TIDMTCAP
RNS Number : 9759H
TP ICAP PLC
06 August 2019
TP ICAP PLC
Financial and Interim Management Report - for the six months
ended 30 June 2019
TP ICAP plc (the "Company") today announces its results for the
six months ended 30 June 2019.
Financial highlights
Underlying (before acquisition, disposal and integration costs,
and exceptional items)
-- Revenue of GBP922m (H1 2018: GBP910m)
-- Operating profit GBP158m (H1 2018: GBP155m)
-- Operating margin 17.1% (H1 2018: 17.0%)
-- Profit before tax GBP134m (H1 2018: GBP139m)
-- Basic EPS 19.3p (H1 2018: 19.2p)
Statutory (after acquisition, disposal and integration costs,
and exceptional items)
-- Operating profit GBP107m (H1 2018: GBP50m)
-- Operating margin 11.6% (H1 2018: 5.5%)
-- Profit before tax GBP83m (H1 2018: GBP34m)
-- Basic EPS 11.8p (H1 2018: 2.3p)
A table showing Underlying and Statutory figures for each
period, detailing the acquisition, disposal and integration costs,
and exceptional items is included in the Financial review. H1 2019
figures include the impact of IFRS16, which are outlined in Note
2(d).
The average number of shares used for the basic EPS calculation
for the period is 560m.
Operational performance
-- A resilient performance reflecting the benefit of a
diversified business portfolio and cost discipline
-- Global Broking revenue fell 6% at constant exchange rates,
against a backdrop of double digit revenue declines by our largest
customers
-- Energy & Commodities revenue increased by 8% at constant
exchange rates benefitting from acquisitions and team hires in 2018
and more favourable market conditions in power and gas
-- Strong revenue growth of 28% in Institutional Services which
has benefitted from structural market changes and new hires
-- Data & Analytics revenue continues to grow at 12%
reflecting new product launches, new clients and expanding existing
client relationships
-- Integration programme on track for targeted annualised
synergy savings of GBP75m by the end of 2019
Strategic highlights
-- Further electronification of services to enhance our broking
capabilities and meet clients' evolving needs
-- Aggregation of liquidity across brands and products to give
clients clearer access to best pricing and simpler workflows
-- Diversification of our customer base, range of services and geographic profile
-- Enhancing the links between our business divisions to maximise the Company's potential
Dividend
A 5.6p per share interim dividend (2018: 5.6p) will be paid on 8
November 2019 to shareholders on the register at close of business
on 4 October 2019.
Nicolas Breteau, CEO of TP ICAP plc, said:
"We have delivered a resilient performance and maintained our
operating margins despite a decline in trading amongst the
investment banks, and additional costs driven by increasing
regulation and Brexit. At the same time we have stepped up
investment in a range of new initiatives to improve client service
and to promote greater hybrid and electronic trading.
As we enter the final six months of the integration program, we
will achieve the GBP75m of synergy savings and deliver the benefits
derived from offering access to the deepest OTC liquidity pools for
wholesale trading alongside high levels of client service.
During my first year as CEO, I have focused the business in
those areas where we provide the greatest value to our clients and
have the greatest competitive advantage. We have also made
considerable organisational changes, made good progress on
integration, are implementing an improved risk management framework
and simplifying our legal entity structure.
We have made considerable progress on our strategic planning for
growth from 2020 onwards in. Our budgeting and plans for this are
underway and we will update the market in the New Year."
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
Robin Stewart, CFO
Direct: +44 0 20 7200 7603
email: robin.stewart@tpicap.com
Media
William Baldwin-Charles, Group Media Relations Director
Direct: +44 0 7834 524833
email: William.Baldwin-Charles@tpicap.com
Eilis Murphy
Brunswick Group LLP
Direct: +44 0 20 7404 5959
email: tpicap@brunswickgroup.com
Further information on the Company and its activities is
available on the Company's website: www.tpicap.com
CEO review
My focus during the first six months of this year has been on
building the platform from which we can deliver good returns for
our shareholders. We have made good progress: we are nearing the
end of the integration of Tullett Prebon and ICAP which will be
completed by the year end and achieve our targeted synergies of
GBP75m; we are deep into the process of implementing a new risk
management framework; we are fully prepared for Brexit; and we have
continued to strengthen management capability within the
Company.
At the same time, we have made considerable progress on our
strategic planning for long-term growth from 2020 onwards. Our
budgeting and plans for this are underway and we will update the
market on the content of these in 2020.
Financial performance
The Company delivered a resilient performance in the first half
of 2019. Market conditions have been challenging for our Global
Broking division, particularly given the decline in trading amongst
our investment banking customers, but our strategic emphasis on
diversification has resulted in strong growth in our other business
divisions.
Revenue fell by 2% on a constant exchange rate basis to GBP922m
and is up 1% on a reported basis. We achieved an underlying
operating profit of GBP158m, an increase of 2% on the GBP155m
reported for H1 2018. Our underlying operating profit margin of
17.1% was slightly higher than the 17.0% margin reported at H1 2018
and we reported an underlying profit before tax of GBP134m, down 4%
from GBP139m. Statutory operating profit was GBP107m, up 114% on
the prior year, with an operating profit margin of 11.6% (2018:
5.5%) and statutory profit before tax of GBP83m was GBP49m higher
than reported in 2018.
Basic underlying earnings per share ("EPS") were 19.3 pence
(basic statutory EPS 11.8p) and we are paying a dividend of 5.6
pence per share for the half year, in line with our previously
stated guidance.
Regional performance
Revenue for the EMEA region was GBP458m, down 3% on the prior
year comparative at constant exchange rates. Global Broking revenue
in the region was down 7%, reflecting a decrease in revenue across
all asset classes. The Americas reported revenue of GBP340m, in
line with the prior year at constant exchange rates, with strong
growth in Energy & Commodities and Institutional Services. In
Asia Pacific, a 2% decline to GBP124m at constant exchange rates,
reflected the difficult conditions in Global Broking, partially
offset by strong growth in Energy & Commodities.
Our business divisions
We have continued to invest in our business through 2019. Last
year we indicated that we had earmarked an additional GBP15m of
investment to increase the hybrid and electronic business we
conduct as well as to invest into our fast growing Data &
Analytics (D&A) division. This extra investment is being used
to: improve pre-trade client connectivity to our electronic
platforms; develop our Nova matching engine to allow
electronification of the credit and oil businesses; launch a
non-deliverable forward (NDF) platform for Foreign Exchange (FX) in
Asia; develop an electronic whiteboard and artificial intelligence
(AI) programme in our Energy & Commodities business and invest
in D&A to launch new products.
Diversification has also been a key priority for the business.
This will continue as we look to serve the buy-side in all-to-all
markets, maximise the value of our data and analytics and grow
other non-broking revenue such as risk management and post-trade
services.
We have placed a greater focus on collaboration between the four
business divisions to capitalise on the clear connections between
them and the divisions will increasingly look for opportunities to
cross-sell.
Global Broking
Global Broking is our largest division covering Rates, Credit,
Equities, Foreign Exchange & Money 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 investment banks.
The conditions for the first six months of the year were
challenging for our Global Broking business. Uncertainty created by
Brexit, the softening of the US Federal Reserve's stance on
interest rates and the potential for further quantitative easing in
the Eurozone, have all impacted market volatility and volumes. The
continuing low interest rate environment has also depressed
activity in rates products, our largest asset class in Global
Broking. Against this backdrop, we delivered a resilient
performance, with revenues down 6% at GBP648m (H1 2018: GBP689m at
constant exchange rates), as the major investment banks, our
largest clients, reported a more significant drop in their trading
performance for the first six months of the year.
To mitigate the tougher trading conditions, we are taking a
number of actions to reduce both front and back office costs and
will continue to maintain a focus on expenses without affecting our
service to clients.
Despite the difficult market conditions there have also been
areas of good performance and we continue to make progress in
developing our hybrid and pure electronic business. Our key
priorities remain aggregating liquidity from our competing brands;
improving connectivity with our clients and delivering improved
workflows for all products. For example:
-- In Rates, we successfully launched a hub for both brands in
Singapore, Japan and Australia. The hub also provides an enhanced
electronic workflow, making trade capture and Straight Through
Processing (STP) seamless.
-- In Foreign Exchange, the recent launch of our Asian NDF
platform provides global liquidity to clients from both our brands.
Our foreign exchange options request for quote platform now has a
majority of the large FX dealers electronically connected to
provide auto pricing.
-- In Credit, we have successfully run pure electronic matching
sessions and launched two new platforms in the US during the first
half. One was a portfolio optimisation bond platform called
Scrapbook and the other was Crosstrade, which enables asset
management firms to transition bonds between funds.
-- Our post-trade services group is also performing well. In
Matchbook, which helps clients mitigate their counterparty credit
risk, we are seeing strong profit growth. Matchbook is being rolled
out beyond its existing Rates and FX customer base to our Energy
& Commodities division and we are increasing our collaboration
with ClearCompress - a fintech company that provides a market
leading compression service in cleared and uncleared interest rate
swaps.
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, soft commodities and
coal. Clients include regional banks, corporates, hedge funds and
trading companies.
Revenues were up 8% at GBP187m for the half year on a constant
exchange rate basis, as the business benefited from improved
conditions in the power and gas markets, strategic hires and the
acquisition of Axiom in November 2018. Oil revenues were slightly
up despite challenging market conditions, with market uncertainty
and localised over-supply creating downward pressure on oil volumes
in the period. The diversity of products in the sector provides us
with the potential to continue to expand our offering and revenue
sources. In H1 2019 we added weather derivative and petrochemical
broking and extended the activities of PVM from oil into gas and
power in the US.
The energy and commodities broking industry is highly
fragmented, particularly in the US. Following our global
diversification strategy, we continued our approach of making
bolt-on acquisitions with the purchase of Axiom and the hiring a
new ICAP oil desk in H1 2019. These have been successfully
integrated into our existing infrastructure. We have a core
competency of successfully adding acquisitions and the incremental
revenues to our existing business and believe there are further
opportunities to do this.
We have continued to invest in new electronic solutions. For
example, we have invested in an electronic whiteboard for our oil
business, which is currently in live testing. The whiteboard
enables the efficient capture of multiple data points from every
client interaction. When fully deployed it will enable better
sharing of liquidity across the desks, automatic calculation of
spreads, and STP of executed trades. It will also feed through to
the AI application which is currently being tested with a small
number of users across the division. This AI application will equip
our brokers with client-specific tailored analysis, with
personalised feeds of news, pricing, historical patterns of
activity and correlations, providing a better service to
clients.
Today we announced a joint venture in China with Enmore
Investment Group, called Enmore Commodity Brokers (Shanghai) Co.
Ltd ("JV"). The JV will initially offer brokerage services in iron
ore, coal, LPG and naphtha before expanding to other products over
time. It will offer liquidity from three of our brands - Tullett
Prebon, ICAP and PVM - to clients and vice versa. As part of the
agreement, TP ICAP Data & Analytics has the exclusive right to
distribute data from the JV internationally.
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.
In our Institutional Services division, we achieved revenues of
GBP23m in H1 2019, an increase of 28% over H1 2018 on a constant
exchange rate basis. This growth has been achieved by initially
focusing on products where we believe we can achieve early success
- foreign exchange, listed derivatives, relative value execution
and cleared interest rate swaps. There is strong momentum now in
our offering, driven by a change in market dynamics as investment
banks reorganise their sales coverage and reserve high touch
services for their largest clients.
In addition, we also shifted our client focus from smaller
players to top tier hedge funds. This change has created an
opportunity for agency services that have expert people, a strong
product offering and a global distribution network.
Through our core offering we are well positioned for growth and
we are now expanding it by product and geography, in response to
client demand. In September 2019 our new Foreign Exchange agency
desk in Singapore will go live and we are also developing new
offerings in credit and equity derivatives. We are actively
recruiting to implement this strategy and this will be a main focus
for the division in 2020.
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.
In our Data & Analytics division we grew revenues by 12% in
H1 2019 to GBP64m on a constant exchange rate basis. The strong top
line momentum we saw at the end of last year continued into 2019 as
we launched new products, attracted new clients as well as expanded
our relationships with existing clients, as we are seeing
additional demand for data as new regulatory requirements are
brought into effect.
New client wins included hedge funds, sovereign wealth funds,
market data and independent software vendors. Geographically they
are spread across Europe, the Americas and Asia.
Our focus on product development is paying off as we launched 10
new products in the first half, compared to three in the
comparative period in 2018. Data & Analytics continues to
exhibit a strong growth trajectory coupled with attractive margins
and recurring revenues underpinned by customer loyalty. While we
have seen good organic growth within the D&A business, we see
selective opportunities to accelerate that development.
The senior management team
In March, we highlighted the changes made to the senior
management team. Now this team is in place, we are strengthening
the next layer of management and ensuring the structure and
reporting lines of the Company are efficient and drive
accountability. We have appointed a new Chief Information Officer
and we plan to appoint a new Group Head of Compliance later in
2019.
With regard to reporting lines the business was run along
geographical lines until the end of H1 2019 and each of the
regional heads ran a P&L. We have subsequently moved
responsibility for revenue generation to the four global business
divisions who are more closely aligned with their clients and
needs. We have appointed new Regional CEOs who will have oversight
of culture, risk, governance and the regional support functions to
ensure that the support and control infrastructure in each region
has the capability to support revenue generation and enhance the
success of our business. Consequently, the new structure
strengthens our governance significantly, resulting in a more
streamlined senior management team with clearer responsibilities
and accountability.
We now have a clear management structure for the Company, with
four global business divisions operating alongside Corporate
Services across three regions.
The integration
Twelve months ago, we reset the synergy target from the
integration of Tullett Prebon and ICAP to GBP75m in order to strike
a better balance between cost synergies and providing clients with
high quality service, both now and in the long term. We have
achieved a synergy run rate of GBP74m and will achieve the full
GBP75m by the end of 2019.
Completing the integration has been a key priority for TP ICAP.
We appointed Martin Ryan as Group Chief Operating Officer in
December 2018 with the initial priority to oversee the process.
Integration is now firmly on track with all major work scheduled to
be completed this year.
While integrating the IT systems is a detailed and complex
process, consolidating the two businesses onto one single platform
will provide an infrastructure that is agile, scalable, efficient
and will enable innovation. It will streamline post-trade
processing which in turn will create efficiencies and reduce
operational risk.
We are decommissioning 32 of our 78 core IT applications. By its
nature, this work is back end loaded and therefore decommissioning
will only take place in the last stages of integration.
Additionally, we are consolidating our data centres. At the start
of integration, we had 15 data centres and we plan to reduce that
number to six, two in each region, with more workload moved onto
cloud based infrastructure. Four data centres have been closed.
We continue to rationalise our real estate footprint. Since
March, we have consolidated our offices in Hong Kong, Jakarta and
Amsterdam. London-based Global Broking and support functions staff
will move into a single location next year. The move of support
functions to the new shared service centre in Belfast continues,
and we expect to have around 300 employees there by early 2020.
We have previously stated our intention to reduce the number of
legal entities within the Group. On completion of the ICAP
transaction we had well over 200 separate legal entities, and we
expect to reduce this number by about a half. The reduction in
legal entities will simplify governance, accounting and audit
processes as well as reduce future governance costs significantly.
It will also streamline liquidity management making the flow of
funds within the group easier and more efficient.
While there is still work to be done, we will complete the
integration programme by the end of this year although activities
to deliver further cost benefits and capital efficiencies from the
ICAP acquisition will continue into 2020.
New risk framework
We are in the process of implementing our global risk management
framework which has been designed to take into account the
increased scale and diversity of our business and to respond to
increasing regulatory requirements. This involves developing our
risk-based management information and reporting processes to
provide better linkage between the day-to-day management of risks
in the business and the Company's risk appetite, governance and
oversight.
We are making good progress and expect to complete the
implementation at the end of the year. As part of this process, we
have defined the minimum risk management requirements necessary
which will be subject to formal attestation across the Company.
This framework is essential for us to discharge our
responsibilities when the Senior Managers' and Certification Regime
comes into force in 2019. A robust risk framework is also a
competitive differentiator with clients and a factor in the
assessment of regulatory capital.
Brexit
For some months we have been preparing for all Brexit
eventualities, including the UK leaving the EU without a deal. As
stated in March, 90% of our broking revenues are largely
unaffected, however it still remains a significant regulatory and
operational challenge for the Company.
There are two main business streams we need to consider when we
leave the EU. The first is the business we carry out in the EU for
EU clients, for which we need a legal entity and venues. We have
set up and capitalised a new company in Paris called TP ICAP Europe
and moved our French and German trading branches to sit under this
company. We are in the process of moving our Spanish branch. This
means that the business we currently transact from these offices is
protected in the event of a Hard Brexit.
In March we stated that we had set up three new EU venues - one
multilateral trading facility (MTF) and two organised trading
facilities (OTF) - so that our EU activity can be conducted on
MiFID II compliant venues. These venues are now authorised and
conducting business.
The second stream of business is the work we do for EU based
clients through our broking desks in the UK. We are planning to
protect this business by putting more front office staff in our EU
offices and changing some of our workflows. We have also made plans
to relocate iSwap, our electronic rates MTF, to Amsterdam.
The ultimate distribution of our staff between the UK and EU
will depend on our clients' requirements and locations but, for the
foreseeable future, we expect the UK to remain a major centre for
financial, energy and commodities markets. While we await clarity
as to the eventual outcome of Brexit, we regularly liaise with our
clients to understand their plans to ensure we can continue to
service them as effectively as possible.
Near term outlook
Three of our four business divisions continue to show positive
trends, but the political and economic environment within which we
operate continues to present us with both opportunities and
challenges. However, I remain confident that with the renewed
strategy we are developing, and our ongoing cost discipline, we are
in a good position to navigate these challenges successfully and
make the most of the opportunities we have to create value.
Concluding comments
I am pleased with the progress we have made in the first six
months of 2019. While there is still more to do to complete the
transformation of TP ICAP, I am heartened by what we have achieved
and am confident we are on track.
We are deep into the process of designing a detailed strategy to
ensure that we can deliver sustainable, profitable growth and I am
excited about our future opportunities. Our employees are our most
valuable asset and I would like to thank every one of them for
their enormous contribution. With the capabilities of our skilled
and dedicated employees, and supportive clients, I am confident
that we will succeed.
Nicolas Breteau
Chief Executive Officer
6 August 2019
TP ICAP PLC
Financial review
Statutory Income Statement
H1 2019
Income statement Underlying Acquisition, Exceptional Statutory
GBPm disposal items
and integration
costs
Revenue 922 - - 922
----------- ----------------- ------------ ----------
Underlying 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
H1 2018
Income statement Underlying Acquisition, Exceptional Statutory
GBPm disposal items
and integration
costs
Revenue 910 - - 910
----------- ----------------- ------------ ----------
Underlying operating profit 155 - - 155
Net charge relating to legal
settlements - - (4) (4)
ICAP integration costs - (24) - (24)
Adjustments to deferred consideration - 1 - 1
Impairment of intangible assets
arising on consolidation - (58) - (58)
Amortisation of intangible
assets arising on consolidation - (20) - (20)
Operating profit 155 (101) (4) 50
Net finance expense (16) - - (16)
----------- ----------------- ------------ ----------
Profit before tax 139 (101) (4) 34
Tax (36) 11 - (25)
Share of net profit of associates
and joint ventures 6 - - 6
Non-controlling interests (2) - - (2)
----------- ----------------- ------------ ----------
Earnings 107 (90) (4) 13
=========== ================= ============ ==========
Average number of shares 556.3m 556.3m
Basic EPS 19.2p 2.3p
IFRS 16 leases
In line with International Financial Reporting Standards TP ICAP
plc and its subsidiaries ("Group") have applied IFRS 16 for the
year ending 31 December 2019. The impact of this change is set out
in Note 2(d) of the Consolidated Financial Statements.
The impact on the income statement has been a GBP3m increase in
operating profit and a GBP2m decrease in profit before tax,
resulting in a reduction of EPS of 0.2p.
Our key financial and performance indicators for the first half
of 2019 are summarised in the table below together with
comparatives from the equivalent period in 2018.
H1 2019 H1 2018 Change
---------- -------- -------
Global Broking revenue GBP648m GBP672m -4%
Energy & Commodities revenue GBP187m GBP167m +12%
Institutional Services
revenue GBP23m GBP17m +35%
Data & Analytics revenue GBP64m GBP54m +19%
---------- --------
Total revenue GBP922m GBP910m +1%
Underlying operating profit GBP158m GBP155m +2%
+0.1%
Underlying operating margin 17.1% 17.0% pts
Statutory operating profit GBP107m GBP50m +114%
+6.1%
Statutory operating margin 11.6% 5.5% pts
Average broker headcount 2,706 2,746 -1%
Average revenue per broker
(GBP'000) 317 312 +2%
Average contribution per
broker (GBP'000)* 118 118 -0%
Broking contribution** GBP319m GBP325m -2%
-0.8%
Broking contribution margin 37.2% 38.0% pts
Data & Analytics contribution** GBP42m GBP35m +20%
Data & Analytics gross +0.8%
contribution margin 65.6% 64.8% pts
Total contribution GBP361m GBP360m +0%
Broker headcount - period
end 2,728 2,734 -0%
Broker support headcount
- period end 1,798 1,707 +5%
Broker compensation costs: +1.1%
broking revenue 52.5% 51.4% pts
* 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
** Broking and Data & Analytics contribution
are defined in the Contribution section
Average broker headcount was 1% lower than the prior period, and
with average contribution per broker in line with the prior year,
the resulting broking contribution was 2% lower.
The period-end broking support headcount of 1,798 was 5% higher
than at the end of 2018, primarily reflecting planned investments
made in control functions, in particular in risk, compliance,
internal audit and technology.
The tables below analyse revenue by business division as well as
revenue and underlying operating profit by region for H1 2019
compared with the equivalent period in 2018, at constant exchange
rates.
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 show revenue for H1 2018 translated at the same
exchange rates as those used for H1 2019, with growth rates
calculated on the same basis. The statutory revenue figures as
reported for H1 2018 are shown in Note 5 to the Condensed
Consolidated Financial Statements.
Revenue
Total revenue of GBP922m in H1 2019 was 1% higher than H1 2018
at actual exchange rates and 2% lower at constant exchange
rates.
Revenue by business division
GBPm H1 2019 H1 2018 Change
Rates 288 295 -2%
Credit 50 58 -14%
FX & Money Markets 100 109 -8%
Emerging Markets 108 115 -6%
Equities 102 112 -9%
-------- --------
Global Broking 648 689 -6%
Energy & Commodities 187 173 +8%
Institutional Services 23 18 +28%
Data & Analytics 64 57 +12%
-------- --------
922 937 -2%
Exchange translation (27)
-------- --------
Statutory 922 910 +1%
======== ========
Conditions in financial markets were challenging in H1 2019 for
Global Broking with a considerable decrease in volatility and
market volumes across asset classes relative to the strong
conditions seen in 2018. As a result revenue declined by 6% on a
constant exchange rate basis.
Within Global Broking, Rates revenue fell by 2% as expectations
of rate increases were pushed back, reducing both spreads and
volatility, against a backdrop of slowing economic growth and the
impact of the US China trade war. Conditions in credit markets were
challenging with a lack of new issuance, as well as restrictions on
clients' balance sheets resulting in a 14% reduction in Credit
revenue. There has also been a continued move towards electronic
trading which has affected volumes. Equities revenue was down 9%
against a very strong comparable in 2018 when the business
benefitted from some significant volatility in the period. FX &
Money Markets and Emerging Markets were down 8% and 6%,
respectively.
Energy & Commodities revenue was 8% higher than H1 2018 at
constant exchange rates. The division has benefitted from improving
market conditions in power and gas after a difficult 2018 for these
markets, as well as additional revenue derived from the acquisition
of Axiom, and new hires resulting from the continued build out of
the ICAP oil business. Underlying oil revenues increased 2% despite
tough market conditions resulting from higher oil prices and
localised over-supply across many of our regions.
Institutional Services revenue of GBP23m grew 28% compared to H1
2018 at constant exchange rates. The business continues to perform
well in its core product offering in foreign exchange, listed
derivatives, relative value execution and cleared interest rate
swaps. This is led by client demand resulting from changing market
dynamics as investment banks reorganise their sales coverage teams.
New hires and continued improvement in client onboarding processes
have also improved the performance of the business.
Data & Analytics revenue was 12% higher than H1 2018 at
constant exchange rates with the business benefitting from the
organic growth strategies implemented towards the end of 2018.
There has been strong sales growth with an expanding client base as
well as sales of new products and new use cases (risk management,
compliance and regulatory reporting) to existing clients. During
the period the business launched 10 new products as well as winning
a number of new clients across Hedge Funds, Sovereign Wealth Funds,
Market Data Vendors and Independent Software Vendors.
Revenue by region
GBPm H1 2019 H1 2018 Change
EMEA 458 470 -3%
Americas 340 341 -0%
Asia Pacific 124 126 -2%
-------- --------
922 937 -2%
Exchange translation (27)
-------- --------
Statutory 922 910 +1%
======== ========
EMEA
Revenue for the region was GBP458m and a decrease of 3% relative
to H1 2018 at constant exchange rates. Global Broking revenue
decreased overall by 7% with a decrease in revenue across all asset
classes. Various factors have contributed to this, including
Brexit, US trade tariffs, the softening of the Federal Reserve's
interest rate stance and the potential for increased quantitative
easing in the Eurozone.
Energy & Commodities revenue grew 2%, reflecting the benefit
of emissions volatility driving volumes in a number of products in
region. In particular there were improved conditions in UK and
European power as well as gas markets. Revenues from oil products
overall were flat year on year as more difficult trading conditions
and lower volumes were offset by the new ICAP oil team hires.
Institutional Services has seen a 30% increase in revenue in the
period led by increasing client demand and the impact of new
hires.
Americas
Americas revenue of GBP340m was in line with the prior year at
constant exchange rates, with strong growth in Energy &
Commodities and Institutional Services offset by a 6% revenue
decline in the Global Broking business.
Within Global Broking market conditions were challenging with
lower volatility and market volumes in H1 compared with a very
strong prior year period.
Rates revenue was down 1% as interest rate swaps markets
struggled with lower levels of liquidity and a flattening yield
curve.
Equities revenue was down 4% from H1 2018 as growth in new
product segments was offset due to reduced volatility in 2019.
Equities continues to be an area of investment and new product
expansion for the region. U.S. Credit markets remained subdued, and
revenue in the Credit business was down 12% on H1 2018.
Revenue in the FX & Money Markets and Emerging Markets
businesses saw decreases year on year of 12% and 10%, respectively.
This was the result of lower levels of volatility, de-risking by
some of our primary clients in Forward FX and increased competition
in Emerging Markets.
The Energy & Commodities division improved in H1 2019 with
revenue up 19% compared with the prior year. Increased revenue in
oil products and ethanol bolstered by the acquisition of Axiom
Commodities in November 2018 added to the stronger performance of
the existing business. Energy continues to be a targeted growth
area for the region across the Tullett Prebon, ICAP and PVM
brands.
Institutional Services also performed well in H1 2019 with
revenues up 25% compared with H1 2018 as the business continues to
expand its product offering. Institutional Services is still a
relatively new business for TP ICAP Americas and remains an area
for growth opportunities.
Asia Pacific
Revenue in Asia Pacific declined 2% in H1 2019 compared with the
prior year at constant exchange rates, reflecting difficult
conditions in the Global Broking business, partially offset by
strong growth in Energy & Commodities.
Global Broking revenue in the region was down 5% year on year.
Revenue in the Tullett Prebon brand was down 6% mainly due to the
loss of the Hong Kong credit and bond desk at the end of 2018. In
the ICAP brand, the decision to close loss-making offices in Korea
at the beginning of 2019, and Indonesia at the end of 2018 drove a
revenue decline of 8%. Within specific countries the Global Broking
business performed well, such as in Australia and the Philippines
where markets were more active, but there was a decline in Japan as
there were few central bank or other economic factors to stimulate
the market.
The Energy & Commodities business developed well in both
scale and diversification and revenue grew 13%. The business saw
continuing growth in the electricity business in Australia as well
as good growth in the precious metals business. There was a strong
recovery in the ICAP iron ore business in Singapore, where there
was also improvement in business levels in the long-established
fuel oil and crude desks and newer businesses including
gasoline.
Underlying administrative expenses
Total underlying administrative expenses of GBP771m in H1 2019
were 2% higher than H1 2018 as reported and 1% lower at constant
exchange rates.
Underlying administrative expenses
H1 2019 H1 2018 Change Change
GBPm GBPm GBPm %
Broker compensation 451 454 (3) -1%
Other front office
costs 88 93 (5) -5%
-------- -------- -------
Total front office
costs 539 547 (8) -1%
Other staff costs 117 123 (6) -5%
Technology and related
costs 27 28 (1) -4%
Premises and related
costs 26 27 (1) -4%
Depreciation and
amortisation 17 16 1 +6%
Other administrative
costs 48 39 9 +23%
IFRS 16 adoption (3) - (3) n/m
-------- -------- -------
Total management
and support costs 232 233 (1) 0%
-------- -------- -------
Total costs 771 780 (9) -1%
Exchange translation (22) 22
Underlying expenses 771 758 13 +2%
======== ======== =======
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 and
includes the costs associated with the Data & Analytics
business.
The presentation above is different from Note 5 of the accounts
as we have split out front office and management and support costs
and we have shown this on a constant exchange rate basis.
Overall, the underlying cost base has seen a 1% decrease at
constant exchange rates to GBP771m in H1 2019 compared with H1
2018. This has been substantially driven by continuing reductions
in the front office and further support costs savings which have
been offset by the additional costs we are incurring in respect of
previously guided investments and increased legal and regulatory
costs. Broker compensation costs decreased by GBP3m during the
period reflecting the 2% decrease in broking revenue at constant
exchange rates and an increase in the broker compensation ratio
from 51.4% to 52.5%.
There has been a GBP5m decrease in other front office costs
which reflects reduced telecommunications costs arising from the
renegotiation of unit pricing during the integration period and
reductions in other third party costs.
The GBP6m reduction in other staff costs continues to be driven
by the impact of synergy savings and other staff cost
reductions.
Technology and related costs include the costs of all external
technology services, including maintenance contracts, consultancy,
non-front office market data services and communications costs.
During the period these costs decreased 4% against H1 2018 with
continued cost reductions being offset by the new initiatives to
which we have previously guided.
Premises costs decreased by 4% in H1 2019 compared with the
prior period reflecting the net lower cost of occupied premises in
the period following the consolidation of our offices in New York,
Singapore and Hong Kong.
The increase in other administrative costs of GBP9m mainly
reflects the anticipated cost increases to which we have previously
guided. These include costs associated with Brexit, risk and cyber
security as well as legal and regulatory requirements and legal
costs incurred in respect of a regulatory investigation in the
US.
The IFRS 16 adjustment in H1 2019 is a credit of GBP3m.
Synergy savings and administrative expenses
As at the end of June 2019 the cumulative annualised synergy
savings achieved from the integration programme were GBP74m, an
increase of GBP3m on the annualised GBP71m of synergy savings
reported at the end of 2018. Of the GBP3m additional run rate
synergies, GBP2m were recognised in the period.
Synergy savings reflect the reduction of underlying staff and
other costs as a result of implementing the integration
programme.
The table below shows the movement in administrative expenses
between H1 2018 and H1 2019 re- categorised to reflect the impact
of the movement in synergy savings against other costs between the
two periods.
H1 2018 FX H1 2018 Synergy Net Cost Broker New Investments Planned IFRS H1 2019
Reported Constant Savings Reductions Comp Increases 16 Reported
758 22 780 (6) (8) (3) 4 7 (3) 771
----- ---------- --------- ------------ ------- ---------------- ----------- ------ ----------
Overall, total synergy savings recognised in the period amount
to GBP37m. This represents half of the GBP71m exit run rate
synergies reported in 2018, plus GBP2m of additional synergies
recognised in the first half of 2019. The GBP6m movement in synergy
savings between the two periods equals the total GBP37m synergy
savings recognised in H1 2019 less the GBP31m of synergy savings
recognised in H1 2018.
Net cost reductions of GBP8m include savings in
telecommunications costs, IT maintenance costs and non-synergy
staff costs reductions.
The GBP3m reduction broker compensation reflects the decrease in
broking revenue offset by the increase in the broker compensation
ratio outlined above.
New investments of GBP4m include expenditure made in Data &
Analytics and front office IT platforms. Planned increases of GBP7m
include additional expenditure on Brexit, risk and cyber security
and legal and regulatory costs. Both these increases were included
in our earlier guidance.
Contribution
Broking contribution represents the revenue of our broking
businesses (excluding Data & Analytics) less the total front
office costs described above. An improvement in the absolute level
of broking contribution is an important metric in driving earnings
growth for the Group.
Broking contribution
At constant exchange
rates H1 2019 H1 2018 Change Change
GBPm GBPm GBPm %
Revenue 858 880 (22) -3%
Total front office
costs (539) (547) 8 +1%
-------- -------- ------- -------
Contribution 319 333 (14) -4%
Contribution margin -0.6%
(%) 37.2% 37.8% pts
In H1 2019 the overall level of contribution decreased by GBP14m
or 4% to GBP319m. The overall contribution margin decreased by 0.6
percentage points to 37.2% driven by the impact of a 3% fall in
revenue together with an increase in the broker compensation ratio
to 52.5%, partially offset by lower other front office costs.
Data & Analytics contribution
At constant exchange
rates H1 2019 H1 2018 Change Change
GBPm GBPm GBPm %
Revenue 64 57 7 +12%
Direct costs (22) (20) (2) -10%
-------- -------- ------- -------
Gross contribution 42 37 5 +14%
Gross contribution +0.7%
margin (%) 65.6% 64.9% pts
Data & Analytics contribution represents the revenue of the
Data & Analytics business less the direct costs associated with
running the business, but excluding the cost of internally
generated data from the broking businesses. An improvement in the
absolute level of contribution is an important metric in driving
earnings growth for the Group.
In H1 2019 the overall level of contribution increased by GBP5m
or 14% to GBP42m. The overall gross contribution margin increased
by 0.7 percentage points to 65.6% driven by a 12% increase in
revenue at constant exchange rates.
Operating profit
The underlying operating profit of GBP158m is 2% higher than the
prior year, with an underlying operating profit margin of 17.1%
which is 0.1% up from H1 2018.
Statutory operating profit of GBP107m was 114% higher than in H1
2018 and the statutory operating profit margin of 11.6% was 6.1
percentage points higher. Statutory operating profit is after
exceptional and integration, acquisition and disposal related items
and is described further below.
Underlying operating profit by region
The underlying operating profit and underlying operating profit
margin by region shown below are compared against reported data for
the prior period.
Underlying operating profit
GBPm H1 2019 H1 2018 Change
EMEA 96 97 -1%
Americas 49 45 +9%
Asia Pacific 13 13 +0%
-------- --------
Underlying 158 155 +2%
======== ========
Underlying operating profit margin by region
GBPm H1 2019 H1 2018
EMEA 21.0% 20.9%
Americas 14.4% 14.0%
Asia Pacific 10.5% 10.6%
-------- --------
Underlying 17.1% 17.0%
======== ========
EMEA
Underlying operating profit in EMEA of GBP96m is 1% lower than
H1 2018 (GBP95m and 2% lower excluding the impact of IFRS 16). With
revenue 2% lower than the prior year at reported exchange rates,
the underlying operating profit margin has increased by 0.1
percentage points to 21.0% (20.7% excluding the impact of IFRS 16).
The slight decrease in the margin (excluding the impact of IFRS 16
on H1 2019) reflects a fall in broking revenue and contribution
offset by increased contribution in Data & Analytics and an
improvement in the regional management and support cost base.
Americas
The Americas underlying operating profit of GBP49m was 9% higher
than H1 2018 (GBP47m and 4% higher excluding the impact of IFRS
16). Revenue in the Americas was 6% higher than the prior year at
reported exchange rates, and the operating profit margin of 14.4%
in H1 2019 was higher than H1 2018, as higher contribution in the
region more than offset a higher net support cost base that
included some one-off legal costs and the addition of Axiom's
legacy infrastructure.
Asia Pacific
Underlying operating profit in Asia Pacific of GBP13m was in
line with H1 2018, (with minimal impact from IFRS 16). The decline
in Global Broking revenue in the period was offset by strong growth
in Energy & Commodities and this resulted in very little change
in the overall business performance in the region year on year.
Underlying operating margin reduced slightly by 0.1% to 10.5%.
Exceptional and acquisition, disposal and integration items
The Group presents its Consolidated Income Statement in a
columnar format to aid the understanding of its results by
separately presenting its underlying profit before acquisition,
disposal and integration costs and exceptional items. Underlying
profit is reconciled to profit before tax in the 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.
The GBP20m charge for integration costs related to the
acquisition of ICAP includes professional fees and staff costs
relating to planning, setting up and running the integration
workstreams and staff severance costs. We are forecasting no more
than GBP160m of cumulative integration costs by the end of the
integration programme.
The major elements of the integration costs in H1 2019 continue
to be staff costs, which include GBP4m of severance costs, and
other costs of GBP10m of which the majority are consultancy costs
relating to the technology strategy, scope for cost reduction,
project management support and analysis, software development and
quality assurance and support for the project to reduce and
rationalise the legal entity structure.
A further GBP21m 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.
Other acquisition, disposal and integration costs of GBP4m
include a GBP2m charge for adjustments to acquisition
consideration, principally due to an increase in the expected
deferred consideration on the COEX acquisition due to its strong
performance. There are also GBP2m of other minor acquisition and
disposal items that have been excluded from underlying results.
Exceptional items have been excluded from underlying results as
they are non-recurring and do not relate to the underlying
performance of the business. The GBP6m exceptional charge in the
period reflects a GBP2m exceptional legal provision in connection
with finalisation of a regulatory investigation in the US and a
GBP4m business reorganisation cost relating to office moves in Hong
Kong and Belfast.
Net finance expense
The underlying net finance expense of GBP24m is GBP8m higher
than the GBP16m charged in H1 2018. The finance expense of GBP27m
comprises GBP18m of interest expense on the Group's Sterling Notes
(GBP15m of which relates to the GBP500m Sterling Notes issued in
January 2017), GBP1m of fees relating to the amortisation of debt
issue and bank facility costs, GBP2m relating to the commitment fee
and interest on the drawdown of the revolving credit facility and
other loans during the period. It also includes an additional GBP6m
expense relating to the introduction of IFRS 16. The expense is
offset by GBP2m of interest income and GBP1m of income on finance
lease receivables.
Tax
The effective rate of tax on underlying profit before tax is 25%
(2018: 26%). The rate is lower than the prior year, reflecting a
greater impact from the reduction in the US federal rate of tax,
due to a lessening of the impact of measures that broadened the US
tax base. The effective rate of tax on reported profit before tax
is 29% (2018: 74% due to the non-deductibility of the goodwill
write-off), as some exceptional expenses are not tax deductible.
The outlook for the underlying effective tax rate in 2020 is for a
potential reduction of approximately 1% due to an expected
reduction in the UK corporation tax rate.
Basic EPS
The average number of shares used for the basic EPS calculation
of 560.0m reflects the 563.3m shares in issue less the 2.6m shares
held by the Employee Benefit Trust at the beginning of the year,
less the difference between the time apportionment element of the
2.0m shares repurchased in the market in April 2019 to satisfy
deferred share awards made to senior management, and 0.1m of
deferred shares that met their vesting requirements in May. The
Employee Benefit Trust has waived its rights to dividends.
Underlying earnings per share for H1 2019 of 19.3p are 0.1p
higher than for 2018.
Statutory earnings per share of 11.8p are 9.5p higher than in
2018 which was adversely impacted by a GBP58m impairment of
goodwill.
Dividend
The Group's dividend policy is to maintain a full year dividend
of 16.85p throughout the integration period. A 5.6p per share
interim dividend 2018: 5.6p will be paid on 8 November 2019 to
shareholders on the register at close of business on 4 October
2019.
Cash flow
H1 2019
Acquisition,
disposal and
integration costs
and exceptional
GBPm Underlying items Reported
------------------------------------ ----------- ------------------- ---------
Underlying operating profit 158 (51) 107
Share based payment charge
and pension scheme administration
fees 3 2 5
Depreciation and amortisation 18 1 19
Depreciation on leased assets 11 - 11
Non-cash items - 2 2
Impairment and 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)
Underlying operating cash
flow 61
Income taxes paid (39) 5 (34)
Interest paid (27) - (27)
Underlying free cash flow (5)
Reported net cash flow from
operations (2)
H1 2018
Acquisition,
disposal
and integration
costs
and exceptional
GBPm Underlying items Reported
Underlying operating profit 155 (105) 50
Share based payment charge
and pension scheme administration
fees 1 - 1
Depreciation and amortisation 17 - 17
Non-cash items - (1) (1)
Impairment & amortisation
of intangibles on consolidation - 78 78
EBITDA 173 (28) 145
Change in Initial contract
prepayments (16) - (16)
Working capital (104) 4 (100)
Cash generated from operations 53 (24) 29
Capital expenditure (48)
Underlying operating cash
flow 5
Income taxes paid (21) 7 (14)
Interest paid (16) - (16)
Underlying free cash flow (32)
Reported net cash flow from
operations (1)
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 GBP25m during the
period, principally relating to the costs of the integration.
During the period there was a GBP2m net inflow for initial
contract payments ("ICPs") with the increased amortisation on
previously spent ICPs more than offsetting the new ICP cash
expenditure in the period. The working capital outflow of GBP112m
includes GBP48m (2018: GBP46m) for settlement balances and fails
that arise on matched principal business that have not completed
settlement until after the June balance sheet date. The net outflow
of GBP64m, after adjusting for settlement balances, reflects an
increase in trade receivables, largely from the higher revenue in
June 2019 compared with the end of 2018 and a reduction in the 2018
year-end bonus accrual after the payment of discretionary annual
bonuses in the first quarter of 2019.
Capital expenditure of GBP19m in the period is lower than for
the prior year which included the impact of office moves in New
York, London, Singapore and Belfast. We expect full year capital
expenditure of circa GBP70m in 2019 due to the expenditure in H2
2019 relating to our planned office move in London in 2020, as well
as the costs of ongoing investments in the business.
Interest paid has increased from the prior year, reflecting both
the impact of the refinancing in the period and the IFRS 16
inclusion of finance lease interest payments. Tax paid in the
period is higher than the prior year as the Group no longer
benefits from tax losses in the US.
After interest and underlying taxation payments in the period of
GBP66m, the underlying free cash flow for the Group was an outflow
of GBP5m. This GBP27m improvement on H1 2019 is driven by reduced
capital expenditure as well as lower ICPs on broker contracts in
the period.
The movement in net funds is summarised below:
Total Net
Cash & cash Financial funds funds/
GBPm equivalents investments Debt (debt)
------------- -------- ------
At 31 December 2018 667 133 800 (642) 158
Reported net cash flow
from operations (2) - (2) 1 (1)
Net cash flow from investment
activities (21) 2 (19) - (19)
Dividends paid (63) - (63) - (63)
Net repayment of the RCF (52) - (52) 52 -
Issue of Sterling Notes 250 - 250 (250) -
Repayment of Sterling
Notes (149) - (149) 149 -
Related party loan 35 - 35 (37) (2)
Other financing activities (8) - (8) - (8)
Finance lease payments (10) - (10) - (10)
Debt issue cost (1) - (1) 1 -
Net funds pre-IFRS 16 646 135 781 (726) 55
IFRS 16 lease liabilities (150) (150)
At 30 June 2019 646 135 781 (876) (95)
============= ============= ======== ====== ========
Details of the Sterling Note & other debt refinancing in the
period can be found in the next section.
The GBP52m drawn amount of the revolving credit facility at the
year end was repaid in the period and as a result there is no
balance drawn down at the end of the June. The adoption of IFRS 16
in the period has led to the recognition of lease liabilities of
GBP150m that are now included in the total debt figure at the end
of June.
Of the GBP781m cash and financial investments balance at the
period end, GBP678m is held in 61 regulated entities to meet
regulatory capital, margin and other trading requirements as well
as accrued profits, and as such is treated as restricted within
those Group entities. GBP82m is held in non-regulated entities for
working capital requirements, in addition to accrued profits and
GBP21m is held in corporate holding companies.
The impact of IFRS 16 has been to move the Group from a net
funds position of GBP55m to a net debt position of GBP95m as a
result of the recognition of GBP150m lease liabilities. This 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 31 December At 30
June June
GBPm 2019 2018 2018
5.25% Sterling Notes June 2019 - 80 80
5.25% Sterling Notes January 2024 431 500 500
5.25% Sterling Notes May 2026 250 - -
Loan from related party 37 - -
Revolving credit facility drawn - 52 87
Unamortised debt issue costs (3) (2) (3)
Accrued interest 11 12 12
Gross Debt pre-IFRS 16 726 642 676
IFRS 16 lease liabilities 150 - -
Total Debt 876 642 676
====== =============== ======
On 24 May 2019 the Group issued a GBP250m 5.25% note due 2026
under its GBP1bn Euro Medium Term Note Programme. The proceeds of
this were used to pay down the revolving credit facility ("RCF")
drawings, repay the GBP80m bond that matured in June 2019 and to
buy back GBP69m of the GBP500m 2024 bonds through a tender offer.
As a result the Group's core gross debt has increased to GBP681m
with a further Yen5bn (GBP37m) short term loan from our JV partner
Tokyo Tanshi Co. Ltd maturing in September 2019.
The RCF was refinanced in December 2018 on improved terms
increasing our overall facility to GBP270m from GBP250m. The
revolving credit facility matures in December 2021 and was undrawn
at the end of the period.
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 H2 H1 H1 H2
2019 2018 2018 2019 2018 2018
US dollar $1.30 $1.38 $1.30 $1.27 $1.32 $1.28
Euro EUR1.15 EUR1.14 EUR1.12 EUR1.12 EUR1.13 EUR1.13
----------- -------- -------- ----------- ----------- -------- --------
Pensions
In 2017 the Group reported that the Trustee had insured the
defined benefit liabilities of the UK pension scheme ("Scheme")
through the purchase of a bulk annuity 'buy-in' policy from
Rothesay Life. The policy is in the name of the Scheme and is a
Scheme asset.
During 2019 the Trustee commenced proceedings to 'buy-out' the
Scheme's liabilities, a process that will enable the Trustee to
exchange the Scheme's bulk annuity policy for individual policies
issued to, and directly held, by the Scheme's beneficiaries. To
proceed with the 'buy-out', the Sponsor and Trustee commenced the
wind-up of the Scheme. Prior to this, the Trustee had no right to
unilaterally wind-up, or otherwise augment the benefits due to
members and based on those limitations the net surplus was
recognised in full by the Group. Under UK legislation, once a
Scheme commences wind-up, the assets of the Scheme pass
unconditionally to the Trustee to enable it to settle the Scheme's
liabilities. As a result, the Group has applied the requirements of
IFRIC 14, fully restricting the Group's recognition of the GBP55m
net surplus by applying an asset recognition ceiling. The asset
ceiling is recorded as a charge in other comprehensive income.
During the wind-up period, the Group will continue to restrict
the recognition of the net surplus. Should any member benefits be
augmented during this period, they will represent a past service
cost and will be recorded as exceptional costs in the Income
Statement as and when those benefits are agreed. Costs associated
with the settlement of the Scheme's liabilities will also be
recorded as exceptional costs in the Income Statement as and when
incurred.
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 consolidated 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 requirements 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% occurring from 1(st) July
2019. The Excess Goodwill Ceiling continues to reduce by 25% every
2.5 years on a straight line basis. The Group expects to reduce its
Excess Goodwill in accordance to 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
GBP1,553m at the end of June 2019 (31 December 2018: GBP1,605m).
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.
Condensed Consolidated Income Statement
for the six months ended 30 June 2019
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 (771) (45) (6) (822)
Impairment loss on trade
receivables (1) - - (1)
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
-------------------------------- ------ ----------- ------------- ------------ ------
Six months ended
30 June 2018 (unaudited)
-------------------------------- ------ ----------- ------------- ------------ ------
Revenue 5 910 - - 910
Administrative expenses 6 (758) (101) (4) (863)
Impairment loss on trade
receivables (1) - - (1)
Other operating income 8 4 - - 4
-------------------------------- ------ ----------- ------------- ------------ ------
Operating profit 5 155 (101) (4) 50
Finance income 9 2 - - 2
Finance costs 10 (18) - - (18)
-------------------------------- ------ ----------- ------------- ------------ ------
Profit before tax 139 (101) (4) 34
Taxation (36) 11 - (25)
-------------------------------- ------ ----------- ------------- ------------ ------
Profit after tax 103 (90) (4) 9
Share of results of associates
and joint ventures 6 - - 6
-------------------------------- ------ ----------- ------------- ------------ ------
Profit for the period 109 (90) (4) 15
================================ ====== =========== ============= ============ ======
Attributable to:
Equity holders of the
parent 107 (90) (4) 13
Non-controlling interests 2 - - 2
-------------------------------- ------ ----------- ------------- ------------ ------
109 (90) (4) 15
================================ ====== =========== ============= ============ ======
Earnings per share
- Basic 11 19.2p 2.3p
- Diluted 11 19.1p 2.3p
-------------------------------- ------ ----------- ------------- ------------ ------
Acquisition,
Disposal
and
integration Exceptional
Year ended costs Items
31 December 2018 Underlying (Note 7) (Note 7) Total
Notes GBPm GBPm GBPm GBPm
-------------------------------- ------ ----------- ------------- ------------ --------
Revenue 5 1,763 - - 1,763
Administrative expenses 6 (1,498) (160) (23) (1,681)
Impairment loss on trade
receivables (1) - - (1)
Other operating income 8 12 - - 12
-------------------------------- ------ ----------- ------------- ------------ --------
Operating profit 5 276 (160) (23) 93
Finance income 9 5 - - 5
Finance costs 10 (36) - - (36)
-------------------------------- ------ ----------- ------------- ------------ --------
Profit before tax 245 (160) (23) 62
Taxation (63) 20 4 (39)
-------------------------------- ------ ----------- ------------- ------------ --------
Profit after tax 182 (140) (19) 23
Share of results of associates
and joint ventures 12 - - 12
-------------------------------- ------ ----------- ------------- ------------ --------
Profit for the period 194 (140) (19) 35
================================ ====== =========== ============= ============ ========
Attributable to:
Equity holders of the
parent 191 (140) (19) 32
Non-controlling interests 3 - - 3
-------------------------------- ------ ----------- ------------- ------------ --------
194 (140) (19) 35
================================ ====== =========== ============= ============ ========
Earnings per share
- Basic 11 34.2p 5.7p
- Diluted 11 33.9p 5.7p
-------------------------------- ------ ----------- ------------- ------------ --------
Condensed Consolidated Statement of Comprehensive Income
for the six months ended 30 June 2019
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2019 2018 2018
(unaudited) (unaudited)
GBPm GBPm GBPm
---- ------------- ------------- -------------
Profit for the period 67 15 35
------------- ------------- -------------
Items that will not be reclassified
subsequently to profit or loss:
------------------------------------- ---- ------------- ------------- -------------
Remeasurement of defined benefit
pension schemes (55) (2) (2)
Equity investments at FVTOCI
- net change in fair value 1 6 7
Taxation relating to items not
reclassified 19 1 1
------------------------------------------- ------------- ------------- -------------
(35) 5 6
------------------------------------------ ------------- ------------- -------------
Items that may be reclassified
subsequently to profit or loss:
------------------------------------- ---- ------------- ------------- -------------
Effect of changes in exchange
rates on
translation of foreign operations 3 15 49
Taxation relating to items that
may be reclassified - 1 -
------------------------------------- ---- ------------- ------------- -------------
3 16 49
------------------------------------------ ------------- ------------- -------------
Other comprehensive (loss)/income
for the period (32) 21 55
------------------------------------------- ------------- ------------- -------------
Total comprehensive income for
the period 35 36 90
=========================================== ============= ============= =============
Attributable to:
Equity holders of the parent 34 33 86
Non-controlling interests 1 3 4
------------------------------------------- ------------- ------------- -------------
35 36 90
========================================== ============= ============= =============
Condensed Consolidated Balance Sheet
as at 30 June 2019
30 June 30 June 31 December
2019 2018(1) 2018
(unaudited) (unaudited)
Notes GBPm GBPm GBPm
--------------------------------------- ------ ------------- ------------- ------------
Non-current assets
Intangible assets arising on
consolidation 13 1,571 1,581 1,594
Other intangible assets 64 70 69
Property, plant and equipment 78 67 74
Right-of-use assets 2(d) 101 - -
Investment in associates 53 54 53
Investment in joint ventures 27 26 26
Other investments 20 17 20
Deferred tax assets 3 7 4
Retirement benefit assets 14 - 56 55
Other long term receivables 33 18 20
--------------------------------------- ------ ------------- ------------- ------------
1,950 1,896 1,915
--------------------------------------- ------ ------------- ------------- ------------
Current assets
Trade and other receivables(1) 57,638 44,605 22,798
Financial investments 135 131 133
Cash and cash equivalents(1) 646 609 667
--------------------------------------- ------ ------------- ------------- ------------
58,419 45,345 23,598
--------------------------------------- ------ ------------- ------------- ------------
Total assets 60,369 47,241 25,513
======================================= ====== ============= ============= ============
Current liabilities
Trade and other payables (57,470) (44,480) (22,735)
Interest bearing loans and borrowings 15 (48) (179) (144)
Lease liabilities 2(d) (23) - -
Current tax liabilities (49) (65) (55)
Short term provisions 18 (29) (28) (31)
--------------------------------------- ------ ------------- ------------- ------------
(57,619) (44,752) (22,965)
--------------------------------------- ------ ------------- ------------- ------------
Net current assets 800 593 633
======================================= ====== ============= ============= ============
Non-current liabilities
Interest bearing loans and borrowings 15 (678) (497) (498)
Lease liabilities 2(d) (127) - -
Deferred tax liabilities(1) (98) (112) (123)
Long term provisions 18 (25) (20) (30)
Other long term payables (20) (53) (64)
Retirement benefit obligations 14 (3) (4) (3)
--------------------------------------- ------ ------------- ------------- ------------
(951) (686) (718)
--------------------------------------- ------ ------------- ------------- ------------
Total liabilities (58,570) (45,438) (23,683)
--------------------------------------- ------ ------------- ------------- ------------
Net assets 1,799 1,803 1,830
======================================= ====== ============= ============= ============
Equity
Share capital 141 141 141
Share premium 17 17 17
Merger reserve 1,384 1,384 1,384
Other reserves (1,159) (1,192) (1,158)
Retained earnings(1) 1,399 1,438 1,430
--------------------------------------- ------ ------------- ------------- ------------
Equity attributable to
equity holders of the parent 1,782 1,788 1,814
Non-controlling interests 17 15 16
--------------------------------------- ------ ------------- ------------- ------------
Total equity 1,799 1,803 1,830
======================================= ====== ============= ============= ============
1. Trade and other receivables, cash and cash equivalents,
deferred tax liabilities and retained earnings as at 30 June 2018
have been restated for the adoption of IFRS 9 in 2018.
Condensed Consolidated Statement of Changes in Equity
for the six months ended 30 June 2019
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(1) Total(1) interests equity(1)
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
---- ------------------------- -------- -------- ------------ --------- ----------- ------ ------------ --------- ------------ ----------
30 June 2018
(unaudited)
------------------------ ---- --- ------ -------- ---- ----- ----- ------ ------ ---- ------
Balance at
1 January 2018 139 17 1,378 (1,182) 1 (17) (10) 1,494 1,820 13 1,833
Adjustment on
initial application
of IFRS 9(1) - - - - - - - (4) (4) - (4)
------------------------ ---- --- ------ -------- ---- ----- ----- ------ ------ ---- ------
Adjusted balance
at
1 January 2018(1) 139 17 1,378 (1,182) 1 (17) (10) 1,490 1,816 13 1,829
------------------------ ---- --- ------ -------- ---- ----- ----- ------ ------ ---- ------
Profit for the
period - - - - - - - 13 13 2 15
Other comprehensive
income/(loss)
for the period - - - - 6 15 - (1) 20 1 21
------------------------ ---- --- ------ -------- ---- ----- ----- ------ ------ ---- ------
Total comprehensive
income for the
period - - - - 6 15 - 12 33 3 36
------------------------ ---- --- ------ -------- ---- ----- ----- ------ ------ ---- ------
Issue of ordinary
shares 2 - 6 - - - - (2) 6 - 6
Dividends paid - - - - - - - (63) (63) (1) (64)
Gain on disposal
of equity instruments
at FVTOCI - - - - (4) - - 4 - - -
Share settlement
of share-
based payment
awards - - - - - - 4 (4) - - -
Own shares acquired
for employee
trusts - - - - - - (5) - (5) - (5)
Credit arising
on share-based
payment awards - - - - - - - 1 1 - 1
------------------------ ---- --- ------ -------- ---- ----- ----- ------ ------ ---- ------
Balance at
30 June 2018 141 17 1,384 (1,182) 3 (2) (11) 1,438 1,788 15 1,803
======================== ==== === ====== ======== ==== ===== ===== ====== ====== ==== ======
1. Retained earnings as at 1 January 2018 and 30 June 2018 have
been restated for the adoption of IFRS 9 in 2018.
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
2018
---------------- -------- -------- -------- ------------ --------- ----------- ------ --------- ------ ------------ -------
Balance at
1 January 2018 139 17 1,378 (1,182) 1 (17) (10) 1,494 1,820 13 1,833
Adjustment on
initial
application
of IFRS 9
(Note 2(d)) - - - - - - - (4) (4) - (4)
---------------- -------- -------- -------- ------------ --------- ----------- ------ --------- ------ ------------ -------
Adjusted
balance
at
1 January 2018 139 17 1,378 (1,182) 1 (17) (10) 1,490 1,816 13 1,829
---------------- -------- -------- -------- ------------ --------- ----------- ------ --------- ------ ------------ -------
Profit for the
period - - - - - - - 32 32 3 35
Other
comprehensive
income/(loss)
for the period - - - - 7 48 - (1) 54 1 55
---------------- -------- -------- -------- ------------ --------- ----------- ------ --------- ------ ------------ -------
Total
comprehensive
income for the
period - - - - 7 48 - 31 86 4 90
Issue of
ordinary
shares 2 - 6 - - - - (2) 6 - 6
Dividends paid - - - - - - - (94) (94) (1) (95)
Gain on
disposal
of equity
instruments
at FVTOCI - - - - (4) - - 4 - - -
Share
settlement
of share-
based payment
awards - - - - - - 4 (4) - - -
Own shares
acquired
for employee
trusts - - - - - - (5) - (5) - (5)
Credit arising
on share-based
payment awards - - - - - - - 5 5 - 5
---------------- -------- -------- -------- ------------ --------- ----------- ------ --------- ------ ------------ -------
Balance at
31 December
2018 141 17 1,384 (1,182) 4 31 (11) 1,430 1,814 16 1,830
================ ======== ======== ======== ============ ========= =========== ====== ========= ====== ============ =======
Condensed Consolidated Cash Flow Statement
for the six months ended 30 June 2019
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2019 2018 2018
(unaudited) (unaudited)
Notes GBPm GBPm GBPm
-------------------------------------- ------ ------------- ------------- -------------
Cash flows from operating activities 16 (2) (1) 149
-------------------------------------- ------ ------------- ------------- -------------
Investing activities
(Purchase)/sale of financial
investments (2) 5 4
Sale of equity investments at
FVTOCI 1 7 7
Purchase of equity investments (1) - -
at FVTOCI
Interest received 3 1 3
Dividends from associates and
joint ventures 9 5 10
Expenditure on intangible fixed
assets (8) (15) (26)
Purchase of property, plant
and equipment (11) (33) (47)
Deferred consideration paid (12) - (3)
Investment in associates - (1) (2)
Acquisition consideration paid - (5) (18)
Cash acquired with acquisitions - - 1
-------------------------------------- ------ ------------- ------------- -------------
Net cash flows from investment
activities (21) (36) (71)
-------------------------------------- ------ ------------- ------------- -------------
Financing activities
Dividends paid 12 (63) (63) (94)
Dividends paid to non-controlling
interests - (1) (1)
Own shares acquired for employee
trusts (8) (5) (5)
Drawdown of revolving credit
facility 39 87 87
Repayment of revolving credit
facility (91) - (35)
Funds received from loans from 35 - -
related parties
Funds received from issue of 250 - -
Sterling Notes
Repayment of Sterling Notes (149) - -
Debt issue and bank facility
arrangement costs (1) - (3)
Payment of lease liabilities (10) - -
-------------------------------------- ------ ------------- ------------- -------------
Net cash flows from financing
activities 2 18 (51)
-------------------------------------- ------ ------------- ------------- -------------
Net (decrease)/increase
in cash and cash equivalents (21) (19) 27
Cash and cash equivalents
at the beginning of the period 667 622 622
Adjustment on initial application
of IFRS 9(1) - (1) (1)
Effect of foreign exchange rate
changes - 7 19
-------------------------------------- ------ ------------- ------------- -------------
Net cash and cash equivalents
at the end of the period(1) 17 646 609 667
====================================== ====== ============= ============= =============
Cash and cash equivalents(1) 706 663 680
Overdrafts (60) (54) (13)
-------------------------------------- ------ ------------- ------------- -------------
Net cash and cash equivalents
at the end of the period(1) 646 609 667
====================================== ====== ============= ============= =============
1. Cash and cash equivalents as at 30 June 2018 have been
restated for the adoption of IFRS 9 in 2018.
Notes to the Condensed Consolidated Financial Statements
for the six months ended 30 June 2019
1. General information
The condensed consolidated financial information for the six
months ended 30 June 2019 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 2018 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 2018 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 2019 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 2018, 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 2018. The changes in
accounting policies are also expected to be reflected in the
Group's Consolidated Financial Statements for the year ending 31
December 2019.
IFRS 16 'Leases'
The Group has adopted IFRS 16 'Leases' as at 1 January 2019,
using the cumulative catch-up approach. Under this transition
method, comparative information has not been restated and
cumulative adjustments on initial application are recognised in the
opening balance sheet as at 1 January 2019. Accordingly,
comparative information presented for 2018 is presented as
previously reported under IAS 17 and related interpretations.
Lessor accounting remains similar to previous accounting policies.
The details of the changes in the Group's accounting policies as a
lessee are disclosed below.
(i) Definition of a lease
The Group assesses whether a contract is, or contains, a lease
based on the new definition of a lease. Under IFRS 16 a contract
is, or contains, a lease if the contract conveys a right to control
the use of an identified asset for a period of time in exchange for
consideration.
On transition to IFRS 16 the Group elected to apply the
practical expedient not to reassess whether a contract was or
contained a lease. The Group therefore applied IFRS 16 only to
contracts that had been previously identified as leases, in
accordance with IAS 17 and IFRIC 4, before 1 January 2019. The
Group has applied the definition of a lease and related guidance
set out in IFRS 16 to all lease contracts entered into or modified
on or after 1 January 2019. The Group considers that the new
definition in IFRS 16 will not change significantly the scope of
contracts that meet the definition of a lease.
At inception or on reassessment of a contract that contains a
lease component, the Group allocates the consideration in the
contract to each lease and non-lease component on the basis of the
relative stand-alone prices. However, for certain leases of
properties the Group has elected not to separate non-lease
components and will instead account for the lease and non-lease
components as a single lease component.
(ii) As a lessee
The distinction between operating leases and finance leases is
removed. Under IFRS 16 the Group now recognises right-of-use assets
and lease liabilities, which the Group has chosen to report
separately on its balance sheet.
The Group has elected not to recognise right-of-use assets and
lease liabilities for short-term leases and leases of low value
assets. The Group recognises the lease payments associated with
these leases as an expense on a straight-line basis over the lease
term.
The Group recognises a right-of-use asset and a lease liability
at the lease commencement date, the date at which power to control
the asset is obtained. The right-of-use asset is initially measured
at cost, and subsequently at cost less any accumulated depreciation
and impairment losses, and adjusted for certain remeasurements of
the lease liability.
The lease liability is initially measured at the present value
of the lease payments that are not paid at the commencement date,
discounted using the interest rate implicit in the lease or, if
that rate cannot be readily determined, the Group's incremental
borrowing rate. Generally, the Group uses its incremental borrowing
rate as the discount rate.
The lease liability is subsequently increased by the interest
cost on the lease liability and decreased by lease payments made.
It is remeasured when there is a change in the future lease
payments arising from a change in an index or a rate, a change in
the estimate of the amount expected to be payable under a residual
value guarantee, or as appropriate, changes in the assessment of
whether a purchase or extension option is reasonably certain to be
exercised or a termination option is reasonably certain not to be
exercised.
Lease cash flows, currently presented as operating cash flows,
will be split into payments of principal and interest and will be
presented as financing and operating cash flows respectively.
The Group has applied judgement to determine the lease term for
some lease contracts in which it is a lessee that includes
termination and/or renewal options and for leases which the Group
has enforceable rights that extend the lease agreement. The
assessment of whether the Group is reasonably certain to exercise
such options or whether the Group is able to enforce its additional
rights impacts the lease term, which affects the amount of lease
liabilities and right-of-use assets recognised.
(iii) Transition as at 1 January 2019
At transition, for leases classified as operating leases under
IAS 17, lease liabilities were measured at the present value of the
remaining lease payments, discounted at the Group's incremental
borrowing rate as at 1 January 2019. The right-of-use assets were
measured at an amount equal to the lease liability, adjusted by the
amount of any prepaid or accrued lease payments, and any provisions
held in respect of onerous lease contracts.
The Group used the following practical expedients when applying
IFRS 16 to leases previously classified as operating leases under
IAS 17:
Ø Applied the exemption not to recognise right-of-use assets and
lease liabilities for leases with less than 12 months of remaining
lease term;
Ø Relied on previous assessments on whether leases are
onerous;
Ø Excluded initial direct costs from the measuring the
right-of-use asset at the date of initial application; and,
Ø Used hindsight when determining the lease term if the contract
contains options to extend or terminate the lease. This expedient
has been applied in reassessing the lease terms associated with
three significant UK leases. Under an agreement with the landlord,
two property leases will be terminated once the Group has moved its
operations to a new leased property.
(iv) As a lessor
In contrast to lessee accounting, IFRS 16 substantially carries
forward the lessor accounting requirements in IAS 17. Under IFRS
16, a lessor continues to classify leases as either finance leases
or operating leases and account for those two types of leases
differently.
The Group sub-leases some of its leased properties. Under IAS
17, the head lease and sub-lease contracts were classified as
operating leases. Where the Group is an intermediate lessor, it
will account for the head lease and the sub-lease as two separate
contracts and is required to classify the sub-lease as either a
finance or operating lease by reference to the right--of--use asset
arising from the head lease.
Where sub-lease agreements are assessed as finance leases, the
Group will derecognise the right-of-use asset and record its
interest in finance lease receivables. As required by IFRS 9, an
allowance for expected credit losses will be recognised on the
finance lease receivables.
(v) Impact on transition
The impact on transition is summarised below:
1 January
2019
GBPm
------------------------------------------------------------ ----------
Right-of-use assets 96
Finance lease receivables (presented in other receivables) 13
Lease liabilities (145)
Property provisions (1)
------------------------------------------------------------ ----------
When measuring lease liabilities for leases that were classified
as operating leases the Group discounted lease payments using its
incremental borrowing rate as at 1 January 2019, reflecting the
lease term and the type of leased asset. The weighted-average rate
applied was 7.4%.
1 January
2019
GBPm
---------------------------------------------------------------- ----------
Lease liabilities
Operating lease commitment at 31 December 2018 as disclosed
in the Group's consolidated financial statements 313
- Recognition exemption for leases of low-value assets -
- Recognition exemption for leases with less than 12
months of lease term at transition (3)
- Termination and extension options reasonably certain
to be exercised(1) (89)
---------------------------------------------------------------- ----------
Gross lease commitments at 1 January 2019 221
================================================================ ==========
Lease liabilities recognised at 1 January 2019, discounted
using the incremental borrowing rate 145
================================================================ ==========
Right-of-use assets
Initial right-of-use assets at amounts equal to the associated
lease liability 145
- Adjustment for prepaid and accrued lease payments (29)
- Adjustment for provisions held in respect of onerous
leases (8)
- Adjustment for additional property provisions 1
Amounts recognised as finance lease receivables (13)
---------------------------------------------------------------- ----------
96
================================================================ ==========
1. Operating lease commitments have reduced by a net GBP89m
following a reassessment of three significant UK leases. Under an
agreement with the landlord, two property leases will be terminated
once the Group has moved its operations to a new leased property.
The new lease is estimated to have a commencement date of 30
September 2019 at which date a lease liability and right-of-use
asset, with estimated values of GBP59m, will be recognised. The
gross lease commitment is estimated to be GBP99m.
(vi) Impact for the period
During the six months ended 30 June 2019, the Group, in relation
to leases under IFRS 16, has recognised depreciation and interest
costs, instead of IAS 17 operating lease expenses, as follows:
Recognised in the Operating
Income Statement during lease expense
the six months ended under IAS
30 June 2019 17
Depreciation Net Interest
Expense
GBPm GBPm GBPm
-------------- ------------- ------------- ---------------
EMEA 5 1 6
Americas 3 3 5
Asia Pacific 3 1 3
-------------- ------------- ------------- ---------------
11 5 14
============== ============= ============= ===============
As at 1 January 2019 and 30 June 2019 the right-of-use assets
and lease liabilities were as follows:
30 June 1 January
2019 2019
GBPm GBPm
-------------------------------------- -------- ----------
Right-of-use assets by type
- Properties 100 95
- Equipment 1 1
--------------------------------------- -------- ----------
101 96
====================================== ======== ==========
Finance lease receivables (presented
in other receivables)
- Properties 13 13
13 13
-------------------------------------- -------- ----------
Lease liabilities
- Current lease liabilities 23 17
- Non-current lease liabilities 127 128
--------------------------------------- -------- ----------
150 145
====================================== ======== ==========
Other New Standards and Interpretations
The following new Standards and Interpretations are effective
from 1 January 2019 but they do not have a material effect in the
Group's financial statements:
Ø IFRIC 23 Uncertainty over Income Tax Treatments;
Ø Amendments to IFRS 9: Prepayment Features with Negative
Compensation;
Ø Amendments to IAS 28: Long-term Interests in Associates and
Joint Ventures;
Ø Annual Improvements to IFRS Standards (2015-2017 Cycle);
and
Ø Amendments to IAS 19: Plan Amendment, Curtailment or
Settlement.
(e) Restatement of 30 June 2018 comparative information
Trade and other receivables, cash and cash equivalents and
deferred tax liabilities have been restated as at 30 June 2018
reflecting amendments to expected credit losses (ECL's) recorded on
the adoption of IFRS 9. Reported retained earnings as at 30 June
2018 have reduced by GBP1m, reflecting a GBP3m reduction in the
reported value of trade and other receivables, a GBP1m increase in
the reported value of cash and cash equivalents, and a GBP1m
decrease in the reported value of deferred tax liabilities.
3. Related party transactions
Related party transactions are described in Note 36 to the 2018
statutory Group Financial Statements. During the half-year ended 30
June 2019 the Group entered into a loan with a related party, the
details of which are set out in Note 15. There have been no other
material changes in the nature or value of related party
transactions in the six months ended 30 June 2019.
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
impacts': Capital, Liquidity, Reputation, Regulatory standing and
Access to capital markets. 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 39
to 43 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 2018. 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
2019 2018 2018
GBPm GBPm GBPm
--------------------------------------- ----------- ----------- -------------
Revenue
EMEA 458 465 886
Americas 340 322 636
Asia Pacific 124 123 241
--------------------------------------- ----------- ----------- -------------
922 910 1,763
======================================= =========== =========== =============
Operating profit(1)
EMEA 96 97 173
Americas 49 45 81
Asia Pacific 13 13 22
--------------------------------------- ----------- ----------- -------------
Underlying operating profit(1) 158 155 276
Acquisition, disposal and integration
costs (Note 7) (45) (101) (160)
Exceptional items (Note 7) (6) (4) (23)
--------------------------------------- ----------- ----------- -------------
Reported operating profit 107 50 93
Finance income(2) 3 2 5
Finance costs(2) (27) (18) (36)
--------------------------------------- ----------- ----------- -------------
Profit before tax 83 34 62
Taxation (24) (25) (39)
--------------------------------------- ----------- ----------- -------------
Profit of consolidated companies 59 9 23
Share of results of associates and
joint ventures 8 6 12
--------------------------------------- ----------- ----------- -------------
Profit for the period 67 15 35
======================================= =========== =========== =============
In relation to leases under IFRS 16:
1. Operating profit includes depreciation of GBP5m for EMEA,
GBP3m for Americas and GBP3m for Asia Pacific instead of operating
lease expense of GBP6m for EMEA, GBP5m for Americas and GBP3m for
Asia Pacific; and
2. Net finance costs include the unwind of discounted lease
liabilities of GBP1m for EMEA, GBP3m for Americas and GBP1m for
Asia Pacific.
There are no inter-segment sales included in segment
revenue.
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2019 2018 2018
Revenue by Business Division GBPm GBPm GBPm
------------------------------ ----------- ----------- -------------
* Rates 288 284 547
* Credit 50 56 101
* FX & Money Markets 100 110 207
* Emerging Markets 108 113 213
* Equities 102 109 210
------------------------------ ----------- ----------- -------------
Global Broking 648 672 1,278
Energy & Commodities 187 167 331
Institutional Services 23 17 37
Data & Analytics 64 54 117
------------------------------ ----------- ----------- -------------
922 910 1,763
============================== =========== =========== =============
Other segmental information
30 June 30 June 31 December
2019 2018(2) 2018
Segment assets(1) GBPm GBPm GBPm
---------------------------------------------- -------- --------- ------------
EMEA - UK(2) 14,356 14,623 4,179
EMEA - Other 855 732 110
Americas(2) 44,780 31,512 20,873
Asia Pacific(2) 378 353 351
---------------------------------------------- -------- --------- ------------
60,369 47,220 25,513
Unallocated goodwill arising on acquisitions - 21 -
---------------------------------------------- -------- --------- ------------
60,369 47,241 25,513
============================================== ======== ========= ============
Segment liabilities(1)
---------------------------------------------- -------- --------- ------------
EMEA - UK(2) 13,289 13,537 3,090
EMEA - Other 834 721 95
Americas 44,259 31,024 20,341
Asia Pacific 188 156 157
---------------------------------------------- -------- --------- ------------
58,570 45,438 23,683
============================================== ======== ========= ============
1. Segmental assets and liabilities as at 30 June 2019 include
right-of-use assets, finance lease receivables and lease
liabilities following the adoption of IFRS 16. Right-of-use assets
as at 30 June 2019 were: EMEA - UK GBP30m, EMEA - Other GBP3m,
Americas GBP47m and Asia Pacific GBP21m. Finance lease receivables
as at 30 June 2019 were: EMEA - UK GBP2m and Americas GBP11m. Lease
liabilities as at 30 June 2019 were: EMEA - UK GBP40m, EMEA - Other
GBP3m, Americas GBP87m and Asia Pacific GBP20m.
2. Segmental assets and liabilities as at 30 June 2018 have been
restated for the adoption of IFRS 9 in 2018.
Segmental assets and liabilities exclude all inter-segment
balances.
The Group continues to review the assets and liabilities it
acquired with Axiom Refined Products, LLC, Atlas Commodity Markets,
LLC, Atlas Petroleum Markets, LLC, and Atlas Physical Grains, LLC
(collectively 'Axiom'), together with their associated fair values.
As permitted by IFRS 3 'Business Combinations', this review will be
completed during the 12 month 'measurement period' ending in
November 2019. Details of the acquisition of Axiom is set out in
Note 30(b) to the 2018 statutory Group Financial Statements.
6. Administrative expenses
Administrative expenses comprise:
Acquisition,
disposal
and
Six months ended integration Exceptional
30 June 2019 (unaudited) Underlying costs items Total
GBPm GBPm GBPm GBPm
--------------------------------------- ----------- ------------- ------------ ------
Broker compensation costs 451 - - 451
Other staff costs 113 9 1 123
Other share-based compensation
charge 3 2 - 5
--------------------------------------- ----------- ------------- ------------ ------
Employment costs 567 11 1 579
Technology and related costs 76 3 - 79
Premises and related costs 11 - 2 13
Amortisation of other intangible
assets 12 1 - 13
Depreciation of property,
plant and equipment 6 - - 6
Depreciation of right-of-use
assets 11 - - 11
Amortisation of intangible
assets arising on consolidation - 21 - 21
Adjustments to deferred consideration - 2 - 2
Other administrative costs 88 7 3 98
--------------------------------------- ----------- ------------- ------------ ------
771 45 6 822
======================================= =========== ============= ============ ======
Six months ended
30 June 2018 (unaudited)
--------------------------------------- ----------- ------------- ------------ ------
Broker compensation costs 440 - - 440
Other staff costs 118 12 - 130
Other share-based compensation
charge/(credit) 2 (1) - 1
--------------------------------------- ----------- ------------- ------------ ------
Employment costs 560 11 - 571
Technology and related costs 73 - - 73
Premises and related costs 27 1 - 28
Amortisation of other intangible
assets 12 - - 12
Depreciation of property,
plant and equipment 5 - - 5
Amortisation of intangible
assets arising on consolidation - 20 - 20
Impairment of intangible assets
arising on consolidation - 58 - 58
Adjustments to deferred consideration - (1) - (1)
Other administrative costs 81 12 4 97
--------------------------------------- ----------- ------------- ------------ ------
758 101 4 863
======================================= =========== ============= ============ ======
Acquisition,
disposal
and
Year ended integration Exceptional
31 December 2018 Underlying costs items Total
GBPm GBPm GBPm GBPm
--------------------------------------- ----------- ------------- ------------ ------
Broker compensation costs 859 - - 859
Other staff costs 237 22 - 259
Other share-based payment
charge 5 - - 5
Charge relating to employee
long-term benefits - - 2 2
--------------------------------------- ----------- ------------- ------------ ------
Employment costs 1,101 22 2 1,125
Technology and related costs 146 - - 146
Premises and related costs 52 1 14 67
Amortisation of other intangible
assets 25 1 - 26
Depreciation of property,
plant and equipment 10 - 3 13
Amortisation of intangible
assets arising on consolidation - 40 - 40
Impairment of intangible assets
arising on consolidation - 65 - 65
Impairment of associate - 3 - 3
Adjustments to deferred consideration - 5 - 5
Net change relating to legal
settlement - - 3 3
Acquisition costs - 3 - 3
Other administrative costs 164 20 1 185
--------------------------------------- ----------- ------------- ------------ ------
1,498 160 23 1,681
======================================= =========== ============= ============ ======
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
2019 2018 2018
GBPm GBPm GBPm
----------------------------------------- ----------- ----------- -------------
ICAP integration costs
- Employee related costs 9 12 22
- Share-based payment charge/(credit) 2 (1) -
- Premises and technology costs 3 1 1
- Amortisation of other intangible
assets 1 - 1
- Other administrative costs 5 12 20
----------------------------------------- ----------- ----------- -------------
20 24 44
Acquisition and disposal costs
- Acquisition costs 2 - 3
- Amortisation of intangible assets
arising on consolidation 21 20 40
- Impairment of intangible assets
arising on consolidation - 58 65
- Impairment of associate - - 3
- Adjustments to deferred consideration 2 (1) 5
----------------------------------------- ----------- ----------- -------------
45 101 160
Taxation (8) (11) (20)
----------------------------------------- ----------- ----------- -------------
37 90 140
========================================= =========== =========== =============
Exceptional items comprise:
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2019 2018 2018
GBPm GBPm GBPm
----------------------------------------------- ----------- ----------- -------------
Exceptional items
- Charge relating to business reorganisation 4 - 18
- Charge relating to employee long-term
benefits - - 2
- Net charge relating to legal settlements
(Note 18) 2 4 3
----------------------------------------------- ----------- ----------- -------------
6 4 23
Taxation (1) - (4)
----------------------------------------------- ----------- ----------- -------------
5 4 19
=============================================== =========== =========== =============
8. Other operating income
Other operating income represents receipts such as rental
income, royalties, insurance proceeds, settlements from
competitors, and business relocation grants. Costs associated with
such items are included in administrative expenses.
9. Finance income
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2019 2018 2018
GBPm GBPm GBPm
---------------------------------------- ----------- ----------- -------------
Interest receivable and similar income 2 1 4
Interest receivable on finance lease 1 - -
receivables
Deemed interest arising on the defined
benefit pension scheme surplus - 1 1
---------------------------------------- ----------- ----------- -------------
3 2 5
======================================== =========== =========== =============
10. Finance costs
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2019 2018 2018
GBPm GBPm GBPm
--------------------------------------- ----------- ----------- -------------
Interest and fees payable on bank
facilities 2 1 4
Interest payable on Sterling Notes
June 2019 2 2 4
Interest payable on Sterling Notes
January 2024 12 13 26
Interest payable on Sterling Notes 1 - -
May 2026
Other interest payable - 1 1
Amortisation of debt issue and bank
facility costs 1 1 1
--------------------------------------- ----------- ----------- -------------
Borrowing costs 18 18 36
Interest payable on lease liabilities 6 - -
Premium on repurchase of Sterling 3 - -
Notes January 2024
--------------------------------------- ----------- ----------- -------------
27 18 36
======================================= =========== =========== =============
11. Earnings per share
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2019 2018 2018
---------------------------- ----------- ----------- -------------
Basic - underlying 19.3p 19.2p 34.2p
Diluted - underlying 19.1p 19.1p 33.9p
Basic earnings per share 11.8p 2.3p 5.7p
Diluted earnings per share 11.7p 2.3p 5.7p
---------------------------- ----------- ----------- -------------
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
2019 2018 2018
No. (m) No. (m) No. (m)
--------------------------------- ----------- ----------- -------------
Basic weighted average shares 560.0 556.3 558.5
Contingently issuable shares 5.7 4.4 5.6
--------------------------------- ----------- ----------- -------------
Diluted weighted average shares 565.7 560.7 564.1
================================= =========== =========== =============
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
2019 2018 2018
GBPm GBPm GBPm
--------------------------------------- ----------- ----------- -------------
Earnings for the period 67 15 35
Non-controlling interests (1) (2) (3)
--------------------------------------- ----------- ----------- -------------
Earnings 66 13 32
Acquisition, disposal and integration
costs (Note 7) 45 101 160
Exceptional items (Note 7) 6 4 23
Taxation (9) (11) (24)
--------------------------------------- ----------- ----------- -------------
Underlying earnings 108 107 191
======================================= =========== =========== =============
12. Dividends
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2019 2018 2018
GBPm GBPm GBPm
------------------------------------- ----------- ----------- -------------
Amounts recognised as distributions
to
equity holders in the period:
Final dividend for the year ended
31 December 2018
of 11.25p per share 63 - -
Interim dividend for the year ended
31 December 2018
of 5.6p per share - - 31
Final dividend for the year ended
31 December 2017
of 11.25p per share - 63 63
63 63 94
===================================== =========== =========== =============
An interim dividend of 5.6p per share will be paid on 8 November
2019 to all shareholders on the Register of Members on 4 October
2019.
As at 30 June 2019 the TP ICAP plc Employee Benefit Trust held
4,535,504 ordinary shares (31 December 2018 and 30 June 2018:
2,609,004 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 2019 1,030 564 1,594
Acquisition adjustments in the measurement
period:
- Remeasurement of other intangible
assets (5) 5 -
- Increase in net asset acquired (2) - (2)
Amortisation of acquisition related
intangibles - (21) (21)
Impairment of acquisition related - - -
intangibles
Effect of movements in exchange rates - - -
-------------------------------------------- --------- ------ ------
As at 30 June 2019 1,023 548 1,571
============================================ ========= ====== ======
The Group continues to review the assets and liabilities it
acquired with Axiom Refined Products, LLC, Atlas Commodity Markets,
LLC, Atlas Petroleum Markets, LLC, and Atlas Physical Grains, LLC
(collectively 'Axiom'), together with their associated fair values.
As permitted by IFRS 3 'Business Combinations', this review will be
completed during the 12 month 'measurement period' ending in
November 2019. Details of the acquisition of Axiom is set out in
Note 30(b) to the 2018 statutory Group Financial Statements. As at
30 June 2019 measurement adjustments have been recorded that
increase the provisional value of customer relationships by GBP5m
and increase the value of net assets acquired by GBP2m, with a
corresponding reduction in goodwill.
Other intangible assets at 30 June 2019 represent customer
relationships of GBP532m (31 December 2018: GBP543m), business
brands and trademarks of GBP13m (31 December 2018: GBP16m), and
other intangibles of GBP3m (31 December 2018: GBP5m) 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
2019 2018
GBPm GBPm
---------------------------- -------- ------------
CGU
EMEA 655 654
Americas 273 281
Asia Pacific 95 95
----------------------------- -------- ------------
Goodwill allocated to CGUs 1,023 1,030
============================= ======== ============
During the period the Group has undertaken an impairment
assessment of its CGUs to which goodwill has been allocated.
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.
Following the adoption of IFRS 16, the right-of-use assets
recognised by the Group have been allocated to the relevant CGU,
increasing that CGU's carrying value. The valuation of the CGU also
increases reflecting changes in the relevant discount rates used,
due to the inclusion of lease liabilities, together with changes to
lease renewal cash flows during the forecast period. As both the
carrying value and valuation of the CGU increase, no additional
impairment arises as a result of the change in CGU carrying value
and valuation.
As at 30 June 2019 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
revenue, equating to a 0.9% compound annual growth rate over the
five year projected period, have been used for all CGUs, with post
IFRS 16, pre-tax discount rates of 11.0% for EMEA, 13.6% for
Americas and 11.8% for Asia Pacific. The calculations have been
subject to stress tests reflecting reasonably possible changes in
key assumptions.
No impairment has arisen as a result of the VIU valuation at
June 2019, however both the Americas and Asia Pacific CGUs are
sensitive to reasonably possible changes in the VIU assumptions.
Under this approach the recoverable amount for Americas exceeded
its carrying value by GBP141m, which reduces to GBPnil if, over the
projected period, compound annual growth rates fall to negative
0.5% or if the discount rate increased to 17.3% and Asia Pacific
exceeded its carrying value by GBP17m, which reduces to GBPnil if,
over the projected period, compound annual growth rates falls to
0.8% or if the discount rate increased to 12.9%. 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. Retirement benefits
The Group has a defined benefit pension scheme in the UK and a
small number of schemes operated in other countries.
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2019 2018 2018
GBPm GBPm GBPm
------------------------------------------------------------- ----------- ----------- -------------
Defined benefit scheme surplus -
UK 55 56 55
Impact of asset ceiling on UK scheme
surplus:
(55) - -
* Charged to other comprehensive income (remeasurement
of defined benefit pension schemes)
------------------------------------------------------------- ----------- ----------- -------------
Recognised in Condensed Consolidated
Balance Sheet - 56 55
============================================================= =========== =========== =============
Defined benefit schemes deficit -
Overseas (3) (4) (3)
============================================================= =========== =========== =============
Movements in the UK Scheme's assets and liabilities were as
follows:
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2019 2018 2018
GBPm GBPm GBPm
--------------------------------------- ----------- ----------- -------------
Fair value of Scheme assets:
Opening balance 243 260 260
Deemed interest income 2 3 6
Return on Scheme assets - Trustee
administered funds - (2) (2)
Return on Scheme assets - revaluation
of insurance policies 16 (5) (9)
Benefits paid/transfers out (5) (4) (11)
Administrative expenses - - (1)
--------------------------------------- ----------- ----------- -------------
Closing balance 256 252 243
======================================= =========== =========== =============
Present value of Scheme liabilities:
Opening balance (188) (203) (203)
Deemed interest cost (2) (2) (5)
Actuarial (losses)/gains (16) 5 9
Benefits paid/transfers out 5 4 11
--------------------------------------- ----------- ----------- -------------
(201) (196) (188)
======================================= =========== =========== =============
Scheme surplus 55 56 55
======================================= =========== =========== =============
In 2017 the Group reported that the Trustee had insured the
Scheme's defined benefit liabilities through the purchase of a bulk
annuity 'buy-in' policy from Rothesay Life. The policy is in the
name of the Scheme and is a Scheme asset.
During 2019 the Trustee commenced proceedings to 'buy-out' the
Scheme's liabilities, a process that will enable the Trustee to
exchange the Scheme's bulk annuity policy for individual policies
issued to, and directly held, by the Scheme's beneficiaries. To
proceed with the 'buy-out', the Sponsor and Trustee commenced the
wind-up of the Scheme. Prior to this, the Trustee had no right to
unilaterally wind-up, or otherwise augment the benefits due to
members and based on those limitations the net surplus was
recognised in full by the Group. Under UK legislation, once a
Scheme commences wind-up, the assets of the Scheme pass
unconditionally to the Trustee to enable it to settle the Scheme's
liabilities. As a result, the Group has applied the requirements of
IFRIC 14, restricting the Group's recognition of the net surplus by
applying an asset recognition ceiling. The asset ceiling is
recorded in other comprehensive income.
During the wind-up period, the Group will continue to restrict
the recognition of the net surplus. During this period any member
benefits that are augmented will represent a past service cost and
will be recorded as exceptional costs in the Income Statement as
and when those benefits are agreed. Costs associated with the
settlement of the Scheme's liabilities will also be recorded as
exceptional costs in the Income Statement as and when incurred.
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%.
15. Interest bearing loans and borrowings
Current Non-current Total
30 June 2019 GBPm GBPm GBPm
----------------------------- -------- ------------ ------
Bank loans - - -
Loans from related parties 37 - 37
Sterling Notes January 2024 10 429 439
Sterling Notes May 2026 1 249 250
----------------------------- -------- ------------ ------
48 678 726
============================= ======== ============ ======
31 December 2018
Bank loans 52 - 52
Sterling Notes June 2019 80 - 80
Sterling Notes January 2024 12 498 510
----------------------------- -------- ------------ ------
144 498 642
============================= ======== ============ ======
All amounts are stated after unamortised transaction costs.
Bank credit facilities and bank loans
In December 2018 the Group cancelled its GBP250m committed
revolving credit facility, that would have matured in April 2020,
and entered into a new GBP270m committed revolving credit facility
maturing in December 2021. Interest of LIBOR+2.0% is payable on the
drawn balance. Facility commitment fees of 0.8% on the undrawn
balance are payable on the new facility, reduced from 1.0% that
were payable on the cancelled facility. Arrangement fees of GBP3m
were incurred in 2018 and will be amortised over the maturity of
the new facility.
As at 30 June 2019, the GBP270m revolving credit facility was
undrawn. Amounts drawn down are reported as bank loans in the above
table. Bank loans are denominated in Sterling and their carrying
amount approximated to their fair value.
Interest and facility fees of GBP2m were incurred in the six
months to 30 June 2019.
Loans from related parties
In April 2019 the Group borrowed Yen 5bn (GBP35m) due 30
September 2019 from a related party. The loan has a coupon of 6
month TIBOR + 2.25%. At 30 June 2019 the fair value of the loan
(Level 2) was GBP37m. Accrued interest at 30 June 2019 amounted to
less than GBP1m.
Sterling Notes: Due June 2019
In June 2019 the Group repaid its GBP80m Sterling Notes that
were due June 2019. These Notes had a coupon of 5.25% payable
semi-annually.
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. During the period to 30 June 2019 the Group repurchased
Notes with a par value of GBP69m, for GBP73m including accrued
interest. At 30 June 2019 the fair value of the remaining Notes
(Level 1) was GBP452m. Accrued interest at 30 June 2019 amounted to
GBP10m. Issue costs of GBP3m were incurred in 2017.
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.
At 30 June 2019 the fair value of the Notes (Level 1) was GBP256m.
Accrued interest at 30 June 2019 amounted to GBP1m. Issue costs of
GBP1m were incurred in the period.
16. Reconciliation of operating result to net cash from operating activities
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2019 2018 2018
GBPm GBPm GBPm
----------------------------------------------------- ----------- ----------- -------------
Operating profit 107 50 93
Adjustments for:
- Share-based payment charge 5 1 5
- Pension scheme's administration
costs - - 1
- Depreciation of property, plant
and equipment 6 5 13
- Depreciation of right-of-use assets 11 - -
- Amortisation of intangible assets 13 12 26
* Amortisation of intangible assets arising on
consolidation 21 20 40
* Impairment of intangible assets arising on
consolidation - 58 65
* Loss on disposal of associates - - 1
* Impairment of associates - - 3
- Adjustments to deferred consideration 2 (1) 5
- Revaluation of debt instruments 2 - -
- Non-cash movement in FVTPL balances (2) - -
----------------------------------------------------- ----------- ----------- -------------
Operating cash flows before movement
in working capital 165 145 252
Increase in trade and other receivables (38) (69) (37)
Increase in net settlement and trading
balances (48) (46) (14)
(Decrease)/increase in trade and
other payables (20) (2) 1
Decrease in provisions - (13) (1)
Increase in non-current liabilities - 14 13
Retirement benefit scheme contributions - - (1)
----------------------------------------------------- ----------- ----------- -------------
Cash generated from operations 59 29 213
Income taxes paid (34) (14) (30)
Interest paid (27) (16) (34)
----------------------------------------------------- ----------- ----------- -------------
Net cash from operating activities (2) (1) 149
===================================================== =========== =========== =============
17. Analysis of net funds
1 January Adoption Cash Non-cash Exchange 30 June
2019 of IFRS flow items differences 2019
16
GBPm GBPm GBPm GBPm GBPm GBPm
--------------------------- ---------- --------- ------ --------- ------------- --------
Cash 670 - 23 - - 693
Cash equivalents 10 - 3 - - 13
Overdrafts (13) - (47) - - (60)
--------------------------- ----------
Cash and cash equivalents 667 - (21) - - 646
Financial investments 133 - 2 - - 135
--------------------------- ---------- --------- ------ --------- ------------- --------
Total funds 800 - (19) - - 781
=========================== ========== ========= ====== ========= ============= ========
Bank loan due within
one year (52) - 52 - - -
Loans from related
parties - - (35) - (2) (37)
Sterling Notes June
2019 (80) - 82 (2) - -
Sterling Notes January
2024 (510) - 84 (13) - (439)
Sterling Notes May
2026 - - (249) (1) - (250)
Lease liabilities - (145) 10 (15) - (150)
--------------------------- ---------- --------- ------ --------- ------------- --------
(642) (145) (56) (31) (2) (876)
=========================== ========== ========= ====== ========= ============= ========
Total net funds 158 (145) (75) (31) (2) (95)
=========================== ========== ========= ====== ========= ============= ========
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.
During the six months to 30 June 2019 the Group repaid the
GBP52m that was drawn on its GBP270m committed revolving credit
facility as at 31 December 2018. As at 30 June 2019 the facility is
undrawn. The facility matures in December 2021. Interest of
LIBOR+2.0% is payable on the drawn balance with facility fees of
0.8% payable on the undrawn balance.
The Group adopted IFRS 16 'Leases', as set out in Note 2(d), on
1 January 2019. Lease liabilities arising as a result of the
application of the standard have been included as part of the
Group's net funds.
Non-cash items represent additions to lease liabilities, accrued
interest, the amortisation of debt issue costs and IFRS 9 expected
credit losses.
18. Provisions
Property Re-structuring Legal Total
and other
GBPm GBPm GBPm GBPm
------------------------------------------------------------- --------- --------------- ----------- ------
At 1 January 2019 14 10 37 61
Adoption of IFRS16
* onerous lease provisions offset against right-of-use
assets (8) - - (8)
* increase in property provisions charged against
right-of-use assets 1 - - 1
Charge to income statement - 4 3 7
Utilisation of provisions - (7) - (7)
Effect of movements in exchange - - - -
rates
------------------------------------------------------------- --------- --------------- ----------- ------
At 30 June 2019 7 7 40 54
============================================================= ========= =============== =========== ======
Included in current liabilities 29
Included in non-current liabilities 25
------------------------------------------------------------- --------- --------------- ----------- ------
54
============================================================= ========= =============== =========== ======
Property provisions outstanding as at 30 June 2019 relate to
provisions in respect of building dilapidations, represents the
estimated cost of making good dilapidations and disrepair on
various leasehold buildings. Onerous lease provisions as at 31
December 2018 have been offset again the right-of-use asset arising
on the adoption of IFRS 16 (Note 2(d)). Property leases expire in
one to 15 years.
Restructuring provisions outstanding as at 30 June 2019 relate
to termination and other employee related costs. The net decrease
during the period reflects the utilisation of the provisions
established as a result of the Group's cost improvement programme
and the integration of ICAP. It is expected that these obligations
will continued to be discharged during 2019.
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 25 years.
European Commission - Yen LIBOR
In February 2015 the European Commission imposed a fine of
EUR15m (GBP13m) on ICAP Europe Limited ('IEL') for alleged
competition violations in relation to the involvement of certain of
IEL'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, the
Company notes 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 IEL served its reply during
April 2018. Written submissions for the appeal process closed in
2018. During 2018 the amount provided in respect of this matter was
reduced to EUR10m (GBP9m) reflecting the Group's estimate of the
liability. A decision from the Courts of Justice 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. However, the European Commission is likely to adopt new
articles in relation to a fine and therefore the amount of EUR10m
(GBP9m) has been retained.
Commodity Futures Trading Commission - USD Medium Term Interest
Rate Swaps
In June 2018, the Group recorded an exceptional legal provision
in the amount of US$10m (GBP8m) in connection with an ongoing
regulatory investigation into its subsidiary, Tullett Prebon
Americas Corp. ('TPAC'), relating to alleged broker conduct on the
TPAC USD Medium Term Interest Rate Swaps desk between 2013 and
2014. Based upon currently available information, the Company
believes that the outcome of the investigation will not, in
aggregate, have a material adverse effect on the Group's financial
condition. During the period, the amount provided for in respect of
this matter has been increased from US$10m (GBP8m) to US$13m
(GBP10m) reflecting the Group's current estimate of the liability.
In light of the inherent uncertainties of such proceedings,
however, including those that may be brought by regulators or other
governmental authorities, the ultimate cost to the Group of
resolving such proceedings may exceed current litigation provisions
and any excess may be material to its operating results for any
particular period depending, in part upon the operating results for
such period.
19. Contingent liabilities
FCA investigation
Tullett Prebon Europe Limited ('TPEL') is currently under
investigation by the FCA in relation to certain trades undertaken
between 2008 and 2011, including trades which are risk free, which
are alleged to have no commercial rationale or economic purpose, on
which brokerage is paid, and trades on which brokerage may have
been improperly charged. As part of its investigation, the FCA is
considering the extent to which during the relevant period (i)
TPEL's systems and controls were adequate to manage the risks
associated with such trades and (ii) whether certain of TPEL's
managers were aware of, and/or managed appropriately the risks
associated with, the trades. The FCA is also reviewing the
circumstances surrounding a failure in 2011 by TPEL to discover
certain audio files and produce them to the FCA in a timely manner.
As the investigation is ongoing, it is not possible to predict its
ultimate outcome and accordingly any potential liability and/or
financial impact cannot currently be reliably estimated. In
connection with the investigation, the Group has undertaken its own
review of the Group's previous systems and controls in relation to
client gifts and hospitality. A decision from the FCA is expected
to be received in the second half of 2019.
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 Valores Mobiliários Ltda
('ICAP Brazil') is a defendant in 13 (31 December 2018: 19) 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 54m (GBP11m) (31 December 2018: BRL 67m (GBP14m)). 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.
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 233m (GBP48m). 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 and it is stayed pending discussion before the
Superior Court of Justice regarding the production of evidence.
Therefore, the case is not anticipated to be resolved in 2019.
LIBOR Class actions
The Group is currently defending two LIBOR related 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 and the Court is expected to
issue its decision by 14 August 2019. 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.
(ii) Swiss Franc 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 3 July 2018, the
Companies filed motions to dismiss for lack of jurisdiction and
failure to state a claim, which are currently pending. 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.
ICAP Securities Limited - Frankfurt AG
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.
General note
From time to time the Group's subsidiaries are engaged in
litigation in relation to a variety of matters, and it is required
to provide information to regulators and other government agencies
as part of informal and formal enquiries or market reviews. 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.
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.
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.
20. 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
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)
----------------------------------- ---------- ------------ ------- ---------- ------ ------------- --------
Six months ended 30 June
2018
(unaudited)
----------------------------------- ---------- ------------ ------- ---------- ------ ------------- --------
Equity investments at FVTOCI
- net change in fair value 6 - - - 6 - 6
----------------------------------- ---------- ------------ ------- ---------- ------ ------------- --------
Effect of changes in exchange
rates on translation of
foreign operations - 14 - - 14 1 15
----------------------------------- ---------- ------------ ------- ---------- ------ ------------- --------
Remeasurement of the defined
benefit pension scheme - - - (2) (2) - (2)
----------------------------------- ---------- ------------ ------- ---------- ------ ------------- --------
Taxation on components
of
other comprehensive income - 1 - 1 2 - 2
----------------------------------- ---------- ------------ ------- ---------- ------ ------------- --------
Other comprehensive income/(loss)
for the period 6 15 - (1) 20 1 21
----------------------------------- ---------- ------------ ------- ---------- ------ ------------- --------
Year ended 31 December
2018
----------------------------------- ---------- ------------ ------- ---------- ------ ------------- --------
Equity investments at FVTOCI
- net change in fair value 7 - - - 7 - 7
----------------------------------- ---------- ------------ ------- ---------- ------ ------------- --------
Effect of changes in exchange
rates on translation of
foreign operations - 48 - - 48 1 49
----------------------------------- ---------- ------------ ------- ---------- ------ ------------- --------
Remeasurement of the defined
benefit pension scheme - - - (2) (2) - (2)
----------------------------------- ---------- ------------ ------- ---------- ------ ------------- --------
Taxation on components
of
other comprehensive income - - - 1 1 - 1
----------------------------------- ---------- ------------ ------- ---------- ------ ------------- --------
Other comprehensive income/(loss)
for the period 7 48 - (1) 54 1 55
=================================== ========== ============ ======= ========== ====== ============= ========
21. 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 2019 (unaudited) GBPm GBPm GBPm GBPm GBPm
---------------------------- ------------------ ------------- ------------ -------------- ----------
Non-current financial
assets
measured at fair
value
Equity securities - 18 - - 18
Corporate debt securities 2 - - - 2
---------------------------- ------------------ ------------- ------------ -------------- ----------
2 18 - - 20
============================ ================== ============= ============ ============== ==========
Current financial
assets
measured at fair
value
Derivative instruments - - - 2 2
Government debt securities 84 - - - 84
Current financial
assets
Not measured at fair
value
Term deposits - - 38 - 38
Restricted funds - - 13 - 13
Trade receivables - - 322 - 322
Settlement balances
receivable - - 56,370 - 56,370
Deposits paid for
securities borrowed - - 818 - 818
Cash and cash equivalents - - 646 - 646
---------------------------- ------------------ ------------- ------------ -------------- ----------
84 - 58,207 2 58,293
============================ ================== ============= ============ ============== ==========
Total financial assets 86 18 58,207 2 58,313
============================ ================== ============= ============ ============== ==========
Mandatorily at FVTPL Other financial Total
liabilities carrying
Financial Liabilities amount
----------------------------- ----------------------- ----------------------
Non-current Current Non-current Current
30 June 2019 (unaudited) GBPm GBPm GBPm GBPm GBPm
----------------------------- ------------- -------- ------------ -------- ----------
Financial liabilities
measured at fair
value
Deferred consideration 12 19 - - 31
Derivative instruments - - - - -
----------------------------- ------------- -------- ------------ -------- ----------
12 19 - - 31
============================= ============= ======== ============ ======== ==========
Financial liabilities
Not measured at fair
value
Bank loan - - - - -
Loans from related
parties - - - 37 37
Sterling Notes January
2024 - - 429 10 439
Sterling Notes May
2026 - - 249 1 250
Trade payables - - - 22 22
Settlement balances
payable - - - 56,289 56,289
Deposits received
for
securities loaned - - - 821 821
----------------------------- ------------- -------- ------------ -------- ----------
- - 678 57,180 57,858
============================= ============= ======== ============ ======== ==========
Total financial liabilities 12 19 678 57,180 57,889
============================= ============= ======== ============ ======== ==========
(b) Maturity profile of financial liabilities
As at 30 June 2019, 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 2019 (unaudited) GBPm GBPm GBPm GBPm GBPm
-------------------------- ------------ ---------- --------- ---------- -------------
Settlement balances 56,289 - - - 56,289
Deposits received
for
securities loaned 821 - - - 821
Derivatives at FVTPL - - - - -
Trade payables 22 - - - 22
Bank loan - - - - -
Loans from related
parties 37 - - - 37
Sterling Notes January
2024 11 11 522 - 544
Sterling Notes May
2026 - 13 53 276 342
Lease liabilities 8 27 88 100 223
Deferred consideration - 19 12 - 31
-------------------------- ------------ ---------- --------- ---------- -------------
57,188 70 675 376 58,309
========================== ============ ========== ========= ========== =============
(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 2019 (unaudited) GBPm GBPm GBPm GBPm
-------------------------------- -------- -------- -------- ------
Financial assets
measured at fair value
Equity instruments 3 8 7 18
Corporate debt securities - - 2 2
Government debt securities 84 - - 84
Derivative instruments - 2 - 2
Financial liabilities
measured at fair value
Deferred consideration - - (31) (31)
Derivative instruments - - - -
-------------------------------- -------- -------- -------- ------
87 10 (22) 75
================================ ======== ======== ======== ======
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 2019 7 2 (41) (32)
Net change in fair value
- included in 'administrative
expenses' - - (2) (2)
Acquisitions during the period 1 - - 1
Amounts settled during the
period (1) - 12 11
Effect of movements in exchange - - - -
rates
--------------------------------- ------------- ---------------- ------------------ ------
Balance as at 30 June 2019 7 2 (31) (22)
================================= ============= ================ ================== ======
Directors' Responsibility Statement
The Directors 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, and that 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
6 August 2019
Independent Review Report to TP ICAP plc
Introduction
We have been engaged by the Company to review the condensed set
of financial statements in the half year report for the six months
ended 30 June 2019 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
21. We have read the other information contained in the half year
report and considered whether it contains any apparent
misstatements or material inconsistencies with the information in
the condensed set of financial statements.
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 them
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.
Directors' responsibilities
The half year report is the responsibility of, and has been
approved by, the Directors. The Directors are responsible for
preparing the half year report in accordance with the Disclosure
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 year 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 year 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 year report for the six months ended 30 June 2019 is
not prepared, in all material respects, in accordance with
International Accounting Standard 34 as adopted by the European
Union and the Disclosure and Transparency Rules of the United
Kingdom's Financial Conduct Authority.
Deloitte LLP
Statutory Auditor
London, UK
6 August 2019
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 PAMBTMBBMTFL
(END) Dow Jones Newswires
August 06, 2019 02:01 ET (06:01 GMT)
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