Interim Results
November 25 2003 - 2:02AM
UK Regulatory
RNS Number:4439S
ICAP PLC
25 November 2003
ICAP plc
Interim Results for six months ended 30 September 2003
ICAP plc, the world's largest voice and electronic interdealer broker, today
announced Interim Results for the six months ended 30 September 2003.
Highlights:
*Profit before tax, goodwill amortisation and exceptionals rose 47% to
#85.4 million (2002: #58.2 million)
*Turnover rose 31% to #407.7 million (2002: #311.3 million)
*Cash inflow from operating activities before operating exceptional items
was #81.5 million (2002: #47.3 million)
*Group operating profit margin improved to 19.8% from 16.5%
*Adjusted EPS rose 27% to 45.7p (2002: 35.9p), basic EPS was 41.5p (2002:
43.7p)
*Interim dividend of 8.5p (2002: 7p)
*A share split to divide each of the Company's ordinary shares of 50p into
five new ordinary shares of 10p each is proposed
Michael Spencer, Group Chief Executive, said:
"This has been a most successful first half with profit* rising significantly as
ICAP continues to expand through organic growth and benefit from the recent
acquisition of BrokerTec. Turnover has continued to grow faster than costs and
we have delivered a further improvement in our operating margins, demonstrating
the importance of tight cost control and the economies of scale.
The performance of BrokerTec since acquisition in May 2003 has been even better
than our original expectations and we have successfully completed the first
phase of the integration of the businesses. ICAP's electronic broking activities
are now profitable* and our market share is rising.
Overall market conditions across the fixed income and derivatives markets have
been extremely active as medium-term rates have been volatile. We expect that
the markets will remain active even if rate volatility moderates.
In summary, ICAP is in a very strong position in both the voice and electronic
broking segments of the market and we look forward to a continued good
performance in the second half."
There will be an analyst's briefing at 09:30 am GMT on Tuesday 25 November 2003
at Park House, 16 Finsbury Circus, London EC2M 7UR. An audiocast of the
presentation made to analysts at 09:30 am GMT on 25 November 2003 will be
available on the web site, www.icap.com at 2:30 pm GMT on 25 November 2003. It
will remain on the web site for six months.
25 November 2003
ENQUIRIES:
ICAP plc
Michael Spencer, Group Chief Executive (44) 20 7628 6708
Mike Sheard, Director of Corporate Affairs (44) 20 7574 7771
Gavin Anderson
Ken Cronin (44) 20 7554 1400
About ICAP
ICAP is the world's largest voice and electronic interdealer broker. The Group
is active in the wholesale market for OTC derivatives, fixed income, money
markets, futures, energy, foreign exchange, equities and equity derivatives with
daily transaction volumes in excess of $550 billion.
Please go to www.icap.com for more information.
ICAP plc
Interim Results for six months ended 30 September 2003
Operational Review
ICAP has enjoyed another very successful first half of the year, with profit
before tax, goodwill amortisation and exceptionals up 47% to #85.4 million and
adjusted earnings per share up 27% to 45.7 pence. Excluding the impact of recent
acquisitions, underlying turnover grew by 16% and profit* by 28%, reflecting
active market conditions as well as market share growth.
Derivatives The markets have been generally buoyant as a result of continuing
high volatility in virtually all the interest rate markets. The Bank of
International Settlements recently announced continued strong growth in interest
rate derivatives, which reached a record $121.8 trillion of notional amounts
outstanding in the first half of 2003. Interest rate swaps grew by 20% and
interest rate options by 23% compared with the second half of 2002. Overall
business in the foreign exchange derivatives markets was especially buoyant with
currency options surging by 42% over the previous six months. ICAP's turnover in
derivatives and money markets rose by 27% to #167.8 million, generating sharply
higher profit* of #39.4 million (2002 - #28.1 million).
Fixed Income A number of factors contributed to the increased activity in the
fixed income markets and ICAP increased turnover to #189 million, generating a
profit* of #34.7 million (2002 - #27.1 million):
* There was significant new issuance as G7 governments' budget deficits
ballooned. In the US, daily average Treasury volumes grew to $478 billion/
day in the third quarter of 2003, 6.3% above the previous quarter and 21.6%
above the same period in the previous year.
* Corporate issuers grabbed at the opportunity created by continuing low
interest rates to strengthen their balance sheets and new international
issuance grew in the first 9 months of 2003 by 39% in Europe and 22% in
North America.
*There was increasing use of credit derivatives. According to ISDA (the
International Swaps Dealers Association), credit derivatives continued their
strong growth, up 25% in the first six months of 2003 to $2.69 trillion, a
similar rate of growth to the previous six months. Credit derivatives
include credit default swaps, baskets and portfolio transactions.
Energy Consolidating the acquisition of APB in the United States in 2002 and the
addition of Intercontinental Energy Brokers staff in the UK in 2003, ICAP's
energy related turnover rose to #20 million from #8.9 million in 2002. Profit*
rose to #2.4 million. We plan to expand further our energy activities, both
organically and through selective acquisitions.
Data The financial information market remains a very competitive environment for
our customers, the information vendors. However, through product innovation and
additional revenue as a result of the BrokerTec acquisition, profit* from
information services has risen to #7.3 million (2002 - #4.0 million).
Electronic Broking
The completion of the BrokerTec acquisition in May was a key strategic
objective, transforming our electronic broking capability. ICAP is now the
leading global electronic interdealer broker, as well as the leading voice
broker. In the third quarter of 2003, ICAP's electronic broking volumes had
grown to an average of $221 billion/day. BrokerTec's results have exceeded our
original expectations with turnover of #26.8 million and profit* of #6.9 million
since the acquisition on 7 May 2003. Overall, ICAP's electronic broking division
recorded a profit* of #1.4 million in the six months to 30 September 2003.
Electronic broking naturally complements voice broking and bringing together
ICAP and the BrokerTec business provides a highly competitive platform for
trading in the fixed income markets. A technology project to cross-connect
BrokerTec's and ICAP's electronic platforms in the US Treasury markets was
completed in September and now successfully provides voice and/or electronic
access to a common pool of liquidity. This provides our customers with the
choice between voice support or electronic execution. Taking US Treasuries,
Bills and Agencies together ICAP had an estimated market share of 44% in
October.
Integration of the BrokerTec business is well underway and we expect that cost
savings this year will exceed the original #2.2m target (with one-off costs so
far of #1.9m) and forecast to total #5m for the full year. We anticipate that
further synergies are achievable in 2004/2005.
ICAP has a much more extensive electronic footprint than any other broker and in
October completed 81% of its volume electronically in US Treasuries, 43% in
T-Bills, 36% in Agencies, 59% in US Repo and 34% in Mortgage Backed Securities.
Following the success of the cross-connect project for US Treasuries, we are
extending the use of cross-connect. A second product, US$ Sovereigns and Supra's
in Europe, is expected go live late in November 2003. European Government Bonds
and Repos will follow in early 2004.
Outside the fixed income markets, 35 banks have now been connected and are using
the iSwap platform (non-interactively) for Euro interest rate swaps, 5 more are
at various stages of installation. The next steps will be to extend coverage to
Sterling IRS and in early 2004 to launch iSwap for electronic trading of Eonias
(short term IRS).
A project to provide improved price discovery and straight through processing in
Forward FX and money market cash products using the Datatec platform is expected
to go live in early 2004. It will involve offices in Europe, the US and Asia
sharing access to the liquidity generated across the ICAP network.
TriOptima, the highly successful Swedish business in which ICAP has a 30% stake,
has become the established system for reducing interest rate swap portfolios for
the banks. Since its launch in April this year the total nominal value of swap
termination transactions through TriOptima's triReduce(R) service has been
$2,954 billion (approximately 5.8% of the total value of outstanding
inter-dealer interest rate derivative contracts).
Geographic analysis
Europe and Africa was the most profitable region with turnover of #174.6 million
generating profit* of #42.2 million, a margin of 24% (2002 - #31.2 million).
Turnover in the Americas, including acquisitions, rose strongly to #199.4
million, up 34% and generating profit* of #37.9 million (2002 - #20.9 million).
Market activity in Asia Pacific was slightly slower. Following the integration
of the Nittan businesses last year profit* grew slightly to #5.1 million (2002 -
#3.6 million) on turnover of #43.5 million.
US foreign exchange market
ICAP has instructed external lawyers to carry out an investigation into the
alleged fraudulent activity in the foreign exchange market by three ICAP broking
staff who were arrested last week together with several others in the US. The
Group is co-operating fully with the government's investigation of these staff.
As far as we can determine, we do not believe that ICAP itself has suffered any
direct financial loss.
Outlook
Our strategy has been consistent over the past several years and will remain on
the same path; growing our business - both voice and electronic - organically
and through selective acquisition. We believe that there is still a significant
opportunity to increase our global market share, currently 26%, to more than
30%.
Other than ICAP's acquisition of BrokerTec, the pace of industry consolidation
elsewhere has been slightly disappointing. We expect that further mergers will
occur as the potential of scale economies become more widely appreciated.
Market conditions remain good for ICAP and our overall position is very strong.
Medium term interest rate volatility may not return to the very high levels seen
in mid 2003 but we have seen a turning point in the interest rate cycle in most
countries, which is good for our activity levels. The high levels of bond
issuance also seem set to continue, both corporate as well as government. Credit
derivatives volumes continue to grow further and energy related activity is also
strong.
Dividend
An interim dividend of 8.5 pence per share covering the six-month period to 30
September 2003 will be paid on 27 February 2004 to shareholders on the register
on 30 January 2004.
Share Split
It is proposed to divide each of the Company's ordinary shares of 50p into five
new ordinary shares of 10p each. The proposed split recognises that the level of
ordinary shares, which have risen by 580% since the merger of Garban and
Intercapital in 1999, is now at a level that might impair their marketability
and liquidity. Accordingly the Board will seek approval at an Extraordinary
General Meeting on 4 February 2004 to implement the subdivision. The value of
each shareholding will not be affected and, except for the difference in nominal
value, the ordinary shares, following the share subdivision will have the same
rights as the existing ordinary shares.
Subject to the approval by shareholders, the subdivision will become effective,
and the dealings in the new ordinary shares are expected to commence, on
9 February 2004.
* Profit before tax, goodwill amortisation and exceptionals.
Consolidated Profit and Loss Account
Unaudited 6 months ended 30 September 2003
Before goodwill Goodwill amortisation Exceptional Total
amortisation Items
and exceptional (note 4)
items
Note #m #m #m #m
Turnover including share of
joint ventures
Continuing operations 390.7 - - 390.7
Acquisitions 26.8 - - 26.8
2 417.5 - - 417.5
Less share of joint (9.8) - - (9.8)
ventures' turnover
Group turnover 407.7 - - 407.7
Net operating expenses 3 (327.1) (17.7) (0.9) (345.7)
Continuing operations 73.7 (10.4) (0.4) 62.9
Acquisitions 6.9 (7.3) (0.5) (0.9)
Group operating profit 80.6 (17.7) (0.9) 62.0
Share of operating profit 4.6 (0.1) - 4.5
of joint ventures and
associates
Total operating profit 85.2 (17.8) (0.9) 66.5
Net profit on disposal of - - 4.6 4.6
fixed assets
Net loss on termination and - - - -
disposal of operations
Profit before interest 2 85.2 (17.8) 3.7 71.1
Net interest receivable 0.2 - - 0.2
Profit on ordinary 85.4 (17.8) 3.7 71.3
activities before taxation
Taxation on profit on 5 (29.7) 5.6 1.0 (23.1)
ordinary activities
Profit on ordinary 55.7 (12.2) 4.7 48.2
activities after taxation
Minority interests - equity (2.1) - - (2.1)
Profit for the financial 53.6 (12.2) 4.7 46.1
period
Dividends 6 (12.4) - - (12.4)
Retained profit for the 41.2 (12.2) 4.7 33.7
financial period
Earnings per share
- basic 7 41.5p
- diluted 7 38.5p
- adjusted 7 45.7p
Unaudited 6 months ended 30 September 2002
Before goodwill Goodwill amortisation Exceptional items Total
amortisation and (note 4)
exceptional items
Note #m #m #m #m
Turnover including
share of joint ventures
Continuing operations 322.5 - - 322.5
Acquisitions - - - -
2 322.5 - - 322.5
Less share of joint (11.2) - - (11.2)
ventures' turnover
Group turnover 311.3 - - 311.3
Net operating expenses 3 (259.8) (6.6) (1.5) (267.9)
Continuing operations 51.5 (6.6) (1.5) 43.4
Acquisitions - - - -
Group operating profit 51.5 (6.6) (1.5) 43.4
Share of operating 4.2 (0.1) - 4.1
profit of joint
ventures and associates
Total operating profit 55.7 (6.7) (1.5) 47.5
Net profit on disposal - - 14.4 14.4
of fixed assets
Net loss on termination - - - -
and disposal of
operations
Profit before interest 2 55.7 (6.7) 12.9 61.9
Net interest receivable 2.5 - - 2.5
Profit on ordinary 58.2 (6.7) 12.9 64.4
activities before
taxation
Taxation on profit on 5 (20.6) 1.4 (0.5) (19.7)
ordinary activities
Profit on ordinary 37.6 (5.3) 12.4 44.7
activities after
taxation
Minority interests - (1.3) - - (1.3)
equity
Profit for the 36.3 (5.3) 12.4 43.4
financial period
Dividends 6 (7.0) - - (7.0)
Retained profit for the 29.3 (5.3) 12.4 36.4
financial period
Earnings per share
- basic 7 43.7p
- diluted 7 42.0p
- adjusted 7 35.9p
Audited year ended 31 March 2003
Before goodwill Goodwill amortisation Exceptional items Total
amortisation and (note 4)
exceptional items
Note #m #m #m #m
Turnover including
share of joint ventures
Continuing operations 685.5 - - 685.5
Acquisitions - - - -
2 685.5 - - 685.5
Less share of joint (21.2) - - (21.2)
ventures' turnover
Group turnover 664.3 - - 664.3
Net operating expenses 3 (550.8) (16.7) (4.0) (571.5)
Continuing operations 113.5 (16.7) (4.0) 92.8
Acquisitions - - - -
Group operating profit 113.5 (16.7) (4.0) 92.8
Share of operating 7.1 (0.3) - 6.8
profit of joint
ventures and associates
Total operating profit 120.6 (17.0) (4.0) 99.6
Net profit on disposal - - 15.4 15.4
of fixed assets
Net loss on termination - - (0.6) (0.6)
and disposal of
operations
Profit before interest 2 120.6 (17.0) 10.8 114.4
Net interest receivable 3.1 - - 3.1
Profit on ordinary 123.7 (17.0) 10.8 117.5
activities before
taxation
Taxation on profit on 5 (42.5) 3.9 0.5 (38.1)
ordinary activities
Profit on ordinary 81.2 (13.1) 11.3 79.4
activities after
taxation
Minority interests - (2.6) - - (2.6)
equity
Profit for the 78.6 (13.1) 11.3 76.8
financial period
Dividends 6 (30.3) - - (30.3)
Retained profit for the 48.3 (13.1) 11.3 46.5
financial period
Earnings per share
- basic 7 77.0p
- diluted 7 73.4p
- adjusted 7 77.3p
The Group's results are derived wholly from continuing operations.
Consolidated Balance Sheet
Unaudited as at Unaudited as at Audited as at
30 September 2003 30 September 2002 31 March 2003
Note #m #m #m
Fixed assets
Intangible assets 282.1 91.0 118.8
Tangible assets 65.4 51.8 51.1
Investments in joint ventures 6.3 6.7 6.1
Investments in associates 6.2 5.9 5.6
Investments in own shares 4.0 1.3 2.2
Other investments 3.3 5.5 3.1
367.3 162.2 186.9
Current assets
Debtors 9 1,178.9 532.2 648.5
Investments 15.5 11.5 11.5
Cash at bank and in hand 194.9 133.4 174.1
1,389.3 677.1 834.1
Creditors: amounts falling due within one year 9 (1,254.2) (573.2) (723.3)
Net current assets 135.1 103.9 110.8
Total assets less current liabilities 502.4 266.1 297.7
Creditors: amounts falling due after more than (13.0) (16.8) (27.1)
one year
Provisions for liabilities and charges (8.4) (9.1) (7.4)
Net assets 481.0 240.2 263.2
Capital and reserves
Called up share capital 10 57.5 50.3 51.4
Contingent share capital 10 96.8 16.2 22.9
Share premium account 10 141.7 9.9 28.6
Other reserves 10 31.4 32.9 33.0
Profit and loss account 10 144.1 122.6 118.9
Shareholders' funds - equity 471.5 231.9 254.8
Minority interests - equity 9.5 8.3 8.4
481.0 240.2 263.2
Consolidated Statement of Total Recognised Gains and Losses
Unaudited Unaudited Audited
6 months ended 6 months ended year ended
30 September 2003 30 September 2002 31 March 2003
Note #m #m #m
Profit for the financial period 46.1 43.4 76.8
Adjustments to reserves
- Exchange adjustments on net investments in 10 (8.6) (9.4) (7.7)
overseas undertakings
- Other recognised exchange losses - - (0.2)
Total recognised gains and losses for the 37.5 34.0 68.9
period
Reconciliation of Movements in Consolidated Shareholders' Funds
Unaudited Unaudited Audited
6 months ended 6 months ended year ended
30 September 2003 30 September 2002 31 March 2003
Note #m #m #m
Opening shareholders' funds 254.8 188.5 188.5
Movements during the period
Total recognised gains and losses for the 37.5 34.0 68.9
period
Other movements
- Dividends (12.4) (7.0) (30.3)
- Shares issued 10 117.7 0.2 4.8
- Contingent share capital 10 73.9 16.2 22.9
Closing shareholders' funds 471.5 231.9 254.8
Consolidated Cash Flow Statement
Unaudited Unaudited Audited
6 months ended 6 months ended year ended
30 September 2003 30 September 2002 31 March 2003
Note #m #m #m
Cash inflow from operating activities
Before operating exceptional items 11(a) 81.5 47.3 142.1
Operating exceptional items paid (1.7) (6.2) (8.3)
79.8 41.1 133.8
Dividends received from joint ventures and 1.8 2.8 3.9
associates
Returns on investments and servicing of finance (0.2) 2.2 3.0
Taxation (18.5) (14.9) (35.7)
Capital expenditure and financial investment (13.6) (13.3) (21.8)
Acquisitions and disposals (4.7) (18.1) (36.4)
Equity dividends paid (26.1) (17.9) (24.9)
Management of liquid resources 1.1 (0.1) -
Financing (0.2) 0.2 2.1
Increase/(decrease) in cash in the period 11(b) 19.4 (18.0) 24.0
Notes to the Financial Statements
1 Basis of preparation
The Interim Financial Statements have been prepared under the historical cost convention, in accordance
with applicable United Kingdom accounting standards and in accordance with the accounting policies and
definitions set out in the Annual Report of ICAP plc for the year ended 31 March 2003, except for the
introduction of the new accounting policy described below.
The Interim Financial Statements are unaudited but have been reviewed by the auditors,
PricewaterhouseCoopers LLP. The statutory accounts to 31 March 2003 have been filed with the Registrar
of Companies and the auditors issued an unqualified report thereon which did not contain any statement
under Section 237 of the Companies Act 1985.
Government grants
Revenue grants are credited to the profit and loss account in the same period as the related expenditure
is charged.
2 Segmental information
In order to reflect its increasing significance to the Group, the analysis by activity has been expanded
to show Energy broking as a separate business segment. Energy broking was formerly included within
Derivatives and money broking and the comparatives have been restated accordingly.
(a) Turnover
Analysis by activity 6 months ended 30 September 2003 6 months ended 30 September
2002
Continuing Acquisitions Joint Total Continuing Joint Total
operations ventures operations ventures
#m #m #m #m #m #m #m
Securities broking 186.3 - 2.7 189.0 166.3 3.6 169.9
Derivatives and money 160.7 - 7.1 167.8 124.9 7.6 132.5
broking
Energy broking 20.0 - - 20.0 8.9 - 8.9
Electronic broking 7.2 22.3 - 29.5 5.0 - 5.0
Information services 6.7 4.5 - 11.2 6.2 - 6.2
380.9 26.8 9.8 417.5 311.3 11.2 322.5
Year ended 31 March 2003
Continuing Joint Total
Operations ventures
#m #m #m
Securities broking 347.4 6.3 353.7
Derivatives and money broking 264.9 14.9 279.8
Energy broking 28.5 - 28.5
Electronic broking 10.8 - 10.8
Information services 12.7 - 12.7
664.3 21.2 685.5
Analysis by geographic 6 months ended 30 September 2003 6 months ended 30 September
location 2002
Continuing Acquisitions Joint Total Continuing Joint Total
opeartions ventures operations ventures
#m #m #m #m #m #m #m
Americas 170.6 21.8 7.0 199.4 141.3 7.8 149.1
Europe 167.1 5.0 2.5 174.6 143.5 3.4 146.9
Asia Pacific 43.2 - 0.3 43.5 26.5 - 26.5
380.9 26.8 9.8 417.5 311.3 11.2 322.5
Year ended 31 March 2003
Continuing Joint Total
operations ventures
#m #m #m
Americas 300.7 14.4 315.1
Europe 300.1 6.1 306.2
Asia Pacific 63.5 0.7 64.2
664.3 21.2 685.5
The geographic analysis presented above shows the Group's turnover by origin. There is no material
difference between the Group's turnover by origin and its turnover by destination.
2 Segmental information continued
(b) Profit before interest
Analysis by activity 6 months ended 30 September 2003
Continuing Joint
operations ventures Total
before and before
goodwill Acquisitions associates goodwill Goodwill Total
#m #m #m #m #m #m
Securities broking 34.2 - 0.5 34.7 (5.5) 29.2
Derivatives and money broking 35.5 - 3.9 39.4 (3.5) 35.9
Energy broking 2.4 - - 2.4 (1.4) 1.0
Electronic broking (2.8) 4.0 0.2 1.4 (4.9) (3.5)
Information services 4.4 2.9 - 7.3 (2.5) 4.8
73.7 6.9 4.6 85.2 (17.8) 67.4
Exceptional items (note 4) 3.7
Total 71.1
6 months ended 30 September 2002
Continuing Joint
operations ventures Total
before and before
goodwill associates goodwill Goodwill Total
#m #m #m #m #m
Securities broking 26.5 0.6 27.1 (4.9) 22.2
Derivatives and money broking 24.3 3.8 28.1 (1.8) 26.3
Energy broking 1.4 - 1.4 - 1.4
Electronic broking (4.7) (0.2) (4.9) - (4.9)
Information services 4.0 - 4.0 - 4.0
51.5 4.2 55.7 (6.7) 49.0
Exceptional items (note 4) 12.9
Total 61.9
Year ended 31 March 2003
Continuing Joint
operations ventures Total
before and before
goodwill associates goodwill Goodwill Total
#m #m #m #m #m
Securities broking 56.9 0.8 57.7 (10.5) 47.2
Derivatives and money broking 52.3 6.7 59.0 (5.2) 53.8
Energy broking 4.3 - 4.3 (1.2) 3.1
Electronic broking (8.1) (0.4) (8.5) (0.1) (8.6)
Information services 8.1 - 8.1 - 8.1
113.5 7.1 120.6 (17.0) 103.6
Exceptional items (note 4) 10.8
Total 114.4
Analysis by geographic location 6 months ended 30 September 2003
Continuing Joint
operations ventures Total
before and before
goodwill Acquisitions associates goodwill Goodwill Total
#m #m #m #m #m #m
Americas 28.9 6.9 2.1 37.9 (13.0) 24.9
Europe 40.9 - 1.3 42.2 (3.4) 38.8
Asia Pacific 3.9 - 1.2 5.1 (1.4) 3.7
73.7 6.9 4.6 85.2 (17.8) 67.4
Exceptional items (note 4) 3.7
Total 71.1
6 months ended 30 September 2002
Continuing Joint
operations ventures Total
before and before
goodwill associates goodwill Goodwill Total
#m #m #m #m #m
Americas 19.1 1.8 20.9 (3.8) 17.1
Europe 29.7 1.5 31.2 (2.7) 28.5
Asia Pacific 2.7 0.9 3.6 (0.2) 3.4
51.5 4.2 55.7 (6.7) 49.0
Exceptional items (note 4) 12.9
Total 61.9
2 Segmental information continued
Year ended 31 March 2003
Continuing Joint
operations ventures Total
before and before
goodwill associates goodwill Goodwill Total
#m #m #m #m #m
Americas 41.5 2.8 44.3 (9.5) 34.8
Europe 66.7 2.6 69.3 (5.9) 63.4
Asia Pacific 5.3 1.7 7.0 (1.6) 5.4
113.5 7.1 120.6 (17.0) 103.6
Exceptional items (note 4) 10.8
Total 114.4
3 Net operating expenses
Net operating expenses include other operating income of #5.5m (6 months to 30 September 2002 and year
ended 31 March 2003 - nil) principally consisting of #3.9m relating to a government grant receivable for
the current period in the US under a Business Employment Incentive Program (BEIP).
4 Exceptional items
6 months 6 months Year
ended ended ended
30 30 31
September September March
2003 2002 2003
#m #m #m
Operating exceptional items
Exceptional items relating to acquisitions (1.9) - (1.7)
Operating expenses relating to the World Trade Center - (1.5) (2.3)
disaster
Other operating exceptional items 1.0 - -
(0.9) (1.5) (4.0)
Non-operating exceptional items
Profit on disposal of fixed assets 4.6 14.4 15.4
Net loss on termination and disposal of operations - - (0.6)
Exceptional items included in profit before interest 3.7 12.9 10.8
Taxation 1.0 (0.5) 0.5
Total exceptional profits 4.7 12.4 11.3
Operating exceptional items
Operating exceptional items include:-
- a loss of #1.9m in the 6 months ended 30 September 2003 in respect of reorganisation and
rationalisation costs following the acquisition of BrokerTec.
- a net credit of #1.0m for other operating exceptional items relates to a revenue grant in
the US in respect of the prior year of #2.8m, offset by expenses of #1.8m principally relating
to an adjustment to a vacant property provision.
Non-operating exceptional items
Non-operating exceptional items include a profit on the disposal of fixed assets of #4.6m representing
the final receipt of material damage insurance proceeds in connection with the World Trade Center
disaster (6 months ended 30 September 2002 - #14.4m; year ended 31 March 2003 - #15.4m).
5 Taxation on profit on ordinary activities
6 months 6 months Year
ended ended ended
30 30 31
September September March
2003 2002 2003
#m #m #m
Current taxation
UK Corporation Tax at 30.0%
- Current period 11.4 9.0 20.9
- Double tax relief - - (0.7)
- Adjustment to prior periods (1.9) (0.1) -
Overseas taxation
- Current period 12.2 9.4 15.7
- Adjustment to prior periods 4.7 (0.4) (1.5)
26.4 17.9 34.4
Deferred taxation (5.1) 0.1 0.7
21.3 18.0 35.1
Share of taxation of joint ventures and 1.8 1.7 3.0
associates
23.1 19.7 38.1
The Group's tax charge is stated after taking into account the tax effect of exceptional items which
reduced the Group's tax charge by #1.0m (30 September 2002 - #0.5m increase; 31 March 2003 - #0.5m
reduction). The tax charge for the period to 30 September 2003 also includes tax relief of #5.6m for
goodwill on acquisitions (30 September 2002 - #1.4m; 31 March 2003 - #3.9m).
The Group's tax charge exceeds the UK statutory rate because of the tax effect of costs that are not
deductible for tax purposes and the higher corporate tax rates applying to certain overseas profits.
6 Dividends
6 months 6 months Year
ended ended ended
30 30 31
September September March
2003 2002 2003
Dividends in respect of ordinary shares: #m #m #m
Interim dividend of 8.5p per share (2002 - 7p per share) 9.6 7.0 7.0
Final dividend of 23p per share - - 23.3
Adjustment to dividend declared in prior period 2.8 - -
12.4 7.0 30.3
The adjustment of #2.8m relates to the additional final dividend paid for the year ended 31 March 2003
in respect of the initial shares issued following the completion of the BrokerTec acquisition in May
2003 (see note 8).
7 Earnings per share
Basic earnings per share is calculated by dividing the profit for the financial period of #46.1m (6
months ended 30 September 2002 - #43.4m; year ended 31 March 2003 - #76.8m) by the weighted average
number of ordinary shares in issue during the period of 111.0m shares (6 months ended 30 September 2002
- 99.4m and year ended 31 March 2003 - 99.7m).
The weighted average number of ordinary shares in issue excludes the weighted average number of shares
held by trusts relating to employee share schemes, being 1.6m shares (6 months ended 30 September 2002
and year ended 31 March 2003 - 1.0m).
Adjusted earnings per share is based on earnings before goodwill amortisation and exceptional items (and
their tax effects) and is presented in order to assist in the understanding of the underlying
performance of the Group's businesses. Since post acquisition profits are included in earnings, the
adjusted weighted average number of ordinary shares takes into account the effect of contingent share
capital.
Diluted earnings per share takes into account the dilutive effect of share options outstanding under the
Company's employee share schemes and the dilutive effect of contingent share capital.
6 months 6 months Year
ended ended ended
30 30 31
September September March
2003 2002 2003
#m #m #m
Earnings
Profit for the financial period 46.1 43.4 76.8
Goodwill amortisation 17.8 6.7 17.0
Exceptional items (note 4) (3.7) (12.9) (10.8)
Taxation on exceptional items and (6.6) (0.9) (4.4)
goodwill amortisation
Adjusted earnings 53.6 36.3 78.6
Shares Shares Shares
millions millions millions
Weighted average number of shares
Basic 111.0 99.4 99.7
Dilutive effect of contingent 6.4 1.6 2.0
share capital
Adjusted 117.4 101.0 101.7
Dilutive effect of share options 2.2 2.4 2.9
Diluted 119.6 103.4 104.6
6 months 6 months Year
ended ended ended
30 30 31
September September March
2003 2002 2003
pence pence pence
Earnings per share
Basic 41.5 43.7 77.0
Diluted 38.5 42.0 73.4
Adjusted 45.7 35.9 77.3
8 Acquisitions
On 7 May 2003 the Group announced that it had completed the acquisition of the BrokerTec fixed income
securities businesses by the issue of an initial 11,989,509 ordinary shares in ICAP valued at #117.3m.
Further shares will be issued after the first full 12 months following acquisition, the final number of
which will be dependent upon the revenues earned by the acquired business and ETC, ICAP's existing
electronic trading platform, in certain products in the first full 12 calendar months following
completion. At 30 September 2003 it is estimated that the further shares to be issued will be the
maximum number of 6,744,099. These were valued at #83.7m on 30 September 2003 and in accordance with
Financial Reporting Standard No.7 have been included as contingent share capital (note 10).
The total goodwill of #179.6m arising on the acquisition is stated after provisional fair value
adjustments of #5.1m and is being amortised over 10 years.
In the Consolidated Profit and Loss Account, Group operating profit before goodwill amortisation and
exceptional items of #6.9m relates to BrokerTec for the period since acquisition on 7 May 2003.
9 Matched principal business
Certain Group companies are involved as principal in the purchase and simultaneous commitment to sell
securities between third parties.
In accordance with the Group's accounting policies, outstanding transactions which have gone beyond
settlement date (initially unsettled transactions) and where neither side of the transaction has settled
are shown gross and are included in trade debtors and trade creditors. As at 30 September 2003 such
amounts included in both debtors and creditors were #1,008m (30 September 2002 - #402m; 31 March 2003 -
#520m). All of these trades have now settled.
10 Capital and reserves
Share Contingent Share Other Profit Total
capital share premium reserves and
account account loss
capital account
#m #m #m #m #m #m
As at 1 April 2003 51.4 22.9 28.6 33.0 118.9 254.8
Shares issued note (a) 6.1 - 113.1 - (1.5) 117.7
Contingent share note (b) - 73.9 - - - 73.9
capital
Retained profit for - - - - 33.7 33.7
the period
Exchange note (c) - - - (1.6) (7.0) (8.6)
adjustments
As at 30 September 57.5 96.8 141.7 31.4 144.1 471.5
2003
(a) The shares issued include 11,989,509 shares issued on the acquisition of BrokerTec (see note 8). The
remaining 223,768 shares were issued as a result of the exercise of employee options.
(b) The increase in contingent share capital includes contingent consideration in respect of the
acquisition of BrokerTec of #83.7m. In May 2003, the directors of ICAP exercised their option to pay the
first instalment of the deferred consideration due for First Brokers in cash, rather than shares.
Accordingly there has been a reduction in the contingent share capital. Further adjustments have been
made to contingent share capital as a result of the re-estimation of the contingent consideration due
for First Brokers and ICAP Energy LLC (formerly APB).
(c) The Group is exposed to foreign exchange translational risk on consolidation of its overseas
operations not denominated in Sterling. During the 6 months ended 30 September 2003 the US Dollar
depreciated by 5% with respect to Sterling. In accordance with the Statement of Standard Accounting
Practice 20, the resulting exchange difference is included within the #8.6m exchange adjustment taken
directly to reserves, as disclosed in the Consolidated Statement of Total Recognised Gains and Losses.
11 Cash flow
(a) Reconciliation of operating profit to net cash inflow from operating activities
6 months 6 months Year
ended ended ended
30 30 31
September September March
2003 2002 2003
#m #m #m
Total operating profit 66.5 47.5 99.6
Operating exceptional items 0.9 1.5 4.0
Share of operating profits and losses of joint ventures and associates (4.5) (4.1) (6.8)
Depreciation of tangible fixed assets 14.2 6.4 15.8
Amortisation of goodwill 17.7 6.6 16.7
Amortisation of other investments - - 0.1
Amortisation of the cost of own shares 0.5 0.4 0.6
Loss on sale of fixed assets - - 0.1
Increase in debtors (31.5) (21.9) (3.5)
Increase in creditors 17.7 10.9 15.5
Cash inflow from operating activities before operating exceptional 81.5 47.3 142.1
items
(b) Reconciliation of net cash inflow to movement in net funds
6 months 6 months Year
ended ended ended
30 30 31
September September March
2003 2002 2003
#m #m #m
Increase/(decrease) in cash in the period 19.4 (18.0) 24.0
Cash outflow from financing 0.6 0.2 1.4
Cash inflow from management of liquid resources (1.1) (0.1) -
Increase/(decrease) in net funds resulting from cash flows 18.9 (17.9) 25.4
Exchange adjustments (5.2) (5.7) (6.5)
Current asset investments acquired with 5.4 - -
subsidiary
Finance leases acquired with subsidiary (3.8) - -
Increase/(decrease) in net funds 15.3 (23.6) 18.9
Opening net funds 184.6 165.7 165.7
Closing net funds 199.9 142.1 184.6
12 Contingent liabilities
In July 2003, it was announced that one of the Group's subsidiary undertakings, BrokerTec USA LLC, was
among those being sued in connection with an alleged infringement of patent number 6,560,580 in the
United States of America.
The Group has rejected the claim and expects successfully to defend the action.
13 Exchange rates
The principal exchange rates which affect the Group, expressed in currency per #1, are shown
below:
Average Average Average
rate rate rate
Closing Closing Closing 6 months 6 months year
rate rate rate ended ended ended
30 30 31 30 30 31
September September March September September March
2003 2002 2003 2003 2002 2003
US Dollar 1.66 1.57 1.58 1.62 1.51 1.54
Euro 1.43 1.59 1.45 1.43 1.59 1.56
Yen 185.60 191.45 187.43 190.87 186.01 188.17
Webcast URL http://events.simplywebcast.com/icap_nov_2003
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR FEWEFLSDSEIF