Tp Icap Group Plc · LSE:TCAP
Tp Icap — Tullett Prebon — H1 2016 Earnings Presentation
42 slides from Tp Icap's earnings presentation, Aug 2, 2016
Slide 1: Interim Results for the 6 months ended 30 June 2016
Tullett Prebon plc Interim Results for the 6 months ended 30 June 2016 London | August 2016
Slide 2: John Phizackerley, Chief Executive
John Phizackerley Chief Executive
Slide 3: Agenda
Agenda • Introduction • Financial highlights • Business developments • CFO’s presentation • Operational developments • Themes and outlook • Q&A 3
Slide 4: Key messages
Key messages • Momentum at Tullett Prebon • TP ICAP deal transformational and on track • Increasingly diverse product mix and client base • Evolving geographic footprint • Cost control key 4
Slide 5: H1 2016 financial highlights
H1 2016 financial highlights • Good overall financial performance Tullett Prebon Revenue 6m ended 30 June (£m) • Resilient broking business • Strong performance in Energy and Commodities 455.1 and Equities 439.8 430.3 415.7 • Strong contribution from Information Sales and RMS 360.3 • Revenue £430.3m
Slide 6: Business developments
Business developments • Appointment of new CFO • Strategic reorganisation into 5 global divisions • Launch of new division – Institutional Services • Advanced stage of integration preparation for the ICAP acquisition • New technology and support centre in Northern Ireland • Driving talent recruitmen
Slide 7: TP ICAP transaction headlines
TP ICAP transaction headlines • Creates the world’s largest interdealer broker • Multi-platform hybrid voice business operating across all major asset classes • 3,245 brokers and c.5,500 total staff • Historical pro forma revenue £1.5bn • 3 year integration • At least £60m synergies • Oil desk dispo
Slide 8: Andrew Baddeley, Chief Financial Officer
Andrew Baddeley Chief Financial Officer
Slide 9: Revenue by product group
Revenue by product group £m (2015 at constant exchange rates) H1 2016 H1 2015 Change Energy and Commodities 117.6 104.9 +12% Interest Rate Derivatives 70.2 77.8 -10% Fixed Income 88.8 96.7 -8% Treasury Products 94.3 98.6 -4% Equities 27.6 22.3 +24% Information Sales and RMS 31.8 27.6 +15% 430.3 427.
Slide 10: Revenue by region
Revenue by region £m H1 2016 H1 2015 Change Reported Constant Europe and the Middle East 234.2 241.9 -3% -5% Americas 134.1 117.9 +14% +8% Asia Pacific 62.0 55.9 +11% +6% 430.3 415.7 +4% +1% 10
Slide 11: Underlying operating profit & margin by region
Underlying operating profit & margin by region Underlying operating profit Margin £m H1 2016 H1 2015 Change H1 2016 H1 2015 Reported Constant Europe and the Middle East 47.5 46.3 +3% +4% 20.3% 19.1% Americas 10.8 7.1 +52% +21% 8.1% 6.0% Asia Pacific 8.7 7.2 +21% +6% 14.0% 12.9% 67.0 60.6 +11% +7% 15
Slide 12: Cost improvement programme 2015
Cost improvement programme 2015 • 2015 programme − Focused on broker headcount reduction in Europe and restructuring contracts in North America − Charge of £5.2m in H1 2016 • Benefits in H1 2016 − Broker employment costs as a % of revenues driven down • Broker employment costs as % of broking revenu
Slide 13: 2016 progress and initiatives
2016 progress and initiatives • Continuing to invest in response to regulatory demands − Increased costs in compliance, risk management and control − Increased headcount in support functions − Impact on operating margin • Focus on − Continuing improvement in broker employment costs − Expense control
Slide 14: Northern Ireland technology and support services centre
Northern Ireland technology and support services centre • Major overhaul of our IT delivery • Nearshoring technology and support services centre • Phase 1 – 200 IT contractors • Over time – other IT professionals and support • Target an initial headcount of 300 • Mixture of current outsourced and in
Slide 15: Integration planning
Integration planning • Key areas of focus of resource • Comprehensive project management programme Integration Working Group Front Office Functional Integration Lead Integration Lead Front Front Office IT Operations Finance Control HR Premises Comms IGBB Office Business & Branding Separation Busines
Slide 16: Integration planning
Integration planning • Day 1 readiness flowing into detailed integration plans • Synergy targets built into budgets over 2017-2019 • Previous synergy target guidance maintained • Interaction with Belfast 16
Slide 17: Underlying profit & loss
Underlying profit & loss £m H1 2016 H1 2015 Revenue 430.3 415.7 Operating profit 67.0 60.6 Net finance expense (6.7) (7.7) Profit before tax 60.3 52.9 Tax (10.8) (10.8) Associates 1.7 1.2 Minorities (0.3) (0.3) Earnings 50.9 43.0 Weighted average shares in issue 242.7m 243.6m Basic EPS 21.0p 17.7p E
Slide 18: Exceptional and acquisition related items
Exceptional and acquisition related items £m H1 2016 H1 2015 Major legal actions - 64.4 Cost improvement programme (5.2) - Acquisition related costs (9.5) - Acquisition related share-based payment charge (5.5) (5.2) Amortisation of intangible assets arising on acquisition (0.6) (0.7) Other acquisiti
Slide 19: Earnings and EPS
Earnings and EPS £m H1 2016 H1 2015 Underlying Earnings 50.9 43.0 Exceptional and acquisition related items (net of tax) (21.9) 45.3 Reported Earnings 29.0 88.3 Weighted average shares in issue 242.7m 243.6m Underlying EPS 21.0p 17.7p Reported EPS 11.9p 36.2p 19
Slide 20: Dividend
Dividend • Interim dividend 5.6p • Expected full year dividend 16.85p (2015: 16.85p) • Mechanism to apportion dividend to pre / post completion 20
Slide 21: Operating cash flow
Operating cash flow £m H1 2016 H1 2015 Underlying operating profit 67.0 60.6 Share based compensation and other non-cash items 2.9 0.3 Depreciation/amortisation 7.8 7.4 EBITDA 77.7 68.3 Capital expenditure (5.1) (6.3) Decrease/(increase) in initial contract prepayments 0.6 (2.2) Other working capita
Slide 22: Net cash flow
Net cash flow £m H1 2016 H1 2015 Operating cash flow 44.4 46.1 Exceptional and acquisition related items – Cost improvement programme 2015 (17.0) - – Cost improvement programme 2014 (0.6) (3.8) – Restructuring 2011/2012 (0.2) (0.2) – Major legal actions - 64.4 – Acquisition costs related to IGBB (9.
Slide 23: Movement in cash and debt
Movement in cash and debt £m Cash Debt Net At 31 December 2015 379.2 (220.2) 159.0 Cash flow 0.2 - 0.2 Dividends (27.2) - (27.2) Bank facility fees (2.9) - (2.9) Amortisation of debt issue costs - (0.3) (0.3) Effect of movement in exchange rates 20.7 - 20.7 At 30 June 2016 370.0 (220.5) 149.5 23
Slide 24: Debt profile and refinancing
Debt profile and refinancing £m June 2016 December 2015 June 2015 7.04% Sterling Notes July 2016 141.1 141.1 141.1 5.25% Sterling Notes June 2019 80.0 80.0 80.0 Unamortised issue costs (0.6) (0.9) (1.1) 220.5 220.2 220.0 Committed facilities • £470m bank bridge facility • £250m RCF - from which £141
Slide 25: Balance sheet
Balance sheet £m June 2016 December 2015 June 2015 Intangible assets arising on consolidation 372.1 357.4 334.3 Deferred consideration (18.9) (16.4) (6.5) Associates/investments 16.1 14.5 14.4 Operating assets/(liabilities) 25.6 (11.3) 35.7 Interest/facility fees (8.7) (2.5) (8.9) Tax (13.4) (16.3)
Slide 26: John Phizackerley, Chief Executive
John Phizackerley Chief Executive
Slide 27: New business model – global product lines
New business model – global product lines Global Brokerage competing Tullett Prebon, ICAP and other brands Corporate Services Global Energy and Commodities Information Sales Institutional Services 27
Slide 28: New business division – Institutional Services
New business division – Institutional Services Global Brokerage Corporate Services Global Energy and Commodities Information Sales Institutional Services • Headed by Sam Ruiz • Brings market credentials and experience • Diverse stream of non-bank revenues 28
Slide 29: Hiring the new generation
Hiring the new generation • Graduates • Referrals • Lateral hires • Apprentices • Second jobbers • Annual target of 100 29
Slide 30: Hiring the next generation
Hiring the next generation 30
Slide 31: Growth initiatives – acquisitions, partnerships and new products
Growth initiatives – acquisitions, partnerships and new products Creditex • Acquisition of specialist US CDS brokers • 14 brokers, $11m revenues Coex • Partnership with a specialist listed futures and options broker • High touch, ideas-driven business • Diverse client base Hybrid trading platform te
Slide 32: BREXIT
BREXIT 32
Slide 33: Brexit – our offices in Europe
Brexit – our offices in Europe BELFAST LONDON WARSAW FRANKFURT LUXEMBOURG PARIS ZURICH VIENNA GENEVA MADRID 33
Slide 34: Operational highlights – our clients' endorsements
Operational highlights – our clients’ endorsements Best data provider, Tullett Prebon Information Interdealer broker of the year GlobalCapital Americas Derivatives Awards •1st place, Equity •1st place, Interest Rate Derivatives 34
Slide 35: Summary
Summary • Good results • TP ICAP transaction and integration on track • Organisational and management changes • Ongoing growth and diversification 35
Slide 36: Q&A
© tullett prebon Q&A
Slide 37: Appendices
© tullett prebon Appendices
Slide 38: Headcount
Headcount Brokers Support Other* Total At June 2015 1,739 817 149 2,705 At December 2015 1,716 811 158 2,685 At June 2016 1,707 815 192 2,714 *Other includes Corporate, Information Sales and RMS, Temporary integration resource 38
Slide 39: Underlying net finance expense
Underlying net finance expense £m H1 2016 H1 2015 Interest receivable on cash balances 1.1 0.8 Payable on Sterling Notes (7.0) (7.0) Bank and RCF commitment fee (1.2) (0.8) Amortisation of debt issue and bank facility costs (0.8) (1.1) Other interest (0.2) (0.2) Cash interest and fees (8.1) (8.3) De
Slide 40: Operating assets/(liabilities)
Operating assets/(liabilities) £m June 2016 December 2015 June 2015 Fixed assets 48.7 49.5 48.0 Trade receivables 110.6 94.2 92.2 Net settlement balances 4.7 0.3 2.0 Other debtors/prepayments 35.3 33.6 39.5 Payables/accruals (156.8) (159.8) (133.9) Provisions (16.9) (29.1) (12.1) 25.6 (11.3) 35.7 Gr
Slide 41: Pension scheme surplus
Pension scheme surplus £m June 2016 December 2015 June 2015 Scheme assets 332.6 289.8 257.9 IAS19 valuation of liabilities (216.8) (201.6) (201.0) Accounting surplus 115.8 88.2 56.9 Related deferred tax liability (40.5) (30.9) (19.9) 75.3 57.3 37.0 Discount rate applied 2.8% 3.7% 3.6% 41
Slide 42: Major shareholders as at 14 July 2016
Major shareholders as at 14 July 2016 Investor Holding (%) 1. Schroder Investment Management 28,641,144 11.76 2. Jupiter Asset Management 21,153,096 8.69 3. Majedie Asset Management 19,976,924 8.20 4. OppenheimerFunds Inc. 14,516,841 5.96 5. Invesco Trimark 11,925,889 4.90 6. Liontrust Asset Managem