IAP.L Regulatory News (IAP)

31 Mar 2009 07:00



Press Release

ICAP plc Trading Statement 

London - 31 March 2009. ICAP plc (IAP.L), the world's premier interdealer broker, is making this trading statement in relation to ICAP's financial year ending 31 March 2009 and particularly to the three month period from 1 January 2009 to 31 March 2009. ICAP expects to announce its preliminary results for the year ending 31 March 2009 on 19 May 2009. 

Commenting on the year, recent events and outlook, Michael Spencer, Group Chief Executive of ICAP said, "Our business continues to make significant progress despite these more challenging conditions; for the first time our revenues have exceeded £1.5 billion during the year.

While the fiscal easing and capital rebuilding by the banks will in due course restore confidence in the financial markets we are still in a period of turbulence as banks and other financial institutions restructure to address asset disposals, cost reduction and the reallocation of leverage. The last quarter of our financial year saw activity in the wholesale financial markets slower overall than the same, exceptionally busy, period in the previous financial year. 

We expect to take full advantage of the restructuring of the financial markets and remain very positive about the medium term outlook for the business. There are significant opportunities to build our business by attracting high quality people and acquiring some assets at attractive prices. 

In line with our strategy, we have maintained our commitment to the future growth of the business by investing an additional £40 million in new initiatives this year, in addition to our acquisitions. We will continue to invest in these and other opportunities in the coming year to support the long term growth of the business.

ICAP has maintained its focus on costs and has taken advantage of a number of opportunities in both voice and electronic broking to reduce costs by £38 million; this reduced costs this year by £15 million, in 2009/2010 costs will be reduced by a further £23 million. These savings partially offset the investment in the new areas described above, many of which are still in their development phase. The Group continues to be highly cash generative to support these initiatives and benefits from a strong balance sheet.

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 within the range of analysts' current forecasts after investing significantly in the future growth of the business and reducing our cost base."

Highlights 

ICAP continues to benefit from the scale and the diversity of our business; once again we have increased market share in both voice and electronic broking. 

Voice broking - the over-the-counter (OTC) markets have demonstrated their flexibility, depth and breadth as they have adapted to recent market conditions. Low short term interest rates, steep yield curves and substantially increased bond issuance have kept interest rate derivatives busy, particularly in longer maturity interest rate swaps in Europe. Corporate bonds have been strong performers though credit derivative volumes have been lower. In commodities, the markets continue their good performance, with oil and emissions particularly active. Cash equities and equity derivatives have continued to experience tougher conditions. Many emerging markets have seen patchy liquidity and lower volumes but with an increase in activity in recent weeks.

Electronic broking - Volumes in electronic broking began to slow in November but overall have steadied in the last three months. Average daily volume in March, until last Friday, was $147 billion in spot FX and $420 billion in the fixed income markets. Our market position in both foreign exchange and fixed income remains very strong and there is potential for volumes to grow with increased government bond issuance and buy-backs. We continue to invest in the expansion and development of the Group's electronic systems. 

Post trade services - Demand for improvements in the efficiency of post-trade processing and for reductions in the capital allocated to existing positions are continuing to provide opportunities for ICAP's range of post-trade processing, portfolio compression and reconciliation and risk management services - Traiana, TriOptima and Reset. The current environment is creating pressure from regulatory authorities to ensure that the infrastructure behind the OTC markets is as robust as possible and the banks have responded positively to that pressure. 

As previously announced, ICAP is an equal member of a consortium of a number of leading financial institutions that is collectively considering a possible cash offer for LCH.Clearnet Group Limited. Discussions are continuing.

Note: 

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 13 equity analysts. The range of those forecasts for the year to March 2009 is between £336 million and £356 million. The source of these estimates was Bloomberg, Reuters and the analysts. 

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Contacts: 

About ICAP: 

ICAP (www.icap.com) is the world's premier voice and electronic interdealer broker and the source of global market information and commentary for professionals in the international financial markets. The Group is active in the wholesale markets in interest rates, credit, commodities, foreign exchange and equity derivatives. ICAP has an average daily transaction volume in excess of US$2.3 trillion, more than 40% of which is electronic. ICAP plc was added to the FTSE 100 Index on 30 June 2006.