ICAP: Full-year results for the year ended 31 March 2015
ICAP plc (IAP.L), a leading markets operator and provider of post trade risk and information services, announces today its audited results for the year ended 31 March 2015.
Highlights:
- Double digit Post Trade Risk and Information revenue growth, on a constant currency basis, driven by TriOptima and Traiana
- Significant new business momentum at EBS
- Group full year trading PBT down 15% to £229 million; second half PBT up 8% on the prior year second half to £143 million
- Global Broking restructuring substantially completed; Group annualised cost saving target exceeded £70 million achieved with £41 million realised in the year
- Targeted investment in growth areas – £43 million investment in new initiatives (2013/14 – £42 million)
- Strong cash conversion – 106% (2013/14 – 75%)
- Proposed final dividend maintained at 15.4p; full year dividend 22.0p
Financial performance
For the year ended 31 March 2015, the Group reported revenue of £1,276 million, 7% below the prior year. On a constant currency basis, revenue from Post Trade Risk and Information was up 10% which was offset by decreases of 1% in Electronic Markets and 11% in Global Broking.
During the course of the year, the Group’s trading performance was impacted by a combination of structural and cyclical factors. Bank deleveraging, in response to stricter regulatory capital requirements, negatively impacted the trading activity of ICAP’s customers, particularly in the Global Broking division. This was partly offset in the second half of the year by the European quantitative easing announcements and the speculation on the timing of a US interest rate rise which resulted in increased volatility. Some of the revenue loss within Global Broking was as a result of closed businesses as the Group successfully completed its restructuring programme.
In response to the challenging trading conditions experienced towards the end of 2013/14 and into the first half of 2014/15, the Group embarked on a comprehensive review and restructuring of the Global Broking division. As a result of this action, coupled with improved market volumes and new product initiatives, in the second half of 2014/15 the Group delivered a trading profit before tax of £143 million, an increase of 8% on the prior year.
The 10% increase in Post Trade Risk and Information revenue was driven through increased participation in triReduce portfolio compression cycles and the uptake of the portfolio reconciliation service, triResolve. Subscription based revenue increased in products such as CreditLink and crossasset regulatory reporting in Traiana. Electronic Markets’ revenue decreased 1% on a constant currency basis, with EBS revenue increasing by 2%, offset by a 2% revenue decrease in BrokerTec.
Group net trading operating expenses of £1,024 million were 6% lower than the previous year, mostly driven by an 11% decrease in Global Broking as the cost saving programme initiated over the past three financial years has taken £175 million of cumulative annualised costs out of the business. £41 million of net cost savings were achieved from the successful completion of the Group’s 2014/15 restructuring programme. A further £12 million of incremental net annualised savings attributable to the prior year cost reduction initiatives was also achieved. Additionally, the flexibility of the cost base continued to be enhanced through the restructuring of broker compensation as contracts became due for renewal. The total broker and support headcount in Global Broking reduced by 740 in the year to 2,336 employees, and the broker compensation ratio was reduced by four percentage points to 53%.
Consistent with the Group’s growth strategy, ICAP continues to make significant investment in the Electronic Markets and Post Trade Risk and Information divisions. During the year the Group invested £43 million in new business lines including EBS Direct, the ICAP SEF, triCalculate and Traiana Limithub, an increase of £1 million compared with the same period last year. The total headcount of Electronic Markets and Post Trade Risk and Information businesses expanded by 119 during the year to 1,226 employees.
The Group reported a trading operating profit of £252 million, 13% down on the prior year. The Group’s trading operating profit margin reduced to 20% (2013/14 – 21%). The proportion of the Group’s trading operating profit generated from the Electronic Markets and Post Trade Risk and Information divisions increased to 75%, reflecting a seven percentage point increase on the prior year.
Group trading profit before tax of £229 million and trading EPS (basic) of 28.7p were 15% and 14% down on the prior year respectively. Profit before tax was £95 million (2013/14 – £121 million), reflecting a £15 million decrease in acquisition and disposal costs partially offsetting the £42 million decrease in trading profit before tax. Basic EPS declined 17% to 13.0p.
Source: ICAP
