Tullett Prebon PLC Half Yearly Report -4-
July 28 2015 - 2:02AM
UK Regulatory
arising on acquisition (0.7) (0.7)
Loss on disposal of subsidiary (0.3) (0.3)
Operating profit 60.6 58.2 118.8
Net finance expense (7.7) (7.7)
------------- ----------------- -----------
Profit before tax 52.9 58.2 111.1
Tax (10.8) (12.9) (23.7)
Associates 1.2 1.2
Minorities (0.3) (0.3)
------------- ----------------- -----------
Earnings 43.0 45.3 88.3
============= ================= ===========
Average number of shares 243.6m 243.6m
Basic EPS 17.7p 36.2p
H1 2014
--------------------------------------------------------------------------------------
Exceptional
Income Statement and acquisition
GBPm Underlying related Reported
items
Revenue 360.3 360.3
------------- ----------------- -----------
Operating profit 50.3 50.3
Charge relating to major legal
actions (4.4) (4.4)
Charge relating to cost improvement
programme (28.6) (28.6)
Acquisition costs (1.3) (1.3)
Operating profit 50.3 (34.3) 16.0
Net finance expense (7.1) (7.1)
------------- ----------------- -----------
Profit before tax 43.2 (34.3) 8.9
Tax (9.3) 2.2 (7.1)
Associates 1.2 1.2
Minorities (0.2) (0.2)
------------- ----------------- -----------
Earnings 34.9 (32.1) 2.8
============= ================= ===========
Average number of shares 217.8m 217.8m
Basic EPS 16.0p 1.3p
Exceptional and acquisition related items
As previously announced, the Company entered into an agreement
with BGC in January 2015 under which BGC would pay $100m to the
Company to settle the litigation in the New Jersey Superior Court.
The first $25m of the $100m settlement was paid to the Company in
January and the remaining $75m was paid to the Company at the end
of March. Net of the GBP2.7m of costs that have been incurred in
2015 in relation to the legal action the exceptional credit in the
first half of 2015 relating to the major legal actions is GBP64.4m.
The GBP4.4m charge in the first half of 2014 relates to the costs
incurred in that period on the major legal actions with BGC.
The Company completed the acquisition of PVM on 26 November
2014. The payment to each individual vendor of their share of up to
$48m of deferred consideration (which is subject to the achievement
of revenue targets in the three years after completion) is linked
to their continued service with the business, and is therefore
amortised through the income statement over the three year period.
The amortisation charge recognised in the first half of 2015 is
GBP5.2m.
Intangible assets other than goodwill of GBP9.5m arising on the
acquisition of PVM relate to the PVM brand and the value of
customer relationships. This amount is being amortised through the
income statement over the estimated useful lives of those assets.
The amortisation charge recognised in the first half of 2015 is
GBP0.7m.
Unified Energy Services was sold during the first half of the
year incurring a loss of GBP0.3m on disposal.
The GBP28.6m charge in the first half of 2014 relating to the
cost improvement programme reflects the costs incurred in that
period of the actions taken to reduce fixed costs.
The GBP1.3m charge in the first half of 2014 relating to
acquisition costs reflects legal and professional costs incurred in
relation to the acquisition of PVM.
Net finance expense
The net finance expense comprises a cash finance charge of
GBP8.3m (2014: GBP8.2m) partly offset by non-cash finance income of
GBP0.6m (2014: GBP1.1m).
The cash finance charge comprises the GBP7.0m interest payable
on the outstanding Sterling Notes, the commitment fee for the
revolving credit facility of GBP0.8m, other net interest income of
GBP0.6m, and GBP1.1m of amortisation of debt issue costs including
a GBP0.6m one-off charge relating to the balance of unamortised
issue costs arising on the revolving credit facility that was
refinanced in April 2015.
The non-cash finance income comprises the deemed interest on the
pension scheme net asset of GBP1.1m, partly offset by the unwind of
discounted liabilities and provisions.
Tax
The effective rate of tax on underlying PBT is 20.5% (H1 2014:
21.5%). The effective rate of tax reflects the estimated effective
rate for the full year.
The actual effective rate of tax on underlying PBT for the full
year 2014 of 19.5% included the benefit of the release of some
provisions relating to tax uncertainties which were resolved during
that year. Excluding the benefit from the release of provisions,
the effective rate of tax on underlying PBT for the full year 2014
would have been 23.1%.
The 2.6% point reduction in the estimated effective rate for
2015 compared with the 23.1% effective rate for 2014 reflects the
reduction in the UK statutory rate of corporation tax and higher
taxable profits in the USA on which no charge has been recognised
due to the availability of unrecognised tax losses.
The GBP12.9m tax charge on exceptional and acquisition related
items in the first half of 2015 reflects the GBP13.0m UK tax
payable on the GBP64.4m credit relating to the settlement with BGC
net of the costs incurred, less GBP0.1m deferred tax credit
relating to the amortisation of the intangible assets arising on
acquisition. The amortisation of deferred consideration does not
attract tax relief. The GBP2.2m tax credit on exceptional items in
the first half of 2014 reflected the tax relief at the relevant
rate for the jurisdiction in which the charges were borne. No tax
relief was recognised on the exceptional charges arising in the USA
in 2014 due to the low level of taxable profit in that
jurisdiction.
Basic EPS
The average number of shares used for the basic EPS calculation
of 243.6m reflects the 243.5m shares in issue at the beginning of
the year, plus the 0.3m shares that are issuable when vested
options are exercised, less the 0.2m shares held throughout the
period by the Employee Benefit Trust which has waived its rights to
dividends.
Exchange rates
The income statements and balance sheets of the Group's
businesses whose functional currency is 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,
the Euro, the Singapore dollar and the Japanese Yen. Average and
period end exchange rates used in the preparation of the financial
statements are shown below.
Average Period End
---------------------------- ----------------------------
H1 2015 H1 2014 H2 2014 30 June 31 Dec 30 June
2015 2014 2014
US dollar $1.53 $1.67 $1.64 $1.57 $1.56 $1.71
Euro EUR1.36 EUR1.22 EUR1.26 EUR1.41 EUR1.29 EUR1.25
Singapore dollar S$2.06 S$2.11 S$2.08 S$2.12 S$2.07 S$2.13
Japanese Yen Yen183 Yen171 Yen177 Yen192 Yen187 Yen173
Cash flow
H1 2015 H1 2014
GBPm GBPm
Underlying Operating profit 60.6 50.3
Share-based compensation and other non-cash
items 0.3 0.5
Depreciation and amortisation 7.4 6.7
EBITDA 68.3 57.5
Capital expenditure (net of disposals) (6.3) (4.0)
(Increase)/decrease in initial contract
prepayment (2.2) 7.4
Other working capital (13.7) (33.1)
-------- --------
Operating cash flow 46.1 27.8
Exceptional and acquisition related items
- Cost improvement programme 2014 (3.8) (3.8)
- Restructuring 2011/2012 (0.2) (0.7)
- Major legal actions 64.4 (4.4)
- Acquisition costs - (1.3)
Interest (2.1) (2.4)
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