TIDMTCAP
RNS Number : 5898E
TP ICAP PLC
09 November 2020
TP ICAP PLC
9 November 2020
TP ICAP plc (the "Group")
Trading Update for the nine months and third quarter ended 30
September 2020 (the "Period")
TP ICAP issues a scheduled trading update in relation to the
Period. Commentary on year-on-year performance is on a reported and
constant currency basis.
Nicolas Breteau, Chief Executive Officer said:
"Over a nine-month period of substantial economic dislocation,
TP ICAP's business has been resilient. We have implemented a
targeted cost efficiency programme that will provide further
support to our earnings power in an operating environment that
remains uncertain."
"TP ICAP has a clear strategy of electronification, liquidity
aggregation and diversification, on which we have made meaningful
progress over the course of 2020, and which our proposed
acquisition of Liquidnet will accelerate."
"I am excited by the prospects for each of our businesses, and
for the additional opportunities that Liquidnet will bring. Our
franchises are strong, and our clients value our critical role in
the global financial market structure. We look forward to updating
investors on our plans at our 1 December 2020 Capital Markets
Day."
Revenue by division for the first nine months
Revenue for the first nine months was GBP1,378m and only 1%
lower than the prior year on a constant currency basis (2% lower as
reported), which demonstrates the resilience of the TP ICAP
franchise and the benefit of our diversification strategy.
- Global Broking revenue was 5% lower than the prior year on a
constant currency basis (6% lower as reported) for the first nine
months. This reflected weaker trading volumes in the third quarter
compared with the strong prior year comparative and followed the
strong H1 performance dominated by the unprecedented macroeconomic
backdrop that was characterised by the emergence of the COVID-19
pandemic.
- Energy & Commodities revenue was 5% higher than the prior
year on a constant currency basis (4% as reported) for the first
nine months. The division continued to capitalise on its market
leading position and delivered solid revenue growth from its oil
trading activity.
- Institutional Services revenue was 28% higher than the prior
year on both a constant currency and reported basis for the first
nine months, reflecting both the growing size and strength of our
buyside franchise and the supportive market conditions in H1
2020.
- Data & Analytics continued its trajectory of growth for
the first nine months, with revenue 8% higher than the prior year
on a constant currency basis (7% higher as reported).
Revenue for the third quarter
TP ICAP's broking revenue performance directly reflects
transaction activity in the key asset classes in which we are
active and was broadly in line with exchange-traded volumes in
these segments. As expected, revenue for the third quarter was
lower than the strong prior year comparative and was 16% lower at
constant exchange rates (19% lower as reported). Revenue from our
broking businesses was 18% lower in the quarter at constant
exchange rates (20% as reported). Revenue in Data & Analytics,
which is mainly subscription based, was 9% higher than the prior
year at constant exchange rates (3% as reported) as growth
accelerated towards the year end as a result of investments made in
the business.
Three month period to Year to 30 September
GBPm 30 September
--------------------------- -------------------------
Revenues 2020 2019 Change 2020 2019 Change
(%) (%)
Global Broking 255 316 902 952
Inter-division revenues(1) 5 4 14 13
------- ------ ------- -------
Total Global Broking 260 320 -19% 916 965 -5%
------- ------ ------- -------
Energy & Commodities 81 95 297 283
Inter-division revenues(1) 1 1 2 2
------- ------ ------- -------
Total Energy & Commodities 82 96 -15% 299 285 +5%
------- ------ ------- -------
Institutional Services 16 19 -16% 73 57 +28%
Data & Analytics 36 33 +9% 106 98 +8%
Inter-division eliminations(1) (6) (5) (16) (15)
------- ------ ------- -------
Constant Exchange
Rates 388 463 -16% 1,378 1,390 -1%
------- ------ ------- -------
Exchange Translation 15 10
------- ------ ------- -------
Reported 388 478 -19% 1,378 1,400 -2%
======= ====== ======= =======
1. 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. The prior year
Period has been restated in line with the new-presentation format.
The Global Broking inter-division revenues and Data & Analytics
inter-division costs are eliminated upon the consolidation of the
Group's financial results
Strategic update and announcement of 1 December Capital Markets
Day
Despite the disruptions caused by Covid-19, the Group has
continued to make good progress in executing on its three strategic
pillars of electronification, liquidity aggregation and
diversification, with a number of electronic broking platform
launches and enhancements over the course of the year, together
with additions to the Data & Analytics product suite and
distribution capabilities.
- Global Broking . We have continued to invest in the
electronification of our business, and the aggregation of liquidity
across our brands. In particular, we have made strong progress with
our hub strategy, through which we deliver a single sign-on to
multiple linked products with a common visual layout. FXO Hub, the
division's FX options platform launched earlier this year, has
gained rapid traction, boosting our estimated market share in this
segment by approximately 5 percentage points (an increase of
c.30%). We have progressed on our Rates Hub strategy, by extending
the ICAP brand's market-leading interest rates options ("IRO")
platform to the Tullett Prebon brand. The IRO platform is highly
sophisticated, offering clients innovative multi-level matching
capabilities. Other electronic solutions within the division have
also performed well in 2020, notably our eRepo platform (electronic
repurchase agreements for EUR and GBP), CrossTrade (intra-fund
crossing tool for asset managers) and our suite of Risk Management
Services ("RMS"), designed to support post-trade portfolio
optimisation.
- Energy & Commodities. TP ICAP is the world's leading
broker of OTC oils products, and the division's Oils Hub strategy
is focused on electronifying our end-to-end activity in this
segment. Over the course of 2020, we have made substantial progress
in rolling out an order management system to our broker teams
across the division's brands, as well as in automating key
post-trade processes. We have continued to expand the ICAP oils
business, with a core team now in place for middle distillates,
Singapore distillates and fuel oil. We have also recently entered
the Japanese power market, a segment where we expect to see
substantial growth in trading volume as a result of market
deregulation.
- Institutional Services. Our buyside-focused agency execution
business has continued to make good progress as it seeks to expand
its increasingly global and multi-product franchise. Notably, the
division has recently launched interest rate swaps capability in
Singapore, leveraging the London-based team.
- Data & Analytics. Our subscription-based Data &
Analytics business has performed well throughout the year. Although
the pace of growth over 2020 year-to-date was slower than the prior
year period, we returned to double-digit growth in September. In
June, the division launched its Bond Evaluated Pricing ("BEP")
service which allows clients to determine a bond's fair value at
regular intervals throughout a trading day. This can be used for
price verification, XVA calculations, stress testing, general
pricing and valuations. The BEP service utilises our new Data
Warehouse and Data Science capabilities and incorporates
third-party data. Our TP ICAP WebStore has also gone live, which
will allow customers to purchase data directly from the division
and thereby bypass intermediated distribution costs. Lastly, we
have strengthened our global sales team, appointing new heads of
sales for the Americas and APAC.
Proposed acquisition of Liquidnet
The proposed acquisition of Liquidnet remains a unique
opportunity for TP ICAP. The acquisition accelerates delivery of
the three pillars of TP ICAP's strategy - electronification,
liquidity aggregation and diversification, and is expected to
transform TP ICAP's earnings profile and growth trajectory. The e
nlarged g roup's earnings mix will progressively reflect the
contribution from higher growth and higher margin businesses,
including electronic D2C Credit and Rates trading and Data &
Analytics.
We look forward to providing our investors with a detailed
update on our 2020 progress, as well as our multi-year strategic
plans and financial targets for the Group - including the proposed
acquisition of Liquidnet - at our Capital Markets Day, scheduled
for 1 December 2020.
2020 full year guidance
TP ICAP's broking revenue is driven primarily by transaction
volumes in the secondary financial markets. As such the Group's
broking revenues correlates more closely with derivative exchange
volumes than with the financial results of the trading divisions of
global investment banks which reflect fluctuations in asset values,
the level of spreads earned on direct trading with customers, as
well as the impact of primary debt and equity issuance
activity.
While transaction volumes were particularly subdued in the third
quarter, we started to see increased activity in our broking
businesses during October. In addition, investments made in the
sales capability of the Data & Analytics business during the
year, together with new product launches, means that we expect that
business to exit the year with a double-digit growth rate. Together
with market volatility that we anticipate resulting from the US
elections and Brexit we expect our full year revenue guidance to be
in line with 2019 on a constant currency basis.
While compensation expenses in the broking businesses have
fallen in line with the lower revenue in the Period, we also expect
to maintain that variability within the business and continue to
target improving the revenue generated per broker. In addition to
efficiency actions we have been taking in our broking businesses
during H2, we are seeking further improvement in the Group's
operating profit margin and have implemented a targeted
reorganisation of the structure of broking businesses as a result
of current market conditions. We expect these actions to achieve
annualised savings of approximately GBP35m by the end of 2021. We
will offer more detail on the GBP35m cost savings at the 1 December
Capital Markets Day.
Financial position and liquidity:
-- Fitch re-affirmed the Group's BBB- with stable outlook
investment grade credit rating in October 2020.
-- As at the end of the Period, GBP260m of the Group's Revolving
Credit Facility ("RCF"), which matures in December 2022, remained
undrawn. This facility remains available to meet the Group's
liquidity needs and can be used for general corporate purposes. The
Group has no bond maturities until 2024.
For further information:
Analysts and investors:
-- Al Alevizakos, Head of Investor Relations and FP&A
Direct: +44 (0) 20 3933 3040
Mobile: +44 (0) 79 9991 2672
E-mail: Alevizos.Alevizakos@tpicap.com
Media:
-- William Baldwin-Charles, Group Media Relations Director
Direct: +44 (0) 20 7200 7124
Mobile: +44 (0) 78 3452 4833
E-mail: William.Baldwin-Charles@tpicap.com
-- Neil Bennett, Maitland
Direct: +44 (0) 20 7379 5151
E-mail: 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.
Further information on the company and its activities is
available on the Company's website: www.tpicap.com
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END
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