TP ICAP Regulatory News (TCAP)

TP ICAP GROUP PLC ("TP ICAP" or the "Group")

3 August 2021

Trading update for the six months ended 30 June 2021 (the "Period")

TP ICAP issues a scheduled trading update in relation to the Period. Commentary on year-on-year performance is on both a constant currency and a reported basis. Given the extraordinary trading experienced in Q1 2020, as global markets reacted to the COVID-19 pandemic, for context, we have included relevant commentary comparing performance to 2019.

Nicolas Breteau, Chief Executive Officer, TP ICAP said: 

"Our revenue performance reflects challenging trading conditions caused by the combination of very quiet secondary markets and the ongoing disruption from COVID-19. Against this market backdrop, we have focused on those areas that we can control: namely, executing on our strategy and managing costs.

"In terms of corporate development, this has been a busy and successful period. In February we completed the redomicile of our holding company from the UK to Jersey and realised tangible capital benefits as a result. We also completed the Liquidnet acquisition in March and the subsequent integration is successfully progressing at pace. We have continued to execute our organic strategy to electronify our business to improve margins over time, connect clients with liquidity more efficiently and diversify our revenue mix. In addition, we have continued to innovate, going live with a new fully automated Spot FX matching platform and announcing the launch of a pioneering wholesale trading platform for spot crypto-assets.

"The Group delivered revenue of £936m for the Period, down 1% on a constant currency basis compared with H1 2020, but up 6% when compared with H1 2019, again on a constant currency basis. H1 2021 revenue includes £55m from Liquidnet. Excluding Liquidnet, Group revenue for the Period declined 7% on a constant currency basis compared with H1 2020, but was broadly in line with the equivalent period of 2019. We anticipate full-year revenue for the Group, excluding Liquidnet, to be broadly in line with 2020 on a constant currency basis."

Divisional Reporting

TP ICAP reports H1 2021 revenues in four divisions: Global Broking; Energy & Commodities; Agency Execution (formerly Institutional Services and now including Liquidnet); and Parameta Solutions (formerly Data & Analytics and now including Post-trade Solutions).

Revenue for the Period:

§ Revenue in the Period of £936m, 1% lower than the equivalent period last year (2020: £947m) on a constant currency basis (5% lower on a reported basis);

§ Revenue decline in the Period reflected quieter markets compared with the extraordinary volumes seen in March 2020;

§ Excluding Liquidnet's revenue of £55m, revenue in the Period was 7% lower than the prior year on a constant currency basis (11% lower on a reported basis).

Notes:

1. For comparative purposes, in H1 2020, £12m revenue on a constant currency basis (£13m on a reported basis) has been reclassified from Global Broking into Parameta Solutions as a result of the transfer of our Post-trade Solutions business.

2. Inter-division charges have been made by Global Broking and Energy & Commodities to reflect the value of proprietary data provided to Parameta Solutions. The prior year Period has been restated in line with the new-presentation format. The Global Broking inter-division revenues and Parameta Solutions inter-division costs are eliminated upon the consolidation of the Group's financial results. In H1 2020, £1m of revenue has been reclassified as Inter-division revenue in Global Broking relating to SEF (Swap Execution Facility) revenue that was charged to Post-trade Solutions. The reclassified increase in the inter-division revenue and costs are eliminated upon consolidation.

3. For H1 2021, £55m of revenue has been included within Agency Execution relating to the Liquidnet acquisition that completed on 23 March 2021.

Revenue and activity by division for the Period:

§ Global Broking revenue declined 7% compared with the prior year on a constant currency basis (-11% on a reported basis) in an environment where H1 2021 wholesale market activity was generally subdued compared with H1 2020. Performance for the Period was in line with market activity and we maintained our industry-leading market share. Across Rates, Credit and FX, we made substantial progress in advancing our hub strategy to electronify our platforms and aggregate liquidity across our market leading brands.

§ Energy & Commodities revenue declined 9% on a constant currency basis (-14% on a reported basis), with the strong prior year period characterised by the record pandemic-driven oil trading volumes of the first quarter.

Over the Period, energy markets were less active than in the same period in 2020. The cadence of energy-related trading activity followed a similar pattern to most financial asset classes, with robust first-quarter volume, followed by a weaker Q2.

§ Agency Execution revenue increased by 84% in the Period on a constant currency basis (+81% on a reported basis), largely due to the inclusion of Liquidnet. Following its acquisition on 23 March 2021, Liquidnet contributed revenue of £55m in the Period.

Excluding Liquidnet, H1 2021 revenue was 14% lower than the prior year on a constant currency basis (-16% on a reported basis), reflecting weaker activity in the Relative Value business.

The process to integrate Liquidnet into the Group is progressing well. We have advanced our plans to realise new revenue streams for Equities and Credit; we have increased our marketing of the business in Continental Europe; and we have identified cost synergies. We will provide a more detailed integration update at our Interim Results presentation on 7 September 2021. 

§ In Parameta Solutions, the Data & Analytics business achieved double-digit revenue growth (+11% on constant currency basis, +3% on reported basis) as it continued to benefit from its strategy to launch new and higher value products, expand distribution channels and deepen and diversify its client relationships. Post-trade Solutions revenues declined 17% on a constant currency basis (-23% on a reported basis) compared with the prior year due to lower market-wide volumes. Overall, revenue grew 6% in the Period on a constant currency basis (-1% on a reported basis).

2021 full year guidance and outlook:

§ Given the subdued trading conditions we have experienced in the Period, together with continuing uncertainty caused by quiet markets and the disruption from COVID-19, we anticipate full-year revenue for the Group, excluding Liquidnet, to be broadly in line with 2020 on a constant currency basis;

§ The Group reiterates its guidance on investment spending on its organic strategy and Liquidnet as previously disclosed in our Capital Markets Day and Preliminary Results;

§ The Group notes that GBP:USD year-on-year appreciation acts as a headwind against our reported revenues and operating margin. With GBP strengthening against USD, the average GBP:USD rate in H1 2021 was 1.39 compared with the same period in 2020 average of 1.28 (a change of 8%). Around 60% of Group revenues and 40% of expenses are USD. The Group is not engaged in any active currency hedging for reporting purposes;

§ The FX impact and investment spending on organic strategy and Liquidnet mentioned above and in our Preliminary Results are expected to have an adverse impact on operating margin.

2021 Interim Results:

§ The Group will report its 2021 Interim Results on 7 September 2021.

For further information:

Analysts and Investors:

· Al Alevizakos, Group Head of Investor Relations & Rating Agencies Management Direct: +44 (0) 20 3933 3040

Mobile: +44 (0) 79 9991 2672

E-mail: Alevizos.Alevizakos@tpicap.com 

Media:

· William Baldwin-Charles, Group Media Relations DirectorDirect: +44 (0) 20 7200 7124

Mobile: +44 (0) 78 3452 4833

E-mail: William.Baldwin-Charles@tpicap.com

· Neil Bennett, Maitland

Direct: +44 (0) 20 7379 5151

E-mail: tpicap-maitland@maitland.co.uk

About TP ICAP Group plc

TP ICAP Group plc is a diversified global markets infrastructure and data solutions provider. The Group operates a portfolio of separate and competing brands to deliver intermediary services, contextual insights and intelligence, trade execution, pre- and post-trade services, and data-led solutions. We are formed of four business divisions:

· Global Broking: the largest Interdealer Broker in the world operating under the ICAP, Tullett Prebon and Louis Capital brands servicing clients in Rates, FX, Credit and Equities. We match buyers and sellers, facilitate price discovery, liquidity, execution and risk management.

· Energy & Commodities: the world's leading OTC energy and commodities broker operating under the ICAP, PVM and Tullett Prebon brands. Active in all major commodities markets including oil, gas, power, renewables, ferrous metals, base metals, precious metals and soft commodities. 

· Agency Execution: serving the buy side operating under the Liquidnet and COEX Partners brands. We provide trading services for a broad range of asset classes, serving a sophisticated client base of asset managers, asset owners and hedge funds.

· Parameta Solutions: a world leading OTC data provider operating under the Parameta Solutions brand offering unbiased data products and solutions that facilitate trading, enhance transparency, reduce risk and improve operational efficiency, complemented by a broad range of post trade solutions.

Further information on the Company and its activities is available on the Company's website: www.tpicap.com