Revenue from Information Sales and Risk Management Services was
17% higher than last year. The Information Sales business has
benefited from the growing client demand for independent data and
for enhanced validation of information sources, and has increased
revenue by adding new data content sets and through broadening its
customer base, with an increasing number of information feeds to
client IT applications. The investment in sales and marketing in
the Risk Management Services business has resulted in increased
market share in USD and Asia Pacific currencies.
Revenue from Treasury Products (FX and cash) was 3% lower, with
lower activity in Europe and some products in Asia Pacific partly
offset by a stronger performance in the Americas.
Revenue from Interest Rate Derivatives (swaps and options) was
6% higher than last year, reflecting the sporadic volatility in
interest rates in Europe during the period and improved market
conditions for JPY products in Asia Pacific.
The 11% decline in revenue from Fixed Income reflects the low
liquidity and levels of activity in the European government and
corporate bond markets, and in the North American government and
agency bond markets, partly offset by higher revenue in corporate
bonds in North America including that generated by the brokers
hired from Murphy & Durieu at the beginning of the year.
The Equities businesses in Europe and the Americas both
performed well during the period but this was offset by lower
activity in equity derivatives in Asia Pacific reflecting lower
levels of client trading.
Revenue by region H1 2015 H1 2014 Change Change
GBPm GBPm Incl. Excl.
PVM PVM
Europe and the Middle East 241.9 208.1 +16% -4%
Americas 117.9 110.9 +6% +1%
Asia Pacific 55.9 49.7 +12% +5%
At constant exchange rates 415.7 368.7 +13% -1%
Exchange translation (8.4)
Reported 415.7 360.3 +15% +1%
======== ======== ======= =======
Europe and the Middle East
Revenue in Europe and the Middle East was 16% higher including
PVM, and was 4% lower excluding PVM. The base broking revenue in
the region was 6% lower than last year, partly offset by growth in
revenue from Information Sales.
The region continues to face difficult market conditions in many
of the traditional major product areas. Revenue from forward FX and
cash, and from government and corporate bonds, which account for a
significant proportion of the revenue in the region, was lower than
last year. This was partly offset by higher revenue in Interest
Rate Derivatives reflecting the sporadic volatility in interest
rates in Europe during the period, and by higher revenue from
Energy and commodities, particularly in oil and from the
development of our activities in base and precious metals. The
Equities business has also performed well compared with a difficult
period in the first half of 2014.
Including PVM, Energy is the largest product group by revenue in
the region, and accounts for over one third of the region's broking
revenue in the first half.
Average broker headcount in the region, excluding PVM, was 7%
lower than last year with average revenue per broker up 1%. Period
end broker headcount, including PVM, was 831.
Americas
Revenue in the Americas was 6% higher including PVM and was 1%
higher excluding PVM.
Revenue in the product areas where the business is particularly
dependent on serving the traditional interdealer broker client
base, most notably Interest Rate Derivatives and government and
agency Fixed Income, was lower than last year reflecting the lower
level of market activity. This was offset by higher revenue in
Treasury products (FX and cash), particularly in emerging markets'
currencies, by the further development of the business's presence
in corporate bonds through the addition of brokers from Murphy
& Durieu at the beginning of the year, and by the benefit of
the investments made last year in the Equities business.
We have improved the quality of our Energy business in the
Americas through our withdrawal from broking power contracts for
end-users by disposing of our standalone subsidiary Unified Energy
Services. We have invested in establishing our presence in
emissions broking. Including PVM, our Energy activities in the
Americas accounted for over 10% of the total revenue in the region,
and this will be further boosted by the acquisition of MOAB.
Average broker headcount in the Americas, excluding PVM, was 6%
higher than in 2014, with average revenue per broker 5% lower.
Period end broker headcount in the Americas, including PVM, was
554.
Asia Pacific
Revenue in Asia Pacific was 12% higher than last year including
PVM and was 5% higher excluding PVM. The growth in base broking
revenue in the region was boosted by the increased revenue from the
Risk Management Services business which is operated from the
region.
The growth in base broking revenue has been achieved despite the
slowdown in client trading in volatility products in regional
currencies and in equity derivatives compared with last year, and
reflects the continued development of the offshore Renminbi market,
improved market conditions for JPY interest rate swaps, and the
development of the Energy and commodities broking activities in the
region. Including PVM, Energy and commodities now accounts for
around one sixth of the region's total broking revenue. We are also
developing the Fixed Income broking capability in the region, and
we have hired a team to build our presence in corporate and
sovereign bonds in the region who will start with the business
during the second half.
Average broker headcount in the region, excluding PVM, was 5%
lower than in 2014 reflecting the actions taken to improve the cost
base, with average revenue per broker up 8%. Period end broker
headcount in Asia Pacific, including PVM, was 365.
Underlying Operating profit
The revenue, underlying operating profit and operating margin by
region shown below are as reported.
Revenue Underlying Operating
profit
--------------------------- ---------------------------
GBPm H1 2015 H1 2014 Change H1 2015 H1 2014 Change
Europe and the Middle
East 241.9 209.0 +16% 46.3 43.0 +8%
Americas 117.9 102.7 +15% 7.1 2.7 +163%
Asia Pacific 55.9 48.6 +15% 7.2 4.6 +57%
-------- -------- ------- -------- -------- -------
Reported 415.7 360.3 +15% 60.6 50.3 +20%
======== ======== ======= ======== ======== =======
Underlying Operating margin by region H1 2015 H1 2014
Europe and the Middle East 19.1% 20.6%
Americas 6.0% 2.6%
Asia Pacific 12.9% 9.5%
-------- --------
14.6% 14.0%
======== ========
The GBP46.3m underlying operating profit in Europe and the
Middle East was 8% higher than last year, but the underlying
operating margin has reduced to 19.1%. The actions taken under the
cost improvement programme last year have resulted in a 10%
reduction in fixed broker employment costs in the first half,
excluding PVM, compared with the same period a year ago, but this
benefit has been offset by the operational leverage effect of the
decline in base broking revenue and from the investments being made
in strengthening and developing the business.
The significant improvement in profitability in the Americas
reflects the benefit of building scale in the region and the cost
improvement programme. Fixed broker compensation costs in the base
business in North America were 17% lower than last year. The 163%
increase in underlying operating profit to GBP7.1m has resulted in
the underlying operating margin improving to 6.0%.
Underlying operating profit in Asia Pacific has increased by 57%
to GBP7.2m, and the underlying operating margin in the region has
increased to 12.9%. Fixed broker employment costs in the first
half, excluding PVM, have been reduced by 8% compared with the
first half of 2014. The benefit of the higher contribution margin
has been complemented by the operational leverage effect of the
higher broking revenue and by the increased revenue and operating
profit from Risk Management Services.
Financial Review
The results for the first half of 2015 compared with those for
the first half of 2014 are shown in the tables below.
H1 2015
-------------------------------------- ------------- ----------------- -----------
Exceptional
Income Statement and acquisition
GBPm Underlying related Reported
items
Revenue 415.7 415.7
------------- ----------------- -----------
Operating profit 60.6 60.6
Credit relating to major legal
actions 64.4 64.4
Amortisation of acquisition deferred
consideration (5.2) (5.2)
Amortisation of intangible assets
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