's employees
to work from home effectively.
-- Re-engineering the business presented significant technological, management and regulatory challenges, coming as
it did during a period of extremely high volatility and a sharp increase in volumes. The Group demonstrated
readiness and resilience to continue to serve clients and provide essential liquidity in the markets.
-- The Group has not furloughed or reduced its permanent workforce as a consequence of COVID-19, nor has it
requested any government aid in any of its global locations.
-- The Group paid its final 2019 dividend and has declared an interim dividend for 2020.
The Group increased its underlying profits in the period,
despite incurring a GBP10m charge due to an increase in unused
annual leave as at 30 June ("impact from unused annual leave"), as
employees chose not to use their annual leave due to the lockdown
enforced in most jurisdictions where the Company operates. This
charge will reverse in H2 2020 in line with Group policy on holiday
carry-forward.
Financial highlights
Underlying (before acquisition, disposal and integration costs,
and exceptional items)
H1 2020 H1 2019
Revenue GBP990m GBP922m
Operating profit GBP159m GBP158m
Operating margin 16.1% 17.1%
Profit before GBP136m GBP134m
tax
Basic EPS 19.9p 19.3p
Statutory (after acquisition, disposal and integration costs,
and exceptional items)
H1 2020 H1 2019
Revenue GBP990m GBP922m
Operating profit GBP101m GBP107m
Operating margin 10.2% 11.6%
Profit before GBP78m GBP83m
tax
Basic EPS 9.7p 11.8p
A table showing Underlying and Statutory figures for each
period, detailing acquisition, disposal and integration costs, and
exceptional items is included in the Financial Review.
The average number of shares used for the basic H1 2020 EPS
calculation for the period is 557.3m (H1 2019: 560m).
Operational highlights
-- The Group's performance reflected our operational and
technological resilience and the benefits of a diversified
portfolio.
-- Revenue of GBP990m grew 7% on a reported basis (7% at constant currency).
-- Underlying operating profitability was 1% higher (7% higher
excluding the impact of unused annual leave, 6% lower on a
statutory basis) on higher revenues and tight cost discipline,
offset by measured strategic investments.
-- Global Broking revenue increased 2% on a reported basis (2%
at constant currency), as stronger Rates were partially offset by
weaker FX & Money Markets and Emerging Markets businesses.
-- Energy & Commodities revenue increased 15% on a reported
basis (15% at constant currency) with strong organic growth in oil
and non-oil products, boosted by strategic hires and favourable
markets.
-- Institutional Services revenue increased 50% on a reported
basis (50% at constant currency), as the division benefited from
increased client appetite, increased capacity to service new
accounts, and strategic hires.
-- Data & Analytics revenue increased 9% on a reported basis
(8% at constant currency), against a strong prior year comparative
period as the business continued to benefit from strategic
initiatives to launch new, higher-value products and deeper client
relationships. The minor slowdown reflects some COVID-19-driven
reduction in clients' overall spend appetite.
Strategic highlights
-- Provided continuous global client service, whilst maintaining
strong financial position and liquidity.
-- Furthered earnings diversification through continued strong
growth in non-Global Broking businesses.
-- Expanded our customer base, range of services and geographic
profile, especially in our newest divisions.
-- Enhanced the synergies and links between our business
divisions to maximise cross-selling opportunities.
-- Modernised our technology infrastructure by investing in
cloud capabilities, enabling the majority of our front-office
employees to maintain full working capability remotely. The Group
expects that this agility could lead to future property footprint
savings, as it will require a smaller number of recovery sites.
-- Continued the measured execution of our strategy, investing
in core long-term projects aligned to our three defined strategic
themes of electronification, liquidity aggregation and
diversification.
Dividend
A 5.6p per share interim dividend (2019: 5.6p) will be paid on 6
November 2020 to shareholders on the register at close of business
on 2 October 2020.
2020 full year guidance and outlook
-- July trading activity has slowed down and is materially lower
than 2019 levels. Consequently our full year guidance of low
single-digit revenue growth remains unchanged. We will continue to
monitor the impact of the COVID-19 pandemic on TP ICAP and its
customers through the remainder of the year.
-- The targeted investment spend we guided to in March will be
partially deferred as we manage resources prudently in response to
the ongoing uncertainty caused by COVID-19. We will prioritise
investment projects based on business needs. We aim to invest
cGBP15m of cash in 2020, of which cGBP7m will be expensed.
Investor update and redomiciling timetable
-- The Group plans to host its Investor Update on 8 October 2020.
-- The Group maintains its intention to incorporate a new
holding Company in Jersey and the Group is currently in the process
of seeking the relevant regulatory approvals. This has taken longer
than originally anticipated due to COVID-19. The Group will in due
course seek shareholder approval and currently expects to post
shareholder documentation by the end of 2020 with completion
following shortly thereafter.
Forward looking statements
This document contains forward looking statements with respect
to the financial condition, results and business of the Company. By
their nature, forward looking statements involve risk and
uncertainty and there may be subsequent variations to estimates.
The Company's actual future results may differ materially from the
results expressed or implied in these forward looking
statements.
Enquiries:
Analysts and investors
Al Alevizakos
Direct: +44 (0) 203 933 3040
Email: Alevizos.Alevizakos@tpicap.com
Media
William Baldwin-Charles
Direct: +44 (0) 207 200 7124
Email: William.Baldwin-Charles@tpicap.com
Neil Bennett
Maitland
Direct: +44 0 20 7379 5151
Email: tpicap-maitland@maitland.co.uk
About TP ICAP
-- TP ICAP brings together buyers and sellers in global
financial, energy and commodities markets.
-- It is the world's largest wholesale market intermediary, with
a portfolio of businesses that provide broking services, data &
analytics and market intelligence, trusted by clients around the
world.
-- We operate from offices in 26 countries, supporting
award-winning brokers with market-leading technology.
CEO review
The emergence of COVID-19 caused a significant shock to the
global economy and resulted in an uplift of volatility and trading
volumes in the OTC markets where we operate.
Our focus during the pandemic has been on ensuring the safety of
our employees while continuing to provide high quality service to
our clients and maintaining our financial and operational
resilience. I am pleased that we have achieved these three goals
while growing our revenues and our underlying operating profit.
This is testament to the resilience and adaptability of the Group
and its employees.
We operate in 26 countries globally and therefore had to adapt
to new working practices for each office to align with local
guidance. In essence, this meant sending support staff to work from
home as soon as was feasible allowing us to free up extra floor
space to give the brokers who needed to remain in the office enough
room to socially distance while continuing to work.
For brokers who could work from home, we introduced new digital
technology and new workflows. This involved transferring more than
2,000 telephone lines to the cloud to create new client connections
and installing desktop software to create digital dealer boards, or
soft-turrets, for over 500 brokers. This solution was identified,
purchased and rolled out effectively in less than two weeks. It
provided a fully-integrated and compliant voice and electronic
infrastructure with access to our global client base alongside a
robust trading workflow.
Despite these challenges, all desks continued to be fully
operational and our clients benefited from continuous global
coverage across all asset classes.
Furthermore, in response to COVID-19, we have not furloughed any
staff, reduced our permanent workforce, nor requested any
government aid in any of our locations. We paid our full year
dividend demonstrating our resilience and recognising the
importance of income to our investors, and in turn, their
customers.
As well as serving our clients and helping enable the markets to
remain open and liquid, we have been mindful of our
responsibilities to the communities in which we operate. We
redirected our Disaster Relief Fund to global and local initiatives
supporting those affected by the pandemic, for example the COVID-19
Solidarity Response Fund, the UK National Emergencies Trust, and
the US CDP COVID-19 Response Fund. At a time when governments were
lacking in Personal Protective Equipment, we donated 20,000 face
masks to health authorities in the UK and US. Additionally,
colleagues around the world have taken action to support those in
need - for example, our UK employees took part in the 2.6 challenge
to raise money for charities who have seen a significant reduction
in donations during the period.
Financial performance
The Group delivered a good performance in the first half of
2020. The COVID-19 pandemic led to higher volatility and volumes
particularly in February and March. This translated into higher
revenues in our Energy & Commodities, Institutional Services
and certain Global Broking asset classes, highlighting the Group's
increasing diversification.
Revenue grew by 7% year-on-year to GBP990m on a reported basis
(7% on a constant currency). We achieved an underlying operating
profit of GBP159m, an increase of 1% on the GBP158m reported for H1
2019. Our underlying operating profit would have increased to
GBP169m (7% higher year-on-year), excluding the GBP10m impact from
unused annual leave. Our underlying operating profit margin of
16.1% (17.1% excluding impact from unused annual leave) was
slightly lower than the 17.1% reported at H1 2019. We reported an
underlying profit before tax of GBP136m, up 1% (9% excluding the
impact from unused annual leave) from GBP134m in the prior
year.
Statutory operating profit was GBP101m, 6% lower than the prior
year, with an operating profit margin of 10.2% (2019: 11.6%) and
statutory profit before tax of GBP78m was GBP5m lower in H1 2019.
The decrease in statutory profit is mainly due to higher business
reorganisation expense due to the proposed Group redomiciliation,
and the GBP10m impact due to an increase in unused annual leave as
at 30 June which will reverse by the year end in line with Group
policy on holiday carry-forward and an Asia Pacific goodwill
impairment. This is partially offset by the non-recurrence of costs
associated with the ICAP integration that was completed in December
2019.
Basic underlying earnings per share ("EPS") were 19.9p (21.4p
excluding the impact from unused annual leave, basic statutory EPS
9.7p) and we are paying a dividend of 5.6p per share for the half
year, in line with our previously stated guidance.
Regional performance
Revenue for the EMEA region was GBP488m, a 7% year-on-year
increase on a reported basis (6% at constant currency). This
performance reflected an increase in all divisions, with notable
growth in Institutional Services, due to strong growth in relative
value (RV) strategies and our core product offering and Energy
& Commodities, with strong revenue growth across all three
brands. On a geographical basis, EMEA reported strong revenue
growth year-on-year in Continental Europe, namely France, Spain and
the Netherlands as well as in the UK and Africa, whilst the Middle
East was more muted.
The Americas reported revenue of GBP376m, an increase of 11%
year-on-year on a reported basis (+9% on constant currency), with
strong growth in Global Broking, Energy & Commodities and
Institutional Services.
In Asia Pacific, revenue was GBP126m, an increase of 2%
year-on-year on a reported basis (2% on constant currency). This
reflected a very solid growth in Energy & Commodities offset by
more challenging Global Broking figures, especially in Q2, as
trading appetite was dampened due to the pandemic that placed
practical constraints on market activity.
Our business divisions
In March of this year we announced the three key strategic
pillars which would drive our medium-term growth: electronification
and technology; aggregation of liquidity across our brands; and
diversification of our revenues.
These three pillars remain critical for our future growth but we
have taken a prudent approach to managing these through the crisis
and its associated macro uncertainty. Consequently, the execution
of our strategy has been actively slowed as we prioritised our
liquidity and capital buffers under stressed scenarios.
We previously indicated that we planned an additional GBP45m of
investment for 2020, of which GBP30m would be capital
expenditure.
Under our prudent approach, this has resulted in a
lower-than-targeted H1 investment spend of cGBP7m, of which cGBP6m
were operating expenses which was also lower than originally
targeted. In addition we have incurred GBP3m of IT expenses related
to the development of cloud capabilities as a response to COVID-19,
which will have longer term benefits. We intend to flex our
investment spending in line with market performance. We aim to
invest cGBP15m of cash in 2020, of which cGBP7m will be
expensed.
Despite the aforementioned deceleration, we were still able to
continue with a number of initiatives which fit our three strategic
themes: liquidity aggregation, electronification and
diversification and detail these initiatives in the business
division reviews below. We aim to update you on our revised plans
at our Investor Update on 8 October 2020.
On top of these initiatives, we continue to expand our customer
base, especially in our newest business divisions, whilst adding a
range of new solutions (e.g. new agency execution products and new
data offerings) in new jurisdictions. Previously, we have looked to
increase collaboration between the four businesses to capitalise on
the clear connections between them. In the first half of 2020, the
increased footprint of our business has allowed us to pursue
cross-divisional referrals, and we have seen particular success
with this initiative between Institutional Services and Data &
Analytics.
Looking ahead, we will continue to assess where and when it
makes sense to invest. Where we see opportunities to acquire assets
that would accelerate and further our strategic ambitions, then we
will consider them carefully.
Global Broking
Global Broking is our largest division covering Rates, Credit,
Equities, Foreign Exchange & Money Markets and Emerging
Markets, where we have market leading positions. We bring together
buyers and sellers providing a range of professional intermediary
services that enable them to execute trades successfully. We
operate through Tullett Prebon and ICAP brands separately. We also
offer clients a range of ways to interact with us - through voice,
hybrid or electronically - depending on the nature of the market,
product and transaction. One of our fundamental strengths is the
long-established relationships we have with top-tier banks, and our
ability to operate deep liquidity pools.
Market volatility and market volumes increased from the impact
of COVID-19 improving revenue performance by 2% both on reported
basis and constant currency, at GBP656m (H1 2019: GBP642m). This is
despite implementing a remote broking strategy due to COVID-19. Q1
2020 saw particularly high volatility and volumes driving the
increased revenue performance with Q2 2020 offsetting much of the
gains from the prior period as conditions in financial markets
began a decline following fears of COVID-19 resurgence and a global
recession.
The Rates business, largest of Global Broking, increased by 6%
(both on reported basis and at constant currency) as interest rate
swap and treasuries markets saw increased volatility. Equities
business also increased 3% on reported basis (1% at constant
currency) from good global market volatility, especially in Q1
2020.
Credit markets were in better shape, boosted by increased
issuance, and revenues increased by 2% in H1 2020 year-on-year both
on reported basis and at constant currency. FX & Money Markets
and Emerging Markets were down 2% (3% at constant currency) and 5%
(4% at constant currency) on a reported basis, respectively, as
macroeconomic factors including slowdown in global growth
challenged these businesses.
Despite the difficult macroeconomic backdrop, we continue to
identify opportunities to fill gaps in coverage and offer
additional products for our clients as well as continue to expand
our hybrid technology offering. These developments will better
position TP ICAP to take advantage as market conditions and
challenges adjust.
Our key strategic priorities remain aggregating liquidity from
our competing brands; improving connectivity with our clients and
delivering improved workflows for all products. Our Global Broking
strategy is based around electronic hubs that create a seamless
experience for our clients. These hubs offer a single point of
liquidity for clients across our brands, from screens with a common
look and feel together with robust post-trade processing.
For example:
-- In Rates, we continued the build-out of our Rates hub, with
development of cross-brand execution platform for Sterling products
with integrated functionalities. In addition, we continue the
migration of legacy matching engines, mainly in Tullett Prebon, to
TP ICAP's Fusion platform.
-- In Foreign Exchange, we launched the FXO hub in March. FXO
hub is a multi-brand, hybrid trading platform for FX Options
products, covering both G10 and emerging markets currency pairs.
The platform supports collation of "Indication of Interest" bids
and offers, via an electronic order book, "Request for Quote", plus
Auxiliary matching order entry methods. It provides our clients
with a much better user experience and improved connectivity. It
has had an excellent response so far and we are seeing a good
number of top tier banks already streaming liquidity.
-- In Credit, we increased electronification through launching
the Matchbook Rebalance platform. This is a pure-electronic
platform used for Emerging Market, Investment Grade, High Yield,
Financial and Sterling Corporate Bonds. The platform, which has
common TP ICAP branding, runs auctions allowing traders to clear up
unwanted odd-lot risk on their books, based on a total P&L
marker.
-- In Equities, where the market is much more dispersed, we
completed the acquisition of Louis Capital Markets, which brings us
expertise and scale in cash equities and equity derivatives, as
well as strengthening our Continental European franchise.
We will maintain this commitment to increase the
electronification and innovation of our business to meet the
changing demands of our clients.
Energy & Commodities
Energy & Commodities is our second largest division and
operates through the Tullett Prebon, ICAP and PVM brands in all the
key commodities markets including oil, gas, power, renewables,
ferrous metals, base metals, precious metals and soft commodities.
Clients include regional banks, corporates, hedge funds and trading
companies.
Revenues were up 16% at GBP216m for the half year on a reported
basis (15% at constant currency basis), as the market has been
characterised by increased volatility with COVID-19 tensions, trade
discussions and oil price war. The oil market faced unchartered
territory with significantly reduced demand (particularly
transportation fuels), excess supply combined with filled storage,
resulting in decreased prices and negative territory for the first
time in history. Freight economics have also played a significant
part in the reduced movement of physical oil. We believe that
during extreme Q1 volatility, clients turned to more established
brokers with deeper liquidity pools.
Overall, the increased revenues with constant cost discipline,
despite higher spending relating continuous strategic execution,
led to increased divisional profitability (+2.5 ppts
year-on-year).
In EMEA, we had a record first quarter in precious metals, and
recorded a strong performance in LNG due to the market making
greater use of it as a hedging tool. Oil performed well, driven by
new hires, as well as increased volatility caused by the oil price
war.
Utility markets have generally held up well with European gas
(especially the UK) being over-supplied, with pricing moving to
historical lows off the back of a long bear run as the market
struggled with storage and capacity issues. Volatility and
uncertainty in the power market has caused volumes to spike to
record highs with participants adjusting positions as a result of
reduced electricity demand.
In Americas, power revenue increased as the western market saw
increased volatility. Oil revenue increased driven by extreme
market volatility from both the pandemic and global oil price war,
with high growth in crude swaps and refined products group,
assisted with the Atlas partnership, physical refined products.
In APAC, we reported strong performance from our established oil
desks within PVM and Tullett Prebon, notably Crude, fuel, middle
distillates and Gasoline.
This is already a mature business and our strategic goal for
Energy & Commodities is to consolidate our global leadership
position. To this end, we have made further progress with several
strategic initiatives, which include increasing aggregation and
electronification.
Similarly to Global Broking, we are building an Oil hub which
will ultimately allow clients to view aggregated liquidity across
our competing brands and execute electronically via a range of low
touch protocols.
In the half, we have made good progress with Nova, our
electronic matching engine for Oil. This is an important initiative
as we believe it will become a significant component in the oil
trading market infrastructure and lead to increased efficiencies
within the business, stronger margins and better client retention.
Developments include implementing an Order Management System on the
platform to facilitate and manage trades; automating straight
through processing; and incorporating an instrument feed from the
Intercontinental Stock Exchange ("ICE").
We will invest further in Nova in the second half to accelerate
its deployment. We have already rolled out Nova to desks in Norway
and Asia Pacific with the next stages being to onboard our
remaining desks, and our clients, and then build a new front end.
We expect to complete this in H2.
We have previously flagged our machine learning tool, Darwin. We
have trialled this successfully during the first half and it will
be rolled out to all desks this September. Darwin harvests and
mines big data, ranging from clients' historic trading behaviour to
external news events. It identifies trading opportunities for our
brokers and alerts them to market triggers. In time, it will enable
our brokers to anticipate and better meet the needs of our clients
and in turn do more business. It will also capture trades across
all our brands and provide our Data & Analytics business with
fast, real-time information.
Institutional Services
Institutional Services provides trade ideas and agency execution
to buy side clients including hedge funds, asset managers and
non-bank liquidity providers. The role of an agency brokerage is to
offer the buy side access to the best price in the market from a
wide range of different banks, whilst guaranteeing client anonymity
and neutrality. Institutional Services is an important part of the
Group's diversification strategy bringing in a new revenue stream
from a different client base.
In the first half of the year, Institutional Services achieved
revenues of GBP57 million up 50% on the comparative period. This
very strong growth underlines that the agency execution model has
become an established and valued component of the market's
ecosystem.
Growth was driven by increased client appetite and the business'
greater capacity to service new clients, and was experienced across
our core products and strategies: Foreign exchange, exchange traded
and cleared derivatives; relative value; government bonds and cash
equities.
We also grew our client base, mainly hedge funds and asset
managers and grew our team by making new hires in Singapore and New
York. Our continued ability to attract high calibre salespeople
from both the buy-side and sell-side shows that our business model
is recognised and accepted by seasoned market participants, and
opportunities remain open as banks reduce their salesforce.
Our strategy for Institutional Services is to continue grow the
business and further diversify our revenues. To this end, we are
adding more asset classes to our coverage; broadening our
geographic reach; and investing in further electronification. In
the first half, we introduced additional interest swaps and equity
derivatives to our asset coverage.
We have previously mentioned the importance of pre-trade
connectivity to the business and we have since connected to
Bloomberg's Fixed Income and Derivatives Execution System (TSOX)
which is the gateway to the majority of the buy-side. In addition,
we have added TP Credit Deal order book liquidity to institutional
customers via Bloomberg, and will shortly be adding TP CreditDeal
Volume Match liquidity.
Data & Analytics
Our Data & Analytics business provides unbiased data
products that facilitate trading, enhance transparency, reduce risk
and improve operational efficiency. It is the leading provider of
OTC pricing data and has access to more OTC data than any other
company globally. We have pricing, reference data and analytical
tools for major asset classes and markets. We pride ourselves on
our rigorous quality assurance processes, which ensure the
integrity and robustness of our products.
It is a high margin business with revenues that are largely
subscription-based and sticky, so it provides us with excellent
earnings diversification and sustainable growth opportunities.
Data & Analytics grew its revenues by 8% in the half, which
was a good performance given the impact of COVID-19 on many of its
customers which lead to reduced spending, and expectations that
Global Data revenues will decline in the full year due to the
pandemic.
During the half, we increased permanent headcount to support our
long-term initiatives and future revenue generation, including
sales heads in Asia and America, which impacted contribution.
However, subscription revenues grew as we continued to roll out
new products sets and signed new mandates with clients, enhancing
our ability to generate strong recurring revenues going
forward.
Our strategy to grow our Data & Analytics business is clear:
to harvest the data generated internally which historically has not
been captured; to broaden our distribution network, both internally
and externally; and to move our product offering up the value
chain.
In line with our strategy, we launched five new products in the
first six months. In April, we launched a new FIX protocol-based
data feed, called SURFIX. This allows us to distribute real-time
market data for all security types, from all TP ICAP brands, via a
single consolidated data feed. We launched new products via new
distribution partners such as AWS Data Exchange. In addition, we
are working on building a web store which will allow our clients to
buy our products in the same way that people shop on Amazon.
In the half, we also launched our first information product
called Bond Evaluated Price. We launched the product after our
clients told us that meaningful transparency in fixed income
pricing has become critical as regulators globally require more
detailed disclosure and stricter risk management. This new product
captures all available bond transaction across the Group and uses
our proprietary model to offer clients more detailed information
than the price of a bond at one point in time. The product employs
machine learning to provide frequent and regular updates on a large
number of bonds, rather than just indicative pricing. Clients
therefore have better insights into the price formation process.
The product will help financial institutions with exposure to
government, corporate or supranational bond risk to run internal
market risk tasks and meet regulatory requirements.
Near term outlook
The Group continues to monitor and respond as appropriate to the
challenges presented by COVID-19. The emergence and continuation of
the COVID-19 pandemic creates unusually high levels of uncertainty
in our major markets, but our intention is to continue our
technology implementation in H2, and we expect to see some early
benefits from recent hires, geographic expansion and product
roll-out. H2 has started slowly with July volumes materially lower
than in 2019. We remain cautious and expect to see continued
episodic volatility and the frequency, duration and intensity of
these periods will be more significant determinants of our
performance than usual.
Concluding comments
While the first six months of the year have been challenging, I
am delighted with how the business and my colleagues responded. We
acted rapidly and effectively to ensure that our staff remained
safe and our clients continued to receive the service from us that
they expect.
We continued to implement our strategic initiatives, albeit at a
more measured pace, and we plan to update the market on our plans
in detail on Thursday 8 October. Despite the near-term uncertainty,
I am confident that our strategic initiatives will deliver
sustainable profit growth.
I would like to thank all of my colleagues at TP ICAP for their
enormous efforts and the remarkable resilience they have
demonstrated in the first half of the year.
Nicolas Breteau
Chief Executive Officer
7 August 2020
Financial review
Statutory Income Statement
H1 2020 Underlying Acquisition, Exceptional Statutory
GBPm disposal items
& integration
costs
----------------------------------- ----------- --------------- ------------ ----------
Revenue 990 - - 990
----------------------------------- ----------- --------------- ------------ ----------
Underlying Operating profit 159 - - 159
Net charge relating to legal
settlements - - (2) (2)
Business re-organisation costs - - (13) (13)
Impairment of intangible assets
arising on consolidation - (21) - (21)
Amortisation of intangible
assets arising on consolidation - (20) - (20)
Other - (2) - (2)
Operating profit 159 (43) (15) 101
Net finance expense (23) - - (23)
----------------------------------- ----------- --------------- ------------ ----------
Profit before tax 136 (43) (15) 78
Tax (34) - 1 (33)
Share of net profit of associates
and joint ventures 10 - - 10
Non-controlling interests (1) - - (1)
----------------------------------- ----------- --------------- ------------ ----------
Earnings 111 (43) (14) 54
=================================== =========== =============== ============ ==========
Average number of shares 557.3m 557.3m
Basic EPS 19.9p 9.7p
H1 2019 Underlying Acquisition, Exceptional Statutory
GBPm disposal items
& integration
costs
----------------------------------- ----------- --------------- ------------ ----------
Revenue 922 - - 922
----------------------------------- ----------- --------------- ------------ ----------
Operating profit 158 - - 158
ICAP integration costs - (20) - (20)
Amortisation of intangible
assets arising on consolidation - (21) - (21)
Net charge relating to legal
settlements - - (2) (2)
Charge relating to business
reorganisation - - (4) (4)
Other acquisition and disposal
items - (4) - (4)
Operating profit 158 (45) (6) 107
Net finance expense (24) - - (24)
----------------------------------- ----------- --------------- ------------ ----------
Profit before tax 134 (45) (6) 83
Tax (33) 8 1 (24)
Share of net profit of associates
and joint ventures 8 - - 8
Non-controlling interests (1) - - (1)
----------------------------------- ----------- --------------- ------------ ----------
Earnings 108 (37) (5) 66
=================================== =========== =============== ============ ==========
Average number of shares 560.0m 560.0m
Basic EPS 19.3p 11.8p
Our key financial and performance indicators for H1 2020 are
summarised in the table below together with comparatives from the
equivalent period in H1 2019.
H1 2020 H1 2019 Change
------------------------------------------------- ---------- --------- -----------
Total revenue (reported basis) GBP990m GBP922m +7%
------------------------------------------------- ---------- --------- -----------
Operating profit:
- Underlying GBP159m GBP158m +1%
- Underlying margin 16.1% 17.1% -1.0% pts
- Statutory GBP101m GBP107m -6%
- Statutory margin 10.2% 11.6% -1.4% pts
------------------------------------------------- ---------- --------- -----------
Contribution:
- Broking(1) GBP349m GBP330m +6%
- Broking margin 37.5% 38.4% -0.9% pts
- Data & Analytics(1) GBP33m GBP32m +3%
- Data & Analytics margin 47.1% 50.0% -2.9% pts
Total contribution GBP375m GBP362m +4%
------------------------------------------------- ---------- --------- -----------
Underlying operating profit margin
(%):
- EMEA 19.1% 21.0% -1.9% pts
- Americas 14.9% 14.4% +0.5% pts
- Asia Pacific 7.9% 10.5% -2.6% pts
------------------------------------------------- ---------- --------- -----------
Underlying operating profit margin
(%):
- Global Broking 20.0% 20.7% -0.7% pts
- Energy & Commodities 14.7% 12.2% +2.5% pts
- Institutional Services 14.0% 8.1% +5.9% pts
- Data & Analytics 40.0% 45.3% -5.3% pts
------------------------------------------------- ---------- --------- -----------
Average:
- broker headcount 2,770 2,706 +2%
- revenue per broker(2) (GBP'000) 332 318 +4%
- contribution per broker(3) (GBP'000) 126 122 +3%
------------------------------------------------- ---------- --------- -----------
Period end:
- Broker headcount 2,754 2,728 +1%
- Broker support headcount 1,833 1,798 +2%
- Total headcount 4,898 4,866 +1%
------------------------------------------------- ---------- --------- -----------
Broker compensation costs : broking
revenue(4) 53.8% 52.5% +1.3% pts
------------------------------------------------- ---------- --------- -----------
1. Broking and Data & Analytics contribution and contribution
margins are defined in the Contribution & Underlying Profit
by Division section. Prior year figures have been restated due
to inter-division revenues in Global Broking and Energy & Commodities,
and inter-division front-office costs in Data & Analytics.
2. Average revenue per broker is defined as Total Broking revenues
excluding inter-division revenues divided by average broker
headcount.
3. Average contribution per broker represents broking contribution
(as defined in the Contribution section) divided by the average
broker headcount with the prior year comparative calculated
on the same basis.
4. Broker compensation costs : broking revenue is defined as
Total Broking compensation costs divided by Broking revenues
excluding inter-division revenues.
Average broker headcount increased 2% in H1 2020 to 2,770
year-on-year, and with average revenues per broker increasing 6%,
the resulting broking revenue was 7% higher than in H1 2019 on a
reported basis.
The period-end broking support headcount increased by 2%
year-on-year primarily reflecting in-sourcing (including Belfast),
and investing in Risk and Compliance functions as a response to
increasing regulatory demands.
The tables that follow analyse revenue by business division as
well as revenue and underlying operating profit by region for H1
2020 compared with the equivalent period in 2019, on a reported
basis. The tables also show the change at constant currency.
A significant portion of the Group's activity is conducted
outside the UK and the statutory revenue is therefore impacted by
the movement in the foreign exchange rates used to translate the
revenue from non-UK operations. The comparative data in the tables
below therefore shows the statutory revenue change, but also the
constant currency basis, where the revenues are translated at the
same exchange rates as those used for H1 2020.
Revenue
Total revenue of GBP990m in H1 2020 was 7% higher than H1 2019
on a reported basis, and 7% higher at constant currency.
Revenue by business division
Constant
Reported Currency
GBPm H1 2020 H1 2019 Change Change
------------ ---------- ----------- -----------
Rates(1) 290 273 +6% +6%
Credit 51 50 +2% +2%
FX & Money Markets 98 100 -2% -3%
Emerging Markets 103 108 -5% -4%
Equities 105 102 +3% +1%
Inter-division revenues(2) 9 9 0% 0%
-------------------------------------- ------------ ----------
Global Broking total 656 642 +2% +2%
-------------------------------------- ------------ ----------
Energy & Commodities 216 187 +16% +15%
Inter-division revenues(3) 1 1 +0% +0%
-------------------------------------- ------------ ----------
Energy & Commodities
total 217 188 +15% +15%
Institutional Services
total(1) 57 38 +50% +50%
Data & Analytics total 70 64 +9% +8%
-------------------------------------- ------------ ----------
Inter-division eliminations(3) (10) (10) +0% +0%
-------------------------------------- ------------ ----------
Total Revenue 990 922 +7% +7%
====================================== ============ ==========
1. For H1 2019 GBP15m of revenues have been reclassified from
Rates business into Institutional Services as the Global Broking
Relative Value (RV) Rates businesses have been reclassified
to move all RV desks under Institutional Services. This is
to reflect the mechanics of the underlying business.
2. Institutional Services growth rate would have been 26% on
a reported and constant currency basis excluding the aforementioned
move of the RV desks.
3. Inter-division charges have been made by Global Broking
and Energy & Commodities to reflect the value of proprietary
data provided to the Data & Analytics division. Previous year
has been restated in line with the new presentation format.
The broking inter-segmental revenues and Data & Analytics inter-segmental
costs are eliminated upon the consolidation of the Group financial
results.
Conditions in financial markets have generally been volatile in
H1 2020 due to the unprecedented macroeconomic environment caused
by the emergence of COVID-19 pandemic. The sharp volatility
accompanied with higher industry volumes in February and March, was
succeeded by flattening yield curves and more subdued activity in
the latter part of the period.
Despite this mixed macroeconomic backdrop, Global Broking Rates,
Energy & Commodities, Data & Analytics and Institutional
Services performance was strong. This performance was only
partially offset by weaker performances in Global Broking's
Emerging Markets & FX & Money Markets.
Inter-division revenue has been recognised in Global Broking and
Energy & Commodities to identify the value of data provided to
the Data & Analytics division. Additionally, the Relative Value
(RV) businesses from the Rates division in Global Broking have been
reclassified to move all RV desks within the Group under
Institutional Services. This leads to a GBP15m H1 2019 revenue
reclassification from Global Broking Rates to Institutional
Services.
In Global Broking, revenue grew by 2% as Q1 volumes surged on
the back of sharp volatility boosted by the global pandemic. During
the heightened volatility period, clients sought expert market
colour and advice from the most established brokers. Conditions
normalised in the beginning of Q2, before a drop in volatility
towards the end of the H1 period.
With this in mind, Rates revenue grew 6% year-on-year both on
reported and at constant currency basis. Similarly, Equities (3% on
reported, 1% at constant currency) and Credit (2% on reported and
at constant currency basis) benefited from the aforementioned
volatility surge. On the contrary, conditions in emerging markets
were challenging due to lower risk appetite in APAC since the
beginning of the year, leading to Emerging Markets decline of 5% on
a reported basis (4% lower at constant currency). FX & Money
Markets were down 2% and 3%, on a reported and at constant currency
respectively.
Energy & Commodities revenue was 16% higher than H1 2019 on
a reported basis (15% at currency basis). The division has
benefitted from higher volumes in all major products combined with
additional strategic hires. Power & Gas demonstrated very
strong revenue growth, while oil revenues increased 12%
capitalising on unprecedented volatility across different oil
products.
Institutional Services revenue of GBP57m grew 50% compared to H1
2019 on a reported basis (50% at constant currency. The continuous
growth was supported by growing client appetite and increased
capacity to service new accounts. This is due to continued
improvement in client onboarding and referrals from other Group
divisions, most notable Data & Analytics. The business now has
a well-defined panoply of core product offerings, namely foreign
exchange, listed derivatives, relative value execution and cleared
interest rate swaps. New products include additional rate swaps and
equity derivatives. Performance was also boosted through strategic
hires, notably in Singapore and the US.
Data & Analytics revenue was 9% higher than H1 2019 on a
reported basis (8% at constant currency). Despite the emergency of
COVID-19, revenues continued to grow as we engaged with all our
clients, in the sell and buy-side, in order to fulfil their
previously unmet needs. However, our growth has been slightly
reduced as: (a) clients' attrition rate increased to 0.7% (from
0.3% in H1 2019) where some clients "tightened the purse" due to
the pandemic, (b) new initiatives requiring bulk historical data,
e.g. ad hoc hedge fund requests, were postponed by clients and (c)
one-time revenue recoveries have also slowed as we were unable to
do on-side data audits. Despite these short-term obstacles, the
division invested in its future by: (a) expanding Data, Channel
Management and Technology partnerships, (b) creating a new Digital
Marketing strategy for product and capabilities launch, (c)
deploying a new scalable Sales methodology to enhance performance,
(d) launched SURFIX for single line delivery of our multiple
broking brands and (e) improved our back-office systems to automate
certain processes and generate savings. Finally, during H1 2020, we
deployed four new high-value data products, plus our very first
information product (the Bond Evaluated Pricing or BEP) which is
valuable for our clients.
Revenue by region
GBPm Constant
Reported Currency
H1 2020 H1 2019 Change Change
-------- -------- --------- ----------
EMEA 488 458 +7% +6%
Americas 376 340 +11% +9%
Asia Pacific 126 124 +2% +2%
--------------- -------- --------
Total Revenue 990 922 +7% +7%
--------------- -------- --------
EMEA
Revenue for the region increased by 7% in H1 2020 compared with
H1 2019 on a reported basis (6% at constant currency). Revenues
were uplifted by a strong month in March 2020 due to increased
volatility created by the pandemic. Global Broking revenue
increased slightly, with Rates and Credit being ahead year-on-year.
The remaining three asset classes saw small revenue declines.
Revenue from Energy & Commodities increased materially with
strong results stemming from all three brands. The growth came from
strong performance in power, gas, environmental, metals, soft &
agricultural products and oil. Our data expansion also delivered
some good results with higher revenues.
Institutional Services also saw a strong year-on-year increase.
This is due to material increases in relative value, COEX and
electronic markets.
Americas
Americas revenues were up by 11% on a reported basis (9% at
constant currency) to GBP376m in H1 2020 versus H1 2019 as global
market volatility from COVID-19 fears drove increased performance
despite the necessity to implement a remote broking strategy for a
large percentage of the brokers.
Within our Global Broking business, increased market volatility
and market volumes in Q1 2020 relative to Q1 2019 drove the overall
H1 2020 revenue up year-on-year. Depressed volatility and general
summer slowdown in the latter half of H1 2020 offset some of the
year-on-year growth.
Rates revenue was up year-on-year as USD interest rate swaps and
Treasuries markets were very active in the beginning of H1 2020
driven by increased volatility from a dipped yield curve with
rising concerns around a recession. Rates continues to be Americas'
largest asset class.
Equities revenue was materially up versus H1 2019 from increased
volatility in global equity markets. US Credit markets remained
subdued with revenues down marginally year-on-year. Continued focus
remains on building an electronic strategy to improve Credit
business.
FX & Money Markets business saw increased revenues in H1
2020 versus H1 2019, while emerging business was flat year-on-year.
Lower levels of volatility, de-risking by some of our primary
clients in Forward FX as well as new entrants in the emerging
markets space continue to put pressure on revenue growth.
Americas Energy & Commodities outperformed in H1 2020 with
strong double-digit increase year-on-year. Increased revenue across
most products was driven by the COVID-19 pandemic and global oil
price war as well as the strengthening of the PVM/Atlas partnership
in Oil and organic growth in Power, Environmental and Gas
businesses. Energy continues to be a target area for TP ICAP
Americas across all three brands.
Institutional Services also performed well in H1 2020 with
strong revenue growth as COEX and RV drove the increased
performance from global market volatility. Finally, Data &
Analytics continued its good performance as the business expanded
further its product offering.
Asia Pacific
Overall revenue in the region was up by 2% year on year on a
reported basis (2% at constant currency).
The Global Broking business in APAC suffered a small
year-on-year revenue decline after a solid first quarter gave way
to a very challenging second quarter. From April, turnover in the
Asian markets suffered a sharp dip as COVID-19 dampened trading
appetite and placed some practical constraints on market activity.
The month of June saw some recovery in volumes across the
region.
The sharp dip in market activity in the second quarter was
especially pronounced in our Japan Rates business and to some
extent in the Hong Kong based Rates and FX businesses. It was also
a difficult period for the Singapore based NDF and INR Rates
businesses. Overall, however, our various Equities businesses grew
revenue year-on-year and the newly established Credit business in
Hong Kong gained some traction. Encouragingly, our smaller offices
in the region, continued to perform well, especially our Korean
business which had strengthened its FX desk in the summer of
2019.
The Energy & Commodities business, the majority of which
comprises of oil and gas related products, benefited from episodes
of volatility in those markets, together with some increased scale
and diversification within the ICAP branded business. Overall
revenue from Energy & Commodities grew strongly
year-on-year.
Underlying administrative expenses
Total underlying administrative expenses of GBP837m in H1 2020
were 8% higher than H1 2019 on a reported and at constant currency
basis (see Note 6 in the financial statements for further details),
or 7% excluding the impact of unused annual leave.
Underlying administrative expenses
Constant
Reported Currency
Change Change
GBPm H1 2020 H1 2019(1) Change (%) (%)
-------- ----------- ------- --------- ----------
Broker compensation 495 451 44 +10% +9%
Unused annual leave 7 - 7 +100% +100%
Other front office
costs 86 88 (2) -2%% -3%
Data & Analytics costs 27 21 6 +29% +29%
------------------------------- -------- ----------- -------
Total front office
costs 615 560 55 +10% +9%
------------------------------- -------- ----------- -------
Other staff costs 121 108 13 12% 12%
Unused annual leave 3 - 3 +100% +100%
Technology and related
costs 38 30 8 +27% +27%
Premises and related
costs 24 22 2 +9% +4%
Depreciation and amortisation 15 18 (3) -17% -17%
Other administrative
costs 21 34 (13) -38% -36%
------------------------------- --------
Total management and
support costs 222 212 10 +5% +5%
------------------------------- -------- ----------- -------
Total costs 837 772 65 +8% +8%
------------------------------- -------- ----------- -------
1. Restated in line with our new divisional disclosures
The table above sets out administrative expenses on the basis on
which management chooses to view this area, divided principally
between front office costs and management and support costs. Front
office costs tend to have a large variable component to them and
are directly linked to the output of our brokers. The largest
element of this is broker compensation as well as other front
office costs, which include travel and entertainment,
telecommunications and information services, clearing and
settlement fees as well as other direct costs. The remaining cost
base represents the management and support costs of the Group.
Overall, the underlying cost base has seen a 8% increase at
reported rates to GBP837m in H1 2020 compared with H1 2019 (8% at
constant currency), or 7% excluding to a GBP10m increase in unused
annual leave as at 30 June which will reverse by the year end in
line with Group policy on holiday carry-forward.
The 8% increase has been primarily driven by an increase in
total front office costs. Broker compensation costs increased by
10% at reported rates (9% at constant currency rates) during the
period reflecting a 7% increase in broking revenue at reporting
rates (7% at constant exchange rates) and an increase in the broker
compensation ratio from 53.1% to 53.8%. The increase in broker
compensation reflects the change in revenue mix between the two
periods towards businesses with higher compensation ratio, mainly
relating to the strong Energy & Commodities growth.
Other front office costs have decreased by 2% (GBP2m) on a
reported basis (3% (GBP3m) at constant currency rates). Increases
in information services (GBP3m), clearing & settlements (GBP5m)
and increased revenue provisions (GBP1m) on the back of higher
revenues have been offset by decreases in travel and entertainment
(GBP10m). The increase in front office Data & Analytics costs
of 29% reflect the continuous top-line growth in the business but
also the significant investment in talent, which should increase
revenues in future periods.
The GBP13m increase (GBP14m reduction at constant currency
rates) in other staff costs on a reported basis mainly reflects
previously announced increased technology (GBP5m), risk (GBP1m) and
legal & compliance (GBP1m) support costs as we enhance these
functions to fulfil our increased IT strategic needs and ensure
compliance in an ever-changing environment.
Technology and related costs include the costs of all external
technology services, maintenance contracts, consultancy, market
data services and communications costs. During 2020 these costs
increased GBP11m on a reported basis (GBP12m at constant currency)
year-on-year due to a combination of planned increases regarding IT
infrastructure modernisation, cyber and surveillance IT projects
and other IT investments. The balance relates to other IT
increases, mainly COVID-19 related IT spending, such as investment
in cloud services.
The significant decrease in other administrative costs (GBP13m
lower on a reported basis, GBP15m lower at constant currency rates)
includes a decrease in corporate travel & entertainment(GBP2m),
decreases in legal fees, higher capitalisation of support staff
costs (GBP2m), lower audit & tax fees (GBP2m), lower one-off
costs in respect of the Group strategy, lower Brexit costs and
other FX gains (GBP6m).
Contribution & Underlying Operating Profit by division
Contribution represents the revenue of our businesses less the
total front office costs described above. An improvement in the
absolute level of contribution is an important metric in driving
earnings growth for the Group. In H1 2020, the overall level of
contribution was 4% higher at GBP375m year-on-year. The overall
contribution margin decreased by 1.4 percentage points to 37.5% as
higher revenues were more than offset by higher front office
costs.
This decline mainly reflects the broker compensation ratio
increase, due to revenue shift changes, combined with higher
initial contract payments ("ICP") amortisation.
GB = Global Broking; E&C = Energy & Commodities; IS =
Institutional Services, D&A = Data & Analytics, Corp.
Centre = Corporate Centre and other unallocated costs
Corp.
H1 2020 (GBPm) GB(1) E&C IS(1,2) D&A Centre(5) Total
----------------------------- ------ ------- -------- ------ ----------- ------
Revenue:
- External 647 216 57 70 - 990
- Inter-division(3) 9 1 - - (10) -
------ ------- -------- ------ ----------- ------
656 217 57 70 (10) 990
Total front office costs:
- External (396) (144) (41) (27) (7) (615)
- Inter-division(3) - - - (10) 10 -
------ ------- -------- ------ ----------- ------
(396) (144) (41) (37) 3 (615)
------ ------- -------- ------ ----------- ------
Contribution 260 73 16 33 (7) 375
47.1
Contribution margin(4) 39.6% 33 .6% 28.1% % n/a 37.9%
Net management and support
costs:
- Management and support
costs (131) (41) (8) (5) (37) (222)
- Other operating income 2 - - - 4 6
------ ------- -------- ------ ----------- ------
(129) (41) (8) (5) (33) (216)
------ ------- -------- ------ ----------- ------
Underlying Operating profit
/ (loss) 131 32 8 28 (40) 159
====== ======= ======== ====== =========== ======
Underlying operating profit
margin(4) 20.0% 14.7% 14.0% 40.0% n/a 16.1%
Corp.
H1 2019 (GBPm) GB E&C IS(1,2) D&A Centre(5) Total
-------------------------------- ------- ------- --------- ------ ------------ ------
Revenue:
- External 634 187 37 64 - 922
- Inter-division(3) 9 1 - - (10) -
------- ------- --------- ------ ------------ --------
643 188 37 64 (10) 922
Total front office costs:
- External (381) (129) (28) (22) - (560)
- Inter-division(3) - - - (10) 10 -
(381) (129) (28) (32) 10 (560)
Contribution 262 59 9 32 - 362
50.0
Contribution margin(4) 40.7% 31.4% 24.3% % n/a 39.3%
Net management and support
costs:
- Management and support
costs (130) (36) (6) (3) (37) (212)
- Other operating income 1 - - - 7 8
------- ------- --------- ------ ------------ --------
(129) (36) (6) (3) (30) (204)
------- ------- --------- ------ ------------ --------
Underlying Operating profit
/ (loss) 133 23 3 29 (30) 158
======= ======= ========= ====== ============ ========
Underlying operating profit
margin 20.7% 12.2% 8.1% 45.3% n/a 17.1%
1. For H1 2019 GBP15m of revenues have been reclassified from
Rates business into Institutional Services as the Global Broking
Relative Value (RV) Rates businesses have been reclassified
to move all RV desks under Institutional Services. This is
to reflect the mechanics of the underlying business.
2. Institutional Services growth rate would have been 26%
on a reported and constant currency basis excluding the aforementioned
move of the RV desks.
3. Inter-division charges have been made by Global Broking
and Energy & Commodities to reflect the value of proprietary
data provided to the Data & Analytics division. Previous year
has been restated in line with the new presentation format.
The broking inter-segmental revenues and Data & Analytics
inter-segmental costs are eliminated upon the consolidation
of the Group financial results.
4. Contribution and Underlying Operating Profit margins are
calculated using External and Inter-division revenues as the
denominator.
5. Corporate Centre and Other unallocated costs represents
the cost of group and central functions that are not allocated
to the Group's divisions, including a H1 2020 GBP10m charge
(H1 2019: GBPnil) due to an increase in unused annual leave
as at 30 June which will reverse by the year-end in line with
Group policy on holiday carry-forward.
Broking contribution (excluding Data & Analytics) was 5%
higher year-on-year at GBP349m, as higher contribution from Energy
& Commodities and Institutional Services, was only partially
offset by lower contribution from Global Broking, due to different
product mix and the aforementioned higher ICP amortisation.
Data & Analytics contribution represents the revenue of the
Data & Analytics business less the total front office costs
associated with running the business, including the cost of
internally generated data from the broking businesses. In H1 2020
the overall level of contribution increased by GBP1m or 3% to
GBP33m. The overall contribution margin decreased by 2.9 percentage
points to 47.1% driven by hiring, mainly in H2 2019.
Underlying operating profit
The underlying operating profit of GBP159m is 1% higher than the
prior year, with an underlying operating profit margin of 16.1%,
1percentage point lower than H1 2019. Underlying operating profit
and profit margin would have been GBP169m (7% higher year-on-year)
and 17.1%, excluding the impact of the unused annual leave.
We produce the underlying operating profit by division which is
after the allocation of net management and support costs (excluding
Corporate centre and other unallocated costs) to the different
divisions.
For Global Broking, the underlying operating profit decreased to
GBP131m, or 2% lower versus H1 2019. This was due to higher front
office costs reflecting higher compensation ratio on the back of
continuous retention and hiring efforts, as well as increased
clearing and settlement costs reflecting to vendor cost increases.
Moreover, other costs were increased due to higher IT allocations
regarding investments in cloud capabilities, strategic investments
and cyber and risk and compliance costs. Operating profit margin
decreased 0.7 percentage points to 20%.
For Energy & Commodities, the underlying operating profit
increased to GBP32m, or 39% higher versus H1 2019. This is
primarily due to higher revenues, only partially offset by higher
support costs. The underlying operating profit margin improved 2.5
percentage points to 14.7%.
Institutional Services improved its underlying operating profit
to GBP8m, or 267% higher than H1 2019. Our newest business division
continues to generate necessary scale to improve its profitability,
with very strong revenue growth. The underlying operating profit
margin improved to 14.0%, 5.9 percentage points higher
year-on-year.
Data & Analytics reported minor underlying operating profit
decline to GBP32m, or 3% lower versus H1 2019. Despite solid
revenue growth in a tough environment, the cost base included a
number of H2 2019 strategic hires that were not fully deployed due
to the global pandemic. As such, the underlying operating profit
margin slightly deteriorated to 40.0%, 5.3 percentage points lower
year-on-year.
Underlying operating profit by region
The underlying operating profit and underlying operating profit
margin by region are shown below are compared against reported data
for the prior period.
Underlying operating profit
GBPm H1 2020 H1 2019 Change
EMEA 93 96 -3%
Americas 56 49 14%
Asia Pacific 10 13 -23%
-------------- -------- --------
Underlying 159 158 1%
-------------- -------- --------
Underlying operating profit margin by region
GBPm H1 2020 H1 2019
EMEA 19.1% 21.0%
Americas 14.9% 14.4%
Asia Pacific 7.9% 10.5%
-------------- -------- --------
Underlying 16.1% 17.1%
-------------- -------- --------
EMEA
Underlying operating profit in EMEA of GBP93m was 3% lower than
H1 2019 on a reported basis, and with revenue up 7% on a reported
basis (6% at constant currency), the underlying operating profit
margin has decreased by 1.9 percentage points, to 19.1%. The
decrease reflects higher broker compensation due to different
revenue mix, higher clearing and settlement costs due to increase
market volumes, combined with slightly inflated support costs
mainly through increased employee in-sourcing of IT
consultancy.
Americas
The Americas underlying operating profit of GBP56m was 14%
higher than H1 2019. Revenue in the Americas was 11% higher than
the prior year at reported exchange rates (9% at constant
currency), and the operating profit margin of 14.9% in H1 2020 was
0.5 percentage points higher than H1 2019, as higher contribution
in the region more than offset a higher net support cost base.
Asia Pacific
Underlying operating profit in Asia Pacific decreased by GBP3m
to GBP10m in H1 2020, while the underlying operating profit margin
has reduced by 2.6 percentage points to 7.9%. This was due to the
building of new businesses in Energy & Commodities and
Institutional Services that created some drag on the contribution
margin. Meanwhile additional expenditure on the Group's technology
infrastructure, together with some specific need to put in place
recovery sites to cater for pandemic contingency, put upward
pressure on support costs despite a strong focus on cost control in
other areas.
Exceptional and acquisition, disposal and integration items
The Group presents its Condensed Consolidated Income Statement
in a columnar format on page 28 to aid the understanding of its
results by separately presenting its underlying operating profit
before acquisition, disposal and integration costs and exceptional
items. Underlying operating profit is reconciled to profit before
tax in the Condensed Consolidated Income Statement and is disclosed
separately to give a clearer presentation of the Group's underlying
trading results.
Acquisition, disposal and integration costs are excluded from
underlying results as they reflect the impact of acquisitions and
disposals rather than underlying trading performance.
A further amount of GBP20m has been charged through the income
statement reflecting the amortisation of intangible assets other
than goodwill arising on acquisitions, reflecting brand value, the
value of customer relationships and other intangible assets. This
non-cash item is excluded from underlying results to present the
performance of the Group's acquired businesses consistently with
its organically grown businesses where such intangible assets are
not recognised.
In accordance with its obligations under IAS 36 (see also Note
13), the Group has undertaken an impairment review of the carrying
value of its regional cash generating units ('CGU') to which
goodwill arising on acquisitions, including the acquisition of
ICAP, has been allocated. In determining whether goodwill is
impaired under IAS 36, the resulting value of each CGU has been
estimated based on its value in use. As a result of the review, the
carrying value of the Asia Pacific CGU has been written down by
GBP21m and this charge is included as an acquisition related item.
This non-cash impairment does not have an impact on the Group's
regulatory capital position, which excludes the carrying value of
intangible assets in the calculation of the Group's allowable
resources.
Other acquisition, disposal and integration costs also include a
GBP1m charge for adjustments to acquisition consideration, due to
an increase in the expected deferred consideration on the Axiom
acquisition due to its continuous strong performance, partially
offset by the finalisation of the COEX acquisition payment. There
are also cGBP1m of other minor acquisition and disposal items that
have been excluded from underlying results, mainly relating to the
Louis Capital acquisition.
Other exceptional items include GBP2m legal provision in
connection with ongoing court cases in Australia and Germany, plus
some costs associated with enforcing escrow related claims.
A GBP13m charge relating to business reorganisations, which
includes GBP9m in relation to our proposed redomiciliation, GBP2m
charge for other business reorganisation including office moves the
Group has undertaken in Belfast and GBP2m in relation to the
impairment of a lease receivable and a right-of-use asset as a
result of office consolidations.
Exceptional items have been excluded from underlying results as
they are non-recurring and do not relate to the underlying
performance of the business.
Net finance expense
The underlying net finance expense of GBP23m is GBP1m lower than
the GBP24m charged in H1 2019. This comprises GBP25m of interest
expense, of which GBP18m relates to the Group's Sterling Notes,
GBP1m of costs relating to interest fees on bank facilities, GBP1m
relating to the amortisation of debt issue and bank facilities and
GBP5m interest payable on lease liabilities. The expense is offset
by GBP2m of interest income.
Tax
The effective rate of tax on underlying profit before tax is 25%
(2019: 25%). The effective rate of tax on reported profit before
tax is 42% (2019: 29%) as some exceptional expenses are not tax
deductible, in particular the goodwill write-off. The outlook for
the underlying effective tax rate in 2021 is for it to remain
broadly in line with that for the current period.
Basic EPS
The average number of shares used for the basic EPS calculation
of 557.3m reflects the 563.3m shares in issue less the 4.5m shares
held by the TP ICAP plc Employee Benefit Trust at the beginning of
the year, less the difference between the time apportionment
elements of the 2.8m of shares acquired by the TP ICAP plc Employee
Benefit Trust to satisfy deferred share awards made to senior
management, and the 0.8m of deferred shares meeting their vesting
requirements in June. The TP ICAP plc Employee Benefit Trust has
waived its rights to dividends.
Dividend
A 5.6p per share interim dividend H1 2019: 5.6p will be paid on
6 November 2020 to shareholders on the register at close of
business on 2 October 2020. The ex-dividend date will be 1 October
2020.
The Company offers a Dividend Reinvestment Plan ("DRIP"), where
dividends can be reinvested in further TP ICAP plc shares. The DRIP
election cut-off date will be 16 October 2020.
Cash Flow H1 2020
GBPm Underlying Non-Underlying(1) Reported
----------------------------------------- ----------- ------------------ ---------
Operating profit 159 ( 58) 101
Share based compensation and pension
admin fees 4 - 4
Depreciation and amortisation 15 - 15
Depreciation on leased assets 12 - 12
Exceptional non-cash items - 3 3
Impairment & amortisation of intangible
assets arising on consolidation - 41 41
-----------------------------------------
EBITDA 190 ( 14 ) 176
Working capital (24) 1 (23)
Unused annual leave 10 - 10
-----------------------------------------
Cash generated from operations 176 (13) 163
Capital expenditure (23)
-----------------------------------------
Operating cash flow 153
Interest paid (24) (24)
Income taxes paid (37) 4 (33)
-----------------------------------------
Underlying Free cash flow 92
-----------------------------------------
Reported net cash flow from operating
activities 106
----------------------------------------- ----------- ------------------ ---------
1. Acquisition, disposal and integration costs, and exceptional
items
The cash flow presentation above reconciles the underlying cash
flow generation, excluding the impact of acquisition, disposal and
integration costs and exceptional items, to the reported net cash
flow from operations. The impact on EBITDA of acquisition, disposal
and integration costs and exceptional items was GBP14m during the
period principally relating to the costs of the business
reorganisation.
During the period, there was a working capital outflow of GBP24m
that mainly reflects a seasonal increase in trade receivables
(GBP18m) and settlement balances (GBP6m). This outflow is
significantly lower than the prior period as change to settlement
balances was GBP48m. Capital expenditure has increased to GBP23m,
slightly higher than in the prior year. This is due to incremental
spending on our new London Headquarters and continued IT spending
on routine, mandatory and investment projects.
After interest paid and underlying taxation paid, the underlying
free cash flow for the Group was GBP92m, an increase of GBP97m
versus 2019, mainly due to lower working capital outflows. Interest
paid was GBP3m lower than the prior year.
Cash Flow H1 2019
GBPm Underlying Non-Underlying(1) Reported
---------------------------------------- ----------- ------------------ ---------
Operating profit 158 (51) 107
Share based compensation and
pension admin fees 3 2 5
Depreciation and amortisation 18 1 19
Depreciation on leased assets 11 - 11
Exceptional non-cash items - 2 2
Impairment & amortisation of
intangible assets arising on
consolidation - 21 21
----------------------------------------
EBITDA 190 (25) 165
Change in Initial contract prepayments 2 2 4
Working capital (112) 2 (110)
----------------------------------------
Cash generated from operations 80 (21) 59
Capital expenditure (19)
----------------------------------------
Operating cash flow 61
----------------------------------------
Interest paid (27) (27)
Income taxes paid (39) 5 (34)
----------------------------------------
Underlying Free cash flow (5)
---------------------------------------- ---------
Reported net cash flow from operations (2)
---------------------------------------- ----------- ------------------ ---------
1. Acquisition, disposal and integration costs, and exceptional
items
The movement in net funds is summarised below:
Net
Cash & Financial Total Lease funds/
GBPm cash equivalents invest-ments funds Debt liabilities (debt)
----------------------------- ------------------ -------------- -------- ------ ------------- --------
At 31 December 2019 676 148 824 (689) (140) (5)
Reported net cash
flow from operations 106 - 106 - - 106
Net cash flow from
investment activities (29) 8 (21) - - (21)
Dividends paid (63) - (63) - - (63)
Net drawdown of the
RCF 40 - 40 (40) - -
Other financing activities (9) - (9) (1) - (10)
Change in lease liabilities
net of interest - - - - (85) (85)
Payments of lease
liabilities (16) - (16) - 16 -
Effect of movements
in exchange rates 23 2 25 - 7 18
----------------------------- ------------------ -------------- -------- ------ ------------- --------
At 30 June 2020 728 158 886 (730) (216) (60)
----------------------------- ------------------ -------------- -------- ------ ------------- --------
Of the GBP886m cash and financial investments balance at the
period end, GBP798m is held in 61 regulated entities to meet
regulatory capital, margin and other trading requirements as well
as accrued profits, GBP80m is held in non-regulated entities for
working capital requirements as well as accrued profits and GBP8m
is held in corporate holding companies. GBP641m of cash is held in
regulated entities for regulatory and operational reasons.
Details of the Sterling Note & other debt refinancing in the
period can be found in the next section. The Group's net debt
position of GBP60m has increased from a net debt position of GBP5m
at 2019 year-end. Net debt has increased mainly due to a net GBP85m
increase in IFRS 16 lease liabilities increased in the period due
the commencement of three new leases relating to our new City of
London premises in 135 Bishopsgate.
Excluding the impact of IFRS 16, that requires the recognition
of GBP216m lease liabilities, the Group would have a net funds
position of GBP156m. The IFRS 16 impact is not recognised within
the Group's banking covenant calculations.
Debt finance
The composition of the Group's outstanding debt, excluding lease
liabilities, is summarised below.
At 30 At 30 At 31
June June December
GBPm 2020 2019 2019
----------------------------------- ------ ------ ----------
5.25% Sterling Notes January 2024 431 431 431
5.25% Sterling Notes May 2026 250 250 250
Loan from related party - 37 -
Revolving credit facility drawn 40 - -
Unamortised debt issue costs (2) (3) (3)
Accrued interest 11 11 11
----------------------------------- ------ ------ ----------
Debt 730 726 689
Lease liabilities 216 150 140
----------------------------------- ------ ------ ----------
Total Debt 946 876 829
----------------------------------- ------ ------ ----------
The Group's core debt, pre lease liability has increased to
GBP730m. The increase was due to a drawdown on our revolving credit
facility (RCF). The GBP270m RCF was extended in December 2019 and
matures in December 2022. We have drawn GBP40m at the end of the
period for general corporate purposes.
Exchange rates
The income statements and balance sheets of the Group's
businesses whose functional currencies are not GBP are translated
into Sterling at average and period end exchange rates
respectively. The most significant exchange rates for the Group are
the US Dollar and the Euro. The Group's current policy is not to
hedge income statement or balance sheet translation exposure.
Average and period end exchange rates used in the preparation of
the financial statements are shown below.
Average Period End
----------------------------
H1 H1 FY H1 H1 H2
2020 2019 2019 2020 2019 2019
US Dollar $1.28 $1.30 $1.28 $1.24 $1.27 $1.32
Euro EUR1.15 EUR1.15 EUR1.14 EUR1.10 EUR1.12 EUR1.18
Pensions
The Group has one defined benefit pension scheme in the UK which
is in the process of being wound up and individual policies issued
to beneficiaries. During the wind-up period, the Group will
continue to restrict the recognition of the net surplus applying an
asset recognition ceiling.
Following the full settlement of the Scheme's liabilities the
Scheme will be wound-up and the sponsor expects to receive the
remaining assets. Any repayment received will also be subject to
applicable taxes at that time, currently 35%.
Regulatory capital
The Group's lead regulator is the FCA. The Group has a waiver
from the consolidated capital adequacy requirements under CRD IV.
The Group's current waiver took effect on 30 December 2016,
following the acquisition of ICAP, and will expire on 30 December
2026. Under the terms of the waiver, each investment firm within
the Group must be treated as either a limited activity or a limited
licence firm and comply with its individual regulatory capital
resources requirements. TP ICAP plc, as the parent Company, must
continue to maintain capital resources in excess of the sum of the
solo notional capital resources requirements for each relevant firm
within the Group (the 'Financial Holding Company test'). The terms
of the waiver require the Group to eliminate the excess of its
consolidated own funds requirement compared with its consolidated
own funds ('Excess Goodwill') over the ten-year period to 30
December 2026. The amount of the Excess Goodwill must not exceed
the amount determined as at the date the waiver took effect (the
'Excess Goodwill Ceiling'). The Excess Goodwill Ceiling is reduced
to nil in line with a schedule over ten-years to December 2026,
with the first reduction of 25% having occurred at the end of June
2019. The Excess Goodwill Ceiling continues to reduce 25% every 2.5
years on a stepped basis. The Group expects to reduce its Excess
Goodwill in accordance with the declining Excess Goodwill Ceiling.
The waiver also sets out conditions with respect to the maintenance
of financial ratios relating to leverage, debt service and debt
maturity profile.
The Group's regulatory capital headroom under the Financial
Holding Company test calculated in accordance with Pillar 1 was
GBP1,453m (2019 year-end: GBP1,591m). Many of the Group's broking
entities are regulated on a 'solo' basis, and are obliged to meet
the regulatory capital requirements imposed by the local regulator
of the jurisdiction in which they operate. The Group maintains an
appropriate excess of financial resources in such entities.
Information disclosure under Pillar 3 is available on the
Group's website: www.tpicap.com.
Going concern
The Group has sufficient financial resources both in the regions
and at the corporate centre to meet the Group's ongoing
obligations. After making enquiries, the Directors have a
reasonable expectation that the Company and the Group have adequate
resources to continue in operational existence for the foreseeable
future. Accordingly, the Interim Management Report continues to be
prepared on the going concern basis.
Condensed Consolidated Income Statement
for the six months ended 30 June 2020
Acquisition,
disposal
and
integration Exceptional
Six months ended costs Items
30 June 2020 (unaudited) Underlying (Note 7) (Note 7) Total
Notes GBPm GBPm GBPm GBPm
-------------------------------- ------ ----------- ------------- ------------ ------
Revenue 5 990 - - 990
Administrative expenses 6 (837) (43) (15) (895)
Other operating income 8 6 - - 6
-------------------------------- ------ ----------- ------------- ------------ ------
Operating profit 5 159 (43) (15) 101
Finance income 9 2 - - 2
Finance costs 10 (25) - - (25)
-------------------------------- ------ ----------- ------------- ------------ ------
Profit before tax 136 (43) (15) 78
Taxation (34) - 1 (33)
-------------------------------- ------ ----------- ------------- ------------ ------
Profit after tax 102 (43) (14) 45
Share of results of associates
and joint ventures 10 - - 10
-------------------------------- ------ ----------- ------------- ------------ ------
Profit for the period 112 (43) (14) 55
================================ ====== =========== ============= ============ ======
Attributable to:
Equity holders of the
parent 111 (43) (14) 54
Non-controlling interests 1 - - 1
-------------------------------- ------ ----------- ------------- ------------ ------
112 (43) (14) 55
================================ ====== =========== ============= ============ ======
Earnings per share
- Basic 11 19.9p 9.7p
- Diluted 11 19.7p 9.6p
-------------------------------- ------ ----------- ------------- ------------ ------
Acquisition,
disposal
and
integration Exceptional
Six months ended costs Items
30 June 2019 (unaudited) Underlying (Note 7) (Note 7) Total
Notes GBPm GBPm GBPm GBPm
-------------------------------- ------ ----------- ------------- ------------ ------
Revenue 5 922 - - 922
Administrative expenses 6 (772) (45) (6) (823)
Other operating income 8 8 - - 8
-------------------------------- ------ ----------- ------------- ------------ ------
Operating profit 5 158 (45) (6) 107
Finance income 9 3 - - 3
Finance costs 10 (27) - - (27)
-------------------------------- ------ ----------- ------------- ------------ ------
Profit before tax 134 (45) (6) 83
Taxation (33) 8 1 (24)
-------------------------------- ------ ----------- ------------- ------------ ------
Profit after tax 101 (37) (5) 59
Share of results of associates
and joint ventures 8 - - 8
-------------------------------- ------ ----------- ------------- ------------ ------
Profit for the period 109 (37) (5) 67
================================ ====== =========== ============= ============ ======
Attributable to:
Equity holders of the
parent 108 (37) (5) 66
Non-controlling interests 1 - - 1
-------------------------------- ------ ----------- ------------- ------------ ------
109 (37) (5) 67
================================ ====== =========== ============= ============ ======
Earnings per share
- Basic 11 19.3p 11.8p
- Diluted 11 19.1p 11.7p
-------------------------------- ------ ----------- ------------- ------------ ------
Acquisition,
Disposal
and
integration Exceptional
Year ended costs Items
31 December 2019 Underlying (Note 7) (Note 7) Total
Notes GBPm GBPm GBPm GBPm
-------------------------------- ------ ----------- ------------- ------------ --------
Revenue 5 1,833 - - 1,833
Administrative expenses 6 (1,570) (115) (31) (1,716)
Other operating income 8 16 - 9 25
-------------------------------- ------ ----------- ------------- ------------ --------
Operating profit 5 279 (115) (22) 142
Finance income 9 6 - - 6
Finance costs 10 (55) - - (55)
-------------------------------- ------ ----------- ------------- ------------ --------
Profit before tax 230 (115) (22) 93
Taxation (55) 15 - (40)
-------------------------------- ------ ----------- ------------- ------------ --------
Profit after tax 175 (100) (22) 53
Share of results of associates
and joint ventures 15 - - 15
-------------------------------- ------ ----------- ------------- ------------ --------
Profit for the period 190 (100) (22) 68
================================ ====== =========== ============= ============ ========
Attributable to:
Equity holders of the
parent 189 (100) (22) 67
Non-controlling interests 1 - - 1
-------------------------------- ------ ----------- ------------- ------------ --------
190 (100) (22) 68
================================ ====== =========== ============= ============ ========
Earnings per share
- Basic 11 33.8p 12.0p
- Diluted 11 33.5p 11.9p
-------------------------------- ------ ----------- ------------- ------------ --------
Condensed Consolidated Statement of Comprehensive Income
for the six months ended 30 June 2020
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2020 2019 2019
(unaudited) (unaudited)
GBPm GBPm GBPm
------------------------------------- ---- ------------- ------------- -------------
Profit for the period 55 67 68
------------------------------------------- ------------- ------------- -------------
Items that will not be reclassified
subsequently to profit or loss:
------------------------------------- ---- ------------- ------------- -------------
Remeasurement of defined benefit
pension schemes - (55) (52)
Equity investments at FVTOCI
- net change in fair value (1) 1 1
Taxation relating to items not
reclassified - 19 19
------------------------------------------- ------------- ------------- -------------
(1) (35) (32)
------------------------------------------ ------------- ------------- -------------
Items that may be reclassified
subsequently to profit or loss:
------------------------------------- ---- ------------- ------------- -------------
Effect of changes in exchange
rates on
translation of foreign operations 66 3 (44)
Taxation relating to items that
may be reclassified 1 - -
------------------------------------- ---- ------------- ------------- -------------
67 3 (44)
------------------------------------------ ------------- ------------- -------------
Other comprehensive income/(loss)
for the period 66 (32) (76)
------------------------------------------- ------------- ------------- -------------
Total comprehensive income/(loss)
for the period 121 35 (8)
=========================================== ============= ============= =============
Attributable to:
Equity holders of the parent 118 34 (8)
Non-controlling interests 3 1 -
------------------------------------------- ------------- ------------- -------------
121 35 (8)
========================================== ============= ============= =============
Condensed Consolidated Balance Sheet
as at 30 June 2020
30 June 30 June 31 December
2020 2019 2019
(unaudited) (unaudited)
Restated(1)
Notes GBPm GBPm GBPm
--------------------------------------- ------ ------------- ------------- ------------
Non-current assets
Intangible assets arising on
consolidation 13 1,505 1,571 1,511
Other intangible assets 62 64 61
Property, plant and equipment 82 78 72
Right-of-use assets 14 164 106(1) 91
Investment in associates 60 53 58
Investment in joint ventures 27 27 28
Other investments 17 20 20
Deferred tax assets 3 3 3
Other long term receivables 15 25 28(1) 26
--------------------------------------- ------ ------------- ------------- ------------
1,945 1,950 1,870
--------------------------------------- ------ ------------- ------------- ------------
Current assets
Trade and other receivables 15 37,672 57,638 49,371
Financial investments 19 158 135 148
Cash and cash equivalents 19 728 646 676
--------------------------------------- ------ ------------- ------------- ------------
38,558 58,419 50,195
--------------------------------------- ------ ------------- ------------- ------------
Total assets 40,503 60,369 52,065
======================================= ====== ============= ============= ============
Current liabilities
Trade and other payables (37,577) (57,470) (49,305)
Interest bearing loans and borrowings 16 (51) (48) (11)
Lease liabilities 17 (22) (23) (23)
Current tax liabilities (55) (49) (48)
Short term provisions 20 (20) (29) (21)
--------------------------------------- ------ ------------- ------------- ------------
(37,725) (57,619) (49,408)
--------------------------------------- ------ ------------- ------------- ------------
Net current assets 833 800 787
======================================= ====== ============= ============= ============
Non-current liabilities
Interest bearing loans and borrowings 16 (679) (678) (678)
Lease liabilities 17 (194) (127) (117)
Deferred tax liabilities (78) (98) (83)
Long term provisions 20 (26) (25) (26)
Other long term payables (16) (20) (21)
Retirement benefit obligations (2) (3) (2)
--------------------------------------- ------ ------------- ------------- ------------
(995) (951) (927)
--------------------------------------- ------ ------------- ------------- ------------
Total liabilities (38,720) (58,570) (50,335)
--------------------------------------- ------ ------------- ------------- ------------
Net assets 1,783 1,799 1,730
======================================= ====== ============= ============= ============
Equity
Share capital 141 141 141
Share premium 17 17 17
Merger reserve 1,384 1,384 1,384
Other reserves (1,148) (1,159) (1,205)
Retained earnings 1,368 1,399 1,375
--------------------------------------- ------ ------------- ------------- ------------
Equity attributable to
equity holders of the parent 1,762 1,782 1,712
Non-controlling interests 21 17 18
--------------------------------------- ------ ------------- ------------- ------------
Total equity 1,783 1,799 1,730
======================================= ====== ============= ============= ============
1. Right-of-use assets and other long term receivables as at 30
June 2019 have been restated for the adoption of IFRS 16 in
2019.
Condensed Consolidated Statement of Changes in Equity
for the six months ended 30 June 2020
Equity attributable to equity holders of the parent
Share Reverse Re- Hedging Non-
Share premium Merger acquisition valuation and Own Retained controlling Total
capital account reserve reserve reserve translation shares earnings Total interests equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
---------------- -------- -------- -------- ------------ --------- ----------- ------ --------- ------ ------------ -------
30 June 2020
(unaudited)
---------------- -------- -------- -------- ------------ --------- ----------- ------ --------- ------ ------------ -------
Balance at 1, (1,
1 January 2020 141 17 384 182) 5 (12) (16) 1,375 1,712 18 1,730
---------------- -------- -------- -------- ------------ --------- ----------- ------ --------- ------ ------------ -------
Profit for the
period - - - - - - - 54 54 1 55
Other
comprehensive
income/(loss)
for the period - - - - (1) 65 - - 64 2 66
---------------- -------- -------- -------- ------------ --------- ----------- ------ --------- ------ ------------ -------
Total
comprehensive
Income/(loss)
for the period - - - - (1) 65 - 54 118 3 121
Dividends paid - - - - - - - (63) (63) - (63)
Gain on
disposal
of equity
instruments
at FVTOCI - - - - (1) - - 1 - - -
Share
settlement
of share-
based payment
awards - - - - - - 3 (3) - - -
Own shares
acquired
for employee
trusts - - - - - - (9) - (9) - (9)
Credit arising
on share-based
payment awards - - - - - - - 4 4 - 4
---------------- -------- -------- -------- ------------ --------- ----------- ------ --------- ------ ------------ -------
Balance at
30 June 2020 141 17 1,384 (1,182) 3 53 (22) 1,368 1,762 21 1,783
================ ======== ======== ======== ============ ========= =========== ====== ========= ====== ============ =======
Equity attributable to equity holders of the parent
Share Reverse Re- Hedging Non-
Share premium Merger acquisition valuation and Own Retained controlling Total
capital account reserve reserve reserve translation shares earnings Total interests equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
---------------- -------- -------- -------- ------------ --------- ----------- ------ --------- ------ ------------ -------
30 June 2019
(unaudited)
Balance at
1 January 2019 141 17 1,384 (1,182) 4 31 (11) 1,430 1,814 16 1,830
---------------- -------- -------- -------- ------------ --------- ----------- ------ --------- ------ ------------ -------
Profit for the
period - - - - - - - 66 66 1 67
Other
comprehensive
income/(loss)
for the period - - - - 1 3 - (36) (32) - (32)
---------------- -------- -------- -------- ------------ --------- ----------- ------ --------- ------ ------------ -------
Total
comprehensive
income for the
period - - - - 1 3 - 30 34 1 35
Dividends paid - - - - - - - (63) (63) - (63)
Share
settlement
of share-
based payment
awards - - - - - - 2 (3) (1) - (1)
Own shares
acquired
for employee
trusts - - - - - - (7) - (7) - (7)
Credit arising
on share-based
payment awards - - - - - - - 5 5 - 5
---------------- -------- -------- -------- ------------ --------- ----------- ------ --------- ------ ------------ -------
Balance at
30 June 2019 141 17 1,384 (1,182) 5 34 (16) 1,399 1,782 17 1,799
================ ======== ======== ======== ============ ========= =========== ====== ========= ====== ============ =======
Equity attributable to equity holders of the parent
Share Reverse Re- Hedging Non-
Share premium Merger acquisition valuation and Own Retained controlling Total
capital account reserve reserve reserve translation shares earnings Total interests equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------ -------- -------- -------- ------------ --------- ----------- ------ --------- ------ ------------ -------
31 December 2019
------------------ -------- -------- -------- ------------ --------- ----------- ------ --------- ------ ------------ -------
Balance at 1,
1 January 2019 141 17 384 (1,182) 4 31 (11) 1,430 1,814 16 1,830
Profit for the
period - - - - - - - 67 67 1 68
Other
comprehensive
(loss)/income
for the period - - - - 1 (43) - (33) (75) (1) (76)
------------------ -------- -------- -------- ------------ --------- ----------- ------ --------- ------ ------------ -------
Total
comprehensive
Income/(loss)
for the period - - - - 1 (43) - 34 (8) - (8)
Dividends paid - - - - - - - ( 94) (94) (1) (95)
Share settlement
of share-
based payment
awards - - - - - - 2 (3) (1) - (1)
Own shares
acquired
for employee
trusts - - - - - - (7) - (7) - (7)
Increase in
non-controlling
interests - - - - - - - 3 3 3 6
Credit arising
on share-based
payment awards - - - - - - - 5 5 - 5
------------------ -------- -------- -------- ------------ --------- ----------- ------ --------- ------ ------------ -------
Balance at 1, (1,
31 December 2019 141 17 384 182) 5 ( 12) (16) 1,375 1,712 18 1,730
================== ======== ======== ======== ============ ========= =========== ====== ========= ====== ============ =======
Condensed Consolidated Cash Flow Statement
for the six months ended 30 June 2020
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2020 2019 2019
(unaudited) (unaudited)
Notes GBPm GBPm GBPm
-------------------------------------- ------ ------------- ------------- -------------
Cash flows from operating activities 18 106 (2) 148
-------------------------------------- ------ ------------- ------------- -------------
Investing activities
Purchase of financial investments (8) (2) (20)
Sale of equity investments at
FVTOCI 2 1 1
Purchase of equity investments
at FVTOCI - (1) (1)
Interest received 2 3 5
Dividends from associates and
joint ventures 3 9 10
Expenditure on intangible fixed
assets (10) (8) (20)
Purchase of property, plant
and equipment (13) (11) (13)
Deferred consideration paid (4) (12) (12)
Investment in associates (1) - (5)
Net cash flows from investment
activities (29) (21) (55)
-------------------------------------- ------ ------------- ------------- -------------
Financing activities
Dividends paid 12 (63) (63) (94)
Dividends paid to non-controlling
interests - - (1)
Dividend equivalents paid on
share-based awards - - (1)
Sale of equity to non-controlling
interests - - 6
Own shares acquired for employee
trusts (9) (8) (7)
Drawdown of revolving credit
facility 161 39 39
Repayment of revolving credit
facility (121) (91) (91)
Funds received from loans from
related parties - 35 35
Repayment of loans from related
parties - - ( 38 )
Gain on derivative financial
instruments - - 3
Funds received from issue of
Sterling Notes - 250 250
Repayment of Sterling Notes - (149) (149)
Debt issue and bank facility
arrangement costs - (1) (2)
Payment of lease liabilities (16) (10) (21)
-------------------------------------- ------ ------------- ------------- -------------
Net cash flows from financing
activities (48) 2 (71)
-------------------------------------- ------ ------------- ------------- -------------
Net increase/(decrease)
in cash and cash equivalents 29 (21) 22
Cash and cash equivalents
at the beginning of the period 676 667 667
Effect of foreign exchange rate
changes 23 - (13)
-------------------------------------- ------ ------------- ------------- -------------
Net cash and cash equivalents
at the end of the period 19 728 646 676
====================================== ====== ============= ============= =============
Cash and cash equivalents 733 706 686
Overdrafts (5) (60) (10)
-------------------------------------- ------ ------------- ------------- -------------
Net cash and cash equivalents
at the end of the period 728 646 676
====================================== ====== ============= ============= =============
Notes to the Condensed Consolidated Financial Statements
for the six months ended 30 June 2020
1. General information
The condensed consolidated financial information for the six
months ended 30 June 2020 has been prepared in accordance with the
Disclosure and Transparency Rules ('DTR') of the Financial Conduct
Authority and with IAS 34 'Interim Financial Reporting' as adopted
by the European Union ('EU'). This condensed financial information
should be read in conjunction with the statutory Group Financial
Statements for the year ended 31 December 2019 which were prepared
in accordance with International Financial Reporting Standards
('IFRS') as adopted by the EU.
The statutory Group Financial Statements for the year ended 31
December 2019 have been reported on by the Company's auditors,
Deloitte LLP, and have been delivered to the Registrar of
Companies. The report of the auditors on those financial statements
was unqualified, did not draw attention to any matters by way of
emphasis and did not contain a statement under section 498(2) or
(3) of the Companies Act 2006.
The condensed consolidated financial information for the six
months ended 30 June 2020 has been prepared using accounting
policies consistent with IFRS. The interim information, together
with the comparative information contained in this report for the
year ended 31 December 2019, does not constitute statutory
financial statements within the meaning of section 434 of the
Companies Act 2006. The financial information is unaudited but has
been reviewed by the Company's auditor, Deloitte LLP, and their
report appears at the end of the Interim Management Report.
2. Basis of preparation
(a) Basis of accounting
The Condensed Consolidated Financial Statements have been
prepared on the historical cost basis, except for the revaluation
of certain financial instruments.
The Directors have a reasonable expectation that the Group has
adequate resources to continue in operational existence for the
foreseeable future. Accordingly, the going concern basis continues
to be used in preparing these Condensed Consolidated Financial
Statements.
The Condensed Consolidated Financial Statements are rounded to
the nearest million pounds (expressed as GBPm), except where
otherwise indicated.
(b) Basis of consolidation
The Group's Condensed Consolidated Financial Statements
incorporate the financial information of the Company and entities
controlled by the Company made up to each reporting period. Under
IFRS 10 control is achieved where the Company exercises power over
an entity, is exposed to, or has rights to, variable returns from
its involvement with the entity and has the ability to use its
power to affect the returns from the entity.
(c) Presentation of the Income Statement
The Group maintains a columnar format for the presentation of
its Condensed Consolidated Income Statement. The columnar format
enables the Group to continue its practice of aiding the
understanding of its results by presenting its underlying profit.
This is the profit measure used to calculate underlying EPS (Note
11) and is considered to be the most appropriate as it better
reflects the Group's underlying earnings. Underlying profit is
reconciled to profit before tax on the face of the Condensed
Consolidated Income Statement, which also includes acquisition,
disposal and integration costs and exceptional items.
The column 'acquisition, disposal and integration costs'
includes: any gains, losses or other associated costs on the full
or partial disposal of investments, associates, joint ventures or
subsidiaries and costs associated with a business combination that
do not constitute fees relating to the arrangement of financing;
amortisation or impairment of intangible assets arising on
consolidation; any re-measurement after initial recognition of
contingent consideration which has been classified as a liability,
and any gains or losses on the revaluation of previous interests.
The column may also include items such as gains or losses on the
settlement of pre-existing relationships with acquired businesses
and the re-measurement of liabilities that are above the value of
indemnification.
Acquisition related integration costs include costs associated
with exit or disposal activities, which do not meet the criteria of
discontinued operations, including costs for employee and lease
terminations, or other exit activities. Additionally, these costs
include expenses directly related to integrating and reorganising
acquired businesses and include items such as employee retention
costs, recruiting costs, certain moving costs, certain duplicative
costs during integration and asset impairments.
Items which are of a non-routine nature and material, when
considering both size and nature, are disclosed separately to give
a clearer presentation of the Group's results. These are shown as
'exceptional items' on the face of the Condensed Consolidated
Income Statement.
(d) Accounting policies
Except as described below, the accounting policies applied in
these Condensed Consolidated Financial Statements are the same as
those applied in the Group's Consolidated Financial Statements as
at and for the year ended 31 December 2019.
The following new Standards and Interpretations are effective
from 1 January 2020 but they do not have a material effect on the
Group's financial statements:
Ø Amendments to IAS 1 and IAS 8: Definition of Material;
Ø Amendments to References to the Conceptual Framework in IFRS
Standards;
Ø Amendments to IFRS 3 Business Combinations; and
Ø Amendments to IFRS 9, IAS 39 and IFRS17: Interest Rate
Benchmark.
(e) Restatement of 30 June 2019 comparative information
Right-of-use assets and trade and other receivables have been
restated as at 30 June 2019 reflecting a reclassification of
finance lease receivables, included in trade and other receivables,
as right-of-use assets following the adoption of IFRS 16. The
reported value of right-of-use assets has increased by GBP5m with a
corresponding reduction in trade and other receivables.
3. Related party transactions
The total amount due from related parties as at 30 June 2020 was
GBP11m (31 December 2019: GBP3m) and amounts due to related parties
as at 30 June 2020 was GBP3m (31 December 2019: GBP3m).
4. Principal risks and uncertainties
Robust risk management is fundamental to the achievement of the
Group's objectives. The Group identifies the risks to which it is
exposed as a result of its business objectives, strategy and
operating model, and categorises those risks into five 'risk
objectives': Financial position, Operational effectiveness and
resilience, Regulatory standing, Reputation and Business strategy.
The risks identified within each of these categories, along with an
explanation of how the Group seeks to manage or mitigate these risk
exposures can be found on pages 35 to 39 of the latest Annual
Report which is available at www.tpicap.com . The Directors do not
consider that the principal risks and uncertainties have changed
since the publication of the Annual Report for the year ended 31
December 2019. Risks and uncertainties, which could have a material
impact on the Group's performance over the remaining six months of
the financial year are discussed in the Interim Management
Report.
5. Segmental analysis
Products and services from which reportable segments derive
their revenues
The Group is organised by geographic reporting segments which
are used for the purposes of resource allocation and assessment of
segmental performance by Group management. These are the Group's
reportable segments under IFRS 8 'Operating Segments'.
Revenue arising in each geographic reportable segment is derived
from four business divisions; Global Broking, Energy &
Commodities, Institutional Services, and Data & Analytics.
Information regarding the Group's operating segments is reported
below:
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2020 2019 2019
GBPm GBPm GBPm
--------------------------------------- ----------- ----------- -------------
Revenue
EMEA 488 458 900
Americas 376 340 687
Asia Pacific 126 124 246
--------------------------------------- ----------- ----------- -------------
990 922 1,833
======================================= =========== =========== =============
Operating profit
EMEA 93 96 164
Americas 56 49 94
Asia Pacific 10 13 21
--------------------------------------- ----------- ----------- -------------
Underlying operating profit 159 158 279
Acquisition, disposal and integration
costs (Note 7) (43) (45) ( 115 )
Exceptional items (Note 7) (15) (6) ( 22 )
--------------------------------------- ----------- ----------- -------------
Reported operating profit 101 107 142
Finance income 2 3 6
Finance costs (25) (27) ( 55 )
--------------------------------------- ----------- ----------- -------------
Profit before tax 78 83 93
Taxation (33) (24) ( 40 )
--------------------------------------- ----------- ----------- -------------
Profit of consolidated companies 45 59 53
Share of results of associates and
joint ventures 10 8 15
--------------------------------------- ----------- ----------- -------------
Profit for the period 55 67 68
======================================= =========== =========== =============
There are no inter-segment sales included in segment
revenue.
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2020 2019 2019
Restated(1)
Revenue by Business Division GBPm GBPm GBPm
---------------------------------------- ----------- ------------- -------------
* Rates 290 273(1) 537
* Credit 51 50 94
* FX & Money Markets 98 100 201
* Emerging Markets 103 108 213
* Equities 105 102 199
---------------------------------------- ----------- ------------- -------------
Global Broking 647 633 1,244
Energy & Commodities 216 187 379
Institutional Services 57 38(1) 75
Data & Analytics 70 64 135
---------------------------------------- ----------- ------------- -------------
990 922 1,833
======================================== =========== ============= =============
Operating Profit
Global Broking 131 133 221
Energy & Commodities 32 23 46
Institutional Services 8 3 3
Data & Analytics 28 29 59
Corporate Centre and other unallocated
costs ( 40 ) (30) (50)
159 158 279
======================================== =========== ============= =============
1. In 2019, RV broking business was transferred from Global
Broking to Institutional Services. June 2019 revenue has been
restated to reclassify GBP15m from Global Broking to Institutional
Services
Corporate Centre represents the cost of group and central
functions that are not allocated to the Groups divisions including
a GBP10m (2019: GBPnil) charge relating to an increase in unused
annual leave on 30 June 2020 which will reverse by the year end in
line with Group policy on holiday carry-forward.
Other segmental information
30 June 30 June 31 December
2020 2019 2019
Segment assets GBPm GBPm GBPm
----------------------- -------- -------- ------------
EMEA - UK 24,804 14,356 11,219
EMEA - Other 412 855 223
Americas 14,943 44,780 40,280
Asia Pacific 344 378 343
----------------------- -------- -------- ------------
40,503 60,369 52,065
======================= ======== ======== ============
Segment liabilities
----------------------- -------- -------- ------------
EMEA - UK 23,729 13,289 10,161
EMEA - Other 395 834 208
Americas 14,403 44,259 39,782
Asia Pacific 193 188 184
----------------------- -------- -------- ------------
38,720 58,570 50,335
======================= ======== ======== ============
Segmental assets and liabilities exclude all inter-segment
balances.
6. Administrative expenses
Administrative expenses comprise:
Acquisition,
disposal
Underlying and
Six months ended Front Underlying Total integration Exceptional
30 June 2020 (unaudited) Office Support Underlying costs items Total
GBPm GBPm GBPm GBPm GBPm GBPm
------------------------------ ----------- ----------- ------------ ------------- ------------ ------
Broker compensation
costs 495 - 495 - - 495
Other staff costs 11 117 128 - 2 130
Other share-based
payment charge - 4 4 - - 4
------------------------------ ----------- ----------- ------------ ------------- ------------ ------
Employment costs -
divisionally allocated 506 121 627 - 2 629
Unused annual leave 7 3 10 - - 10
Employment costs 513 124 637 - 2 639
Technology and related
costs 49 38 87 - - 87
Premises and related
costs - 12 12 - 2 14
Amortisation of other
intangible assets - 9 9 - - 9
Depreciation of property,
plant and equipment - 6 6 - - 6
Depreciation of right-of-use
assets - 12 12 - - 12
Amortisation of intangible
assets arising on
consolidation - - - 20 - 20
Impairment of intangible
assets arising on
consolidation - - - 21 - 21
Adjustments to deferred
consideration - - - 1 - 1
Net charge related
to legal settlements - - - - 2 2
Acquisition Costs - - - 1 - 1
Other administrative
costs 51 19 70 - 9 79
613 220 833 43 15 891
Impairment loss on
trade receivables 2 2 4 - - 4
------------------------------ ----------- ----------- ------------ ------------- ------------ ------
Total Administrative
Expenses 615 222 837 43 15 895
============================== =========== =========== ============ ============= ============ ======
Acquisition,
disposal
Underlying and
Six months ended Front Underlying Total integration Exceptional
30 June 2019 (unaudited) Office Support Underlying costs items Total
GBPm GBPm GBPm GBPm GBPm GBPm
------------------------------ ----------- ----------- ------------ ------------- ------------ ------
Broker compensation
costs 451 - 451 - - 451
Other staff costs 8 105 113 9 1 123
Other share-based
payment charge - 3 3 2 - 5
Employment costs -
divisionally allocated 459 108 567 11 1 579
Technology and related
costs 46 30 76 3 - 79
Premises and related
costs - 11 11 - 2 13
Amortisation of other
intangible assets - 12 12 1 - 13
Depreciation of property,
plant and equipment - 6 6 - - 6
Depreciation of right-of-use
assets - 11 11 - - 11
Amortisation of intangible
assets arising on
consolidation - - - 21 - 21
Adjustments to deferred
consideration - - - 2 - 2
Other administrative
costs 55 33 88 7 3 98
------------------------------ ----------- ----------- ------------ ------------- ------------ ------
560 211 771 45 6 822
Impairment loss on
trade receivables - 1 1 - - 1
------------------------------ ----------- ----------- ------------ ------------- ------------ ------
560 212 772 45 6 823
============================== =========== =========== ============ ============= ============ ======
Acquisition,
disposal
Underlying and
Year ended Front Underlying Total integration Exceptional
31 December 2019 Office Support Underlying costs items Total
GBPm GBPm GBPm GBPm GBPm GBPm
------------------------------ ----------- ----------- ------------ ------------- ------------ ------
Broker compensation
costs 900 - 900 - - 900
Other staff costs 19 209 228 18 2 248
Other share-based
payment charge/(credit) - 6 6 (1) - 5
Charge relating to
employee long-term
benefits - - - - 1 1
------------------------------ ----------- ----------- ------------ ------------- ------------ ------
Employment costs -
divisionally allocated 919 215 1,134 17 3 1,154
Technology and related
costs 99 59 158 - - 158
Premises and related
costs - 26 26 - 1 27
Amortisation of other
intangible assets 1 22 23 4 - 27
Depreciation of property,
plant and equipment 1 12 13 - - 13
Depreciation of right-of-use
assets - 20 20 - 1 21
Amortisation of intangible
assets arising on
consolidation - - - 42 - 42
Impairment of intangible
assets arising on
consolidation - - - 24 - 24
Adjustments to deferred
consideration - - - 6 - 6
Adjustments to provisions
and contingent liabilities
acquired - - - 3 - 3
Charge relating to
legal and regulatory
settlements - - - - 18 18
Pension scheme past
service and settlement
costs - - - - 4 4
Acquisition costs - - - 2 - 2
Other administrative
costs 119 77 196 17 4 217
------------------------------ ----------- ----------- ------------ ------------- ------------ ------
1,139 431 1,570 115 31 1,716
Impairment loss on - - - - - -
trade receivables
------------------------------ ----------- ----------- ------------ ------------- ------------ ------
1,139 431 1,570 115 31 1,716
============================== =========== =========== ============ ============= ============ ======
7. Acquisition, disposal and integration costs, and Exceptional items
Acquisition, disposal and integration costs comprise:
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2020 2019 2019
GBPm GBPm GBPm
-------------------------------------------- ----------- ----------- -------------
ICAP integration costs
- Employee related costs - 9 16
- Share-based payment charge/(credit) - 2 (1)
- Premises, equipment and other intangible - 3 -
assets
- Amortisation of other intangible
assets - 1 4
- Other administrative costs - 5 15
-------------------------------------------- ----------- ----------- -------------
- 20 34
Acquisition and disposal costs
- Acquisition costs 1 2 6
- Amortisation of intangible assets
arising on consolidation 20 21 42
- Impairment of intangible assets
arising on consolidation 21 - 24
- Adjustments to deferred consideration 1 2 6
- Adjustments to provisions and contingent
liabilities acquired - - 3
-------------------------------------------- ----------- ----------- -------------
43 45 115
Taxation - (8) (15)
-------------------------------------------- ----------- ----------- -------------
43 37 100
============================================ =========== =========== =============
Exceptional items comprise:
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2020 2019 2019
GBPm GBPm GBPm
----------------------------------------------- ----------- ----------- -------------
Exceptional items
- Charge relating to business reorganisation 13 4 7
- Pension scheme past service and
settlement costs - - 4
- Charge relating to employee long-term
benefits - - 1
- Charge relating to legal costs 2 - 1
- Charge relating to legal and regulatory
settlements - 2 18
15 6 31
- Employment related legal settlement
receipt - - (9)
----------------------------------------------- ----------- ----------- -------------
15 6 22
Taxation (1) (1) -
----------------------------------------------- ----------- ----------- -------------
14 5 22
=============================================== =========== =========== =============
8. Other operating income
Other operating income comprises:
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2020 2019 2019
GBPm GBPm GBPm
------------------------------------- ----------- ----------- -------------
Business relocation grants 1 2 3
Employee related insurance receipts 1 1 2
Management fees from associates 1 1 1
Other receipts 3 4 10
6 8 16
===================================== =========== =========== =============
9. Finance income
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2020 2019 2019
GBPm GBPm GBPm
---------------------------------------- ----------- ----------- -------------
Interest receivable and similar income 2 2 5
Interest receivable on finance lease
receivables - 1 1
2 3 6
======================================== =========== =========== =============
10. Finance costs
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2020 2019 2019
GBPm GBPm GBPm
--------------------------------------- ----------- ----------- -------------
Interest and fees payable on bank
facilities 1 2 3
Interest payable on Sterling Notes
June 2019 - 2 2
Interest payable on Sterling Notes
January 2024 11 12 24
Interest payable on Sterling Notes
May 2026 7 1 8
Other interest payable - - 1
Amortisation of debt issue and bank
facility costs 1 1 2
--------------------------------------- ----------- ----------- -------------
Borrowing costs 20 18 40
Interest payable on lease liabilities 5 6 12
Premium on repurchase of Sterling
Notes January 2024 - 3 3
--------------------------------------- ----------- ----------- -------------
25 27 55
======================================= =========== =========== =============
11. Earnings per share
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2020 2019 2019
---------------------- ----------- ----------- -------------
Basic - underlying 19.9p 19.3p 33.8p
Diluted - underlying 19.7p 19.1p 33.5p
Basic 9.7p 11.8p 12.0p
Diluted 9.6p 11.7p 11.9p
---------------------- ----------- ----------- -------------
The calculation of basic and diluted earnings per share is based
on the following number of shares:
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2020 2019 2019
No. (m) No. (m) No. (m)
--------------------------------- ----------- ----------- -------------
Basic weighted average shares 557.3 560.0 559.4
Contingently issuable shares 5.7 5.7 4.2
--------------------------------- ----------- ----------- -------------
Diluted weighted average shares 563.0 565.7 563.6
================================= =========== =========== =============
The earnings used in the calculation of underlying, basic and
diluted earnings per share are set out below:
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2020 2019 2019
GBPm GBPm GBPm
--------------------------------------- ----------- ----------- -------------
Earnings for the period 55 67 68
Non-controlling interests (1) (1) (1)
--------------------------------------- ----------- ----------- -------------
Earnings 54 66 67
Acquisition, disposal and integration
costs (Note 7) 43 45 115
Exceptional items (Note 7) 15 6 22
Taxation (1) (9) (15)
--------------------------------------- ----------- ----------- -------------
Underlying earnings 111 108 189
======================================= =========== =========== =============
12. Dividends
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2020 2019 2019
GBPm GBPm GBPm
------------------------------------- ----------- ----------- -------------
Amounts recognised as distributions
to
equity holders in the period:
Final dividend for the year ended
31 December 2019
of 11.25p per share 63 - -
Interim dividend for the year ended
31 December 2019
of 5.6p per share - - 31
Final dividend for the year ended
31 December 2018
of 11.25p per share - 63 63
63 63 94
===================================== =========== =========== =============
An interim dividend of 5.6p per share will be paid on 6 November
2020 to all shareholders on the Register of Members on 2 October
2020.
As at 30 June 2020 the TP ICAP plc Employee Benefit Trust held
6,624,662 ordinary shares (31 December 2019 and 30 June 2019:
4,535,504 ordinary shares) and has waived its rights to
dividends.
13. Intangible assets arising on consolidation
Goodwill Other Total
GBPm GBPm GBPm
--------------------------------------- --------- ------ ------
As at 1 January 2020 993 518 1,511
Amortisation of acquisition related
intangibles - (20) (20)
Impairment of acquisition related
intangibles ( 21 ) - (21)
Effect of movements in exchange rates 20 15 35
--------------------------------------- --------- ------ ------
As at 30 June 2020 992 513 1,505
======================================= ========= ====== ======
Other intangible assets at 30 June 2020 represent customer
relationships of GBP505m (31 December 2019: GBP506m), business
brands and trademarks of GBP7m (31 December 2019: GBP10m), and
other intangibles of GBP1m (31 December 2019: GBP2m) that arise
through business combinations. Customer relationships are being
amortised between 10 and 20 years.
Goodwill arising through business combinations is allocated to
groups of individual cash-generating units ('CGUs'), reflecting the
lowest level at which the Group monitors and tests goodwill for
impairment purposes. The CGU groupings are as follows:
30 June 31 December
2020 2019
GBPm GBPm
---------------------------- -------- ------------
CGU
EMEA 662 663
Americas 280 262
Asia Pacific 50 68
----------------------------- -------- ------------
Goodwill allocated to CGUs 992 993
============================= ======== ============
During the period the Group has undertaken an impairment
assessment of its CGUs to which goodwill has been allocated,
triggered as a result of changes in expected CGU cash flows.
Determining whether goodwill is impaired requires an estimation of
the recoverable amount of each group of CGUs. The recoverable
amount is the higher of its value in use ('VIU') or its fair value
less cost of disposal ('FVLCD'). VIU is a pre-tax valuation, using
pre-tax cash flows and pre-tax discount rates which is compared to
the pre-tax carrying value of the CGU, whereas FVLCD is a post-tax
valuation, using post-tax cash flows, post-tax discount rates and
other post-tax observable valuation inputs, which is compared to a
post-tax carrying value of the CGU. The CGU's recoverable amount is
compared to its carrying value to determine if an impairment is
required.
As at 30 June 2020 the recoverable amount for each CGU has been
based on their VIU. The key assumptions for the VIU calculations
are those regarding expected cash flows arising in future periods,
regional growth rates and the discount rates. Future projections
are based on the most recent financial projections considered by
the Board which are used to project pre-tax cash flows for the next
five years. After this period a steady state cash flow is used to
derive a terminal value for the CGU. Growth rates on underlying
revenues were 1.4% (2019: 2.1%) for EMEA, 1.1% (2019: 1.6%) for
Americas and 2.0% (2019: 1.2%) for Asia Pacific over the five year
projected period, with pre-tax discount rates of 10.6% (2019:
11.0%) for EMEA, 13.2% (2019: 13.6%) for Americas and 11.6% (2019:
11.6%) for Asia Pacific. As a result, the recoverable amount for
the Asia Pacific CGU was estimated to be lower than its carrying
value by GBP21m and has been impaired by this amount.
As at 30 June 2020 the Asia Pacific CGU remains sensitive to
reasonably possible changes in the VIU assumptions. Further
impairment of the Asia Pacific CGU would be required if there are
changes in the applicable assumptions. A reduction in the growth
rate over the period by 0.5% would increase the impairment charge
by GBP24m and a 1% increase in the discount rate would increase the
charge by GBP9m. The impact on future cash flows resulting from
falling growth rates does not reflect any management actions that
would be taken under such circumstances.
14. Right-of-use assets
Land and Furniture, Total
buildings fixtures,
equipment
and motor
vehicles
GBPm GBPm GBPm
--------------------------------------- ----------- ----------- ------
As at 1 January 2020 90 1 91
Additions 76 - 76
Modifications 8 - 8
Capitalised costs (2) - (2)
Depreciation (12) - (12)
Impairment (1) - (1)
Effect of movements in exchange rates 4 - 4
--------------------------------------- ----------- ----------- ------
As at 30 June 2020 163 1 164
======================================= =========== =========== ======
The Group leases several buildings which have an average lease
terms of 11 years (2019: 10 years).
Additions to right-of-use assets was GBP76m, GBP75m of which is
for new leases for the Group's London based headquarters and
broking operations. Under an agreement with the landlord, two
existing London property leases will be terminated once the Group
has moved its operations to several floors in the newly leased
building. The new leases commenced in January and June 2020 at a
weighted average incremental borrowing rate of 5.32% and the leased
space will be further developed during 2020 enabling the transfer
of operations during the first quarter of 2021. During the
development phase of these leased spaces the depreciation and lease
interest expense is being capitalised as a direct cost of the
leasehold improvements being undertaken. During the period to 30
June 2020 GBP3m has been capitalised.
15. Trade and other receivables
30 June 30 June 31 December
2020 2019 2019
Restated(1)
GBPm GBPm GBPm
--------------------------------------- -------- ------------- ------------
Non-current receivables
Finance lease receivables 6 7(1) 7
Other receivables 19 21 19
--------------------------------------- -------- ------------- ------------
25 28 26
======================================= ======== ============= ============
Current receivables
Settlement balances 36,373 56,369 48,295
Deposits paid for securities borrowed 831 818 652
Trade receivables 335 323 301
Finance lease receivables 1 1 1
--------------------------------------- -------- ------------- ------------
Financial assets 37,540 57,511 49,249
Other debtors 19 18 17
Prepayments 92 89 91
Accrued income 9 11 10
Corporation tax 1 2 1
Owed by associates and joint ventures 11 7 3
--------------------------------------- -------- ------------- ------------
37,672 57,638 49,371
======================================= ======== ============= ============
1. Right-of-use assets and other long term receivables as at 30
June 2019 have been restated for the adoption of IFRS 16 in
2019.
Settlement balances arise on Matched Principal brokerage whereby
securities are bought from one counterparty and simultaneously sold
to another counterparty. Settlement of such transactions is
primarily on a delivery vs payment basis ('DVP') and typically take
place within a few business days of the transaction date according
to the relevant market rules and conventions. The amounts due from
and payable to counterparties in respect of as yet unsettled
Matched Principal transactions are shown gross, except where a
netting agreement, which is legally enforceable at all times,
exists and the asset and liability are either settled net or
simultaneously. The above analysis reflects only the receivable
side of such transactions. Corresponding payable amounts are shown
in 'Trade and other payables'. The Group measures loss allowances
for settlement balances under the general approach reflecting the
probability of default based on the credit rating of the
counterparty together with an assessment of the loss, after the
sale of underlying instruments, that could arise as a result of
default. As at 30 June 2020, the provision for expected credit
losses amounted to less than GBP1m (2019: less than GBP1m).
Deposits paid for securities borrowed arise on collateralised
stock lending transactions. Such trades are complete only when both
the collateral and stock for each side of the transaction are
returned. The above analysis reflects the receivable side of such
transactions. Corresponding deposits received for securities loaned
are shown in 'Trade and other payables'. The Group measures loss
allowances for these balances under the general approach reflecting
the probability of default based on the credit rating of the
counterparty together with an assessment of the loss, after the
sale of collateral, that could arise as a result of default. As at
30 June 2020, the provision for expected credit losses amounted to
less than GBP1m (2019: less than GBP1m).
The Group measures the loss allowance for trade receivables at
an amount equal to the lifetime expected credit loss. The expected
credit losses on trade receivables are estimated using a provision
matrix by reference to past default experience of the debtor and an
analysis of the debtor's current financial position, adjusted for
factors that are specific to the debtors, general economic
conditions and an assessment of both the current as well as the
forecast direction of conditions at the reporting date.
The following table details the risk profile of trade
receivables based on the Group's provision matrix by region. As the
Group's historical credit loss experience does not show
significantly different loss patterns for different regional
customer segments, the provision for loss allowance based on past
due status is not further distinguished between the Group's
different customer base.
Less Greater
than 31-60 61-90 than
30 days days days 91 days
Not past past past past past
Trade receivables Total due due due due due
GBPm GBPm GBPm GBPm GBPm GBPm
---------------------------- ------ --------- --------- ------ ------ ---------
30 June 2020
EMEA 179 66 26 22 16 49
Americas 118 53 17 13 11 24
Asia Pacific 54 24 7 5 4 14
---------------------------- ------ --------- --------- ------ ------ ---------
Group balances outstanding 351 143 50 40 31 87
========= ========= ====== ====== =========
Lifetime ECL (16)
---------------------------- ------
335
============================ ======
31 December 2019
EMEA 161 49 34 21 15 42
Americas 104 47 17 13 7 20
Asia Pacific 48 18 8 5 3 14
---------------------------- ------ --------- --------- ------ ------ ---------
Group balances outstanding 313 114 59 39 25 76
========= ========= ====== ====== =========
Lifetime ECL ( 12)
---------------------------- ------
301
============================ ======
16. Interest bearing loans and borrowings
Current Non-current Total
30 June 2020 GBPm GBPm GBPm
----------------------------- -------- ------------ ------
Bank loans 40 - 40
Sterling Notes January 2024 10 430 440
Sterling Notes May 2026 1 249 250
----------------------------- -------- ------------ ------
51 679 730
============================= ======== ============ ======
31 December 2019
Sterling Notes January 2024 10 430 440
Sterling Notes May 2026 1 248 249
----------------------------- -------- ------------ ------
11 678 689
============================= ======== ============ ======
All amounts are stated after unamortised transaction costs.
Bank credit facilities and bank loans
The Group has a GBP270m committed revolving facility that
matures in December 2022. Facility commitment fees of 0.8% on the
undrawn balance are payable on the facility. Arrangement fees of
GBP3m are being amortised over the maturity of the facility.
As at 30 June 2020, GBP40m of the revolving credit facility was
drawn. Amounts drawn down are reported as bank loans in the above
table. Bank loans are denominated in Sterling.
Interest and facility fees of GBP1m were incurred in the six
months to 30 June 2020.
Sterling Notes: Due January 2024
In January 2017 the Group issued GBP500m unsecured Sterling
Notes due January 2024. The Notes have a fixed coupon of 5.25%
payable semi-annually, subject to compliance with the terms of the
Notes. In May 2019, the Group repurchased GBP69m of the Notes.
Accrued interest at 30 June 2020 amounted to GBP10m. Unamortised
issue costs were GBP1m.
Sterling Notes: Due May 2026
In May 2019 the Group issued GBP250m unsecured Sterling Notes
due May 2026. The Notes have a fixed coupon of 5.25% paid
semi-annually, subject to compliance with the terms of the Notes.
Accrued interest at 30 June 2020 was GBP1m. Unamortised issue costs
were GBP1m.
17. Lease liabilities
The maturity analysis of lease liabilities is as follows:
30 June 31 December
2020 2019
GBPm GBPm
------------------------------------- -------- ------------
Year 1 35 33
Year 2 34 25
Year 3 32 21
Year 4 27 20
Year 5 23 15
Onwards 164 91
-------------------------------------- -------- ------------
315 205
Less interest (99) (65)
-------------------------------------- -------- ------------
216 140
===================================== ======== ============
Included in current liabilities 22 23
Included in non-current liabilities 194 117
-------------------------------------- -------- ------------
216 140
===================================== ======== ============
18. Reconciliation of operating result to net cash from operating activities
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2020 2019 2019
GBPm GBPm GBPm
---------------------------------------------------------- ----------- ----------- -------------
Operating profit 101 107 142
Adjustments for:
- Share-based payment charge 4 5 5
- Pension scheme's administration
costs - - 4
- Depreciation of property, plant
and equipment 6 6 13
- Depreciation of right-of-use assets 12 11 21
- Amortisation of intangible assets 9 13 27
* Amortisation of intangible assets arising on
consolidation 20 21 42
* Impairment of intangible assets arising on
consolidation 21 - 24
* Loss on disposal of property, plant and equipment - - 1
1 - -
* Impairment of right-of-use assets
1 - -
* Impairment of finance lease receivables
- Remeasurement of deferred consideration 1 2 6
- Revaluation of debt instruments - 2 -
- Non-cash movement in FVTPL balances - (2) -
---------------------------------------------------------- ----------- ----------- -------------
Operating cash flows before movement
in working capital 176 165 285
Increase in trade and other receivables (17) (38) (24)
(Increase)/decrease in net settlement
and trading balances (6) (48) 8
Increase/(decrease) in trade and
other payables 12 (20) 4
Decrease in provisions (2) - (5)
Increase in non-current liabilities - - (2)
Retirement benefit scheme contributions - - (1)
---------------------------------------------------------- ----------- ----------- -------------
Cash generated from operations 163 59 265
Income taxes paid (33) (34) (64)
Interest paid (19) (21) (41)
Interest paid - finance leases (5) (6) (12)
---------------------------------------------------------- ----------- ----------- -------------
Net cash from operating activities 106 (2) 148
========================================================== =========== =========== =============
19. Analysis of net funds
1 January Cash Non-cash Exchange 30 June
2020 flow items differences 2020
GBPm GBPm GBPm GBPm GBPm
--------------------------- ---------- ------ --------- ------------- --------
Cash 678 26 - 23 727
Cash equivalents 8 (2) - - 6
Overdrafts (10) 5 - - (5)
----------------------------
Cash and cash equivalents 676 29 - 23 728
Financial investments 148 8 - 2 158
---------------------------- ---------- ------ --------- ------------- --------
Total funds 824 37 - 25 886
============================ ========== ====== ========= ============= ========
Bank loan due within ( 40 ( 40
one year - )(1) - - )
Sterling Notes January
2024 (440) 11(1) (11) - (440)
Sterling Notes May
2026 (249) 7(1) (8) - (250)
Lease liabilities (140) 21(1) (90) (7) (216)
---------------------------- ---------- ------ --------- ------------- --------
(829) (1) (109) (7) (946)
=========================== ========== ====== ========= ============= ========
Total net funds (5) 36 (109) 18 (60)
============================ ========== ====== ========= ============= ========
1. Principal changes plus payment of interest and debt issue costs where applicable
Cash and cash equivalents comprise cash at bank and other short
term highly liquid investments with an original maturity of three
months or less. Cash at bank earns interest at floating rates based
on daily bank deposit rates. Short term deposits are made for
varying periods of between one day and three months depending on
the immediate cash requirements of the Group, and earn interest at
the respective short term deposit rates.
Financial investments comprise government debt securities, term
deposits and restricted funds held with banks and clearing
organisations.
Non-cash items represent additions to lease liabilities, accrued
interest and the amortisation of debt issue.
20. Provisions
Property Re-structuring Legal Total
and other
GBPm GBPm GBPm GBPm
------------------------------------- --------- --------------- ----------- ------
At 1 January 2020 6 8 33 47
Charge to income statement - - 1 1
Utilisation of provisions (1) (2) - (3)
Effect of movements in exchange
rates - - 1 1
------------------------------------- --------- --------------- ----------- ------
At 30 June 2020 5 6 35 46
===================================== ========= =============== =========== ======
Included in current liabilities 20
Included in non-current liabilities 26
------------------------------------- --------- --------------- ----------- ------
46
===================================== ========= =============== =========== ======
Property provisions outstanding as at 30 June 2020 relate to
provisions in respect of building dilapidations, represents the
estimated cost of making good dilapidations and disrepair on
various leasehold buildings. Property leases expire in one to 14
years.
Restructuring provisions outstanding as at 30 June 2020 relate
to termination and other employee related costs. The movements
during the period reflects the actions taken under the Group's
integration of ICAP and other business reorganisations. It is
expected that these obligations will continue to be discharged
during 2020.
Legal and other provisions include provisions for legal claims
brought against subsidiaries of the Group together with provisions
against obligations for certain long-term employee benefits and
non-property related onerous contracts. At present the timing and
amount of any payments are uncertain and provisions are subject to
regular review. It is expected that the obligations will be
discharged over the next 24 years.
European Commission Yen Libor
In February 2015 the European Commission imposed a fine of
GBP13m (EUR15m) on NEX International Limited (formerly ICAP plc),
ICAP Management Services Limited and ICAP New Zealand Limited for
alleged competition violations in relation to the involvement of
certain of ICAP's brokers in the attempted manipulation of Yen
LIBOR by bank traders between October 2006 and January 2011. While
this matter relates to alleged conduct violations prior to
completion of the Group's acquisition of the ICAP global broking
business, it is noted that the fine imposed by the European
Commission has been appealed, seeking a full annulment of the
Commission's decision. In the event that the Commission imposes a
fine in excess of EUR15m such excess will be borne by NEX Group plc
('NEX'). In November 2017, the European General Court granted a
partial annulment of the Commission's findings. The Commission
appealed this decision in February 2018 and the Group served its
reply during April 2018. A decision from the Courts of Justice of
the European Union was received on 10 July 2019 which determined
that the decision of the European Commission in relation to the
competition violations still stands but the decision of the
European Commission imposing the fine was annulled. The European
Commission is likely to adopt new articles in relation to a fine
however and the Group has retained a EUR10m (GBP9m) provision in
its accounts in connection with this matter.
IFUS
On 11 May 2020, Tullett Prebon (Europe) Ltd ("TPE") received
notice of the instigation of disciplinary proceedings by ICE
Futures US ("IFUS") relating to activities undertaken between March
2018 and September 2019. TPE is currently in discussion with IFUS
concerning the violations with the prospect of settling the matter
and agreeing the scope of remediation.
21. Contingent liabilities
Bank Bill Swap Reference Rate case
On 16 August 2016, a litigation was filed in the United States
District Court for the Southern District of New York naming Tullett
Prebon plc, ICAP plc, ICAP Australia Pty LTD and Tullett Prebon
(Australia) Pty. Limited as defendants together with various Bank
Bill Swap Reference Rate ('BBSW') setting banks. The complaint
alleges collusion by the defendants to fix BBSW-based derivatives
prices through manipulative trading during the fixing window and
false BBSW rate submissions. On 26 November 2018, the Court
dismissed all of the claims against the TP ICAP defendants and
certain other defendants. On 28 January 2019 the Court ordered that
a stipulation signed by the Plaintiffs and the TP ICAP defendants
meant that the TP ICAP defendants were not required to respond to
any Proposed Second Amended Class Action Complaint ('PSAC') that
the Plaintiffs were seeking to file. On 3 April 2019 the Plaintiffs
filed a PSAC, however the TP ICAP defendants have no obligation to
respond. The Plaintiffs have reserved the right to appeal the
dismissal of the TP ICAP defendants but have not as yet done so. It
is not possible to predict the ultimate outcome of the litigation
or to provide an estimate of any potential financial impact.
Labour claims - ICAP Brazil
ICAP do Brasil Corretora De Títulos e Varoles Mobiliários Ltda
('ICAP Brazil') is a defendant in 12 (31 December 2019: 13) pending
lawsuits filed in the Brazilian Labour Court by persons formerly
associated with ICAP Brazil seeking damages under various statutory
labour rights accorded to employees and in relation to various
other claims including wrongful termination, breach of contract and
harassment (together the 'Labour claims'). The Group estimates the
maximum potential aggregate exposure in relation to the Labour
claims, including any potential social security tax liability, to
be BRL 60m (GBP9m) (31 December 2019: BRL 49m (GBP11m)). The Group
is the beneficiary of an indemnity from NEX in relation to any
outflow in respect of materially all of these Labour claims insofar
as they relate to periods prior to completion of the Group's
acquisition of ICAP. The Company intends to contest liability in
each of these matters and to vigorously defend itself. It is not
possible to predict the ultimate outcome of these actions.
Flow case - Tullett Prebon Brazil
In December 2012, Flow Participações Ltda and Brasil Plural
Corretora de Câmbio, Títulos e Valores ('Flow') initiated a lawsuit
against Tullett Prebon Brasil S.A. Corretora de Valores e Câmbio
and Tullett Prebon Holdings do Brasil Ltda alleging that the
defendants have committed a series of unfair competition
misconducts, such as the recruitment of Flow's former employees,
the illegal obtainment and use of systems and software developed by
the plaintiffs, as well as the transfer of technology and
confidential information from Flow and the collusion to do so in
order to increase profits from economic activities. The amount
currently claimed is BRL 253m (GBP38m) (31 December 2019: BRL 243m
(GBP44m)). The Group intends to vigorously defend itself but there
is no certainty as to the outcome of these claims. The case is
currently in an early evidentiary phase.
LIBOR Class actions
(i) Stichting LIBOR Class Action
On 15 December 2017, the Stichting Elco Foundation, a
Netherlands-based claim foundation, filed a writ initiating
litigation in the Dutch court in Amsterdam on behalf of
institutional investors against ICAP Europe Limited ('IEL'), ICAP
plc, Cooperative Rabobank U.A., UBS AG, UBS Securities Japan Co.
Ltd, Lloyds Banking Group plc, and Lloyds Bank plc. The litigation
alleges manipulation by the defendants of the JPY LIBOR, GBP LIBOR,
CHF LIBOR, USD LIBOR, EURIBOR, TIBOR, SOR, BBSW and HIBOR benchmark
rates, and seeks a declaratory judgment that the defendants acted
unlawfully and conspired to engage in improper manipulation of
benchmarks. If the plaintiffs succeed in the action, the defendants
would be responsible for paying costs of the litigation, but each
allegedly impacted investor would need to prove its own actual
damages. It is not possible at this time to determine the final
outcome of this litigation, but IEL has factual and legal defences
to the claims and intends to defend the lawsuit vigorously. A
hearing took place on 18 June 2019 on defendants motions to dismiss
the proceedings. On 14 August 2019 the Dutch Court issued a ruling
dismissing ICAP plc from the case entirely but keeping certain
claims against IEL relating solely to JPY LIBOR. The Group is
covered by an indemnity from NEX in relation to any outflow in
respect of the ICAP entities with regard to these matters. It is
not possible to estimate any potential financial impact in respect
of this matter at this time.
(ii) Swiss LIBOR Class Action
On 4 December 2017, a class of plaintiffs filed a Second Amended
Class Action Complaint in the matter of Sonterra Capital Master
Fund Ltd. et al. v. Credit Suisse Group AG et al. naming as
defendants, among others, TP ICAP plc, Tullett Prebon Americas
Corp., Tullett Prebon (USA) Inc., Tullett Prebon Financial Services
LLC, Tullett Prebon (Europe) Limited, Cosmorex AG, ICAP Europe
Limited, and ICAP Securities USA LLC (together, the 'Companies').
The Second Amended Complaint generally alleges that the Companies
conspired with certain bank customers to manipulate Swiss Franc
LIBOR and prices of Swiss Franc LIBOR based derivatives by
disseminating false pricing information in false run-throughs and
false prices published on screens viewed by customers in violation
of the Sherman Act (anti-trust) and RICO. On 16 September 2019, the
Court granted the Companies' motions to dismiss in their entirety.
The plaintiffs have appealed the dismissal to the United States
Court of Appeals for the Second Circuit. The Companies intend to
contest liability in the matter and to vigorously defend
themselves. It is not possible to predict the ultimate outcome of
this action or to provide an estimate of any potential financial
impact.
(iii) Yen LIBOR Class Actions
In April 2013, ICAP plc was added as a defendant to an existing
civil litigation originally filed in April 2012, Laydon v. Mizuho
Bank, Ltd, against certain Yen LIBOR and Euroyen TIBOR panel banks
alleging purported manipulation of the Yen LIBOR and Euroyen TIBOR
benchmark interest rates. The Court dismissed the plaintiff's
antitrust and unjust enrichment claims, but upheld the plaintiff's
claim for purported manipulation under the Commodity Exchange Act.
ICAP plc and certain other foreign defendants were dismissed in
March 2015 for lack of personal jurisdiction. The Court permitted
plaintiffs to file an amended complaint whereby they added new
defendants to the action including ICAP Europe Limited and Tullett
Prebon plc. On 10 March 2017, both ICAP Europe Limited and Tullett
Prebon plc were dismissed for lack of personal jurisdiction. The
Plaintiffs have reserved the right to appeal the dismissal of the
TP ICAP defendants but have not as yet done so. It is not possible
to predict the ultimate outcome of the litigation or to provide an
estimate of any potential financial impact. The
Group is covered by an indemnity from NEX in relation to any
outflow in respect of ICAP Europe Limited with regard to these
matters.
Other plaintiffs filed a related complaint, Sonterra Capital
Master Fund, Ltd. v. UBS AG, which included ICAP plc, ICAP Europe
Limited and Tullett Prebon plc as defendants, asserting a cause of
action for antitrust injury only as a result of the purported
manipulation of Yen LIBOR and Euroyen TIBOR by panel banks and
brokers. Defendants filed motions to dismiss for lack of
jurisdiction and failure to state a claim. On 10 March 2017, the
Court issued an order dismissing the entirety of the Sonterra case
on the grounds that the plaintiffs lacked antitrust standing.
Plaintiffs appealed the dismissal, which was then stayed to
accommodate new settlements reached between the plaintiffs and some
of the defendants. The briefing on the appeal was completed on 28
January 2019 and oral argument was heard on February 5, 2020. On
April 1, 2020, the Second Circuit Court of appeals reversed and
remanded the dismissal. The Company intends to renew its motion to
dismiss on grounds that were not reached in the original decision
to dismiss including but not limited to lack of personal
jurisdiction. It is not possible to predict the ultimate outcome of
the litigation or to provide an estimate of any potential financial
impact. The Group is covered by an indemnity from NEX in relation
to any outflow in respect of ICAP Europe Limited with regard to
these matters.
ICAP Securities Limited, Frankfurt branch - Frankfurt Attorney
General administrative proceedings
On 19 December 2018, the Attorney General's office of Frankfurt
notified ICAP Securities Limited (Frankfurt Branch) ('ISL'), that
administrative offence proceedings have been initiated against ISL
in connection with criminal investigations into two former
employees and a former Director of ISL suspected of aiding and
abetting tax evasion for the benefit of a third party between 2007
and 2008. The Attorney General's office is considering imposing a
corporate administrative fine against ISL or confiscating the
earnings that ISL derived from the underlying alleged criminal
conduct by the former employees and former Director. Not all
details of the alleged wrongdoing or of the case against ISL are
yet available. External lawyers have been instructed to represent
ISL and to seek further access to the Attorney General's case file.
As a result, it is not possible at this stage to provide a reliable
estimate of any potential financial impact on the Group.
ICAP Securities Limited and The Link Asset and Securities
Company Limited - Proceedings by the Cologne Public Prosecutor
On 11 May 2020, TP ICAP learned that proceedings have been
commenced by the Cologne Public prosecutor against ICAP Securities
Limited ('ISL') and The Link Asset and Securities Company Ltd
('Link') in connection with criminal investigations into
individuals suspected of aiding and abetting tax evasion between
2004 and 2012. It is possible that the Cologne Public Prosecutor
may seek to impose an administrative fine against ISL or Link or
confiscate the earnings that ISL or Link allegedly derived from the
underlying alleged criminal conduct by the relevant individuals.
ISL and Link have appointed external lawyers to advise them. Since
the proceedings are at an early stage, details of the alleged
wrongdoing or case against ISL and Link are not yet available, and
it is not possible at present to provide a reliable estimate of any
potential financial impact on the Group.
Autorité des Marchés Financiers (' AMF')
In August 2019, Tullett Prebon (Europe) Limited was notified
that the AMF was investigating alleged facilitation of market abuse
conduct concerning historic transactions with a client undertaken
in 2015 on Eurex. In June 2020, the AMF initiated enforcement
proceedings before the Enforcement Committee of the AMF which is at
an early stage of the process.
General note
The Group operates in a wide variety of jurisdictions around the
world and uncertainties therefore exist with respect to the
interpretation of complex regulatory, corporate and tax laws and
practices of those territories. Accordingly, and as part of its
normal course of business, the Group is required to provide
information to various authorities as part of informal and formal
enquiries or market review.
From time to time the Group's subsidiaries are engaged in
litigation in relation to a variety of matters. The Group's
reputation may also be damaged by any involvement or the
involvement of any of its employees or former employees in any
regulatory investigation and by any allegations or findings, even
where the associated fine or penalty is not material.
Save as outlined above in respect of legal matters or disputes
for which a provision has not been made, notwithstanding the
uncertainties that are inherent in the outcome of such matters,
there are no individual matters which are considered to pose a
significant risk of material adverse financial impact on the
Group's results or net assets.
The Group operates in a wide variety of jurisdictions around the
world and uncertainties therefore exist with respect to the
interpretation of complex tax laws and practices of those
territories. The Group establishes provisions for taxes other than
current and deferred income taxes, based upon various factors which
are continually evaluated, if there is a present obligation as a
result of past events, it is probable that an outflow of resources
embodying economic benefits will be required to settle the
obligation and a reliable estimate of the amount of the obligation
can be made.
In the normal course of business, certain of the Group's
subsidiaries enter into guarantees and indemnities to cover trading
arrangements and/or the use of third party services or
software.
22. Allocation of other comprehensive income within Equity
Equity attributable to equity
holders of the parent
Re- Hedging Non-
valuation and Own Retained controlling Total
reserve translation shares earnings Total interests equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
----------------------------------- ---------- ------------ ------- ---------- ------ ------------- --------
Six months ended 30 June
2020
(unaudited)
----------------------------------- ---------- ------------ ------- ---------- ------ ------------- --------
Equity investments at FVTOCI
- net change in fair value (1) - - - (1) - (1)
----------------------------------- ---------- ------------ ------- ---------- ------ ------------- --------
Effect of changes in exchange
rates on translation of
foreign operations - 64 - - 64 2 66
----------------------------------- ---------- ------------ ------- ---------- ------ ------------- --------
Taxation on components
of
other comprehensive income - 1 - - 1 - 1
----------------------------------- ---------- ------------ ------- ---------- ------ ------------- --------
Other comprehensive income/(loss)
for the period (1) 65 - - 64 2 66
----------------------------------- ---------- ------------ ------- ---------- ------ ------------- --------
Six months ended 30 June
2019
(unaudited)
----------------------------------- ---------- ------------ ------- ---------- ------ ------------- --------
Equity investments at FVTOCI
- net change in fair value 1 - - - 1 - 1
----------------------------------- ---------- ------------ ------- ---------- ------ ------------- --------
Effect of changes in exchange
rates on translation of
foreign operations - 3 - - 3 - 3
----------------------------------- ---------- ------------ ------- ---------- ------ ------------- --------
Remeasurement of the defined
benefit pension scheme - - - (55) (55) - (55)
----------------------------------- ---------- ------------ ------- ---------- ------ ------------- --------
Taxation on components
of
other comprehensive income - - - 19 19 - 19
----------------------------------- ---------- ------------ ------- ---------- ------ ------------- --------
Other comprehensive income/(loss)
for the period 1 3 - (36) (32) - (32)
----------------------------------- ---------- ------------ ------- ---------- ------ ------------- --------
Year ended 31 December
2019
----------------------------------- ---------- ------------ ------- ---------- ------ ------------- --------
Equity investments at FVTOCI
- net change in fair value 1 - - - 1 - 1
----------------------------------- ---------- ------------ ------- ---------- ------ ------------- --------
Effect of changes in exchange
rates on translation of
foreign operations - (43) - - (43) (1) (44)
----------------------------------- ---------- ------------ ------- ---------- ------ ------------- --------
Remeasurement of the defined
benefit pension scheme - - - (52) (52) - (52)
----------------------------------- ---------- ------------ ------- ---------- ------ ------------- --------
Taxation on components
of
other comprehensive income - - - 19 19 - 19
----------------------------------- ---------- ------------ ------- ---------- ------ ------------- --------
Other comprehensive income/(loss)
for the year 1 (43) - (33) (75) (1) (76)
=================================== ========== ============ ======= ========== ====== ============= ========
23. Financial instruments
(a) Categorisation of financial assets and liabilities
FVTOCI FVTOCI Total
debt instruments equity Amortised Mandatorily carrying
Financial Assets instruments cost at FVTPL amount
30 June 2020 (unaudited) GBPm GBPm GBPm GBPm GBPm
----------------------------- ------------------ ------------- ------------ -------------- ----------
Non-current financial
assets
measured at fair
value
Equity securities - 15 - - 15
Corporate debt securities 2 - - - 2
Non-current financial
assets not measured
at fair value
Finance lease receivables - - 6 - 6
----------------------------- ------------------ ------------- ------------ -------------- ----------
2 15 6 - 23
============================= ================== ============= ============ ============== ==========
Current financial
assets
measured at fair
value
Government debt securities 86 - - - 86
Current financial
assets
Not measured at fair
value
Term deposits - - 61 - 61
Restricted funds - - 11 - 11
Trade receivables - - 335 - 335
Settlement balances
receivable - - 36,373 - 36,373
Deposits paid for
securities borrowed - - 831 - 831
Finance lease receivables - - 1 - 1
Cash and cash equivalents - - 728 - 728
----------------------------- ------------------ ------------- ------------ -------------- ----------
86 - 38,340 - 38,426
============================= ================== ============= ============ ============== ==========
Total financial assets 88 15 38,346 - 38,449
============================= ================== ============= ============ ============== ==========
Mandatorily at FVTPL Other financial Total
liabilities carrying
Financial Liabilities amount
----------------------------- --------------------------------- ----------------------------
Non-current Current Non-current Current
30 June 2020 (unaudited) GBPm GBPm GBPm GBPm GBPm
----------------------------- ------------------ ------------- ------------ -------------- ----------
Financial liabilities
measured at fair
value
Deferred consideration 13 26 - - 39
13 26 - - 39
============================= ================== ============= ============ ============== ==========
Financial liabilities
Not measured at fair
value
Bank loan - - - 40 40
Sterling Notes January
2024 - - 430 10 440
Sterling Notes May
2026 - - 249 1 250
Trade payables - - - 20 20
Settlement balances
payable - - - 36,352 36,352
Deposits received
for
securities loaned - - - 826 826
----------------------------- ------------------ ------------- ------------ -------------- ----------
- - 679 37,249 37,928
============================= ================== ============= ============ ============== ==========
Total financial liabilities 13 26 679 37,249 37,967
============================= ================== ============= ============ ============== ==========
(b) Maturity profile of financial liabilities
As at 30 June 2020, the contractual maturities, including future
interest obligations, of the Group's financial liabilities were as
follows:
Contractual maturities Between Between Total
of financial and Less than 3 and 12 1 and 5 Over contractual
lease liabilities 3 months months years 5 years cash flows
30 June 2020 (unaudited) GBPm GBPm GBPm GBPm GBPm
-------------------------- ------------ ---------- --------- ---------- -------------
Settlement balances 36,351 1 - - 36,352
Deposits received
for
securities loaned 826 - - - 826
Trade payables 20 - - - 20
Bank loan 40 - - - 40
Sterling Notes January
2024 11 11 499 - 521
Sterling Notes May
2026 - 13 53 263 329
Lease liabilities 5 30 116 164 315
Deferred consideration 16 10 8 5 39
-------------------------- ------------ ---------- --------- ---------- -------------
37,269 65 676 432 38,442
========================== ============ ========== ========= ========== =============
(c) Fair value measurements recognised in the statement of financial position
The following table provides an analysis of the financial
instruments that are measured subsequent to initial recognition at
fair value, grouped into Levels 1 to 3 based on the degree to which
the fair value is observable:
Ø Level 1 fair value measurements are those derived from quoted
prices (unadjusted) in active markets for identical assets or
liabilities;
Ø Level 2 fair value measurements are those derived from inputs
other than quoted prices included within Level 1 that are
observable for the asset or liability, either directly (i.e. as
prices) or indirectly (i.e. derived from prices); and
Ø Level 3 fair value measurements are those derived from
valuation techniques that include inputs for the asset or liability
that are not based on observable market data (unobservable
inputs).
Level 1 Level 2 Level 3 Total
As at 30 June 2020 (unaudited) GBPm GBPm GBPm GBPm
-------------------------------- -------- -------- -------- ------
Financial assets
measured at fair value
Equity instruments - 8 7 15
Corporate debt securities - - 2 2
Government debt securities 86 - - 86
Derivative instruments - - - -
Financial liabilities
measured at fair value
Deferred consideration - 15 24 39
Derivative instruments - - - -
-------------------------------- -------- -------- -------- ------
86 23 33 142
================================ ======== ======== ======== ======
There were no transfers between Level 1 and 2 during the
period.
Reconciliation of Level 3 fair value movements:
Equity Debt securities Deferred
instruments (at FVTOCI) consideration(at
(at FVTOCI) FVTPL) Total
GBPm GBPm GBPm GBPm
--------------------------------- ------------- ---------------- ------------------ ------
Balance as at 1 January 2020 7 2 (25) (16)
Net change in fair value
- included in 'administrative
expenses' - - (2) (2)
Amounts settled during the
period - - 4 4
Effect of movements in exchange
rates - - (1) (1)
--------------------------------- ------------- ---------------- ------------------ ------
Balance as at 30 June 2020 7 2 (24) (15)
================================= ============= ================ ================== ======
24. Events after the balance sheet date
Louis Capital Markets and MidCap Partners
In July 2020 the Group announced the acquisition of Louis
Capital Markets and MidCap Partners (collectively 'Louis Capital'),
a private brokerage group specialising in equities and fixed
income, primarily based in Europe.
Under the agreement, initial cash consideration is estimated to
be US$21m (GBP16m). Consideration is subject to adjustment based on
the level of regulatory capital, working capital and net cash at
completion, estimated to be an offset of US$1m (GBP1m). Deferred
non-contingent consideration with an estimated fair value of US$5m
(GBP4m) is payable over two years and deferred contingent
consideration, with an estimated fair value of US$11m (GBP9m), is
payable dependent upon the performance of the business over five
years. The gross payment of deferred contingent consideration is
capped at US$17m (GBP13m).
The initial fair value of the net assets acquired is estimated
to be US$5m (GBP4m). The estimated excess purchase price of US$31m
(GBP24m) will be allocated to goodwill and other acquisition
related intangibles during the measurement period commencing in
2020 with goodwill estimated to be US$19m (GBP14m) and US$12m
(GBP10m) relating to other acquisition related intangibles.
Acquisition costs, included in administrative expenses, amounted to
GBP1m in the period to 30 June 2020 and GBP1m was incurred in
2019.
Had Louis Capital been acquired on 1 January 2020 the Group's
underlying operating profit would have been GBP2m higher and its
underlying earnings GBP1m higher.
Statement of Directors' Responsibilities
Each of the Directors who are Directors as at the date of this
Statement of Directors' Responsibilities confirm to the best of
their knowledge that:
-- the condensed set of financial statements has been prepared
in accordance with IAS 34 'Interim Financial Reporting' as adopted
by the European Union;
-- the condensed set of financial statements gives a true and
fair view of the assets, liabilities, financial position and profit
or loss of the Group as required by DTR 4.2.4R; and
-- the Interim Management Report herein includes a fair review
of the information required by DTR 4.2.7R and DTR 4.2.8R.
The Directors are responsible for the maintenance and integrity
of the corporate and financial information included on the
Company's website. Legislation in the United Kingdom governing the
preparation and dissemination of financial information differs from
legislation in other jurisdictions.
By order of the Board
Robin Stewart
Chief Financial Officer
7 August 2020
Independent Review Report to TP ICAP plc
We have been engaged by the Company to review the condensed set
of financial statements in the half yearly financial report for the
six months ended 30 June 2020 which comprises the Condensed
Consolidated Income Statement, the Condensed Consolidated Statement
of Comprehensive Income, the Condensed Consolidated Balance Sheet,
the Condensed Consolidated Statement of Changes in Equity, the
Condensed Consolidated Cash Flow Statement and related Notes 1 to
24. We have read the other information contained in the half yearly
financial report and considered whether it contains any apparent
misstatements or material inconsistencies with the information in
the condensed set of financial statements.
Directors' responsibilities
The half yearly financial report is the responsibility of, and
has been approved by, the Directors. The Directors are responsible
for preparing the half yearly financial report in accordance with
the Disclosure Guidance and Transparency Rules of the United
Kingdom's Financial Conduct Authority.
As disclosed in Note 1, the annual financial statements of the
Group are prepared in accordance with IFRSs as adopted by the
European Union. The condensed set of financial statements included
in this half yearly financial report has been prepared in
accordance with International Accounting Standard 34 'Interim
Financial Reporting', as adopted by the European Union.
Our responsibility
Our responsibility is to express to the Company a conclusion on
the condensed set of financial statements in the half yearly
financial report based on our review.
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410 'Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity' issued by the Financial Reporting Council for use in
the United Kingdom. A review of interim financial information
consists of making inquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures. A review is substantially less in scope than an
audit conducted in accordance with International Standards on
Auditing (UK) and consequently does not enable us to obtain
assurance that we would become aware of all significant matters
that might be identified in an audit. Accordingly, we do not
express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half yearly financial report for the six months ended 30
June 2020 is not prepared, in all material respects, in accordance
with International Accounting Standard 34 as adopted by the
European Union and the Disclosure Guidance and Transparency Rules
of the United Kingdom's Financial Conduct Authority.
Use of our report
This report is made solely to the Company in accordance with
International Standard on Review Engagements (UK and Ireland) 2410
'Review of Interim Financial Information Performed by the
Independent Auditor of the Entity' issued by the Financial
Reporting Council. Our work has been undertaken so that we might
state to the Company those matters we are required to state to it
in an independent review report and for no other purpose. To the
fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the Company, for our review
work, for this report, or for the conclusions we have formed.
Deloitte LLP
Statutory Auditor
London, UK
7 August 2020
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR PFMTTMTJMTTM
(END) Dow Jones Newswires
August 07, 2020 02:00 ET (06:00 GMT)
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