TIDMIAP
RNS Number : 0340E
ICAP PLC
13 July 2016
ICAP plc - Trading Statement
- Positive momentum from investment in new products
- EBS BrokerTec wins contract to deliver technology to CFETS
- Transaction with Tullett Prebon on track to complete later this year
London, 13 July 2016 - ICAP plc (IAP.L), a leading markets
operator and provider of post trade risk mitigation and information
services announces today its trading statement for the period from
1 April 2016 to 30 June 2016. It will be delivered to shareholders
attending ICAP's Annual General Meeting today.
Michael Spencer, Group Chief Executive Officer of ICAP, said: "I
expect 2016/17 to be an exciting and challenging year for ICAP as
we transition to become NEX Group plc, the leading venue for
electronic transactions in OTC products and post trade services.
Our industry position, built around market-leading products and
services developed over many years, provides us with an outstanding
opportunity to deliver long-term profitable growth.
"We have made a good start to the year and remain cautiously
confident looking ahead despite a more uncertain macroeconomic
outlook for the UK and the global economy since the Brexit vote in
the UK on 23 June. The referendum result was a tremendous shock to
global financial markets but our platforms demonstrated resilience.
We handled more than $200 billion of FX volume on 24 June on our
EBS platform demonstrating deep and reliable liquidity throughout a
period of extreme volatility.
"Prior to the UK referendum, we were looking towards a long and
slow journey on the road to more normal market conditions following
the decision by the Fed to raise interest rates back in December.
This journey looks more uncertain now although the subsequent
decline in sterling in the FX markets does provide us with a
significant windfall benefit."
Group revenue from continuing operations for the quarter
increased by 2%* on a constant currency basis and increased by 7%*
on a reported basis compared with the same period last year.
Overall market conditions have been mixed as the malaise in global
financial markets, low interest rates and bank deleveraging
persists. Trading activity levels saw a spike around the time of
the referendum.
Continuing operations
Electronic Markets
Revenue decreased by 2% on a constant currency basis and
increased 3% on a reported basis during the first quarter compared
to the same period last year. On the BrokerTec platform, average
daily volume decreased in US Treasuries by 17% to $142 billion, in
US repo by 7% to $202 billion and in European repo by 2% to EUR175
billion. Average daily volume on EBS decreased by 15% to $83
billion for the first quarter as volatility remained low. Revenue
did not decrease in line with volume as a result of changes to the
product mix and the effect of the volume-based tiered tariff
structure.
EBS Direct, the disclosed, relationship-based liquidity service,
continued to expand with more than 400 customers on the platform
and average daily volume increased to $21 billion (Q1 2015/16 $17
billion) for the period. Interest in forwards and swaps on EBS
Direct has seen steady growth in both average daily volume and the
number of liquidity consumers trading. BrokerTec Direct, the
recently launched relationship-based liquidity service in the US
Treasury market, continues to onboard new customers.
In June, ICAP announced that the China Foreign Exchange Trade
System (CFETS), China's official inter-bank market trading platform
and infrastructure provider, has chosen EBS BrokerTec to deliver
the underlying technology for fixed income and FX electronic
execution services in mainland China. The deal, valued at $65
million over a three-year period, will see ICAP expand into China,
a key growth market for the business, with EBS BrokerTec
establishing a local office and development centre in Shanghai.
Post Trade Risk and Information
Revenue increased 6%* on a constant currency basis and 12%* on a
reported basis during the first quarter compared to the same period
last year. The continuing demand for risk mitigation products was a
key driver of growth in the period, particularly at TriOptima.
During the quarter, triReduce extended its customer base by
completing the first successful compression cycle for cleared euro
interest rate swaps at Eurex Clearing and expanded its product
range by adding an inflation product for compression. The
repository reconciliation offering from triResolve, which aligns
the records of the reporting parties with those of the global trade
repositories, continues to grow and the user base during the period
reached more than 1,700 parties. The division's performance also
benefited from the performance of Reset in which the core business
saw improvement in its US dollar revenue, following the significant
impact in the prior year of low short dated interest rate
volatility and the ECB's quantitative easing programme.
As announced in April 2016, ICAP acquired ENSO, a leading
provider of data analytics for hedge funds and prime brokers. Enso
is now fully consolidated and reported as part of the Post Trade
Risk and Information division.
Discontinuing operations
IGBB
Revenue was flat on a constant currency basis and increased by
2% on a reported basis during the first quarter compared to the
same period last year. Trading activity continued to be impacted by
ongoing structural and cyclical factors. This was, however, partly
offset by increased activity following the result of the UK
referendum in late June. Good progress was made with the continued
roll out of Global Broking's e-Commerce solutions and hybrid
footprint, including an increase in the number of customers using
TrueQuote, a portal for the buyside. The marginal decline in
revenue on a constant currency basis for Global Broking was partly
offset by an increase in revenue from the related information
business.
Transaction with Tullett Prebon
In November 2015, ICAP announced that it had entered into a
transaction which will, when completed, involve the disposal of its
global hybrid voice broking and information business, including its
associated technology and broking platforms, certain of its joint
ventures and associates (IGBB), to Tullett Prebon. In June, the
Competition and Markets Authority (CMA), announced that unless the
companies were able to offer undertakings which addressed the CMA's
competition concerns in relation to the broking of oil products,
the anticipated acquisition would be referred for an in-depth phase
2 investigation. In response, ICAP and Tullett Prebon announced
that they are working together to sell ICAP's voice/hybrid EMEA oil
broking business within the appropriate timeframe. The proposed
transaction remains on track to complete later this year.
In addition, ICAP no longer intends to retain a 19.9% interest
in TP ICAP plc after completion of the transaction and has agreed
with Tullett Prebon that, subject to the requisite approvals
(including the approval of ICAP shareholders), these shares will be
issued directly to ICAP shareholders such that they will hold
approximately 56% of TP ICAP's enlarged share capital on
completion. A revised circular will be sent to ICAP shareholders in
due course.
-Ends-
Investors & Analysts Conference Call:
This will be hosted by Michael Spencer at 08:00am on Wednesday
13 July 2015:
Dial in number: +44 (0)20 3003 2666
Access Code: ICAP
A recording of this call will be available at www.icap.com
Contacts
+44 (0) 20 7050
Alex Dee Head of Investor Relations 7420
Neil Bennett/
Rebecca +44 (0) 20 7379
Mitchell Maitland 5151
Notes:
* The percentage change in revenue excludes: the effect of the
discontinued businesses being sold as part of the transaction with
Tullet Prebon, the consolidation of ENSO and residual revenue from
existing shipping contracts
FX
The closing exchange rates at 11 July 2016 were $1.30/GBP and
EUR1.17/GBP. If these rates remain constant for the rest of
FY2016/17 then the average exchange rates for FY2016/17 would be
$1.34/GBP (FY2015/16: $1.50/GBP) and EUR1.20/GBP (FY2015/16:
EUR1.36/GBP). If FY2015/16 was retranslated at these average rates
then it would have a GBP28m favourable impact on Group operating
profit. GBP18m of this impact relates to the US dollar and GBP10m
relates to the Euro.
About ICAP
ICAP is a leading markets operator and provider of post trade
risk mitigation and information services. The Group matches buyers
and sellers in the wholesale markets in interest rates, credit,
commodities, FX, emerging markets and equity derivatives through
voice and electronic networks. Through our post trade risk and
information services we help our customers manage and mitigate
risks in their portfolios. For more information, please go to
www.icap.com.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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