Tullett Prebon today announces the preliminary results of IGBB for the year ended 31 March 2016
Further to the announcement released on 11 November 2015 regarding the proposed acquisition by Tullett Prebon of the global hybrid voice broking and information business of ICAP plc (“ICAP”) including ICAP’s associated technology and broking platforms (including iSwap and Fusion) and certain of ICAP’s joint ventures and associates (“IGBB”) (the “Transaction”), Tullett Prebon today announces the preliminary results of IGBB for the year ended 31 March 2016.
The financial information has been prepared on the basis outlined in the appendix to this announcement. IGBB has not in the past constituted a separate legal group and the results of IGBB presented in this announcement might have been different had the entities operated as a separate group from 1 April 2014.
The Transaction continues to be conditional upon clearances from antitrust authorities in the UK, the United States, Australia and Singapore. As previously announced, Tullett Prebon continues to work cooperatively with those authorities in connection with their review of the Transaction. Tullett Prebon will also seek a number of approvals from other regulators, including the UK Financial Conduct Authority in relation to a change of control, so as to enable the Transaction to take place. Completion of the Transaction will be subject to satisfaction of these and other conditions.
Performance trends for IGBB for the year ended 31 March 2016
For the year ended 31 March 2016, on a reported basis, IGBB revenue was 8 per cent. lower than in the year to 31 March 2015, IGBB Global Broking (including iSwap) revenue was 10 per cent. lower than the prior year and IGBB Information Services revenue was 24 per cent. higher than the prior year. On a regional basis, EMEA revenue decreased by £43 million to £331 million (2014/15: £374 million), the Americas saw a reduction of £34 million to £263 million (2014/15: £297 million) and APAC revenue was in line with 2014/15 at £96 million.
IGBB revenue from continuing businesses for the year ended 31 March 2016, on a constant currency basis, was 3 per cent. lower than the prior year, IGBB Global Broking (including iSwap) revenue was 4 per cent. lower than the prior year and IGBB Information Services revenue was 22 per cent. higher than the prior year.
The trading performance of IGBB Global Broking (including iSwap) was impacted by the ongoing combination of structural and cyclical factors, including historically low and negative interest rates, low levels of volatility, and bank deleveraging resulting in reduced risk appetite from bank customers and which continue to act as headwinds for the business. Global economic uncertainties and oil price reductions generated spikes in activity but overall market activity remained subdued.
Investments in e-Commerce and IGBB Global Broking’s hybrid footprint drove a 14 per cent. increase in matching revenue. During the year, IGBB Global Broking launched Scrapbook, allowing customers to efficiently manage corporate bond positions and, in March 2016, after a successful pilot, launched CrossTrade on TrueQuote, a new portal for buyside customers. The Relative Value business, launched in August 2014, continued to grow and expand its footprint and revenue more than doubled against the prior year. The launch of technology solutions in equity derivatives continued to improve the market position of the business, contributing to a 6 per cent. increase in equity product revenue (on a reported basis) in 2015/16.
Cost base enhancements following the prior year restructuring of broker compensation resulted in a 2 percentage point decrease in broker compensation as a percentage of broking revenue to 50 per cent. (2014/15: 52 per cent.).
IGBB’s trading operating profit for the year ended 31 March 2016 of £65 million has been impacted by:
- £17 million of indirect costs which are not to be charged to IGBB by ICAP or incurred by IGBB following Completion;
- £11 million of foreign exchange losses which have arisen from accounting for the retranslation of non-functional currency intercompany balances and other monetary items arising within IGBB legal entities; and
- £4 million of one-off legal and termination costs.
IGBB broker headcount as at 31 March 2016 is 1,368 (1,497 as at 31 March 2015 and 1,472 as at 30 June 2015). The decrease in broker headcount reflects ongoing business management in addition to the reclassification of ICAP India Private Limited as an associate.
IGBB current trading
IGBB’s revenue from continuing businesses for April 2016, on a constant currency basis, was in line with the prior year. A marginal decrease in IGBB Global Broking (including iSwap) revenue was offset by an increase in revenue from IGBB Information Services.
Tullett Prebon current trading
Tullett Prebon issued a trading update on 12 May 2016, to coincide with its Annual General Meeting, which is reproduced below.
Revenue in the four months to April 2016 of £291 million was 2% higher than the £285 million reported for the same period last year, and 1% lower at constant exchange rates.
Trading conditions have remained mixed, although the pick-up in activity levels in certain products and markets observed in the last two months of 2015 has continued during the period. In Europe and the Middle East, trading volumes have remained subdued, reflecting lower activity in traditional product areas. Activity levels in the Americas have benefited from the investments that have been made in Energy in the region. The performance of Asia Pacific has continued to progress, benefiting from the investment made in Fixed Income capability at the end of 2015.
Source: Tullett Prebon