Icap profit jumps 31%; eyes acquisitions

Icap profit jumps 31%; eyes acquisitions

After reporting a healthy 31% rise in full year pre-tax profit, London-based interdealer broker Icap says it is on the look out for more acquisitions, despite indications that the market volatility that boosted its trading volumes is returning to normal levels.

Icap has posted pre-tax profit of £330.2 million for the year ending 31 March 2008, while group revenue rose 18% to £1.3 billion. Icap says revenue from electronic broking rose 38% to £273.9 million, while operating profit from e-broking rose 93% to £106.9 million.

But Icap shares were down 31.50 pence, or 4.70%, to 638.50 pence in lunchtime trading - having earlier dropped to 637.50 pence - after CEO Michael Spencer told reporters that he thought the worst of the financial crisis was over and the rate of growth seen at Icap is unlikely to continue in the current year.

In a statement Spencer says: "We have benefited from higher volatility in the interest rate, FX, equity, commodities and in parts of the credit and emerging markets that began in June 2007.

"Both our electronic and voice broking businesses felt the positive impact of these higher levels of activity and we benefited from substantial operating leverage, particularly in the electronic business."

However analysts have questioned whether Icap can sustain the high growth achieved during the global market volatility.

DespiteSpencer's caution on the year ahead, he says the outlook for the business is positive and there is an increasing number of expansion opportunities for the group.

"Industry consolidation is also likely to continue and the current environment offers many attractive opportunities to acquire businesses. Icap is well placed to make further acquisitions and fund the development of the group using its existing financial capacity," says Spencer.

Icap says it will focus on integrating its recent acquisitions - FX settlement outfit Traiana, equity derivatives firm Link Asset and Securities and Capital Shipbrokers - as well as searching for new ones.

There has also been speculation that Icap itself has received an bid approach from US-based Intercontinental Exchange (ICE). Earlier this week UK Daily Telegraph newspaper reported that ICE was eyeing Icap, but Spencer has dismissed claims that Icap is in takeover talks.

Last week it was also reported that Icap is one of six companies bidding to provide a new electronic trading platform for European covered bonds.

According to a Bloomberg report, the European Covered Bond Council (ECBC) met with the companies in London earlier this week to assess bids from Icap, TradeWeb, Eurex, MTS, BGC Partners and Bloomberg.

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