Tp Icap Group Plc · LSE:TCAP
Tp Icap — Investor Day (December 2020)
68 slides from Tp Icap's investor day presentation, Dec 1, 2020
Slide 1: TP ICAP Capital Markets Day
TP ICAP Capital Markets Day 1 December 2020
Slide 2: Disclaimer
Disclaimer This presentation has been prepared by TP ICAP plc (together with its subsidiaries, the “Group”) solely for informational purposes. No representation or warranty express or implied is made as to, and no reliance should be placed on, the fairness, accuracy, completeness or correctness of t
Slide 3: Introduction – Nicolas Breteau
Nicolas Breteau Introduction TP ICAP plc Investor update | 8 October 2020 3
Slide 4: Today's Agenda
Today’s Agenda Activity Presenter Introduction Nicolas Breteau Market Context Joanna Nader Divisions: Global Broking Nicolas Breteau Energy & Commodities Andrew Polydor Data & Analytics Eric Sinclair Institutional Services John Ruskin Liquidnet Joanna Nader / Mark Pumfrey Financials Robin Stewart Wr
Slide 5: Overview
Overview ● One of the world’s largest financial markets infrastructure groups ⎼ Operating at the heart of global financial, energy & commodities markets ⎼ Leading provider of global OTC data & analytics products & services, supporting both sell-side & buy-side ⎼ UK based and listed ● Our activities
Slide 6: A global leader in financial markets infrastructure
Overview A global leader in financial markets infrastructure 26 Operating Countries c.£1.8bn 2019 Revenue #1 IDB By 2019 Revenue c.5,000 Employees (Sep-20) TP ICAP Capital Markets Day | 1 December 2020 6
Slide 7: Case for Change
Case for Change Challenges Opportunities Client margin pressure and We are the #1 IDB globally, with a weighted average Liquidity increased competition market share of 40% (by revenue of key asset classes) Established relationships and strong brand recognition Networks with top tier investment banks
Slide 8: Group-Wide Strategic Pillars
Group-Wide Strategic Pillars Electronification Aggregation Diversification Increase the proportion of Provide clients with access to low-touch activity and improve Build out earnings from buy-side, aggregated liquidity from across client connectivity and post-trade corporates and data businesses our
Slide 9: Divisional Initiatives
Divisional Initiatives Strategic Initiatives “Hub” strategy Global Broking Rates Hub FX Hub Credit Hub - Electronification of activity - Aggregation of liquidity - Enriched, more efficient client experience Energy & Commodities Energy Hub - Institutionalisation of volume/client relationships - Produ
Slide 10: Liquidnet Acquisition: A Potential Transformational Accelerator
Liquidnet Acquisition: A Potential Transformational Accelerator Complementary Asset Class Expertise, Clients and Platforms Transaction Rationale 1,000+ IDB / Dealer focus Buy-side Client Large Global Network of Network1 Sell-side & Buy-side ⎼ Building on the strengths of each partner + ⎼ Serving the
Slide 11: Financial Targets for TP ICAP and Liquidnet
Financial Targets1 for TP ICAP and Liquidnet 20192 Medium Term c.4% Revenue CAGR Target Revenue Liquidnet TP ICAP standalone 2019 2023 Target Medium Term TP ICAP & Liquidnet: c.23% Underlying TP ICAP & Liquidnet: c.18% Operating Margin 15.2% c.20% c.17% 1. Please note that the term “target” used her
Slide 12: Market Context – Joanna Nader
Joanna Nader Market Context TP ICAP plc Investor update | 8 October 2020 12
Slide 13: Transaction Volume Drives Broking Revenue
Transaction Volume Drives Broking Revenue Cyclical: TP ICAP revenue is closely correlated with broader secondary market activity ● TP ICAP’s brokerage businesses earn revenue from facilitating TP ICAP Revenue & Related Market Transaction Volume, by Asset Class secondary market transactions (rebased
Slide 14: Market Structure Drives Medium Term Potential Activity
Market Structure Drives Medium Term Potential Activity Secular: Structural influences dominate cyclical on multi-period basis 1. Regulation is the principal driver of the bulk trading volume “potential”, as 4. Relevant groupings of customers well as the “where/how/who” of execution — Dealer-to-deale
Slide 15: Interest Rate Derivatives
Interest Rate Derivatives Clearing drives OTC volume, D2C electronic trading Key regulatory drivers: Exchange & OTC Rates Derivatives OTC Interest Rate Deriv. Turnover by Avg. Notional Turnover ($tn) Participant Group (% of Total) 1. Clearing mandate (via G20) 50% $15 100% 40% $12 75% 2. Best execut
Slide 16: FX Derivatives
FX Derivatives Early impact of UMR on trading volume & product choices Key regulatory drivers: Electronic FX Trading, by Product Relative Size of Inter-Dealer vs (% Value Traded) Dealer-to-Client (% Value Traded) 1. Uncleared Margin Rules (UMR) – phased global rollout 2016-2022 Options 49% 51% 35% N
Slide 17: Credit
Credit Inefficiency & dysfunction Key regulatory drivers: Dealer inventory of US corporate Inter-dealer Trading bonds (% US Corporate Bond Volume) (Net position, US$ trn) 1. Regulatory capital treatment of market risk 300 28% 26% 250 2. Volcker Rule (US) 24% 200 22% 3. Best execution (MiFID 2) 150 2
Slide 18: Cash Equities
Cash Equities Mature, but still evolving Key regulatory drivers: Global Equity Cash & Derivatives EU Dark Trading as % of Total On-venue (Value traded $m, rebased to 100) Activity 10 350 1. Regulation National Market System (“Reg NMS”, US; 2005) & MiFID 1 (EU; 2007) 8 300 2. Best execution (MiFID 2)
Slide 19: Global Broking – Nicolas Breteau
Nicolas Breteau Global Broking TP ICAP Capital Markets Day | 1 December 2020 19
Slide 20: Role of Inter-dealer Brokers
Role of Inter-dealer Brokers Why and how investment banks (dealers) use inter-dealer brokers ● Dealers use inter-dealer brokers (IDBs) to execute trades Top 3 IDB Revenue1 (FY 2019) between themselves — Inter-dealer trading is principally driven by market risk management needs — Inter-dealer trading
Slide 21: Global Broking: Overview
Global Broking: Overview World’s Largest Inter-dealer Broker ● TP ICAP is the world’s largest IDB1 Revenue Mix by Product (9M 2020) Revenue Mix by Geography (9M 2020) — Market share of c.40% Credit ● Global presence APAC — Present in 252 countries across Americas, EMEA and APAC regions FX & MM EMEA
Slide 22: Hub Strategy: Electronification, Liquidity Aggregation
Medium Term Strategy Hub Strategy: Electronification, Liquidity Aggregation ● “Hub” strategy responds to evolving market requirements and trends — Sell-side economic pressures (regulatory/compliance, B/S, reg cap) Each screen has a different look & feel — Greater internalisation by the largest deale
Slide 23: Hub Strategy: Potential Benefits for TP ICAP
Hub Strategy Potential Benefits for TP ICAP ● Higher quality revenue Illustration of Hubs — Stickier client volume Clients Banks — Increased execution/cross-selling opportunities across asset classes / products — More opportunities for Data & Analytics (to gather data & deploy Connectivity analytics
Slide 24: Rates Hub
Rates Hub 2020 Progress & Medium Term Strategy Progress made in 2020 TP ICAP today • GBP Rates Hub (ICAP) Automation ● Enhancement of electronic platform capability (IRO1 & Gilts) • IRO1 multi-brand offering — Enhancement of market-leading ICAP volume matching functionality • Upgraded matching engin
Slide 25: FX Hub
FX Hub 2020 Progress & Medium Term Strategy Progress made in 2020 TP ICAP today • Broad product range Efficiency ● Cross-brand electronification/ aggregation (FX options) • Single login to display TP & ICAP liquidity for FX Options and Asian NDFs / Forwards Straight-through processing — Launched cro
Slide 26: Credit Hub
Credit Hub 2020 Progress & Medium Term Strategy Progress made in 2020 TP ICAP today • Broad array of products with strong D2D focus Efficiency ● Cross-brand cross product diversification • Choice of straight-through-processing methods • Market Data connectivity — Rolled out the first solution specif
Slide 27: Global Broking Financial Targets
Global Broking Financial Targets ● Financial targets Contribution Margin Operating Margin — Revenue Growth: c.20% c.42% — Medium term target: c.1% CAGR c.19% c.40% — Contribution Margin: 17.5% 38.6% — 2023 target: c.40% — Medium term target: c.42% 2019 32023 year 5 year Medium 2019 32023 year 5 year
Slide 28: Energy & Commodities – Andrew Polydor
Andrew Polydor Energy & Commodities
Slide 29: Energy & Commodities: Overview
Energy & Commodities: Overview Leader in OTC energy market ● Energy & Commodities (E&C) operate through three well recognised Revenue Mix by Product (9M 2020) brands: Other Power energy Gas ● Strong position in key commodities markets globally — Global leader in OTC trading of physical and derivativ
Slide 30: World's Largest OTC Energy and Commodity Broker
World’s Largest OTC Energy and Commodity Broker ● Overview of E&C’s oil business ICE Total Oil Average Daily Volume (millions of contracts) 2.1 1.8 1.8 1.8 — Broker of physical and derivative crude and refined products both on- 1.5 1.4 exchange (ICE & CME) and OTC 1.2 1.2 — Three global brands – ICA
Slide 31: Medium Term Strategy: Oil Hub
Medium Term Strategy: Oil Hub Strategy & 2020 Progress ● What is Oil Hub? ● 2020 progress Oil Hub — A global platform to digitalise the — Initial Order Management System OTC oil broking model and (“OMS”) build complete aggregate liquidity across our brands — Roll-out of OMS to broker desks TP Liquid
Slide 32: E&C ESG Footprint
E&C ESG Footprint ● Energy market transition presents opportunities — The energy market is expected to transition over the next 10-20 years as the economy, and our clients, decarbonise — Potential new broking opportunities: ESG Footprint (% Revenue) — Growth of low carbon markets such as renewables,
Slide 33: Energy & Commodities Financial Targets
Energy & Commodities Financial Targets ● Financial targets Revenue — Revenue Growth: c.4% Revenue CAGR target — Medium term target: c.4% CAGR £382m — Contribution Margin: — 2023 target: c.35% — Medium term target: c.38% 2019 Medium term — Operating Margin: target — 2023 target: c.15% Contribution Ma
Slide 34: Data & Analytics – Eric Sinclair
Eric Sinclair Data & Analytics 34
Slide 35: Data & Analytics: Overview
Data & Analytics: Overview Double Digit Growth, High Margins, Recurring Revenue ● A leading provider of scarce OTC data and neutral pricing information OTC Coverage Revenue (£m) — Market leading data production and quality delivering 500k+ instruments Money Rates markets — Leverages TP ICAP’s propri
Slide 36: Medium Term Strategy
Medium Term Strategy Three-Pronged Strategy: Product, Clients and Distribution ● Operating in a large and growing global market Market Data Revenues (US$bn) 5yr CAGR — Market data revenue: c.$38 billion in 2019, 5-year CAGR: 4.5%1 37.7 4.5% 4.8% 30.2 ● Significant potential opportunity to increase m
Slide 37: Product Strategy
Product Strategy Moving up the Value Pyramid ● Historical focus has been on Data products Product examples — 25 products have been launched since 2018 • Al and ML solutions — c.32% of 2020 sales from new products WISDOM • Predictive Analytics — 100% of 2019 revenues from Data products and services •
Slide 38: Client Strategy
Client Strategy Diversify & Expand ● Shift emphasis to buy-side clients — Targeting 45% from buy-side clients by 2025 — New Information and Knowledge products aimed at unmet buy-side needs including Client mix (% of clients) — Regulatory requirement for neutral, observable data — Advanced analytics
Slide 39: Distribution Strategy
Distribution Strategy Enabling Clients and diversifying Channel Partners ● Enabling clients – Improving optionality and accessibility Client Enablement Strategy – Providing Optionality — New initiatives expected to provide more options to access products 1 Client premises — Three key ways clients ca
Slide 40: Case Study: Pre/Post Trade Analytics
Delivering on product, customer & distribution strategies Case Study: Pre/Post Trade Analytics ● Development of Pre/Post Trade Analytics Pre/Post Trade Analytics — Knowledge product higher up the value pyramid • Exploit multi-asset OTC data sets • Integrate client data, increase revenue stickiness •
Slide 41: Data & Analytics Financial Targets
Data & Analytics Financial Targets Double Digit Growth, Diversified, Recurring Revenue ● Financial targets Revenue Growth — Revenue Growth: — Medium term target: c.11% CAGR c.11% Revenue CAGR target — Contribution Margin: £135m — 2023 target: c.50% — Medium term target: c.53% — Operating Margin: 201
Slide 42: Institutional Services – John Ruskin
John Ruskin Institutional Services TP ICAP plc Investor update | 8 October 2020 42
Slide 43: Institutional Services: Overview
Institutional Services Overview ● IS helps a wide range of investors with their execution and investment IS Revenue Mix1 (by Product) IS Revenue Mix1 (by Region) process, from trade conception to post trade analytics Equity Derivatives APAC EU — Focused on buy-side clients: hedge funds, asset manage
Slide 44: Institutional Services: Successful growth trajectory so far
Institutional Services Successful growth trajectory so far ● Since inception, IS revenues have expanded through Revenue Progression (£m) — Acquisition of COEX (Nov 2017) — CAGR of c.21% c.21% CAGR (2017-2020) ● As a relatively new arrival, IS has built from the ground up on the latest possible platf
Slide 45: Overview of the agency execution model
Institutional Services Overview of the “agency execution model” ● Our interests are aligned with our clients Agency Execution : A Growing Element of Market Structure — We do not prop trade, market make or hold inventory. Where we are counterparty to our client it is solely for the purposes of settle
Slide 46: Institutional Services Financial Targets
Institutional Services Financial Targets ● Financial targets Revenue Growth — Revenue Growth: c.12% Revenue CAGR target — Medium term target: c.12% CAGR — Contribution Margin: £75m — 2023 target: c.30% — Medium term target: c.34% — Operating Margin: — 2023 target: c.19% 2019 Medium term — Medium ter
Slide 47: Liquidnet – Joanna Nader & Mark Pumfrey
Joanna Nader & Mark Pumfrey Liquidnet TP ICAP plc Interim Results for the six months ended 31 July 2020 | 7 August 2020 47
Slide 48: Liquidnet Overview
Liquidnet Overview Leading Global Electronic Trading Network ● Transaction is highly complementary to TP ICAP & will accelerate delivery of Group Revenue Mix Group Revenue and our strategy & boost our growth trajectory by Region3 (2019) EBITDA4 ($m) ● Trusted brand and partner to the buy-side for ~2
Slide 49: Liquidnet Equities
Liquidnet Equities Leading Dark Execution Specialist ● Dark trading is a critical and stable portion of global market activity Liquidnet Market Share in Europe — Key part of market activity in Europe 20% 3% — Accounts for ~15% of market volume in US1 15% 2% ● Initially established to facilitate bloc
Slide 50: Liquidnet Fixed Income
Liquidnet Fixed Income Extensive Global Network with Substantial Growth Potential ● Comparatively early stage business, launched in 2015 Trading Platforms Used, Split by Trading Protocol3 — US and European IG and High Yield launched Sep 2015 — Emerging Market bonds launched October 2018 0% 20% 40% 6
Slide 51: Focus Opportunity #1: D2C Electronic Credit Trading
Focus Opportunity #1: D2C Electronic Credit Trading Leveraging TP ICAP’s Network & Building on Liquidnet’s Capabilities ● Post-2008 regulation prompted behavioural changes that US D2C Corporate Bond Trading Corporate Bonds Electronic meaningfully altered market structure Volume (ADV, $bn) Trading Vo
Slide 52: Focus Opportunity #2: D2C Electronic Rates Trading
Focus Opportunity #2: D2C Electronic Rates Trading Leveraging Liquidnet’s Platform and TP ICAP’s Dealer Connectivity / Product Expertise ● Regulatory change has encouraged growth in OTC Rates derivatives, OTC Interest Rate Derivatives US Treasuries Average Daily Trading compared with exchange-traded
Slide 53: Focus Opportunity #3: Enhanced Data & Analytics
Focus Opportunity #3: Enhanced Data & Analytics (D&A) Leverage Complementary Capabilities with Cross-Selling Potential ● Accelerate D&A’s buy-side penetration — Sell TP ICAP’s data to ~500 fixed income1 buy-side clients already on- boarded on Liquidnet’s platform — Enhance TP ICAP’s objective of div
Slide 54: Liquidnet: Growth & P&L Targets
Liquidnet: Growth & P&L Targets1 Medium Term Targets ● Key Model Drivers and Assumptions Revenue Target ($m): 3-year CAGR of c.17%2 — Equities 600 — Top-line growth in line with market volumes/pricing trends — Low single-digit operating margin improvement — Credit 400 — Build on existing infrastruct
Slide 55: Financials – Robin Stewart
Robin Stewart Financials TP ICAP plc Interim Results for the six months ended 31 July 2020 | 7 August 2020 55
Slide 56: Impact of the anticipated Jersey re-domiciliation
Impact of the anticipated Jersey re-domiciliation Capital Efficiencies Overview — TP ICAP is in the process of completing its re-domiciliation by — The Group will no longer require a waiver from the FCA’s consolidated incorporating a new Group holding company in Jersey capital supervision regulation
Slide 57: Rights Issue Mechanics
Rights Issue Mechanics Overview and Illustrative Timeline Overview Participating in a rights issue — The rights issue gives our existing shareholders the right to purchase — Investors must own shares at the record date to participate but can also new shares in proportion to their existing shareholdi
Slide 58: TP ICAP Standalone Financial Targets: Revenue and Operating Margin
TP ICAP Standalone Financial Targets1 Revenue and Operating Margin Targets ● Revenue Target Revenue Target Revenue CAGR — Medium term revenue CAGR target of c.3%, expected to be driven by our Overall c.3% CAGR target Target double-digit growing business of D&A (c.11%) and I.S. (c.12%) c.12% — Sticki
Slide 59: TP ICAP Standalone Financial Targets: Net Income, Dividend, Cash Conversion
TP ICAP Standalone Financial Targets Underlying Net Income, Dividend and Cash Conversion ● Underlying Net Income Underlying Net Income Growth Drivers — Drivers of net income improvement over the medium term + Margin expansion, greater proportion of higher growth businesses, operating leverage + £189
Slide 60: TP ICAP Standalone Financial Targets: Investment and Costs
TP ICAP Standalone Financial Targets Investment and Costs ● Investment Expected Investment Profile (£m) — c.£100m of incremental strategic investment over the next 5 years expected to drive future margins £158m Strategic Capex — This is on top of the annual c.£140m - £160m technology investment — c.
Slide 61: TP ICAP & Liquidnet Targets
TP ICAP & Liquidnet Targets Medium Term Targets ● Revenue Target: Revenue Target — Medium term revenue CAGR target of 4% 4% Revenue CAGR Target — Liquidnet expected to contribute an additional c.1% revenue growth Liquidnet Higher growth businesses IS ● Underlying Operating Margin Target: D&A — 2023
Slide 62: Wrap Up
Nicolas Breteau Wrap Up TP ICAP plc Investor update | 8 October 2020 62
Slide 63: Q&A
Q&A TP ICAP Capital Markets Day | 1 December 2020 63
Slide 64: Appendices
Appendices TP ICAP Capital Markets Day | 1 December 2020 64
Slide 65: Glossary
Glossary ADV Average Daily Volume FIX Financial Information exchange System allows any member, dealer or client, to negotiate All-to-All (A2A) FXO Foreign exchange Options and trade with any other member API Application Program Interface GUI Graphic User Interface BAU Business as usual IDB Inter-dea
Slide 66: TP ICAP Speaker Biographies
TP ICAP Speaker Biographies Nicolas Breteau Joanna Nader Group CEO Group Head of Strategy Nicolas Breteau was appointed Group CEO on 10 July 2018. His extensive Joanna Nader was appointed Group Head of Strategy on 16 October 2019. experience in the global broking industry complements his in-depth Sh
Slide 67: TP ICAP Speaker Biographies
TP ICAP Speaker Biographies Andrew Polydor Eric Sinclair CEO, Energy & Commodities CEO, Data & Analytics Andrew Polydor was appointed CEO, Energy & Commodities in October Eric Sinclair joined as our CEO of Data & Analytics in November 2017. He 2016. He has spent more than two decades pioneering brok
Slide 68: TP ICAP Speaker Biographies
TP ICAP Speaker Biographies John Ruskin Robin Stewart CEO, Institutional Services Group Chief Financial Officer John Ruskin was appointed CEO, Institutional Services in September 2018. He Robin Stewart was appointed Chief Financial Officer on 10 July 2018. He has more than 25 years of experience in