Tp Icap Group Plc · LSE:TCAP
Tp Icap — FY2016 Earnings Presentation
42 slides from Tp Icap's earnings presentation, Mar 14, 2017
Slide 1: 2016 Preliminary Results
2016 Preliminary Results 14/03/2017
Slide 2: Jo Phizackerley, Chief Executive
Jo Phizackerley John ac e ey Chief Executive TP ICAP 2016 Preliminary Results 2
Slide 3: Agenda
Agenda Introduction John Phizackerley 2016 highlights John Phizackerley Key financials Andrew Baddeley Business update John Phizackerley Q&A TP ICAP 2016 Preliminary Results 3
Slide 4: 2016 financial and operational highlights
2016 financial and operational p highlights g g TP ICAP 2016 Preliminary Results 4
Slide 5: 2016 financial highlights
2016 financial highlights Strong financial progress Revenues 2012 – 2016 (£m) • Revenue £891.5m £891 5m (2015: £796.0m) £796 0m) 891.5 • Operating profit £131.5m 850.8 (2015: 107.9m) 803.7 796.0 • Operating margin 14.8% 14 8% 703 5 703.5 (2015: 13.6%) • Profit before tax £121.6m ((2015: £93.7m)) • B
Slide 6: 2016 operational highlights
2016 operational highlights • Completion of acquisition • Integration under way • Strategic reorganisation complete • Introduction of CRM • New product launches in data business • Hiring the next generation of brokers • Conduct and Culture TP ICAP 2016 Preliminary Results 6
Slide 7: Andrew Baddeley, Chief Financial Officer
Andrew d e Baddeley adde ey Chief Financial Officer TP ICAP 2016 Preliminary Results 7
Slide 8: Key financials
Key y financials TP ICAP 2016 Preliminary Results 8
Slide 9: Tullett Prebon Revenue by product group
Tullett Prebon Revenue by product group £m (2015 at constant exchange rates) 2016 2015 Change Energy and Commodities 245.3 221.9 +11% Interest Rate Derivatives 143.6 144.1 +0% Fixed Income 183.0 184.8 -1% Treasury Products 194.1 198.6 -2% Equities 57.3 50.4 +14% Information Sales and RMS 68.2 56.1 +
Slide 10: Tullett Prebon Underlying operating profit and margin by region
Tullett Prebon Underlying operating profit and margin by region Underlying operating profit Margin £m 2016 2015 Change 2016 2015 Reported EMEA 97.7 81.2 +20% 20.3% 17.8% Americas 18.2 14.9 +22% 6.5% 6.4% Asia Pacific 15.6 11.8 +32% 11.9% 11.1% 131.5 107.9 +22% 14.8% 13.6% TP ICAP 2016 Preliminary Re
Slide 11: Investment in Operational Capabilities
Investment in Operational Capabilities Increase in management and support costs due to investment in: • IT Infrastructure including Belfast support services centre • Legal & Compliance • Conduct & Risk • Customer Relationship Management • HR (recruitment, performance management, training) • Marketin
Slide 12: Tullett Prebon Underlying profit and loss
Tullett Prebon Underlying profit and loss £m 2016 2015 Revenue 891.5 796.0 Operating profit 131.5 107.9 Net finance expense (9.9) (14.2) Profit before tax 121.6 93.7 Tax (22.1) (17.5) Associates and joint ventures 4.0 2.6 Non-controlling interests (0.5) (0.4) g Earnings 103.0 78.4 Weighted average s
Slide 13: Tullett Prebon Exceptional and acquisition related items
Tullett Prebon Exceptional and acquisition related items £m 2016 2015 Major j llegall actions i - 64.4 Cost improvement programme (5.2) (25.7) ICAP Acquisition related costs (16.8) (12.1) ICAP Integration costs (19.3) - Acquisition related share-based payment charge (16.3) (10.5) Amortisation of int
Slide 14: Tullett Prebon Earnings, EPS and Dividends
Tullett Prebon Earnings, EPS and Dividends £m 2016 2015 Underlying Earnings 103.0 78.4 Exceptional and acquisition related items (net of tax) (59.8) 4.5 Reported Earnings 43.2 82.9 Weighted average shares in issue 242.3m 243.6m Underlying EPS 42.5p 32.2p Reported EPS 17.8p 34.0p • Full year dividend
Slide 15: TP ICAP 2016 Unaudited Pro forma
TP ICAP C 2016 0 6UUnaudited aud ted Pro o forma o a TP ICAP 2016 Preliminary Results 15
Slide 16: TP ICAP 2016 Pro forma Income Statement
TP ICAP 2016 Pro forma Income Statement Dec-16 TP Dec-16 ICAP1 Dec-16 Pro forma1 Revenue 891.5 795.1 1,686.6 Operating profit 131.5 108.0 239.5 Operating profit margin 14.8% 13.6% 14.2% Finance income 5.3 3.0 8.3 Finance costs (15.2) (1.0) (16.2) Profit before tax 121.6 110.0 231.6 Tax (22.1) (30.0)
Slide 17: TP ICAP 2016 Revenue
TP ICAP 2016 Revenue TP ICAP £234m 14% Tullett Prebon £842m ICAP 50% £131m £481m £103m £361m 15% 54% 13% 45% £1,687m £892m £795m £611m 36% £280m £280 £331m 31% EMEA 42% Americas Asia Pacific EMEA EMEA Americas Americas Asia Pacific Asia Pacific Note: Unaudited pro forma TP ICAP 2016 Preliminary Resu
Slide 18: With the transaction complete, integration has begun
With the transaction complete, integration has begun Signing November 2015 Closing December 2016 Foundation Design Execution • Strategic vision • Set up integration project organisation Set-up • Implement Day 1 organisational structure and deliver and structure overall integration plan ‘quick wins’
Slide 19: TP ICAP Synergies
TP ICAP Synergies Synergies of £80m by 2019 with a stretch target to achieve £100m by 20201 Illustrative Cumulative £10m £60m £80m £100m Synergies1 100 90 20 100.0 80 70 20 £ million 50 60 241.0 50 40 ns 30 20 10 10 0 2017 synergies 2018 synergies 2019 synergies 2020 synergies Cost to Achieve1 £40m
Slide 20: IT Integration
IT Integration • A large and complex project • Approximately 40% of our synergy target • Deliveryy over the next three years y Four Integration Principles SINGLE IT STACK MAXIMISE FUNCTIONAL MINIMAL CLIENT SYNERGIES PARITY IMPACT Use existing Design and deliver Deliver a functionally rich Ensure min
Slide 21: TP ICAP Debt profile, refinancing and interest cost
TP ICAP Debt profile, refinancing and interest cost £m December 2016 June 2016 December 2015 7.04% Sterling Notes July 2016 - 141.1 141.1 5.25% Sterling Notes June 2019 80.0 80.0 80.0 3.5% Bank bridge loan 470.0 - - Unamortised issue costs (3.2) (0.6) (0.9) 546.8 220.5 220.2 Refinancing • Successful
Slide 22: TP ICAP Tax, JVs, associates and non-controlling interests
TP ICAP Tax, JVs, associates and non-controlling interests • Tax rate expected to be approximately 26% going forward • Increase in rate expected due to: — Higher proportion of profits from the US — The full utilisation of losses brought forward in TP that had sheltered previous i US profits fit • JV
Slide 23: TP ICAP Exceptionals
TP ICAP Exceptionals • PVM acquisition related expenses approximately £9m • Amortisation of intangibles approximately £29m • Tax on exceptionals at underlying tax rate - 26% TP ICAP 2016 Preliminary Results 23
Slide 24: TP ICAP Balance sheet
TP ICAP Balance sheet £m 2016 Goodwill & other intangibles 1,783.2 Other non-current assets 165.5 Current assets less current and non-current liabilities (167.8) C h and Cash d financial fi i l assets t 785 6 785.6 Pension assets / obligations 96.7 Deferred tax liabilities (197.3) Interest bearing l
Slide 25: TP ICAP Movement in cash and debt
TP ICAP Movement in cash and debt £m Cash Debt Net At 31 December 2015 379 2 379.2 (220 2) (220.2) 159 0 159.0 Cash flow 35.2 - 35.2 Dividends (40.7) - (40.7) Bank facility arrangements fees (3.8) 3.8 - Repayment of Sterling Notes June 2016 (141.1) 141.1 - Drawdown Bridge Facility 470.0 (470.0) - Am
Slide 26: John Phizackerley, Chief Executive
John Phizackerley y Chief Executive TP ICAP 2016 Preliminary Results 26
Slide 27: Business update
Business update p TP ICAP 2016 Preliminary Results 27
Slide 28: Tullett Prebon and ICAP broking platforms
Tullett Prebon and ICAP broking platforms Americas EMEA Asia TULLETT PREBON ICAP TULLETT PREBON ICAP TULLETT PREBON ICAP Trading Trading Trading Trading Trading Trading tpAGENCY iSwap tpCREDITDEAL i-Swap tpFORWARDDEAL i-Swap tpCREDITDEAL ICAP Options tpENERGYTRADE ICAPinflation tpREPO ICAPOptions tp
Slide 29: 10 arrows
10 arrows 1. Strategically add brokers 2 2. B ild our Build o r energy energ business b siness 3. Win new all-to-all client business 4. Further monetise Tullett Prebon Information 5. Invest strategically in our IT 6 6. Adopt a focused and disciplined CRM approach 7. Develop our acquisition and partn
Slide 30: Four global business lines
Four global business lines Global Broking • Hybrid voice business operating across all major asset classes • 6 product lines: Rates, FX and Money Markets, Local Markets, Equities and Credit • Hybrid platforms with rich functionality and variety of execution methods • Post-trade risk mitigation servi
Slide 31: Global Broking strategic objectives
Global Broking strategic objectives Maintaining separate brand identities C Co-operating ti t exploit to l it our similarities i il iti andd differences diff Competing and, where appropriate, adopting differing business models per brand A F t office Front ffi optimisation ti i ti B Continue to inves
Slide 32: Energy & Commodities
Energy & Commodities Oil Gas Power Renewables Ferrous metals Base metals Precious metals Soft commodities Coal Freight • Broad range of energy and commodity products • Natural hedge across our portfolio • Products covered are both global and domestic TP ICAP 2016 Preliminary Results 41
Slide 33: Data & Analytics
Data & Analytics • Track record in global OTC financial and commodity markets • Global customer base • Regulatory trends positive • Strong products and technology • Attractive future growth potential TP ICAP 2016 Preliminary Results 33
Slide 34: Institutional Services: delivering new revenue streams
Institutional Services: delivering new revenue streams Objective Delivery • Strategic partnerships with prime brokers, brokers clearing and execution houses 1 Strategic partnerships to expand • Strategic partnerships with banks to outsource sales our capabilities for certain products • Acquisition o
Slide 35: Strategic areas of focus: CRM 5 Pillars
Strategic areas of focus CRM 5 Pillars CRM: Pill Areas of Focus Goals Prioritise “white space businesses”; cross selling; 1 Grow Revenues AA pricing optimisation; competitive analysis Focus at business head level, institutionalise relationships, 2 Improve Client Relationships BB become strategic par
Slide 36: Conduct and Culture
Conduct and Culture • Clear focus on Conduct and Culture • Investment in: ‐ Legal and Compliance ‐ Risk systems and controls ‐ Training ‐ Regulatory readiness • Investment in new brand and identity TP ICAP 2016 Preliminary Results 36
Slide 37: 2017 Outlook
2017 Outlook • Political & Economic uncertainties • Heightened tensions in global relations • Ongoing military and terrorism threats • Expectations p for higher g US interest rates • Political turmoil in UK & Europe • Further growth in Asia TP ICAP 2016 Preliminary Results 37
Slide 38: Summary
Summary • Good strategic and operational progress in 2016 • Continued monetary, political and economic uncertainty likely to impact 2017 • Business model well-suited to a higher volatility and interest rate world • TP ICAP is well-placed to: ‐ Deliver synergies ‐ Build the business ‐ Deliver value t
Slide 39: Q&A
Q&A TP ICAP 2016 Preliminary Results 39
Slide 40: Appendices
Appendices pp TP ICAP 2016 Preliminary Results 40
Slide 41: TP ICAP 2016 Operating Profit by Region
TP ICAP 2016 Operating Profit by Region TP ICAP £23m 9% Tullett Prebon ICAP £57m £7m £16m 24% 7% 12% £160m 67% £240m £18m £62m 14% 57% £132m £108m £39m 36% £98m 74% EMEA Americas Asia Pacific EMEA EMEA Americas Americas Asia Pacific Asia Pacific Note: Unaudited pro forma TP ICAP 2016 Preliminary Res
Slide 42: Tullett Prebon Revenue by region
Tullett Prebon Revenue by region £m 2016 2015 Change Reported d Constant Europe and the Middle East 480.9 455.3 +6% +2% Americas 279.6 234.5 +19% +6% Asia Pacific 131.0 106.2 +23% +9% 891.5 796.0 +12% +4% TP ICAP 2016 Preliminary Results 42