Tp Icap Group Plc · LSE:TCAP
Tp Icap — FY2018 Earnings Presentation
37 slides from Tp Icap's earnings presentation, Mar 19, 2019
Slide 1: TP ICAP plc Preliminary Results
TP ICAP plc Preliminary Results For the year ended 31 December 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: Nicolas Breteau, CEO
Nicolas Breteau CEO TP ICAP plc Preliminary Results for the year ended 31 December 2018 | 19 March 2019 3
Slide 4: Agenda
Agenda Introduction Nicolas Breteau 2018 Highlights & Priorities Nicolas Breteau Key Financials Robin Stewart Future Priorities Nicolas Breteau Questions & Answers TP ICAP plc Preliminary Results for the year ended 31 December 2018 | 19 March 2019 4
Slide 5: 2018 Financial highlights
2018 Financial highlights A resilient performance • Revenue up 3% to £1,763m (2017: £1,719m*) Revenue • Underlying operating profit up 5% to £276m (2017: £263m) £1,763m 891.5 £1,719m* 803.7 • Operating margin up 0.7% pts to 15.7% (2017: 15.0%) • Profit before tax up 5% to £245m (2017: £233m) 2017 20
Slide 6: Priorities
Priorities Clear focus • Strong management team in place • Delivering the integration • Risk framework is a differentiator • Brexit: prepared for all eventualities TP ICAP plc Preliminary Results for the year ended 31 December 2018 | 19 March 2019 6
Slide 7: Senior management team
Senior management team Experienced, with focus on delivery Strengthened senior management team to drive future growth: John Abularrage – CEO of Global Broking John Ruskin – CEO of Institutional Services Andrew Polydor – CEO of Energy & Commodities Eric Sinclair – CEO of Data & Analytics Martin Ryan
Slide 8: Integration
Integration On track to complete this year • Run rate of £71m achieved in 2018; will deliver remaining £4m in 2019 • Martin Ryan is running the integration process • Detailed integration plan, dedicated project management — Fully integrated credit and equities platforms in EMEA and APAC — Co-locatio
Slide 9: New risk framework
New risk framework A competitive differentiator • Full review of global risk framework • Reworking management information and the processes that deliver it • Upfront setting of risk appetites • Ongoing education on the role our people play in risk management • Reducing number of regulated entities a
Slide 10: Brexit preparation
Brexit preparation Prepared for all eventualities • Around 90% of total broking revenues largely unaffected by Brexit • Business for EU clients in the EU — New French subsidiary, TP ICAP Europe — One MTF and two OTFs in the EU • Business for EU-based clients through broking desks in the UK — Plans t
Slide 11: Robin Stewart, Chief Financial Officer
Robin Stewart Chief Financial Officer TP ICAP plc Preliminary Results for the year ended 31 December 2018 | 19 March 2019 11
Slide 12: FY 2018 income statement
FY 2018 income statement Overall operating profit increase £m FY 2018 FY 2017 Revenue 1,763 1,757 Underlying Operating profit 276 263 Underlying Operating profit margin 15.7% 15.0% Finance income 5 6 Finance costs (36) (36) Underlying Profit before tax 245 233 Tax (63) (61) Effective tax rate 25.8%
Slide 13: Revenue by business division
Revenue by business division Benefits seen from business diversification £m (2017 at constant exchange rates) FY 2018 FY 2017 Change Global Broking 1,278 1,244 +3% Energy & Commodities 331 335 -1% Institutional Services 37 32 +16% Data & Analytics 117 108 +8% Revenue at constant exchange rates 1,763
Slide 14: Revenue by product: Global Broking
Revenue by product Global Broking £m (2017 at constant exchange rates) FY 2018 FY 2017 Change Rates 547 520 +5% Credit 101 114 -11% FX & Money Markets 207 213 -3% Emerging Markets 213 219 -3% Equities 210 178 +18% Global Broking revenue at constant exchange rates 1,278 1,244 +3% Exchange translation
Slide 15: Revenue by region
Revenue by region Strong regional performance in rates and equities £m (2017 at constant exchange rates) FY 2018 FY 2017 Change EMEA 886 870 +2% Americas 636 604 +5% Asia Pacific 241 245 -2% Revenue at constant exchange rates 1,763 1,719 +3% Exchange translation - 38 Revenue as reported 1,763 1,757
Slide 16: Progress on integration
Progress on integration A further £4m of synergies to deliver by end of 2019 • Achieved £71m of run rate synergies, of which £31m were recognised in the period • A further £4m of synergies to deliver by end of 2019 • Expecting c. £30m of additional costs to complete the integration by the end of 201
Slide 17: Administrative expenses
Administrative expenses Slight increase in front office costs £m (2017 at constant exchange rates) FY 2018 FY 2017 Change Change Broker compensation 859 809 50 +6% Other front office costs 183 214 (31) -14% Total front office cost 1,042 1,023 19 +2% Other staff costs 242 241 1 +0% Technology and rel
Slide 18: Administrative expenses: breakdown of cost movements
Administrative expenses Breakdown of cost movements * *£71m of total synergy savings recognised to date TP ICAP plc Preliminary Results for the year ended 31 December 2018 | 19 March 2019 18
Slide 19: Contribution
Contribution Contribution drives earnings growth FY 2018 FY 2017 Change Change Total Broking contribution* £m £m £m % Revenue 1,646 1,611 35 +2% Total front office costs (1,042) (1,023) (19) -2% Contribution 604 588 16 +3% Contribution margin (%) 36.7% 36.5% +0.2% pts FY 2018 FY 2017 Change Change D
Slide 20: Underlying operating profit and margin by region
Underlying operating profit and margin by region Americas see benefit from cost improvement programme Underlying operating profit Margin £m (at reported rates) FY 2018 FY 2017 Change FY 2018 FY 2017 EMEA 173 170 +2% +19.5% +19.4% Americas 81 64 +27% +12.7% +10.2% Asia Pacific 22 29 -24% +9.1% +11.5%
Slide 21: Exceptional and acquisition related items
Exceptional and acquisition related items Increase in exceptional charges £m FY 2018 FY 2017 ICAP integration costs 44 79 Amortisation of intangible assets arising on consolidation 40 40 Impairment of intangible assets arising on consolidation 65 - Impairment of associate 3 - Cost improvement progra
Slide 22: Earnings, EPS and dividends
Earnings EPS and dividends Maintenance of full year dividend through integration £m FY 2018 FY 2017 Underlying Earnings 191 184 Exceptional and acquisition-related items (net of tax) (159) (97) Reported Earnings 32 87 Weighted average shares in issue 558.5m 551.8m Underlying EPS 34.2p 33.3p Reported
Slide 23: Operating cash flow
Operating cash flow Increased cash from operations £m 2018 Underlying Cash flow 2017 Underlying Cash flow Change % Change Underlying Operating profit 276 263 13 +5% Share based compensation and pension admin fees 6 6 - - Depreciation and amortisation 35 41 (6) -15% Non-cash items - (2) 2 - EBITDA 31
Slide 24: Net funds
Net funds Decrease in net funds position £m Cash & cash equivalents Financial investments Debt Net At 31 December 2017 622 139 (589) 172 Reported net cash flow from operations 149 - - 149 Net cash flow from investment activities (71) (4) - (75) Dividends paid (94) - - (94) Net drawdown of revolving
Slide 25: Balance sheet
Balance sheet Increase in non-current assets £m Dec-18 Dec-17 Goodwill & other intangibles arising on consolidation 1,663 1,711 Other non-current assets 197 154 Current assets less current and non-current liabilities (117) (141) Cash and financial investments 800 761 Pension assets / obligations 52
Slide 26: Debt profile, refinancing and interest cost
Debt profile, refinancing and interest cost Refinanced an improved RCF £m Dec-18 Dec-17 5.25% Sterling Notes June 2019 80 80 5.25% Sterling Notes January 2024 500 500 Revolving credit facility draw down 52 - Unamortised debt issue costs (2) (3) Accrued interest 12 12 642 589 TP ICAP plc Preliminary
Slide 27: IFRS 16 Leases
IFRS 16 Leases Expected £6m PBT impact in 2019 • The Group has applied IFRS 16 for the year ending 31 December 2019 • At year end 2018 our operating lease commitments were £313m • Under IFRS 16 we estimate that we will now recognise a £146m right of use asset and a £192m lease liability • Estimated
Slide 28: Guidance
Guidance Overall guidance unchanged for 2019 Revenue for 2019 Synergies and CTA Low single digit growth, subject to impact of Brexit £4m of synergies by 2019 to bring total to £75m c. £30m of costs to achieve by end of 2019 Costs Net finance expense £15m in 2019 c. £40m in 2019 pre IFRS 16 adjustmen
Slide 29: Nicolas Breteau, CEO
Nicolas Breteau CEO TP ICAP plc Preliminary Results for the year ended 31 December 2018 | 19 March 2019 29
Slide 30: Global Broking
Global Broking 2018 Revenues Continuing to invest and diversify £1,278m +3% • Long-established relationships with investment banks • Evolving our business in line with changing client needs and preferences, adding new revenue streams • Diversified our services, e.g. equity derivatives, delta one, hi
Slide 31: Energy & Commodities
Energy & Commodities 2018 Revenues Further progress in challenging markets £331m -1% • Global business, diverse client base • Bolt-on acquisition of SCS in New Jersey • Acquired Axiom, which almost doubles our footprint in Houston • Core competency in delivering acquisitions positions us as acquirer
Slide 32: Institutional Services
Institutional Services 2018 Revenues New leadership, new momentum £37m +16% • Good top line growth and healthy margins • Targeting large hedge funds and asset managers • Refocused on listed derivatives, FX, FXO, credit and debt solutions • Multi-product sales team now in place • Investing in system
Slide 33: Data & Analytics
Data & Analytics 2018 Revenues Accelerating growth £117m +8% • Significant changes resulted in increased contribution; growth above market average • Unified two salesforces; creating a new channel management function • Client audit programme • New product management team; go-to-market product implem
Slide 34: Strategic priorities: 2019 is a pivotal year
Strategic priorities 2019 is a pivotal year • Building the foundations for sustained growth against backdrop of significant change in our industry • Aggregating liquidity and data across brands and regions will enhance our competitive position • Building a common, scalable, efficient and agile platf
Slide 35: Strategic priorities: underpinning everything we do
Strategic priorities Underpinning everything we do • Technology Sustain and enhance IT investment to meet client needs • Operational excellence Outstanding service is key for our clients • People A dynamic culture with a strong emphasis on conduct and integrity • Diversification Expand our customer
Slide 36: Summary
Summary Enhancing our competitive position • Strong and resilient business • Integration to be completed in 2019 • Platform is set for future growth • Focused on delivering attractive returns from 2020 TP ICAP plc Preliminary Results for the year ended 31 December 2018 | 19 March 2019 36
Slide 37: Questions & Answers
Questions & Answers TP ICAP plc Preliminary Results for the year ended 31 December 2018 | 19 March 2019 37