Tp Icap Group Plc · LSE:TCAP
Tp Icap — FY2017 Earnings Presentation
38 slides from Tp Icap's earnings presentation, Mar 13, 2018
Slide 1: TP ICAP plc Preliminary Results
TP ICAP plc Preliminary Results For the year ended 31 December 2017 13 March 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: John Phizackerley, Chief Executive
John Phizackerley Chief Executive TP ICAP plc preliminary results for the year ended 31 December 2017 | 13 March 2018 3
Slide 4: Agenda
Agenda Introduction John Phizackerley 2017 highlights John Phizackerley Key financials Robin Stewart Business & operational update John Phizackerley Questions & answers TP ICAP plc preliminary results for the year ended 31 December 2017 | 13 March 2018 4
Slide 5: A good first year for TP ICAP
A good first year for TP ICAP • Diverse global product portfolio delivered a resilient performance in a low volatility environment The • Strong progress on integration • MiFID II investment successfully delivered • Revenue and contribution per broker increased in every region world’s • Continued inv
Slide 6: 2017 financial highlights
2017 financial highlights Good start to life as TP ICAP Revenues • Revenue £1,757m (Pro forma 2016: £1,687m) +4% £1,757m • Operating profit £263m £1,687m 891.5 (Pro forma 2016: £240m) 803.7 • Operating margin 15.0% (Pro forma 2016: 14.2%) 2016 2017 • Profit before tax £233m (Pro forma 2016: £232m) O
Slide 7: This is a fundamentally different business today
This is a fundamentally different business today 2015 2018 Scale Tullett Prebon 3rd of TP ICAP is world’s 5 major IDBs largest IDB, E&C broker and Greater operating leverage independent OTC data provider Technology Traditional broking Comprehensive adoption of More dynamic trading mode technology ca
Slide 8: 2017 integration highlights
2017 integration highlights • £27m of synergies recognised; £52m of exit run rate savings • Single global management team, support function leadership, policies and processes • Increasing productivity; simplifying infrastructure • Focus on sourcing and third party costs • Property moves well under w
Slide 9: Robin Stewart, Interim Chief Financial Officer
Robin Stewart Interim Chief Financial Officer TP ICAP plc preliminary results for the year ended 31 December 2017 | 13 March 2018 9
Slide 10: Key financials
Key financials TP ICAP plc preliminary results for the year ended 31 December 2017 | 13 March 2018 10
Slide 11: Delivered +1% revenue growth in low volatility environment
Delivered +1% revenue growth in low volatility environment VIX (Equity Volatility) MOVE (Rates Volatility) 45 100 40 2015 2016 2017 2015 2016 2017 90 35 30 80 25 70 20 15 60 10 50 5 0 40 CVIX (Currency Volatility) BCOM Vol (Commodities Volatility) 20 18 2015 2016 2017 2015 2016 2017 16 18 14 16 12 1
Slide 12: Revenue by business division
Revenue by business division £m (2016 at constant exchange rates) 2017 2016 Change Global Broking 1,270 1,267 +0% Energy & Commodities 343 359 -4% Institutional Services 32 16 +100% Data & Analytics 112 104 +8% Revenue at constant exchange rates 1,757 1,746 +1% Exchange translation (59) Revenue as r
Slide 13: Revenue by product: Global Broking
Revenue by product Global Broking £m (2016 at constant exchange rates) 2017 2016 Change Rates 528 524 +1% Credit 117 124 -6% FX & Money Markets 218 215 +1% Emerging Markets 225 226 0% Equities 182 178 +2% Global Broking revenue at constant exchange 1,270 1,267 +0% rates Exchange translation (45) Glo
Slide 14: Revenue by region
Revenue by region £m (2016 at constant exchange rates) 2017 2016 Change EMEA 877 857 +2% Americas 628 642 -2% Asia Pacific 252 247 +2% Revenue at constant exchange rates 1,757 1,746 +1% Exchange translation (59) Revenue as reported 1,757 1,687 +4% TP ICAP plc preliminary results for the year ended 3
Slide 15: Underlying operating profit and margin by region
Underlying operating profit and margin by region Underlying operating profit Margin £m (at reported rates) 2017 2016 Change 2017 2016 EMEA 170 160 +6% 19.4% 19.0% Americas 64 57 +12% 10.2% 9.3% Asia Pacific 29 23 +26% 11.5% 9.8% 263 240 +10% 15.0% 14.2% TP ICAP plc preliminary results for the year e
Slide 16: Regulation and strategic initiatives
Regulation and strategic initiatives • There has been an increase in expenditure on regulation during the year as well as increased investment in strategic initiatives • Regulatory spend on MiFID II (£7m P&L, £7m Capitalised), increased legal cost (£4m) and surveillance (£2m) • Investment in value e
Slide 17: Broker productivity
Broker productivity • Increase in revenue per broker of 10% to £579k • Increase in revenue per broker across all regions • Increase in contribution per broker of 11% to £287k • 2017 cost improvement programme TP ICAP plc preliminary results for the year ended 31 December 2017 | 13 March 2018 17
Slide 18: Progress on integration
Progress on integration • Integration progress so far: — £27m of synergy savings recognised in the 2017 P&L — We exited the year with £52m of run rate savings — Reduction of 295 headcount (excluding integration headcount) • Overall integration savings target of £100m Illustrative Cumulative Synergie
Slide 19: 2017 income statement
2017 income statement £m 2017 20161 Revenue 1,757 1,687 Operating profit 263 240 Operating profit margin 15.0% 14.2% Finance income 6 8 Finance costs (36) (16) Profit before tax 233 232 Tax (61) (52) Effective tax rate 26% 23% Share of JVs and associates less non-controlling interests 12 8 Net incom
Slide 20: Exceptional and acquisition-related items
Exceptional and acquisition-related items £m 2017 2016 ICAP acquisition-related costs - (17) ICAP integration costs (79) (19) Acquisition-related share-based payment charge (9) (17) Amortisation of intangible assets arising on acquisition (40) (2) Cost improvement programmes (32) (6) Other acquisiti
Slide 21: Earnings, EPS and dividends
Earnings, EPS and dividends £m 2017 2016 Underlying Earnings 184 188 Exceptional and acquisition-related items (net of tax) (97) (60) Reported Earnings 87 128 Weighted average shares in issue 551.8m 552.6m Underlying EPS 33.3p 34.0p Reported EPS 15.8p 23.2p • Full year dividend 16.85p (2016: 16.85p)
Slide 22: Balance sheet
Balance sheet £m December 2017 December 20161 Goodwill & other intangibles 1,711 1,785 Other non-current assets 154 184 Current assets less current and non-current liabilities (141) (189) Cash and financial assets 761 786 Pension assets and obligations 53 97 Deferred tax liabilities (116) (197) Inte
Slide 23: Net funds
Net funds Movement in net funds Cash and financial assets £28m £114m £38m £(58)m £239m £(33)m £(14)m £172m £761m £619m Regulated entities Non-regulated entities Net Cash Dec Cash Flow Dividends MVT in FX Other Net Cash Dec 2016 2017 Corporate entities TP ICAP plc preliminary results for the year end
Slide 24: Operating cash flow
Operating cash flow FY 2017 FY 2016 Underlying Operating profit 263 132 Share-based compensation and other non-cash items 6 5 Depreciation and amortisation 41 16 EBITDA 310 153 Capital expenditure (net of disposals) (41) (17) Change in initial contract prepayments (26) - Other working capital (33) (
Slide 25: Debt profile, refinancing and interest cost
Debt profile, refinancing and interest cost £m December 2017 December 2016 Bank bridge loan - 470 5.25% Sterling notes June 2019 80 80 5.25% Unsecured Sterling notes January 2024 500 - Accrued interest 12 - Unamortised issue costs (3) (3) 589 547 Net interest costs • Net interest costs of £30m inclu
Slide 26: Summary: Good first year for TP ICAP
Summary Good first year for TP ICAP • Good result in a low volatility environment • Revenue and contribution per broker all increased • Good start to the integration although next phase is more complex • We expect £10m of P&L synergy savings in 2018 in line with original guidance • MiFID II complian
Slide 27: Revenue outlook
Revenue outlook • January and February has seen increased volatility and rising US rates • Although it has been a good start to the year it is too early to tell whether conditions will be sustained throughout the year • At current FX rates we would expect a headwind in our reported revenue (current
Slide 28: Business & operational update
Business & operational update TP ICAP plc preliminary results for the year ended 31 December 2017 | 13 March 2018 28
Slide 29: Continuing to invest in our execution capabilities
Continuing to invest in our execution capabilities to deliver the best service for customers Customer “Fixed income markets continue to show us that no single trading protocol works for everyone. Choice is key, and order book trading will over time be yet another MTF Electronic Volume tool for inves
Slide 30: TP ICAP global business lines
TP ICAP global business lines Global Broking Energy & Commodities Business Lines Data & Analytics Institutional Services 30
Slide 31: Global Broking: Well-positioned for changing market conditions
Global Broking Well-positioned for changing market conditions • Focus on increasing productivity Revenues - £1,270m • New hybrid platform functionality • Pure e and volume matching revenues up 30% YoY • Brokers remain key • Stands to benefit the most from increasing market volatility TP ICAP plc pre
Slide 32: Energy & Commodities: A solid year
Energy & Commodities A solid year • 87% of revenue from non-bank customers Revenues - £343m • Acquisition of SCS strengthens our position as the market continues to consolidate • Consolidating seven support office systems into one global platform • Working with third parties to deploy enhanced analy
Slide 33: Data & Analytics: Accelerating profitable growth
Data & Analytics Accelerating profitable growth • Enhances Group margin (margin at 62%), with growing recurring revenues Revenues - £112m • Leading source of high value independent OTC data • Development and roll out of new products • High probability of repeat business once customer is captured • S
Slide 34: Institutional Services: Starting to grow
Institutional Services Starting to grow • Agency execution to hedge funds, asset managers and other buy-side institutions Revenues - £32m • Withdrawal of traditional service providers has opened a significant buy-side fee pool • 50% of assets managed by Hedge Funds <$1bn AUM • Added FX, FX options,
Slide 35: Conduct and culture
Conduct and culture At the heart of how we do business Regular Clear values assessment and advocated by senior reporting HIRE management Honesty Integrity Respect Excellence Education and training programme for staff TP ICAP plc preliminary results for the year ended 31 December 2017 | 13 March 2018
Slide 36: Brexit: Will be a significant workstream in 2018
Brexit Will be a significant workstream in 2018 • Political uncertainty persists • Ongoing dialogue with our clients and with regulators • Our priorities: — Provide continuity of customer service — Maintain liquidity and support smooth functioning of financial markets • Operating model in Europe pot
Slide 37: Summary: A good first year for TP ICAP
Summary A good first year for TP ICAP • Diverse business with strong market positions • Integration remains on track • Technology is at the heart of everything we do • Well-positioned for any improvements in market conditions • A central role providing liquidity at the heart of the global financial
Slide 38: Questions & answers
Questions & answers TP ICAP plc preliminary results for the year ended 31 December 2017 | 13 March 2018 38