Ahead of the interim results for the six months to 30 June 2018, to be announced on 7 August 2018, TP ICAP plc (the Company) has provided an update on trading and a change in leadership.
Trading update
Revenues for the six months to 30 June were 3% higher than the prior year at constant exchange rates and 2% lower as reported. This is consistent with 2018 full year revenue guidance provided in March, which remains unchanged. Both the Tullett Prebon and ICAP businesses continue to contribute to Group revenue growth.
Actions taken in the first half of the year have delivered additional synergy savings of around £5m in the period and the company has exited H1 at an annualised run rate of around £65m.
The Board has reappraised its approach to the integration and the ongoing investment needs of the business in the light of the evolving industry landscape. As a result the Group is reducing its synergy target from £100m to £75m by the end of 2019 on an annualised basis.
Underlying operating profit for 2018 will be impacted by additional ongoing cost headwinds of around £10m, relating to Brexit, MIFID II, regulatory and legal costs and IT security. Market forces are expected to increase broker compensation in 2018 from 50.5% in FY 2017 to at least 51%. Near-term additional UK regulatory capital requirements and the refinancing of the revolving credit facility (RCF) are likely to increase finance costs in 2018 to around £35m. As a result, earnings per share for 2018 are expected to be slightly below the bottom-end of the range of analyst expectations.
2019 will see the cost associated with Brexit, regulatory and legal, and IT security increase from the above-mentioned £10m in 2018 to £25m. In addition, the Group plans to make strategic organic investments of around £15m in Global Broking, Energy & Commodities and the Data & Analytics divisions to accelerate the future growth of the TP ICAP business. The increased finance costs mentioned above will increase to around £40m in 2019.
Directorate changes
TP ICAP announced that John Phizackerley is leaving his post as Chief Executive and as a member of the Board with immediate effect and has been replaced by Nicolas Breteau, subject to FCA approval. Nicolas joined Tullett Prebon in 2016 as Chief Commercial Officer and currently leads TP ICAP’s largest business, Global Broking.
In addition, Robin Stewart has been appointed as Chief Financial Officer on a permanent basis, subject to FCA approval. Robin joined Collins Stewart Tullett Plc in 2003 as Head of Tax and has been acting as the Company’s Interim Chief Financial Officer since November 2017.
Both Nicolas and Robin will become members of the Board with immediate effect.
Rupert Robson
Rupert Robson, Chairman, said:
The evolving landscape is driving up costs across our industry. The acquisition of ICAP has given us greater scale to withstand this pressure. The potential for these combined businesses remains extremely compelling and this will be evidenced in the coming years. However, it has become clear that a change of leadership is required to execute our medium-term growth strategy and deliver the detail of the integration process.
As part of our established succession plan, the Board and I are very pleased indeed to welcome Nicolas to his new role as Chief Executive. We are confident he has the skill-set to deliver the future growth of the business and conclude the integration.
The Board and I are also delighted to confirm Robin as the Company’s permanent Chief Financial Officer. We believe that Nicolas and Robin make an excellent team to lead the Company for the future.