(Adds analyst comments.
By Digby Larner
Of DOW JONES NEWSWIRES
U.K. interdealer broker ICAP PLC (IAP.LN) said Thursday that because of continued investment in new business activities it expects pretax profit in its fiscal first half to be slightly lower than in the same period a year earlier.
But it said that as a result of higher market activity, group revenue should increase by around 6% over the same period.
The company's shares at 0722 GMT were down 7 pence, or 1.6%, at 416 pence in a slightly higher London market.
ICAP said pretax profit for the fiscal full-year ending March 31, 2010, excluding amortization, impairments and exceptional items, should be in line with analyst forecasts of GBP309 million to GBP354 million. That compares with GBP346 million reported in the fiscal year 2009.
Chief Executive Michael Spencer said: "We made a solid start to the year across many markets ahead of a pronounced seasonal slowdown during the summer. Higher market activity levels have now returned."
He said many of the markets ICAP operates in are benefiting from continuing low short-term interest rates, steep yield curves and substantial corporate and government bond issuance.
"Both credit and equity derivatives have experienced more difficult conditions. Overall activity levels in commodities have remained strong," Spencer said.
He said that in electronic broking, markets have been quieter than a year ago, although cost cuts and other measures have helped to hold margins.
"Our investment is continuing in new organic initiatives to support the long-term growth of this business and in IT to further enhance the existing competitive advantage of our electronic broking platforms," Spencer said.
ICAP said it made further cost cuts of GBP23 million for the 2009/10 fiscal year and that some of this was offset by investment in development areas.
Oriel Securities, with an estimate of GBP337 million for fiscal 2010 pretax profit, said the cautious statement fit with its view that this year would be a slower-growth one for ICAP, but it likes the company's long-term prospects. It kept a reduce rating on the shares, saying they still look overpriced after recent selling. Oriel's price target is 380 pence to 400 pence.
Shore Capital kept the stock at a hold, saying it was a solid start to the year.
The company reports full results Nov. 17.
Company Web site: www.icap.com
-By Digby Larner, Dow Jones Newswires; +33 1 4017 1748; digby.larner@dowjones.com
(Margot Patrick and Andrea Tryphonides contributed to this article.)