British multinational electronic execution, broking and risk management firm ICAP has today announced its full financial results for the financial year ended March 31, 2014.
Considering that last year represented a period of stellar performances for a vast majority of firms worldwide, a point of interest is that ICAP’s operating profit took a 5% dip during the accounting period ending March 31 this year, whilst EBS volumes fell by 11% compared with the previous period which , by contrast to last summer’s global highs, encompassed very low volumes worldwide. In particular, the firm’s result over this period is a point of interest when considering that ICAP raised funding in the form of notes recently.
Group revenue decreased to £1,397m against a what ICAP considers to be a backdrop of challenging market conditions, and the company had engaged in the launch of significant business initiatives during the year include the ICAP SEF, EBS Direct and Traiana’s CreditLink.
For the year ended 31 March 2014, Electronic Market’s revenue decreased by 1% to £265 million (2012/13 – £268 million). This marginal decline in revenues together with an increased level of
investment in the business resulted in the overall trading operating profit margin falling by 2 percentage points to 40%.
Combined average daily electronic volumes for the BrokerTec and EBS platforms for the year ended 31 March 2014 were $719 billion, an increase of 2% on the previous year, reflecting strong growth in US Treasury volumes traded on BrokerTec largely offset by weaker euro/dollar spot volumes traded on EBS Market.
69% of the group’s total operating profit was contributed by the Electronic Markets and Post Trade Risk and Information divisions, up 3 percentage points on the prior year, whilst group trading operating profit margin was maintained at 21% (2012/13 – 21%), with a further £25 million of annualized cost savings identified during the year.
Trading profit before tax decreased by 4% to £272m, in-line with previous guidance, and trading earnings per basic share was up 1% to 33.2p, with a proposed final dividend being maintained at 15.4p per share.
Making a corporate statement today, Michael Spencer, Group Chief Executive Officer, said: “The past year has presented many challenges. Trading conditions have been and are likely to remain extremely difficult.”
“We operate in an industry which is undergoing an enormous amount of structural change with the emergence of a new post-financial crisis regulatory landscape. The trading operations of our bank customers, particularly their FICC franchises, continue to be scaled back as balance sheets are de-levered in response to increased capital requirements. In addition to these structural developments, cyclical factors such as the low interest rate environment, muted foreign exchange rate volatility and continued uncertainty over the long overdue economic recovery, have inevitably impacted revenue” continued Mr. Spencer.
“This was also an extremely difficult year because of the yen Libor investigation. In September 2013, one of our Global Broking subsidiaries reached settlement agreements with the CFTC and FCA and
paid penalties totalling £55 million relating to the involvement of certain brokers assisting bank traders seeking to manipulate yen Libor. We have learnt lessons from this experience and have taken steps to strengthen the business” he explained.
“Despite the ongoing structural challenges facing the industry, I believe that there are reasons to be optimistic. ICAP, with its diverse portfolio of businesses, is uniquely positioned to provide the full range of pre trade, execution and post trade services. I am convinced that the move towards increased electronic trading of derivatives, central clearing and risk mitigation are positive drivers for future growth. In anticipation of the new market place, we are investing heavily in delivering both new and enhanced product and technological solutions including the ICAP SEF, EBS Direct, TriOptima’s triResolve and Traiana’s CreditLink services.
“ICAP is profitable and cash generative. Over many years, we have demonstrated our ability to reposition our business to the changing market landscape. We will continue to pursue our long-term
strategy to grow our Electronic Markets and Post Trade Risk and Information businesses and reshape Global Broking in response to the structural changes in the marketplace” concluded Mr. Spencer.
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