IAP.L Regulatory News (IAP)

16 Jul 2008 07:00



Press Release

ICAP plc Interim Management Statement 

London, 16 July 2008 - ICAP plc (IAP.L), the world's premier interdealer broker, is making this Interim Management Statement in relation to the period from 1 April 2008 to 30 June 2008 and the outlook for ICAP's financial year ending 31 March 2009. It will be delivered to shareholders attending ICAP's Annual General Meeting today.

Performance during the period 

Group revenue (excluding the recent Link acquisition) grew by 15% in the quarter ended 30 June 2008 compared with the same period in the previous year. ICAP has a broadly diversified revenue base and in many markets the Group benefited from higher than average levels of volatility. The increase in electronic broking revenue was particularly strong, especially in foreign exchange. 

ICAP's newer business activities contributed significantly during the quarter. Revenue growth in post-trade services, where the group has recently been investing, was noteworthy. There was also a strong performance from equity derivatives compared with the same period last year. ICAP strengthened these activities during the quarter with the acquisition of Link on 7 April 2008 (see below).

ICAP's increasingly diversified business now operates in 50 countries, covering a broad range of products and servicing an extensive customer base where no single customer accounts for more than 5% of revenues.

In the medium term ICAP's markets are expected to continue to display strong structural growth with an underlying industry revenue growth rate estimated to be at least 10% per annum. This structural growth rate covers both periods when volatility and volumes in the wholesale financial markets can be very high and also quieter periods when these markets are more subdued. In the previous financial year there were several months of high levels of volatility from June 2007 onwards. The resulting increase in activity in ICAP's markets led to revenue growth that was significantly above the underlying, medium term growth rate for the industry. 

At this early stage in this financial year, taking into account the effects of more uncertain market conditions on our customers and their balance sheets, we continue to expect industry revenue during the year to achieve the underlying medium term growth rate. 

ICAP's profit before tax, amortisation and impairment of intangibles arising on consolidation and exceptional items for the financial year ending 31 March 2009 is anticipated to be broadly in line with the current average of analysts' forecasts. 

Commenting on the first quarter and outlook, Michael Spencer, Chief Executive of ICAP, said "ICAP has continued to benefit from higher than average levels of volatility as well as the investment we have made in recent years to broaden our business. We remain very positive about the outlook for the business. As a result of this volatility, activity levels in interest rates (particularly in Europe), foreign exchange and energy markets continued to be high during this period. By contrast, emerging market revenues are slightly down on the exceptional strong quarter in the previous year. Growth in the credit derivatives market has slowed, but revenue in the corporate bond markets has increased."

"ICAP's electronic broking business grew very strongly, particularly in foreign exchange and post trade services. Traiana, which we acquired in late 2007, is performing in line with our high growth expectations." 

Highlights 

ICAP made an important further step in building the Group's overall capability in the equity markets with the completion of the acquisition of The Link Asset and Securities Company Limited (Link) on 7 April 2008. Link enjoys a very strong market position as the leading global equity derivatives broker with 136 staff covering Europe, the Americas and Asia. 

ICAP paid an initial consideration of £156 million, including a payment for the net assets. In addition ICAP will pay deferred consideration equal to 25% of nine times the profit after tax for the year ended 31 March 2010 of the Link group after it has been amalgamated with certain complementary ICAP businesses. The aggregate of the initial consideration and the deferred consideration is capped at £250 million. The consideration paid to Link shareholders has been financed by debt. 

ICAP's average daily electronic broking volumes (covering US Treasury products, spot FX, US dollar and euro Repo) in the quarter ended 30 June 2008 increased by seven percent over the corresponding period in 2007 to US$825.5 billion. Average daily spot FX volumes on the EBS platform in the quarter ended 30 June 2008 were $213.4 billion, 40 percent higher than the corresponding period in 2007. ICAP is continuing expand and develop the Group's electronic systems to handle future demand generated by both manual and algorithmic trading. 

On 8 July 2008 ICAP purchased 1,000,000 of its 10p ordinary shares at a price of 454.13 pence per ordinary share. ICAP has access to sufficient capital to continue to develop its businesses under its already announced strategy of organic and acquisition driven growth and has made this purchase in recognition of the recent weakness in its share price.

Notes: 

1) The current forecasts for ICAP plc pre-tax profits referred to in this announcement are based on forecasts of profit before tax, amortisation and impairment of intangibles arising on consolidation and exceptional items provided by 11 equity analysts. The range of those forecasts for the year to March 2009 is from £344 million to £405 million with an average of £375 million. This compares with the results for the year to March 2008 when ICAP plc's profit increased by 31% to £330 million. The source of these estimates Bloomberg, Reuters and the analysts. 

2) ICAP introduced the publication of its market volume data in selected markets on its website at the beginning of September 2007. The aim is to provide more frequent, transparent, granular data about activity levels in the global OTC financial markets in which ICAP has a significant market share. 

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About ICAP: 

ICAP is the world's premier voice and electronic interdealer broker, delivering specialist intermediary broking services to trading professionals in the wholesale financial markets. The group covers a very broad range of OTC (over-the-counter) financial products and services in commodities, foreign exchange, interest rates, credit and equity markets, as well as data, commentary and indices. ICAP's daily average transaction volume is in excess of $1.5 trillion, more than 60% of which is electronic. ICAP plc was added to the FTSE 100 Index on 30 June 2006. For more information go to www.icap.com