Icap plc (IAP.L), the world's leading interdealer broker and provider of post trade risk and information services, today announced its results for the six months ended 30 September 2012.
- Group revenue fell to £746 million, a 14% decrease
- Profit before tax of £137 million was down 26%
- Electronic, post trade risk and information contributed 67% of operating profit
- On target to realise cost savings of more than £50 million in the current financial year and at least £60 million of annualised cost savings by the year end in addition to the £20 million achieved in the prior year
- Group operating profit margin of 19% (30 September 2011 - 22%)
- EPS (adjusted basic) reduced by 21% to 15.4p; EPS (basic) reduced from 15.4p to 7.8p
- Ongoing free cash flow of £108 million (30 September 2011 - £105 million) with free cash flow conversion of 109% (30 September 2011 - 82%)
- Interim dividend payment to shareholders 6.60p per share (30 September 2011 - 6.00p per share)
Michael Spencer, Group Chief Executive Officer, said: "This has been one of the toughest periods in my 36 year career in the wholesale financial markets. Trading volumes this year have fallen significantly across nearly all asset classes and geographies whether equities, futures, FX, commodities, fixed income and also OTC. This has been caused by a combination of factors: global economic weakness, the continuing Eurozone crisis, bank recapitalisation and deleveraging, uncertainty over regulatory reform, quantitative easing and near zero rates, to name the main ones. I do not believe this negative environment will continue indefinitely but equally I do not expect it to improve imminently. It has been a time to weather a hard storm and prepare thoroughly for financial regulatory reform.
"Against this adverse backdrop we have focused strongly on cutting fixed costs and compensation, slimming the firm to a lower expense base at the same time as focusing on how US and European regulatory reform will create big changes and big opportunities within our sector. We believe we have delivered a creditable performance in a challenging half year. The profits from our electronic division have also exceeded voice profits for the first time.
"Our cost reduction programme continues apace and we remain on track to deliver in excess of £50 million of savings this year in addition to the £20 million achieved last year.
"Importantly we have seen a very significant increase in activity on our i-Swap Euro platform as the dealers prepare for the new regulatory environment with an eight fold increase in monthly volumes since the summer low point. We intend to launch in US dollars in early 2013. We also recently launched ISDX, The ICAP Securities and Derivatives Exchange (formerly Plus Stock Exchange). Likewise the improvements in our electronic platforms and post trade services are bearing more fruit. We have seen an increase in BrokerTec's market share since the major technology upgrade earlier this year. And although it is still early days, we are pleased that the changes we have recently made at EBS have been well received by our customers. Our post trade businesses continue to grow as we help our customers reduce risk and costs.
"In the very short term we are not anticipating any rapid improvement across our markets. However over the past several years we have carefully formulated and invested in our strategy for dealing with the implications of financial regulatory reform which we believe will be significant. As these results confirm, ICAP has successfully reengineered itself towards electronic transaction and post trade services which we believe puts us in a very good position when markets do improve.
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