Tp Icap Group Plc · LSE:TCAP
Tp Icap — H1 2018 Earnings Presentation
40 slides from Tp Icap's earnings presentation, Aug 8, 2018
Slide 1: TP ICAP plc Interim Results
TP ICAP plc Interim Results For the six months ended 30 June 2018 TP ICAP plc interim results for the six months ended 30 June 2018 | 8 August 2018
Slide 2: Disclaimer
Disclaimer This communication and all information contained in or attached to it (including, but not limited to market prices/levels and market commentary) (the "Information") is for informational purposes only, is confidential, may be legally privileged and is the intellectual property of one of th
Slide 3: Agenda
Agenda Introduction Rupert Robson Background and context Nicolas Breteau Key financials Robin Stewart Conclusion Nicolas Breteau Questions & answers TP ICAP plc Interim Results for the six months ended 30 June 2018 | 7 August 2018 3
Slide 4: Rupert Robson, Chairman
Rupert Robson Chairman TP ICAP plc Interim Results for the six months ended 30 June 2018 | 7 August 2018 4
Slide 5: Introduction
Introduction • Business has made progress in first half, and interim dividend remains unchanged • Q2 detailed bottom-up review • Reset synergy targets and integration timing • Reinvest in the business to help promote growth • New management team in place to deliver medium-term strategy and detail of
Slide 6: Nicolas Breteau, CEO
Nicolas Breteau CEO TP ICAP plc Interim Results for the six months ended 30 June 2018 | 7 August 2018 6
Slide 7: H1 2018 Highlights
H1 2018 Highlights • Revenue up 3% to £910m Revenue (H1 2017: £881m*) £910m • Underlying operating profit up 8% to £155m £881m* (H1 2017: £144m) • Operating margin up 1.4% pts to 17.0% (H1 2017: 15.6%) • Profit before tax up 8% to £139m H1 2017 H1 2018 (H1 2017: £129m) Operating Profit • Basic EPS u
Slide 8: TP ICAP's competitive advantages
TP ICAP’s competitive advantages • Largest interdealer broker in the world • Leading provider of OTC data • Deepest liquidity pools in a wide range of products • Truly international and well-balanced geographically • Great brands • Customer service is in our DNA • More opportunities as the integrati
Slide 9: Rebasing the integration
Rebasing the integration • £100m target reduced to £75m • Need to balance synergies with continuing to provide excellent client service • Run-rate of £65m achieved, more and earlier than expected • £10m more to deliver • CTA of £103m to date, one-off costs of £60m to complete integration by 2019 • P
Slide 10: Adopting performance measures for growth
Adopting performance measures for growth • TP ICAP is a people business – brokers are at the centre of it • Focusing solely on broker compensation ratio jeopardises revenue growth • Need to protect our franchise and market position, and grow • In the future, our focus will be on revenue and contribu
Slide 11: TP ICAP global business lines
TP ICAP global business lines Global Broking Energy & Commodities Data & analytics Institutional Services TP ICAP plc Interim Results for the six months ended 30 June 2018 | 7 August 2018 11
Slide 12: Global Broking
Global Broking • Fill in gaps in product coverage • Embed more technology into our execution protocols • Separate and competing brands - a wise decision • Leverage our liquidity with one screen and single sign-on • Harvest valuable data we create • Cautiously optimistic about market conditions TP IC
Slide 13: Energy & Commodities
Energy & Commodities • Our second largest business • Diverse products, clients and locations • Broadening and deepening our offering • Link desks across geographies to enhance client service • Market conditions determined by events which are difficult to predict, so diversification is key TP ICAP pl
Slide 14: Institutional Services
Institutional Services • Our newest business, targets buyside clients • Agency execution in FX, FXO and listed derivatives • Progress to date has been slower and more expensive than expected • COEX acquisition performing strongly • Will adjust our execution to produce acceptable returns TP ICAP plc
Slide 15: Data & Analytics
Data & Analytics • Leading provider of neutral OTC pricing data • Small business with great potential • Investing to accelerate growth TP ICAP plc Interim Results for the six months ended 30 June 2018 | 7 August 2018 15
Slide 16: Eric Sinclair, CEO, Data & Analytics
Eric Sinclair CEO, Data & Analytics TP ICAP plc Interim Results for the six months ended 30 June 2018 | 7 August 2018 16
Slide 17: Data & Analytics
Data & Analytics • Restructured for growth and efficiency to enhance profitability 1. Unified sales team 2. Closer collaboration with Global Broking to extract untapped data 3. Dedicated channel management builds relationship with distribution partners 4. Client audit programme underway 5. Product m
Slide 18: Nicolas Breteau, CEO
Nicolas Breteau CEO TP ICAP plc Interim Results for the six months ended 30 June 2018 | 7 August 2018 18
Slide 19: Building for the future
Building for the future • Focus on front office technology and client-facing initiatives • Ongoing work to invest more in infrastructure, IT security and post-trade processing • £130m p.a. spend on technology in cash terms • Additional initiatives totalling £15m: • £9m in Data & Analytics • £6m in e
Slide 20: Robin Stewart, Chief Financial Officer
Robin Stewart Chief Financial Officer TP ICAP plc Interim Results for the six months ended 30 June 2018 | 7 August 2018 20
Slide 21: H1 2018 income statement
H1 2018 income statement £m H1 2018 H1 2017 Revenue 910 925 Underlying Operating profit 155 144 Underlying Operating profit margin 17.0% 15.6% Finance income 2 3 Finance costs (18) (18) Underlying Profit before tax 139 129 Tax (36) (33) Effective tax rate 26% 26% Share of JVs and associates less non
Slide 22: Revenue by business division
Revenue by business division £m (2017 at constant exchange rates) H1 2018 H1 2017 Change Global Broking 672 641 +5% Energy & Commodities 167 172 -3% Institutional Services 17 16 +6% Data & Analytics 54 52 +4% Revenue at constant exchange rates 910 881 +3% Exchange translation - 44 Revenue as reporte
Slide 23: Revenue by product Global Broking
Revenue by product Global Broking £m (2017 at constant exchange rates) H1 2018 H1 2017 Change Rates 284 265 +7% Credit 56 61 -8% FX & Money Markets 110 110 +0% Emerging Markets 113 114 -1% Equities 109 91 +20% Global Broking revenue at constant exchange rates 672 641 +5% Exchange translation - 29 Gl
Slide 24: Revenue by region
Revenue by region £m (2017 at constant exchange rates) H1 2018 H1 2017 Change EMEA 465 454 +2% Americas 322 303 +6% Asia Pacific 123 124 -1% Revenue at constant exchange rates 910 881 +3% Exchange translation - 44 Revenue as reported 910 925 -2% TP ICAP plc Interim Results for the six months ended 3
Slide 25: Progress on integration
Progress on integration • We expect to complete the integration and achieve the full run rate of £75m by the end of 2019 • We estimate the costs to complete the integration at £60m • These costs will enable us to reduce ongoing IT spend in the future, and increase our operational and IT capabilities
Slide 26: Administrative expenses
Administrative expenses £m (2017 at constant exchange rates) H1 2018 H1 2017 Change Change Broker compensation 440 417 23 +6% Other front office costs 91 103 (12) -12% Total front office cost 531 520 11 +2% Other staff costs 120 125 (5) -4% Technology and related costs 26 25 1 +4% Premises and relat
Slide 27: Administrative expenses
Administrative expenses *underlying £8m of synergies recognised in H1 2017 TP ICAP plc Interim Results for the six months ended 30 June 2018 | 7 August 2018 27
Slide 28: Contribution
Contribution Broking contribution H1 2018 H1 2017 Change Change At constant exchange rates £m £m £m % Revenue 856 829 27 +3% Total front office costs (531) (520) (11) +2% Contribution 325 309 16 +5% Contribution margin (%) 38.0% 37.3% +0.7% pts Data & Analytics contribution H1 2018 H1 2017 Change Ch
Slide 29: Underlying operating profit and margin by region
Underlying operating profit and margin by region Underlying operating profit Margin £m (at reported rates) H1 2018 H1 2017 Change H1 2018 H1 2017 EMEA 97 92 +5% +20.9% +19.9% Americas 45 39 +15% +14.0% +11.7% Asia Pacific 13 13 +0% +10.6% +10.0% 155 144 +8% +17.0% +15.6% TP ICAP plc Interim Results
Slide 30: Exceptional and acquisition related items
Exceptional and acquisition related items £m H1 2018 H1 2017 ICAP integration costs 24 28 Amortisation of intangible assets arising on acquisition 20 20 Impairment of intangible assets arising on consolidation 58 - Cost improvement programmes - 5 Acquisition related share-based payment charge - 5 Ad
Slide 31: Earnings EPS and dividends
Earnings EPS and dividends £m H1 2018 H1 2017 Underlying Earnings 107 101 Exceptional and acquisition-related items (net of tax) (94) (44) Reported Earnings 13 57 Weighted average shares in issue 556.3m 552.4m Underlying EPS 19.2p 18.3p Reported EPS 2.3p 10.3p • Dividend to remain at 16.85p through
Slide 32: Operating cash flow
Operating cash flow £m H1 2018 H1 2017 Underlying operating profit 155 144 Share-based compensation and other non-cash items 1 2 Depreciation and amortisation 17 18 EBITDA 173 164 Capital expenditure (net of disposals) (48) (16) Change in initial contract prepayments (16) - Other working capital (10
Slide 33: Net funds
Net funds £m Cash* Debt Net At 31 December 2017 761 (589) 172 Cash flow (48) 15 (33) Dividends (63) – (63) Revolving Credit Facility draw down 87 (87) – Accrued interest and non-cash items (2) (15) (17) Effect of movement in exchange rates 4 – 4 At 30 June 2018 739 (676) 63 * Includes financial inve
Slide 34: Cash resources and regulation
Cash resources and regulation • Cash held for working capital, regulatory, liquidity and corporate purposes • Capital requirements of the regulated legal entities are generally met by net tangible assets held in cash • This cash is restricted for regulatory and operational purposes TP ICAP plc inter
Slide 35: Balance sheet
Balance sheet £m Jun-18 Dec-17 Goodwill & other intangibles 1,651 1,711 Other non-current assets 189 154 Current assets less current and non-current liabilities (38) (141) Cash and financial investments 739 761 Pension assets / obligations 52 53 Deferred tax liabilities (113) (116) Interest bearing
Slide 36: Debt profile, refinancing and interest cost
Debt profile, refinancing and interest cost £m Jun-18 Dec-17 Jun-17 5.25% Sterling Notes June 2019 80 80 80 5.25% Sterling Notes January 2024 500 500 500 Revolving credit facility draw down 87 - - Unamortised debt issue costs (3) (3) (3) Accrued interest 12 12 12 676 589 589 TP ICAP plc Interim Resu
Slide 37: Guidance
Guidance Revenue for 2018 Net finance expense Low single digit growth at constant exchange rates £35m in 2018 rising to £40m in 2019 Costs Tax rate £10m of extra costs in 2018, rising to £25m 26% for 2018 falling to 25% in 2019 of extra costs in 2019 Investments Exceptional items £15m of extra cost
Slide 38: Nicolas Breteau, CEO
Nicolas Breteau CEO TP ICAP plc Interim Results for the six months ended 30 June 2018 | 7 August 2018 38
Slide 39: Strong foundation for a successful, sustainable business
TP ICAP Strong foundation for a successful, sustainable business • Breadth of offering, diversification and international footprint positions us well • Our ability to offer many execution protocols is a competitive advantage • Growing regulation: we have the scale and firepower to invest • Building
Slide 40: Questions & answers
Questions & answers