REG - TP ICAP Group PLC - Half-year Report
10/08/2022 07:00
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RNS Number : 4931V TP ICAP Group PLC 10 August 2022
TP ICAP Group plc
LEI: 2138006YAA7IRVKKGE63
10 August 2022
TP ICAP Group plc
Financial and interim management report for the six months ended 30 June 2022
(the "Period")
TP ICAP Group plc (the "Group") announces its results for the Period today.
Nicolas Breteau, CEO of the Group, said:
"We have delivered high single digit revenue growth. We have also grown
revenue across all our asset classes and increased our market share. A strong
performance from Rates, helped deliver an uplift in profitability.
Our transformation continues at pace, including the rollout of Fusion, our
award-winning electronic platform. Our focus on diversification is reaping
benefits, too. Parameta Solutions is announcing today an enhanced consensus
pricing solution in partnership with PeerNova and involving many of the
world's largest investment banks. Meanwhile, at Liquidnet, our
Dealer-to-Client credit proposition went live, as planned, in June, initially
with a small number of clients ahead of a wider campaign. Trades have already
been completed and key dealers are connected electronically via API.
We are committed to delivering capital efficiencies for the Group as a
strategic priority. In the first phase of a review we are conducting following
our Jersey redomicile, we have identified around £100 million of cash that
will be generated or freed up by the end of 2023 and used to repay debt.
Following that, and as part of the ongoing assessment of the Group's balance
sheet and investment requirements, the Board is committed to identifying and
returning any resultant surplus capital to shareholders.
Volatility has continued across many markets. Our core franchise, the depth of
our liquidity pools, and our ongoing focus on our transformation mean we are
well positioned in these market conditions."
Results for the Period
Reported / statutory results:
H1 2022 H1 2021
Revenue £1,080m £936m
EBIT(1) £99m £57m
EBIT(1) margin 9.2% 6.1%
Profit before tax £72m £28m
Profit for the period(3) £65m £1m
Basic EPS 8.2p 0.1p
Interim dividend per share 4.5p 4.0p
Weighted average shares in issue (basic)
778.6m 737.7m
Adjusted results:
H1 2022 H1 2021 H1 2021
Constant Currency
Revenue £1,080m £936m £963m
EBITDA(2) £185m £155m £162m
EBIT(1) £142m £117m £123m
EBIT(1) Margin 13.1% 12.5% 12.8%
Profit before tax £116m £88m £94m
Profit for the period(3) £101m £75m £81m
Basic EPS 12.8p 10.2p 11.0p
Weighted average shares in issue (basic) 778.6m 737.7m 737.7m
1. Earnings before interest and tax. For reporting purposes EBIT is equivalent
to operating profit.
2. Earnings before interest, tax and depreciation & amortisation
3. Attributable to equity holders of the parent
A table reconciling Reported to Adjusted figures is included in the Financial
and Operating Review.
The percentage movements referred to in the sections below are in constant
currency (unless otherwise indicated). Constant currency refers to prior year
comparatives being retranslated at current year foreign exchange rates.
Financial highlights
· Revenue growth across all business divisions. Higher margin Rates
business performing well;
· We again increased overall market share;
· Group revenue, excluding Liquidnet, up 7% (up 10% in reported
currency); including Liquidnet, Group revenue up 12% (up 15% in reported
currency);
· Global Broking revenue up 8%. All asset classes generated revenue
uplift;
· Global Broking revenue per broker up 14%;
· Energy & Commodities revenue up 2%. Strong performance in the
US and APAC partly offset by decline in European Gas and Power in a "risk off"
trading environment;
· Agency Execution revenue increased by 58%. Excluding Liquidnet,
revenue up 10%;
· Parameta Solutions revenue up 6%. Data & Analytics again
delivered double digit revenue growth (11%);
· On track to achieve £25m of cost savings by the end of 2022;
· Adjusted EBIT up by 15% to £142m (H1 2021: £123m in constant
currency);
· Reported EBIT increased by 57% to £99m (H1 2021: £63m); and
increased by 74% in reported currency (H1 2021: £57m);
· Adjusted EBIT margin, prior to Russian P&L charges, increased to
16.1% (H1 2021: 12.8% in constant currency); Including Russian impact,
adjusted margin was 13.1%;
· Reported EBIT margin increased to 9.2% (H1 2021: 6.1%);
Capital management highlights
· Following our Jersey redomicile, we have conducted the first phase of
a review which has identified around £100 million of cash that will be
generated or freed up by the end of 2023 and used to repay debt. This will
increase our investment grade rating headroom and reduce future finance costs.
The Board will continue to assess balance sheet and investment requirements
and is committed to identifying and returning any resultant surplus capital to
shareholders.
Strategic highlights
· Continued transformation progress. On track to achieve Fusion
rollout targets for the end of 2022;
· Diversification programme continues, through the following three
initiatives:
o Today, Parameta Solutions is announcing an enhanced consensus pricing
solution, leveraging our unique observable transaction data, which we will
provide for our global client base. The solution will provide clients with
enhanced data for risk and regulatory capital management. This is in
partnership with PeerNova, a Silicon Valley data management and analytics
firm, and in conjunction with over a dozen of the world's largest investment
banks.
o We are planning to launch (subject to regulatory approval) Fusion Digital
Assets, an electronic marketplace for institutions.
o In May, we became the first inter-dealer broker (IDB) through Parameta
Solutions to administer over the counter indices and benchmarks. Part of our
strategy to deliver more data driven insights for clients, including for their
risk and compliance purposes.
· The Liquidnet Dealer-to-Client (D2C) proposition launched, as
planned, in June. The platform was launched with a small number of clients as
the first step, ahead of a wider campaign planned for the second half. The
Request for Quote protocol is live and the first trades have been completed. A
number of key dealers are already connected via Application Programming
Interface (API). This is an exciting growth opportunity for the Group.
· New senior executives in place to increase the pace of execution.
Mark Govoni joined in May from Instinet, where he was President of US
Brokerage, to lead Agency Execution. Daniel Fields, previously Global Head of
Markets at Société Générale, joined in June to lead Global Broking.
Dividend
An interim dividend per share of 4.5 pence (H1 2021: 4.0 pence) will be paid
on 4 November 2022 to shareholders on the register at close of business on 7
October 2022.
Near term outlook
The market environment to date in 2022 has been volatile. This has been driven
primarily by monetary policy tightening to combat record levels of inflation,
the war in Ukraine and recessionary risks in many countries. This has driven
higher trading activity and volumes across most asset classes, which we have
benefited from. However, as we often highlight, it remains difficult to
predict future levels of market activity, given the highly uncertain macro and
geopolitical outlook. Despite the uncertain backdrop, we are cautiously
optimistic for the remainder of the year and we are well positioned. In Rates,
our outlook is positive, and we will benefit further once activity shifts
towards the longer-dated end of the yield curve. Within Energy &
Commodities, we expect the risk-off trading environment in the European Gas
& Power market to continue in the second half, particularly over the
summer months. We expect improved profitability from Liquidnet in the second
half.
Group revenue in July 2022 was 1% higher than the corresponding period in
2021, in constant currency.
Interim results presentation
The Group will hold an in-person presentation and Q&A at 09:30 BST today
in the Peel Hunt auditorium at 100 Liverpool Street, London EC2M 2AT. For
those unable to attend in person, the presentation will also be broadcast via
a live video webcast. Please use the following details to attend the
presentation virtually:
Webcast link:
https://streamstudio.world-television.com/854-1116-33354/en
(https://streamstudio.world-television.com/854-1116-33354/en)
Joining by telephone
United Kingdom (Local) 020 3936 2999
United Kingdom (Toll Free) 0800 640 6441
United States (Local) 1 646 664 1960
All other locations +44 20 3936 2999
Participant access code: 740185
Participants will be greeted by an operator who will register their details.
Attendees via the webcast will be able to ask questions on the phone or by
typing them into the online platform.
A recording of the presentation will also available via playback on our
website after the event.
Forward looking statements
This document contains forward looking statements with respect to the
financial condition, results and business of the Company. By their nature,
forward looking statements involve risk and uncertainty and there may be
subsequent variations to estimates. The Company's actual future results may
differ materially from the results expressed or implied in these
forward-looking statements.
Enquiries:
Analysts and investors
Dominic Lagan
Direct: +44 (0) 20 3933 0447
Email: dominic.lagan@tpicap.com (mailto:dominic.lagan@tpicap.com)
Media
Richard Newman
Direct: +44 (0) 7469 039 307
Email: richard.newman@tpicap.com (mailto:richard.newman@tpicap.com)
About TP ICAP
· TP ICAP connects buyers and sellers in global financial, energy
and commodities markets.
· It is the world's leading wholesale market intermediary, with a
portfolio of businesses that provide broking services, data & analytics
and market intelligence, trusted by clients around the world.
· We operate from more than 60 offices across 27 countries, supporting
brokers with award-winning and market-leading technology.
CEO review
Introduction
Transformation and innovation
Our transformation programme - the deployment of our electronic platform
called Fusion - continues, and we are making good progress. Diversification is
another key strategic focus. Here, we are making good progress too. The
integration of Liquidnet is well advanced. At the same time, Parameta
Solutions is expanding its range of products and services. For example, it
became an FCA authorised benchmark administrator in May. Parameta Solutions
has also announced today a new partnership with PeerNova, a Silicon Valley
data analytics and management company, to deliver a best-in-class consensus
pricing solution, leveraging our unique observable transaction data, and
PeerNova's capabilities.
Innovation, and entrepreneurial focus, are key TP ICAP attributes. We are
ready to launch our Fusion Digital Assets platform, subject to FCA
registration accreditation. It is a good example of how we are applying our
strength in depth as a leading electronic market infrastructure provider to a
new asset class. The digital assets market is going through a challenging
time. Our platform, and our partnership with respected partners, provides an
authoritative, and secure, venue for institutions to participate in this
emerging asset class.
Capital management
In the first phase of a review we are conducting, our redomicile to Jersey has
enabled us to identify around £100 million of cash to be generated or freed
up by the end of 2023. The cash will be used to repay debt to provide
additional headroom to our investment grade credit rating, and to reduce
future finance costs.
Focus on execution
We have made some key senior management appointments during the period. Mark
Govoni, former President of US Brokerage at Instinet, joined us in May as the
new CEO of Agency Execution, with a particular focus on driving Liquidnet's
growth strategy. In June, Daniel Fields became our CEO of Global Broking.
Dan's mandate is to accelerate our strategic execution and to develop our
market leading franchise. Dan has significant transformation expertise and a
strong background in capital markets, including as a Head of Global Markets at
Société Générale. In short, both Mark and Dan bring considerable client
connectivity, and a real commitment to keep transforming our business, to meet
the needs of our clients.
Business Performance
Market commentary
Our broking businesses benefited from increased market volatility. This
generated higher secondary market OTC trading volumes. The heightened
volatility was driven by: geopolitical events (most notably the war in
Ukraine); monetary policy tightening by central banks to combat multi-decade
high levels of inflation; and a slowdown in GDP growth, which has increased
the risk of recession in many countries. From a Rates perspective, a steep
yield curve in 0-2 year maturities increased activity in this part of the
curve. Energy & Commodities also benefited from volatility. But, the
significant price swings in European Gas and Power during the second quarter
reduced activity in this market: traders adopted a 'risk off' approach. This
more cautious market approach was driven by an increase in exchange margin
requirements and a severe contraction in many clients' OTC bilateral credit
lines. In relation to Liquidnet, market volumes declined in the US and Asia,
while in Europe, volumes increased.
High single digit revenue growth
We delivered high single digit revenue growth of 7% excl. Liquidnet. On a
reported currency basis we delivered double digit revenue growth of 10% (excl.
Liquidnet). We generated revenue growth across all our asset classes and again
increased our overall market share. At the business division level, Global
Broking recorded a strong performance, with revenues up 8%. Energy &
Commodities increased revenues by 2%. There was significant growth in Oil and
Power; the almost unprecedented volatility in Gas, however, led to a risk-off
trading stance for many European market participants.
Agency Execution revenue increased by 58%, including Liquidnet; excluding
Liquidnet, revenue was up 10%. The revenue (£114m) generated by Liquidnet
increased by 100%, with the previous year including revenue from completion
(23 March 2021). Revenue was in line with market activity, which was mixed
across the US, Europe and Asia. Market share increased in both Europe and the
US. Parameta Solutions revenue was up 6%. Data & Analytics again delivered
double digit revenue growth (11%). The vast majority of its revenue is
subscription-based so usually recurring and 'sticky'.
Operational leverage driving an increase in EBIT
Rates, a core franchise and our largest and most profitable asset class, saw a
significant uptick in activity at the short-dated end of the yield curve. The
operational leverage underpinning our business model means the increase in
revenue, in Rates in particular, generated an uplift in margin. The reported
EBIT margin increased from 6.1% in H1 21 to 9.2% in H1 22. Prior to the impact
of P&L charges from Russian exposure (£32m), adjusted EBIT margin
increased to 16.1%. The revenue uplift, and the benefits we are reaping from
Fusion, saw Group revenue per broker grow by 12% (+15% in reported currency).
Taking into account the impact of Russian P&L charges, adjusted EBIT
margin was 13.1% compared with 12.8% (in constant currency) a year ago. Total
amounts charged to the P&L have increased from £14m at 11 March 2022 to
£32m at 30 June 2022. This represents our maximum expected exposure to
Russian sanctions.
Our commitment to ongoing operational efficiency is delivering. We completed
the relocation of Liquidnet's London based personnel to our office in
Bishopsgate. This, along with other property consolidation initiatives, is
generating tangible savings. We are on track to deliver our previously
reported Group target for FY22 savings (£25m) as well as the separate
Liquidnet synergies target for the end of 2023 (£25m), at which point we
expect the integration to be complete.
Transforming our business
Our transformation programme is well-defined. Our transformation is about the
delivery of three key priorities:
· Electronification;
· Aggregation; and
· Diversification
These strategic pillars underpin our business model and will deliver
sustainable growth and higher quality earnings.
Delivering better technology and more liquidity for our clients
Our Fusion strategy is at the heart of our focus on the deployment of more
client-led technology and the provision of more liquidity for customers across
our Global Broking and Energy & Commodities businesses. Fusion is about a
single login access for clients; accessing all our liquidity pools for any
given asset class; and a more streamlined process with integrated analytics.
The benefits are significant. For our clients, they include trade efficiency,
cost, speed, risk management, etc. For TP ICAP, the advantages range from
stickier client volume to better profitability, and more opportunities to
gather data and deploy analytics. It is a win-win.
Fusion Planned Rollout Coverage
Business division Fusion coverage
Global Broking Rates | FX | Credit
Energy & Commodities Energy
Fusion provides price discovery and market access in Rates and FX. It is one
tool to facilitate the full trade cycle. The Fusion rollout started in 2021
and will finish in 2025. Most of the development and implementation work will
be in the period 2021 - 2023.
Global Broking
About 55% of Global Broking's revenue is in scope for the Fusion rollout
across the Rates, FX and Credit asset classes. Currently, our focus is on
Rates and FX only, our two largest asset classes. Work will begin on Credit
in 2023. We have continued to roll out Fusion in the first half across the
Global Broking asset classes - this will accelerate in the second half. We are
on track to deliver our 2022 targets.
Fusion is delivering tangible benefits. A Rates desk had a matching session in
the first half encompassing >250 orders from >30 different traders. This
would not have been possible in the traditional voice market. More broadly, in
EMEA Rates, we saw a significant outperformance for Fusion conducted business
compared to desks operating without this platform.
Turning to strategic delivery, we will be launching in the second half, our
offering of Asian 1-Month Non-Deliverable Forwards (NDF). A matching engine in
London will host a Swap Execution Facility (SEF) market with an off-exchange
market in Singapore. Singapore is the third largest FX trading centre globally
and the largest in Asia. In Fusion Rates, our focus is on ensuring we have
ICAP's and Tullett Prebon's inflation and interest rate swaps activity in the
GBP market live on Fusion by the end of this year. We aim to bring Tullett
Prebon EUR inflation onto Fusion - to a similar time frame - with volume
matching and Central Limit Order Book (CLOB) functionality in place as well.
Energy & Commodities
We are the leading global OTC energy and commodities broker. We deliver for
our clients through three strong brands: Tullett Prebon, ICAP and PVM. Our
clients are diverse. They include banks, producers, trading companies and
hedge funds.
As we noted at FY 2021, brokered energy markets are amongst the least
electronified. As we build Fusion Energy, our initial focus is on the internal
rollout of a new order management system (OMS). This key building block will
capture all orders and trades electronically. We have also developed a client
facing screen using the Fusion architecture which we are implementing for our
environmental markets franchise.
We are making good progress expanding our revenue streams in two new areas:
crypto assets and environmental products. We are planning to launch (subject
to regulatory approval) our electronic marketplace for spot crypto asset
trading. Trading will initially be in Bitcoin, with Ethereum to follow in Q3.
The platform will be used by institutional clients only. Our partnership with
custodians, including Fidelity Digital Assets, Zodia, BitGo and Komainu
combines our market infrastructure expertise with their track record of
protecting and storing assets, and settling trades. We are also working
closely with a range of market makers including Virtu Financial, Flow Traders,
Jane Street, Susquehanna and Hudson River Trading. These combinations provide
liquidity and peace of mind for clients as they extend their participation in
this emerging asset class. For us, there may well be opportunities to broaden
our entry into this asset class to the tokenisation of a number of financial
and physical assets over time.
The energy transition is another key opportunity for Energy & Commodities
(and Parameta Solutions, too). We are developing environmental products and
building an environmental hub. In February, Tullett Prebon announced that it
had successfully launched an energy desk in Brazil with a specific focus on
renewables. Over 80% of Brazil's energy comes from renewable sources. The desk
has already seen a significant amount of interest from market participants. In
the renewable certificates market, we have begun the rollout of electronic
client execution capability for Norwegian Green Certificates. We are also
working on launching client screens in the Australian renewables and voluntary
emissions markets this year.
Delivering on diversification
We are diversifying our client base and increasing the proportion of
non-broking revenue. The two key drivers of our diversification strategy are
Parameta Solutions (Data & Analytics) and Liquidnet. We aim to grow these
businesses organically through expanding our product range, geographical
expansion and new distribution channels.
Growing our Data & Analytics business
Our Data & Analytics business is a leading provider of scarce OTC data and
neutral pricing information. We commingle our proprietary trade data with
third party data for the benefit of our clients. The revenue generated by the
business is primarily subscription based: recurring and sticky.
Data & Analytics has a three-pronged strategy - products, clients, and
distribution - to grow revenue and contribution. The focus on products
involves moving up the value chain - beyond data - to include, for instance,
Benchmarks and Indices and Evaluated Pricing. The client strategy includes
diversifying and expanding our customer base to include more buy-side,
corporates, and Energy and Commodities clients. The emphasis on distribution
is about providing clients with more options to access Data & Analytics
products, through more channel partners, including cloud-based solutions.
Progress has been good. Alongside the double-digit revenue growth (11%)
generated by Data & Analytics, important strategic initiatives were
delivered. The move up the product value chain was underlined by Parameta
Solutions becoming, in May, an FCA authorised benchmark administrator. We are
the first inter-dealer broker (IDB) to administer over-the-counter (OTC)
indices and benchmarks. We are taking on the administration of the nine TP
ICAP interest rate swaps benchmarks. They cover the mid-price interest rate
swaps from our Global Broking business; Data & Analytics will be able to
provide more data-driven insights for clients. This will be of considerable
benefit to them, including for risk and compliance purposes.
We are announcing today another major initiative from Parameta Solutions.
ClearConsensus is an enhanced consensus pricing solution, which we will
provide for our global client base. The solution is being delivered in
partnership with PeerNova, a Silicon Valley data management and analytics
firm. We have been working with over a dozen of the world's largest investment
banks to build a new approach to risk and regulatory capital management that
directly addresses some of the growing pressures faced by our clients.
ClearConsensus leverages Parameta Solutions' unique observable transaction
data in its Evaluated Pricing (EP) service - and integrates it with PeerNova's
market leading technology - to provide an efficient consensus process. This
combination will transform the process of running consensus. In doing so, it
will improve the client's quality of their fair value assessments, leading to
more efficient capital allocation and optimisation.
Liquidnet
Liquidnet has major electronic connectivity to around 1,000 buyside clients,
an established equities business and a growing fixed income franchise. Our
focus here is three-fold: complete the integration of Liquidnet, ensure the
core franchise is delivering, and deliver its expansion into dealer-to-client
(D2C) Credit. Later, Liquidnet will also expand into D2C Rates.
The Liquidnet integration programme is going well. About two thirds of the
deliverables have already been completed. We remain on track to complete the
integration by the end of 2023. As noted above, delivery of the targeted
Liquidnet cost synergies is on track. We believe Liquidnet Credit in the D2C
market provides a meaningful opportunity for us. Our objective, as articulated
at our Capital Markets Day in 2020, is to achieve a 3% - 6% market share of
total corporate bond trading by the third full year post completion. Progress
is good. The D2C proposition launched, as planned, in June, with a small
number of select clients as a first step. During the second half, we will
launch the platform to our remaining client base as part of a wider sales
campaign. The onboarding process for clients has been extensively streamlined
making it easier for them to join the platform. The Request For Quote protocol
is live and the first trades have been completed. A number of key dealers are
already connected via API. Strategically, we believe this market segment
provides a material and exciting growth opportunity for us, given its current
low levels of electronification.
Nicolas Breteau
Executive Director and Chief Executive Officer
10 August 2022
Financial and operating review
Introduction
The Group delivered a strong performance in the first half and continued to
grow market share. Geopolitical events, monetary policy tightening and a
slowdown in GDP growth resulted in increased market volatility and secondary
trading volumes during the period. Revenue grew across all divisions and asset
classes. A strong performance in Rates, resulted in an uplift in
profitability.
Group revenue in H1 2022 of £1,080m was 15% ahead of the prior year in
reported currency (12% ahead in constant currency). Excluding Liquidnet,
revenue was 10% higher in reported currency (7% higher in constant currency).
The Group's revenue and EBIT margin benefited from an FX tailwind in the first
half, with GBP weakening by 6%, on average, against the USD.
We have taken a P&L charge of £32m in the period in respect of our
exposure to sanctioned Russian clients and counterparties, an increase of
£18m from the previously disclosed position at 11 March. This follows the
delivery and subsequent write down of inventory. Given that most of the
inventory remains restricted under sanctions, or has very limited
observability on market prices, we have marked the whole portfolio to zero.
These losses could potentially reverse in future.
Excluding Liquidnet and the impact of Russia, variable front office costs
increased by 5% in constant currency, below the growth in revenue (7%).
Revenue per broker (productivity) increased by 15% in reported currency (+12%
in constant currency). The H1 2022 contribution margin was 35.8%. Excluding
the impact of Russia, the contribution margin was 38.8% (H1 2021: 38.2% in
constant currency). Total management and support costs (excluding Liquidnet)
were down 6% in constant currency. The adjusted EBIT margin increased to
13.1%, or 16.1% before the impact of Russian P&L charges (H1 2021: 12.8%
in constant currency). Liquidnet revenue of £114m delivered a contribution of
£44m (at a contribution margin of 38.6%), which, after management and support
costs of £39m resulted in an adjusted EBIT of £5m. We expect improved
profitability from Liquidnet in the second half.
The Group incurred significant items of £36m (post-tax) in reported earnings
(H1 2021: £74m), including £21m of non-cash amortisation of intangible
assets that arose on the acquisition of ICAP and Liquidnet. Reported EBIT
increased from £57m in H1 2021 (reported EBIT margin of 6.1%) to £99m in H1
2022 (reported EBIT margin of 9.2%). We are reducing our guidance for
significant items for FY 2022 from c.£125m (pre-tax) to c.£110m. All other
FY 2022 guidance remains unchanged.
We continue to focus on managing our cost base effectively, given the
inflationary headwind. We are on track to deliver Group targeted savings for
2022 of £25m, as well as our target for Liquidnet synergies (£25m) by the
end of 2023, at which point we expect to complete the integration.
The redomiciliation has enabled the Group to identify opportunities to unlock
capital and cash resources. In aggregate, we expect to generate or free up
approximately £100m of cash by the end of 2023. The freed up cash will be
used to repay debt, to increase our investment grade rating headroom, given
the environment of rising interest rates. Our Revolving Credit Facility has
been successfully renewed for a further 3 years, providing additional
liquidity flexibility.
Despite the highly uncertain macro and geopolitical outlook, we are cautiously
optimistic for the remainder of the year and we are well positioned.
Robin Stewart
Executive Director and Chief Financial Officer
10 August 2022
Key financial and performance metrics
H1 2022 H1 2021
H1 2022 total vs. H1 2021 total
£m Group (exc. Liquidnet) Liquidnet(1) Total Group (exc. Liquidnet) Liquidnet(1) Total (reported currency) reported
change
Revenue 966 114 1,080 881 55 936 15%
Reported
- EBIT n/a n/a 99 n/a n/a 57 74%
- EBIT margin n/a n/a 9.2% n/a n/a 6.1%
Adjusted
- Contribution 343 44 387 333 26 359 8%
- Contribution margin 35.5% 38.6% 35.8% 37.8% 47.3% 38.4%
- EBITDA 167 18 185 148 7 155 21%
- EBIT 137 5 142 119 (2) 117 21%
- EBIT margin 14.2% 4.4% 13.1% 13.5% (3.6%) 12.5%
Average:
- Broker headcount 2,631 n/a 2,631 2,760 n/a 2,760 (5%)
- Revenue per broker(2) (£'000) 333 n/a 333 289 n/a 289 15%
- Contribution per broker(2) (£'000) 114 n/a 114 106 n/a 106 8%
Period end:
- Broker headcount 2,600 n/a 2,600 2,774 n/a 2,774 (6%)
- Total headcount 4,713 440 5,153 4,932 470 5,402 (5%)
1. Liquidnet post-acquisition results included from 23 March 2021
onwards, the date the transaction completed.
2. Revenue and contribution per broker are calculated as external
revenues and contribution of Global Broking, Energy & Commodities and
Agency Execution, excluding Liquidnet, divided by the average brokers for the
Period. The Group revenue and contribution per broker excludes revenue and
contribution from Parameta Solutions and Liquidnet.
Average broker headcount reduced by 5% from 2,760 in H1 2021 to 2,631 in H1
2022. This, together with an increase in total broking revenue, resulted in
average revenue per broker (productivity) increasing by 15% in H1 2022
compared with H1 2021 (+12% in constant currency). The average contribution
per broker increased by 8% (+6% in constant currency). Total Group headcount
decreased by 5% to 5,153.
Performance by Primary Operating Segment (Divisional basis)
The Group has a matrix management structure. The Group's Chief Operating
Decision Maker ('CODM') is the Executive Committee ('ExCo') which operates as
a general executive management committee under the direct authority of the
Board. The ExCo members regularly review operating activity on a number of
bases, including by business division and by legal ownership which is
structured geographically based on the region of incorporation for TP ICAP
legacy entities plus Liquidnet.
Following the redomiciliation of the Group's parent in February 2021, the
operational responsibility of entities was aligned with their legal ownership
and as a result the Group at that time considered that the Primary Operating
Segments continued to be the geographical regions of incorporation being
Americas, EMEA, APAC and Corporate/Treasury. Liquidnet, acquired in March
2021 with its own separate international legal structure, was managed
separately by the CODM, representing its own separate primary operating
segment, even though it itself had operations across Americas, EMEA and APAC
and represented a significant component of the Agency Execution business
division.
In 2022, as a consequence of the inclusion of Liquidnet into Agency Execution,
and the additional appointment of business division leadership, the balance of
the CODM review of operating activity and allocation of the Group's resources
had become more focused on business division. This business division view is
now considered to represent the more appropriate view for the purposes of
Group resource allocation and assessment of the nature and financial effects
of the business activities in which the Group engages, and is consistent with
the information reviewed by the CODM.
Whilst the Group's Primary Operating Segments are now by business division,
individual entities and the legal ownership of such entities continue to
operate with discrete management teams and decision making and governance
structures. Each regional sub-group has its own independent governance
structure including CEOs, board members and Sub-Group regional Conduct and
Governance Committees with separate autonomy of decision making and the
ability to challenge the implementation of Group level strategy and
initiatives within its region. In the EMEA regional sub-group, in particular,
there are also independent non-executive directors on the regional Board of
directors that further strengthens the independence and judgement of the
governance framework.
Income Statement
The Group presents its reported results in accordance with International
Financial Reporting Standards ('IFRS'). The Group also presents adjusted
(non-IFRS) measures to report performance. Adjusted results and other
alternative performance measures ('APMs') may be considered in addition to,
but not as a substitute for, the reported IFRS results. The Group believes
that adjusted results and other APMs, when considered together with reported
IFRS results, provide stakeholders with additional information to better
understand the Group's financial performance and compare performance from
period to period. These adjusted measures and other APMs are also used by
management for planning and to measure the Group's performance.
Reported results are adjusted for significant items (which can be either cash
or non-cash costs) to derive adjusted results. A reconciliation from reported
to adjusted metrics is provided in the Group income statement below. Analysis
of performance by Business Division follows the Group income statement
analysis.
H1 2022 Adjusted Significant Reported
items
£m
Revenue 1,080 - 1,080
Employment, compensation and benefits (658) (11) (669)
General and administrative expenses (241) (19) (260)
Depreciation and impairment of PPE and ROUA (28) (8) (36)
Amortisation and impairment of intangible assets (15) (21) (36)
Impairment of other assets - - -
Operating expenses (942) (59) (1,001)
Other operating income 4 16 20
EBIT 142 (43) 99
Net finance expense (26) (1) (27)
Profit before tax 116 (44) 72
Tax (29) 8 (21)
Share of net profit of associates and joint ventures 14 - 14
Non-controlling interests (1) - (1)
Earnings 100 (36) 64
Basic average number of shares 778.6 778.6 778.6
Basic EPS (pence per share) 12.8p (4.6p) 8.2p
Diluted average number of shares 787.1 787.1 787.1
Diluted EPS 12.7p (4.6p) 8.1p
H1 2021 Adjusted Significant Reported
items
£m
Revenue 936 - 936
Employment, compensation and benefits (591) (9) (600)
General and administrative expenses (194) (28) (222)
Depreciation and impairment of PPE and ROUA (24) (2) (26)
Amortisation and impairment of intangible assets (14) (21) (35)
Impairment of other assets - - -
Operating expenses (823) (60) (883)
Other operating income 4 - 4
EBIT 117 (60) 57
Net finance expense (29) - (29)
Profit before tax 88 (60) 28
Tax (21) (9) (30)
Share of net profit of associates and joint ventures 9 (5) 4
Non-controlling interests (1) - (1)
Earnings 75 (74) 1
Basic average number of shares 737.7 737.7 737.7
Basic EPS 10.2p (10.1p) 0.1p
Diluted average number of shares 745.6 745.6 745.6
Diluted EPS 10.1p (10.0p) 0.1p
Impact of exposure to Russian sanctions
Following the imposition of sanctions in February 2022 against certain Russian
individuals, entities and their subsidiaries, we immediately ceased trading
with sanctioned clients and counterparties. At our 2021 preliminary results we
reported a summary of exposures, totalling £14m (see table below), that we
had recognised in our P&L (as at 11 March 2022 and based on the mark to
market value of inventory we owned). We also reported potential additional
exposures of £12m on unsettled matched principal trades, together totalling
£26m.
Total amounts charged to the P&L in H1 2022 have increased to £32m. This
charge now represents the maximum exposure to the Group on this matter.
This increase primarily reflects the delivery of previously unsettled trades
and the subsequent marking of the Group's entire portfolio to zero, as most of
the inventory remains restricted under sanctions or has very limited
observability on market prices. This follows the ruling from the US Treasury
Department in June, which prohibits all US banks from any further trading in
Russian debt or equity instruments on the secondary market. The P&L charge
also includes an additional £1m of trade debtors written down. There are no
other sanctioned trade debtor exposures at risk to provide for at this time.
Year to date 11 March 2022 Movement to 30 June 2022 Year to date 30 June 2022
£m
Realised losses 4 - 4
Unrealised losses 9 17 26
Trade debtors written down 1 1 2
Total P&L charge 14 18 32
Revenue by division
H1 2022 H1 2021 H1 2021 (constant currency) Reported currency Constant currency change
change
£m
By Business Division
Rates(1) 286 260 266 10% 8%
Credit(1) 61 53 55 15% 11%
FX & Money Markets(1) 149 133 136 12% 10%
Equities(1) 130 119 122 9% 7%
Inter-division revenues(2) 10 10 10 0% 0%
Total Global Broking 636 575 589 11% 8%
Energy & Commodities 195 186 192 5% 2%
Inter-division revenues(2) 2 1 1 n/m n/m
Total Energy & Commodities 197 187 193 5% 2%
Excluding Liquidnet 54 48 49 13% 10%
Liquidnet 114 55 57 107% 100%
Total Agency Execution 168 103 106 63% 58%
Data & Analytics 83 72 75 15% 11%
Post Trade Solutions 8 10 11 (20%) (27%)
Total Parameta Solutions 91 82 86 11% 6%
Inter-division eliminations(2) (12) (11) (11) 9% 9%
Total Revenue 1,080 936 963 15% 12%
Total Revenue (excl. Liquidnet) 966 881 906 10% 7%
1. In previous reporting, the revenue breakdown of Global Broking
included Emerging Markets revenue as a separate line item. This revenue has
now been reclassified to the relevant asset classes within Global Broking.
Emerging Markets revenue reported in H1 2021 of £92m has been reclassified as
follows: Rates: £34m; Credit £9m, FX & Money Markets £47m, Equities
£2m.
2. Inter-division charges have been made by Global Broking and Energy
& Commodities to reflect the value of proprietary data provided to the
Parameta Solutions division. The Global Broking inter-division revenues and
Parameta Solutions inter-division costs are eliminated upon the consolidation
of the Group's financial results.
All percentage movements quoted in the analysis of financial results that
follows are in constant currency, unless otherwise stated. Constant currency
refers to prior year comparatives being retranslated at current year foreign
exchange rates.
Total Group revenue in H1 2022 of £1,080m was 12% higher than the prior year
(+15% in reported currency). Excluding Liquidnet, Group revenue was 7% higher
(+10% in reported currency). Revenue grew across all four divisions. Global
Broking benefited from increased market volatility and was up 8%, growing all
asset classes. Energy & Commodities increased by 2%, with strong growth in
Oil and Power offsetting a decline in Gas, which was impacted by almost
unprecedented volatility, leading to a risk-off trading stance for many
European market participants. Agency Execution, which includes Liquidnet
revenue from 23 March onwards, grew by 58%. Parameta Solutions was up 6%, with
Data & Analytics continuing to deliver double-digit revenue growth (11%).
Diversified (non-Global Broking) revenue as a proportion of total Group
revenue was 42% in H1 2022 (H1 2021: 40%).
Liquidnet revenue in H1 2022 was £114m. On a proforma basis (see table
below), H1 2022 revenue was 3% lower in reported currency and 6% lower in
constant currency. The revenue performance was in line with market activity,
which was mixed across the three regions. Volumes declined in the US and Asia
but were up in Europe. Market share increased marginally in both Europe and
the US.
Revenue 2022 2021
£m Q1 Q2 H1 Q1 Q2 H1 Q3 Q4 FY
2021 in reported currency 62 52 114 68 50 118 50 52 220
2021 in constant currency n/a n/a n/a 70 51 121 54 55 230
Market volatility from the war in Ukraine resulted in a higher volume of
trading activity. This generated higher revenue and contribution during the
period. However, this was broadly offset by the impact of Russian P&L
charges, which totalled £32m in H1 2022.
Operating expenses
The table below sets out operating expenses, divided principally between front
office costs and management and support costs. Front office costs tend to have
a large variable component and are directly linked to the output of our
brokers. The largest element of this is broker compensation as well as other
front office costs, which include travel and entertainment, telecommunications
and information services, clearing and settlement fees as well as other direct
costs. The remaining cost base represents the management and support costs of
the Group.
£m H1 2022 H1 2021 H1 2021 Reported Constant
(constant currency) change currency
change
Front office costs
- Broking(1) 591 517 533 14% 11%
- Liquidnet(1) 66 29 30 128% 120%
- Parameta Solutions(1) 36 31 32 16% 13%
Total front office costs 693 577 595 20% 16%
Management and support costs
- Employment costs 134 123 126 9% 6%
- Technology and related costs 44 38 39 16% 13%
- Premises and related costs 13 15 15 (13%) (13%)
- Depreciation and amortisation 43 38 39 13% 10%
- FX (gains)/losses (12) 4 4 (379%) (400%)
- Other administrative costs 27 28 27 (3%) 0%
Total management & support costs
249 246 250 1% 0%
Total adjusted operating costs 942 823 845 14% 11%
Significant items(2) 59 60 n/a (2%) n/a
Total operating expenses 1,001 883 n/a 13% n/a
1. Includes all front office costs, including broker compensation,
sales commission, travel and entertainment, telecommunications, information
services, clearing and settlement fees as well as other direct costs.
2. Constant currency changes shown against adjusted numbers only, to
highlight true underlying performance.
Total operating expenses were £1,001m, which was 13% higher than H1 2021 in
reported currency, driven by the acquisition of Liquidnet and a 14% increase
in Broking front office costs, reflecting the growth in revenue.
Total front office costs of £693m increased by 16% compared with H1 2021, (an
increase of 20% in reported currency) but include an additional quarter of
Liquidnet and the £32m P&L charge relating to Russian exposures. Broking
front office costs, which are variable with revenue, were only 5% higher than
the prior period (excluding the £32m of Russian related costs) despite the 7%
growth in revenue, reflecting the benefit of cost savings achieved.
Total management and support costs of £249m were flat year-on-year and
included an FX gain of £12m, reflecting the weakening of GBP against other
currencies, in particular the US Dollar, on the retranslation of net financial
assets, including cash. Excluding Liquidnet, management and support costs were
down 6% year-on-year.
We continue to make good progress in our cost savings programme and are on
track to achieve our target of £25m of P&L savings for FY 2022 (as
previously disclosed in our preliminary FY 2021 results on 15 March 2022). We
are also on track to deliver at least £25m of Liquidnet synergies by the end
of 2023, at which point we expect the integration to be complete. We will
provide a further update on progress at our FY 2022 results.
As previously noted, we face a number of headwinds in 2022, which impact our
targeted savings. These include: increased costs in relation to our Brexit
relocation programme; realised and unrealised losses from sanctioned Russian
clients in the first half of £32m; and increasing inflationary pressures.
During H1 2022, we incurred total strategic IT investment spend amounting to
£17m, split into £6m of operating expenses and £11m of capital expenditure
(H1 2021: £11m - £4m of operating expenses and £7m of capital expenditure).
Capital and liquidity management
Capital management
TP ICAP successfully redomiciled from the UK to Jersey, Channel Islands, in
February 2021. This, together with the progress we are making on consolidating
legal entities, has enabled the Group to undertake a first phase of a review
to identify opportunities to unlock cash. In aggregate, we expect to generate
or free up approximately £100m of cash by the end of 2023 from short term
initiatives in train. The exact timing of release for certain initiatives will
be impacted by external (e.g. regulatory) dependencies. The initiatives
include, but are not limited to:
· Consolidation of broker-dealer entities in the US (dependent on
regulatory approval)
· Distribution of the surplus following the wind-up of the UK
Defined Benefit Pension Scheme (dependent on approval from Trustees)
· Proceeds from the Liquidnet purchase price adjustment (see
significant items section below)
· Sale of office space in Paris
· Closure of dormant UK regulated entities (dependent on regulatory
approval)
· Restructuring of settlement and clearing arrangements
We are committed to delivering capital efficiencies for the Group. The cash
generated or freed up from the above short term initiatives will be used for
the repayment of debt - to increase our investment grade credit rating
headroom - and to reduce future finance costs. We are also exercising prudence
in the current environment of rising interest rates.
The Board will continue to assess balance sheet and investment requirements
and is committed to identifying and returning any resultant surplus capital to
shareholders.
Liquidity management
Following our successful debt refinancing in November 2021, we renewed our
Revolving Credit Facility (RCF) for a further three years on 31 May 2022. The
RCF increased from £270m to £350m, providing additional liquidity
flexibility, and additional providers were added. The terms of the new
facility were also improved from 2.00% to 1.75% over the reference rate.
Significant items
Significant items are cash and non-cash items that are excluded from adjusted
measures to aid comparability of financial performance from period to period
and to provide additional information to better understand the Group's
financial performance, when considered together with reported IFRS results.
The table below shows the Significant items in H1 2022 split between cash and
non-cash vs the H1 2021 total.
H1 2022 H1 2021
£m Cash Non-cash Total Total
Restructuring & related costs 13 11 24 17
- Property related 2 8 10 4
- Liquidnet integration 2 1 3 5
- Group cost saving programme 9 2 11 4
- Business redomiciliation - - - 3
- Pension scheme past service and settlement costs - - - 1
Disposals, acquisitions and investment in new business (15) 33 18 32
- Amortisation of intangible assets arising on consolidation - 21 21 21
- Liquidnet acquisition 1 - 1 8
- Losses on derivatives and foreign exchange - 4 4 3
- Adjustment to deferred consideration - 8 8 -
- Liquidnet acquisition-related income (16) - (16) -
Legal & regulatory matters 2 (1) 1 11
EBIT - 43 43 60
Financing: Liquidnet interest expense on Vendor Loan Notes 1 - 1 -
Profit before tax 1 43 44 60
Tax (relief) / charge (8) 9
Associate write down - 5
Reported earnings 36 74
In H1 2022 total significant items amounted to £44m before tax and £36m post
tax and associates. This compares to significant items in H1 2021 of £60m
before tax and £74m post tax and associates. The decrease was driven
primarily by: a £16m Liquidnet arbitration settlement in H1 2022, net of
costs; a £5m impairment of an associate in the prior period; and a tax credit
on significant items in H1 2022 compared with a charge in the prior period.
This was partly offset by higher restructuring costs associated with the Group
cost saving programme.
Significant items can be categorised into the following five areas below.
Restructuring and related costs (£24m in H1 2022; £17m in H1 2021):
Restructuring and related costs arise from initiatives to reduce the ongoing
cost base and improve efficiency to enable the delivery of our strategic
priorities. These initiatives are significant in size and nature to warrant
exclusion from adjusted measures. Costs for other smaller scale restructuring
are retained within both reported and adjusted results.
As adjusted results include the benefits of material restructuring programmes
but some of the related costs have been excluded, they should not be regarded
as a complete picture of the Group's financial performance, which is presented
in the reported IFRS results.
In H1 2022, the following restructuring and related costs were considered to
be significant items:
§ £10m of Liquidnet property-related costs in relation to the sub lease of
floor space in London; £8m (non-cash) relates to the write off of abandoned
leasehold improvements and Right of Use Assets; £2m (cash) of costs
associated with assigning the sub-lease
§ £3m of Liquidnet integration costs - £2m of cash costs related to
employee redundancies and a £1m non-cash item in respect of consultancy fees
incurred in realising synergies
§ £11m of employee redundancy costs associated with the Group cost savings
programme
Disposals, acquisitions and investments in new businesses (£18m H1 2022;
£32m H1 2021):
Costs, and any related income, related to disposals, acquisitions and
investments in new business are transaction dependent and can vary
significantly year-on-year, depending on the size and complexity of each
transaction. Amortisation of purchased and developed software is retained in
both the reported and adjusted results as these are considered to be core to
supporting the operations of the business.
§ £21m for the amortisation of intangible assets (all non-cash) related to
the acquisitions ICAP (£14m), Liquidnet (£6m) and other smaller acquisitions
(£1m).
§ £1m of cash costs related to the Liquidnet acquisition - legal and
professional fees relating to post completion matters.
§ Losses on derivatives and foreign exchange: £4m of foreign currency
exchange losses (non-cash) on the US Dollar denominated Liquidnet vendor loan
note (VLN) following the weakening of GBP in the period.
§ £8m relating to the non-cash adjustment to deferred consideration; £5m of
which relates to a foreign exchange loss as a result of the strengthening of
the USD, and £3m related to the unwind of the discount to present value
(largely Liquidnet).
§ £16m in acquisition reimbursements arising from Liquidnet following the
ruling of an independent arbitration on the purchase consideration. This has
been recognised in the income statement rather than as a reduction of the
purchase consideration, as required by accounting rules, due the acquisition
completing more than 12 months ago. Proceeds were received on 20 July 2022.
Legal and regulatory matters (£1m in H1 2022; £11m in H1 2021):
Costs, and recoveries, related to certain legal and regulatory cases are
treated as significant items due to their size and nature. Management
considers these cases separately due to the judgements and estimation
involved, the costs and recoveries of which could vary significantly
year-on-year.
H1 2022 included the following:
§ £2m of costs largely related to the cum-ex investigation by the Frankfurt
and Cologne Public Prosecutors in Germany
§ £1m remeasurement gain on the Group Income Protection liabilities.
Financing (£1m in H1 2022; nil in H1 2021):
§ £1m related to the interest expense on the $50m Liquidnet Vendor Loan
Notes, which is part of the Liquidnet acquisition consideration.
Tax (£8m net relief in H1 2022; £9m net charge in H1 2021):
§ £8m of tax relief in H1 2022 arises from the unwinding of tax liabilities
recognised on acquired intangibles of £5m and a £3m tax benefit in relation
to the Group cost savings programme. The net charge in the prior period
reflected a £16m increase in deferred tax liabilities on acquisition
intangibles, following the increase in the future UK corporate tax rate, which
more than offset tax relief of £7m.
Significant items - 2022 guidance
We are reducing our existing guidance on the level of significant items
expected to be included in FY 2022 reported results from approximately £125m
(pre-tax) to approximately £110m (pre-tax). This estimate excludes income and
expenses relating to legal and regulatory cases as these items are difficult
to predict accurately and can vary materially year-on-year.
We continue to expect that significant items will reduce further in 2023.
Group net finance expense
The adjusted net finance expense of £26m in H1 2022, which comprised of £28m
of interest expense, less £2m of interest income, a reduction of £3m
compared to the £29m net charge in H1 2021, reflecting the following:
§ £2m reduced interest on Sterling Notes as a result of the refinancing in
November 2021.
§ Zero costs on FX hedging compared to £2m costs related to the purchase of
FX currency options on the Liquidnet acquisition in H1 2021.
§ £2m of additional interest on finance lease liabilities, marginally offset
by a £1m increase in finance lease receivables income.
Group Tax
The effective rate of tax on adjusted profit before tax is 25.0% (H1 2021:
24.1%). The effective rate of tax on reported profit before tax is 29.2% (H1
2021: 107.0%). The higher rate on reported profit before tax in H1 2021 is
due primarily to a £16m increase in the deferred tax liability recognised in
respect of intangible assets arising on consolidation following the
announcement of a future increase in the UK corporation tax rate, which was
included within significant items.
Basic EPS
The average number of shares used for the H1 2022 basic EPS calculation is
778.6m (H1 2021: 737.7m) reflecting the 788.7m shares in issue at 31 December
2021, less 9.2m shares held by the TP ICAP plc Employee Benefit Trust ('EBT')
at the end of the period, offset by the time apportioned movements in shares
held by the EBT used to settle deferred share awards of 0.9m. The TP ICAP plc
EBT has waived its rights to dividends.
The reported Basic EPS for H1 2022 was 8.2p (H1 2021: 0.1p), and adjusted
Basic EPS for H1 2022 was 12.8p (H1 2021: 10.2p).
Dividend
Our policy targets dividend cover of c.2 times on adjusted post-tax earnings -
a 50% pay-out ratio for the year as a whole. The dividend distribution during
the year will typically be based on a pay-out range of 30-40% of H1 adjusted
post-tax earnings with the balance paid in the final dividend. An interim
dividend per share of 4.5 pence (H1 2021: 4.0 pence) will be paid on 4
November 2022 to shareholders on the register at close of business on 7
October 2022.
The Company offers a Dividend Reinvestment Plan (DRIP), where dividends can be
reinvested in further TP ICAP Group plc shares. The DRIP election cut-off date
will be 24 October 2022.
Guidance
The guidance provided at our FY 2021 preliminary on 15 March 2022 in relation
to FY 2022 remains unchanged, with the exception of significant items (see
above). As we often highlight, it remains difficult to predict future levels
of market activity, given the highly uncertain macro and geopolitical outlook.
Despite the uncertain backdrop, we are cautiously optimistic for the remainder
of the year and we are well positioned.
Group revenue in July 2022 was 1% higher than the corresponding period in
2021, in constant currency.
Performance by Primary Operating Segment (Divisional basis)
H1 2022
Corp/
£m GB(1) E&C(1) AE PS(1) Elim Total
Revenue:
- External 626 195 168 91 - 1,080
- Inter-division(1) 10 2 - - (12) -
636 197 168 91 (12) 1,080
Total front office costs:
- External (412) (133) (113) (35) - (693)
- Inter-division(1) - - - (12) 12 -
(412) (133) (113) (47) 12 (693)
Contribution 224 64 55 44 - 387
Contribution margin 35.2% 32.5% 32.7% 48.4% - 35.8%
Net management and support costs:
- Management and support costs (103) (34) (33) (7) (29) (206)
- Other operating income - - - - 4 4
Adjusted EBITDA 121 30 22 37 (25) 185
Adjusted EBITDA margin 19.0% 15.2% 13.1% 40.7% - 17.1%
- Depreciation and amortisation (15) (5) (14) (1) (8) (43)
Adjusted EBIT 106 25 8 36 (33) 142
Adjusted EBIT margin 16.7% 12.7% 4.8% 39.6% - 13.1%
Average broker headcount 1,881 638 112 n/a n/a 2,631
Average sales headcount - - 330 n/a n/a 330
Revenue per broker (£'000)(2) 333 306 482 n/a n/a 333
Contribution per broker (£'000)(2) 119 100 107 n/a n/a 114
H1 2021 (reported currency)
Corp/
£m GB(1) E&C(1) AE PS(1) Elim Total
Revenue:
- External 565 186 103 82 - 936
- Inter-division(1) 10 1 - - (11) -
575 187 103 82 (11) 936
Total front office costs:
- External (357) (123) (67) (30) - (577)
- Inter-division(1) - - - (11) 11 -
(357) (123) (67) (41) 11 (577)
Contribution 218 64 36 41 - 359
Contribution margin 37.9% 34.2% 35.0% 50.0% - 38.4%
Net management and support costs:
- Management & support costs(3) (111) (35) (24) (8) (30) (208)
- Other operating income 1 - - - 3 4
Adjusted EBITDA(3) 108 29 12 33 (27) 155
Adjusted EBITDA margin 18.8% 15.5% 11.7% 40.2% - 16.6%
- Depreciation and amortisation (15) (5) (11) (1) (6) (38)
Adjusted EBIT(3) 93 24 1 32 (33) 117
Adjusted EBIT margin 16.2% 12.8% 1.0% 39.0% - 12.5%
Average broker headcount 1,987 655 118 n/a n/a 2,760
Average sales headcount - - 63 n/a n/a 63
Revenue per broker (£'000)(2) 284 284 407 n/a n/a 289
Contribution per broker (£'000)(2) 110 98 85 n/a n/a 106
H1 2021 (constant currency)
Corp/
£m GB(1) E&C(1) AE PS(1) Elim Total
Revenue:
- External 579 192 106 86 - 963
- Inter-division(1) 10 1 - - (11) -
589 193 106 86 (11) 963
Total front office costs:
- External (367) (127) (69) (32) - (595)
- Inter-division(1) - - - (11) 11 -
(367) (127) (69) (43) 11 (595)
Contribution 222 66 37 43 - 368
Contribution margin 37.7% 34.2% 34.9% 50.0% - 38.2%
Net management and support costs:
- Management & support costs (113) (36) (25) (8) (28) (210)
- Other operating income 1 - - - 3 4
Adjusted EBITDA 110 30 12 35 (25) 162
Adjusted EBITDA margin 18.7% 15.5% 11.3% 40.7% - 16.8%
- Depreciation and amortisation (15) (5) (11) (1) (7) (39)
Adjusted EBIT 95 25 1 34 (32) 123
Adjusted EBIT margin 16.1% 13.0% 0.9% 39.5% - 12.8%
Average broker headcount 1,987 655 118 n/a n/a 2,760
Average sales headcount - - 63 n/a n/a 63
Revenue per broker (£'000)(2) 291 293 415 n/a n/a 297
Contribution per broker (£'000)(2) 112 101 93 n/a n/a 108
GB = Global Broking; E&C = Energy & Commodities; AE = Agency
Execution, PS = Parameta Solutions, Corp/Elim = Corporate Centre, eliminations
and other unallocated costs.
1. Inter-division charges have been made by Global Broking and Energy
& Commodities to reflect the value of proprietary data provided to the
Parameta Solutions division. The Global Broking inter-division revenues and
Parameta Solutions inter-division costs are eliminated upon the consolidation
of the Group's financial results.
2. Revenue and contribution per broker are calculated as external
revenues and contribution of Global Broking, Energy & Commodities and
Agency Execution, excluding Liquidnet, divided by the average brokers for the
Period. The Group revenue and contribution per broker excludes revenue and
contribution from Parameta Solutions and Liquidnet.
3. Following the change in the Group's Primary Operating Segment from
a regional (geographic) to a divisional basis, H1 2021 management &
support costs, Adjusted EBITDA and Adjusted EBIT for each division has been
restated to remove the IFRS 16 interest charge, previously charged to
divisional Adjusted EBIT. The restatement aligns with IFRS statutory reporting
where the IFRS 16 interest cost is disclosed within Group finance costs. This
results in a reduction in management & support costs and a corresponding
increase in Adjusted EBIT, as follows: Global broking: £4m; Energy &
Commodities: £1m; Agency Execution: £1m. At the Corporate level, management
& support costs have increased by £6m with a corresponding decrease in
Adjusted EBIT. There is no restatement to the consolidated Group Adjusted
EBIT.
All percentage movements quoted in the analysis of financial results that
follows are in constant currency, unless otherwise stated. Constant currency
refers to prior year comparatives being retranslated at current year foreign
exchange rates.
Global Broking
Global Broking revenue of £636m (which represents 59% of total Group revenue)
was 8% higher than the prior period (11% higher in reported currency). Market
volatility during the first half drove strong secondary market volumes. This
was driven by geopolitical events, inflationary pressures and monetary policy
tightening by Central Banks across our main markets. As a result, revenue grew
across all asset classes.
Global Broking previously reported Emerging Markets as a separate asset class.
From H1 2022 onwards, the relevant desks have been allocated across the other
asset classes within the division.
Rates revenue (our most profitable asset class, which comprises 45% of Global
Broking revenue and 26% of total Group revenue) increased by 8% to £286m.
This was a strong performance, despite market activity in the first half being
concentrated in contracts with short-dated maturities, which have lower
transaction values. London Clearing House notional SwapClear dealer volumes(1)
in H1 2022 increased by c.19%, while Clarus USD dealer-to-dealer Interest Rate
Swap volumes decreased by 18%. Our outlook for Rates for the remainder of the
year is positive, as monetary policy continues to tighten and de-risking of
Central Bank balance sheets begins to have an impact on the shape of the yield
curve at the longer-dated end. Recessionary risks, however, may keep the long
end of the yield curve flat.
Revenue in FX & Money Markets was up by 10%, marginally underperforming
the year-on-year increase of c.14% in CME FX Futures volumes. Credit revenue
increased by 11%, outperforming the wider market, with total US corporate bond
trading volumes decreasing by c.3% in H1 2022 (Source: SIFMA); total
MarketAxess Post-Trade Eurobonds(2) volumes also declined, by c.17% (Source:
MarketAxess).
Equities revenue increased by 7%. Volumes of equity and index derivatives
contracts on Euronext(4 ) declined by 2% while volumes on Eurex(3) increased
by c.16%.
Revenue per broker increased by 14%, reflecting higher revenues, a reduction
in the average number of brokers and the benefit of our Fusion strategy.
Contribution per broker increased by 6%. Pre Russian losses, contribution per
broker was 21% up on the prior period.
Total front office costs were 12% higher in the period, driven by the growth
in revenue as well as the impact of provisions related to sanctioned Russian
clients (£32m), partly offset by the benefits of the cost saving programme
and lower number of average brokers. The resulting contribution margin was
35.2% compared with 37.7% in the prior period in constant currency (37.9% in
reported currency). Before the impact of Russia, contribution margin was 40.3%
in H1 2022.
Management and support costs decreased by 9%, while depreciation and
amortisation was flat.
The resulting adjusted EBIT was £106m, with an adjusted EBIT margin of 16.7%
(H1 2021: £95m, 16.1% in constant currency and £93m, 16.2% in reported
currency). Before the impact of Russian losses (see above), the H1 2022
adjusted EBIT margin was 21.7%.
1. Dealer volumes refer to all clearing volumes subtracted by all
client clearing volumes.
2. Former Trax Eurobonds, which we consider as a proxy for European
credit volumes.
3. Eurex Equity derivatives and Index derivatives traded contracts.
4. Euronext stock products and index products volumes.
Energy & Commodities (E&C)
E&C revenue of £197m in H1 2022 (18% of total Group revenue) was 2%
higher than H1 2021 (5% higher in reported currency), with growth in
environmental markets, oil and bulk commodities being offset by lower revenues
in gas. By comparison the number of oil, gas and other energy products traded
on the Intercontinental Exchange ('ICE') increased by c.5% in H1 2022.
E&C markets were particularly volatile during the first quarter of 2022,
providing our clients with trading opportunities. This was driven primarily by
the impact of Russian sanctions, but also by supply and demand imbalances. The
second quarter saw less trading activity as clients went 'risk-off' due to
significant price volatility and increasing exchange margin requirements.
Revenue in the US and APAC were strong, however this was offset by weaker
revenues in EMEA, and particularly the gas and power markets as the
significant price swings led to a severe contraction in many clients' OTC
bilateral credit lines, resulting in reduced trading activity.
The strong growth in our Environmental products has continued in the first
half. Revenue in these products was up 37%, building on the growth in FY 2021
of 40%. Clients are focusing activity in this product area as part of the
energy transition to a zero-emission future.
Front office costs of £133m were 5% higher than the prior year, while
management and support costs were 6% lower. Depreciation and amortisation was
flat at £5m. This resulted in a contribution margin of 32.5% (H1 2021: 34.2%
in both reported and constant currency).
The adjusted EBIT was £25m in H1 2022, with an adjusted EBIT margin of 12.7%
(H1 2021: £25m, 13.0% in constant currency and £24m, 12.8% in reported
currency).
Agency Execution
Agency Execution revenue (which represents 16% of total Group revenue)
increased 58% from £106m in H1 2021 to £168m in H1 2022, driven by the
inclusion of Liquidnet revenue from 23 March 2021 onwards (the date of the
acquisition).
Agency Execution (excluding Liquidnet)
Agency Execution (excluding Liquidnet) revenue of £54m increased by 10% (+13%
in reported currency). This was driven by a strong performance from the
Relative Value business, building on the recovery in the second half of 2021,
as well as from Rates. Growth was partially offset by a revenue decline in
Futures, FX and Equity Derivatives.
Total front office costs increased from £36m in H1 2021 to £43m in H1 2022
reflecting the growth in revenue as well as investment to drive future organic
growth in the business. The resulting contribution was £11m (H1 2021: £12m
in constant currency) with a contribution margin of 20.4% (H1 2021: 25.0% in
constant currency).
Management and support costs reduced by £1m to £6m, while depreciation and
amortisation decreased by £1m to £1m.
The adjusted EBIT was £3m and the adjusted EBIT margin was 5.6% (H1 2021:
£3m and 6.3%, in constant currency).
Liquidnet
Liquidnet revenue in H1 2022 of £114m was 100% ahead of the prior year,
driven by the completion of the acquisition on 23 March 2021. On a proforma
basis, H1 2022 revenue declined by 6% (3% down in reported currency). This
reflected a combination of different market dynamics across the US, Europe and
Asia. In the US, block market volumes decreased by 7% in H1 2022 vs H1 2021.
Block volumes by Alternative Trading System (ATS) venues was up 3%. In Europe
and the UK, dark market volumes increased by 21%, and Large in Scale (LIS)
transaction volumes increased by 11%. In Asia, volumes on the Hong Kong Stock
Exchange decreased by 38%, and volumes on the Tokyo Stock Exchange decreased
by 20%.
Overall market share of the US block market increased from 1.1% in H1 2021 to
1.3% in H1 2022, and overall market share of the total US equity market
increased from 0.26% to 0.27%. Liquidnet's block market share within ATS
venues decreased from 13.4% in H1 2021 to 12.9% in H1 2022. European market
share of LIS transactions increased to 29.2% (H1 2021: 28.4%), and overall
market share of the total European equity market decreased marginally from
2.2% in H1 2021 to 2.1% in H1 2022.
Liquidnet delivered a contribution of £44m in H1 2022, with a contribution
margin of 38.6% (H1 2021: 43.1%, in constant currency). The adjusted EBIT was
£5m, at a margin of 4.4% (H1 2021: -3.4%, in constant currency).
Parameta Solutions
In April 2021 we launched our new brand, Parameta Solutions, which includes
Data & Analytics (D&A) and Post Trade Solutions (PTS).
Total Revenue in H1 2022 of £91m (8% of total Group revenue) was 6% higher
than the prior year (11% higher in reported currency), with double-digit
revenue growth in D&A (11%) more than offsetting a decline in PTS from
£11m in H1 2021 to £8m in H1 2022. 96% of total D&A revenue was
subscription-based and therefore recurring.
D&A revenue continued to benefit from the launch of new higher value
products (over 25% of H1 2022 sales are from new products); an increasingly
diversified and growing client base (over 40 new clients added during the
period, 35 of which were non-sellside clients); increased regional sales
coverage, and multi-channel distribution methods (including through channel
partners and direct-to-client through cloud-based solutions).
D&A has today announced ClearConsensus in a new partnership with Silicon
Valley based, PeerNova, leveraging our unique observable transaction data, and
PeerNova's leading data management and analytics capabilities, in conjunction
with over a dozen of the world's largest investment banks, to provide its
global clients with an enhanced consensus pricing solution. In H1 2022
Parameta Solutions became an FCA authorised benchmark administrator - the
first IDB to administer over the counter (OTC) indices and benchmarks. We
expect these two initiatives to be revenue accretive in the second half.
Inflation induced interest rate increases and the war in Ukraine has led to
sustained intra-day volatility through H1 2022. These conditions are
suboptimal for session-based risk management services such as PTS's Matchbook.
Whilst 2022 to date has been challenging for Matchbook, it is developing new
products including inflation matching to minimise the impact of LIBOR's
cessation (approximately 42% of revenue has historically been derived from
LIBOR-based products). The development of new risk reduction solutions enables
the business to better diversify its revenue mix.
ClearCompress continues to deliver high levels of optimisation efficiency
across a number of global solutions and eRepo, an electronic repo platform,
has seen daily notional volumes executed on the platform increase in excess of
200% over the past 12 months leading to a 51% increase in revenues.
Total front office costs in Parameta Solutions increased by 9%, marginally
ahead of the growth in revenue. The resulting contribution was £44m (H1 2021:
£41m in reported currency and £43m in constant currency) with a contribution
margin of 48.4% (H1 2021: 50.0% in both reported and constant currency).
Management and support costs reduced by £1m to £7m. Depreciation and
amortisation was held flat at £1m.
The adjusted EBIT was £36m, 6% ahead of the prior year (H1 2021: £32m in
reported currency and £34m in constant currency), with an adjusted EBIT
margin of 39.6% (H1 2021: 39.0% in reported currency and 39.5% in constant
currency).
Cash flow
The table below shows the changes in cash and debt for the period ending 30
June 2022 and 30 June 2021.
H1 2022 H1 2021
EBIT reported 99 57
Depreciation, amortisation and other non-cash items 92 68
Change in Net Matched Principal balances and balances with clearing (153) (1)
organisations
Movements in working capital (20) (48)
Taxes and Interest paid (45) (52)
Operating cash flow (27) 24
Capital expenditure (22) (30)
Acquisition consideration paid - (451)
Cash acquired with acquisition - 202
Deferred consideration paid on prior acquisitions (4) (7)
Other investing activities 6 24
Investing activities (20) (262)
Net proceeds from rights issue - 309
Dividends paid to shareholders (43) (16)
Net funds (paid) / received from drawdowns of facilities (22) 79
Other financing activities (24) (17)
Financing activities (89) 355
Change in cash (136) 117
Foreign exchange movements 44 (5)
Cash at the beginning of the period 767 649
Cash at the end of the period 675 761
The Group's net cash flow from operating activities reduced by £61m from a
£24m inflow to a £27m outflow driven primarily by the following cash
flows:
§ Reported EBIT increased by £42m to £99m compared to H1 2021,
§ An increase in net matched principle balances and clearing organisation
balances of £153m (H1 2021: £1m), of which £113m arose from unsettled
trades that were cleared shortly afterwards.
§ Working capital outflows of £20m (H1 2021: outflow of £48m) largely
resulted from an £61m increase in trade receivables from higher seasonal
trading volumes and a small rise in collection times. Changes in other
debtors were £15m, the result of the £16m Liquidnet acquisition
reimbursement. These were offset by an increase in payables and provisions of
£56m, chiefly comprising increases of £24m increase in bonus creditors and
£22m in Commission Management liabilities held in Liquidnet.
§ £28m net interest paid is unchanged from H1 2021 which is the result of a
£2m reduction in interest on Sterling Notes and non-recurrence of £2m of
options premium, offset by a £3m increase in finance leases and £1m from the
full six month inclusion of interest on the $50m Liquidnet VLN.
§ £17m of tax payments. This is lower than the £24m paid in H1 2021 as
payments reflect instalments based on estimated tax liabilities which resulted
in a greater weighting toward H1 in 2021.
The key investing activities in the year were:
§ Capital expenditure of £22m mainly represented technology and strategic
projects. This compared with £30m in H1 2021 which included office
development expenditure
§ £13m received in dividends from associates and joint ventures
The primary financing activities in the year were:
§ £22m reduction in debt drawdown of the Group's credit facilities
§ £17m of finance lease capital repayments compared with £16m in H1 2021.
§ Dividends paid to shareholders of £43m reflecting the 2021 final dividend
of 5.5p.
Foreign exchange gain
§ The weakening of Sterling, particularly against the US Dollar, has resulted
in a retranslation gain of £44m.
As a result of the above, the Group's cash decreased by £92m.
Debt finance
The composition of the Group's outstanding debt is summarised below.
At 30 At 30 June At 31 December
June 2021 2021
2022 £m £m
£m
5.25% £247m Sterling Notes January 2024(1) 252 440 252
5.25% £250m Sterling Notes May 2026(1) 250 250 250
2.625% £250m Sterling Notes November 2028(1) 248 - 248
Loan from related party (RCF with Totan) - 65 51
Revolving credit facility drawn - banks 25 42 -
3.2% Liquidnet Vendor Loan Notes 41 36 38
Settlement Overdrafts 113 32 17
Debt (used as part of net (funds)/debt) 929 865 856
Lease liabilities 302 286 286
Total debt 1,231 1,151 1,142
1. Sterling Notes are reported at their par value net of discount and
unamortised issue costs and including interest accrued at the reporting date.
The Group's core debt, excluding lease liabilities, has increased to £929m.
The increase was primarily due to settlement overdrafts which were elevated
due to trades that failed to settle on the 30 June 2022. £111m of these
settlement fails, and their related overdrafts, were cleared the following day
on 1 July. Additionally, in November 2021 the Group issued a £250m par value
Sterling Note maturing in November 2028, the proceeds of which were used in
part to repay £184m (par value) of the January 2024 Sterling Notes, to repay
short-term debt, and to finance working capital requirements.
The Group refinanced its main bank revolving credit facility in May increasing
its capacity to £350m and with a new initial maturity of May 2025. As at 30
June, this facility was drawn by £25m. The Group also has access to a Yen10Bn
Totan facility that, as at 30 June, was undrawn and had a maturity of February
2024. Subsequent to the end of the half-year this facility has been extended
and has a new maturity of August 2024.
Exchange rates
The income statements and balance sheets of the Group's businesses whose
functional currencies are not GBP are translated into Sterling at average and
period end exchange rates respectively. The most significant exchange rates
for the Group are the US Dollar and the Euro. The Group's current policy is
not to enter into formal hedges of income statement or balance sheet
translation exposures. Average and period end exchange rates used in the
preparation of the financial statements are shown below.
Foreign exchange translation has been a tailwind for the Group in H1 2022,
caused largely by GBP depreciation against the USD, with approximately 60% of
Group revenues and approximately 40% of costs in USD, resulting in a currency
mismatch. The average GBP:USD rate weakened 6% year on year, while the period
end rate weakened by 12%.
Average Period end
H1 H1 FY H1 H1 FY
2022 2021 2021 2022 2021 2021
US Dollar $1.31 $1.39 $1.38 $1.21 $1.38 $1.35
Euro €1.19 €1.15 €1.16 €1.16 €1.17 €1.19
Pensions
The Group has one defined benefit pension scheme in the UK that is currently
in the process of being wound up. The wind-up of the Scheme commenced in
2019 and is expected to be completed in Q1 2023.
Under UK legislation, once a Scheme commences wind-up, the assets of the
Scheme pass unconditionally to the Trustee to enable it to settle the Scheme's
liabilities. As a result, the Group applies the requirement of IFRIC 14, fully
restricting the Group's recognition of the £46m (31 December 2021: £46m) net
surplus by applying an asset recognition ceiling. Changes as a result of the
application of the asset ceiling are recorded in Other Comprehensive Income.
During the wind-up period, the Group continues to restrict the recognition of
the net surplus. Any benefits augmented during this period represent a past
service cost and are recorded as a significant item in the Income Statement as
and when such benefits are agreed. Costs associated with the settlement of the
Scheme's liabilities will also be recorded as a significant item in the Income
Statement as and when incurred. There were no past service and settlement
costs in H1 2022 (H1 2021: £1m).
Following the full settlement of the Scheme's liabilities and costs, the
Scheme will be wound up, and the Group expects to receive the remaining asset,
subject to applicable taxes at that time, currently 35%.
Regulatory capital
Since February 2021, Group level regulation falls under the Jersey Financial
Services Commission. The FCA is the lead regulator of the Group's EMEA
businesses, which are sub-consolidated under a UK holding Company, for which
the consolidated capital adequacy requirements under CRD IV apply. This
sub-group maintains an appropriate excess of financial resources.
Many of the Group's broking entities are regulated on a 'solo' basis, and are
obliged to meet the regulatory capital requirements imposed by the local
regulator of the jurisdiction in which they operate. The Group maintains an
appropriate excess of financial resources in such entities.
Condensed Consolidated Income Statement
for the six months ended 30 June 2022
Notes Six months ended 30 June 2022 Six months ended 30 June 2021 Year ended 31 December
(unaudited) (unaudited) 2021
£m £m £m
Revenue 5 1,080 936 1,865
Employment, compensation and benefits 6 (669) (600) (1,152)
General and administrative expenses 6 (260) (222) (476)
Depreciation and impairment of PPE and ROUA 6 (36) (26) (68)
Amortisation and impairment of intangible assets 6 (36) (35) (82)
Impairment of other assets 6 - - -
Total operating costs 6 (1,001) (883) (1,778)
Other operating income 7 20 4 10
EBIT/operating profit 99 57 97
Finance income 8 2 1 3
Finance costs 9 (29) (30) (76)
Profit before tax 72 28 24
Taxation (21) (30) (23)
Profit/(loss) after tax 51 (2) 1
Share of results of associates and joint ventures 14 9 7
Loss on sale of associate - (5) -
Profit for the period 65 2 8
Attributable to:
Equity holders of the parent 64 1 5
Non-controlling interests 1 1 3
65 2 8
Earnings per share
- Basic 10 8.2p 0.1p 0.7p
- Diluted 10 8.1p 0.1p 0.7p
Condensed Consolidated Statement of Comprehensive Income
for the six months ended 30 June 2022
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2022 2021 2021
(unaudited) (unaudited)
£m £m £m
Profit for the period 65 2 8
Items that will not be reclassified subsequently to profit or loss:
Remeasurement of defined benefit pension schemes - 1 3
Equity investments at FVTOCI - - 1
- net change in fair value
Taxation relating to items not reclassified - - -
- 1 4
Items that may be reclassified subsequently to profit or loss:
Fair value movements on net investment hedge - 3 3
Effect of changes in exchange rates on 129 (21) 1
translation of foreign operations
Taxation (4) - (1)
125 (18) 3
Other comprehensive income/(loss) for the period 125 (17) 7
Total comprehensive income/(loss) for the period 190 (15) 15
Attributable to:
Equity holders of the parent 189 (15) 12
Non-controlling interests 1 - 3
190 (15) 15
Condensed Consolidated Balance Sheet
as at 30 June 2022
30 June 30 June 31 December
2022 2021 2021
(unaudited) (unaudited)
(restated)
Notes £m £m £m
Non-current assets
Intangible assets arising on consolidation 12 1,809 1,766 1,762
Other intangible assets 93 91 91
Property, plant and equipment 124 135 123
Right-of-use assets 187 215 187
Investment in associates 50 51 51
Investment in joint ventures 34 29 28
Other investments 22 20 21
Deferred tax assets 7 7 17
Retirement benefit assets 1 1 1
Other long term receivables 13 56 29 44
2,383 2,344 2,325
Current assets
Trade and other receivables 13 2,414 1,842 2,068
Financial assets at fair value through profit or loss 14 863 559 158
Financial investments 19 132 117 115
Derivative financial instruments - - -
Cash and cash equivalents 19 788 793 784
4,197 3,311 3,125
Total assets 6,580 5,655 5,450
Current liabilities
Trade and other payables 15 (2,265) (1,798) (1,977)
Financial liabilities at fair value through profit or loss 14 (702) (491) (120)
Interest bearing loans and borrowings 16 (146) (150) (77)
Lease liabilities 17 (33) (26) (34)
Derivative financial instruments - - (1)
Current tax liabilities (46) (31) (28)
Short term provisions 20 (12) (12) (5)
(3,204) (2,508) (2,242)
Net current assets 993 803 883
Non-current liabilities
Interest bearing loans and borrowings 16 (783) (715) (779)
Lease liabilities 17 (269) (260) (252)
Deferred tax liabilities (97) (108) (107)
Long term provisions 20 (38) (26) (38)
Other long term payables (59) (55) (53)
Retirement benefit obligations (1) (2) (1)
(1,247) (1,166) (1,230)
Total liabilities (4,474) (3,674) (3,472)
Net assets 2,129 1,981 1,978
Equity
Share capital 23 197 197 197
Other reserves 23 (877) (1,024) (1,005)
Retained earnings 23 2,792 2,790 2,769
Equity attributable to equity holders of the parent 2,112 1,963 1,961
Non-controlling interests 23 17 18 17
Total equity 2,129 1,981 1,978
Condensed Consolidated Statement of Changes in Equity
for the six months ended 30 June 2022
Equity attributable to equity holders of the parent (Note 23)
Share Share Merger Reverse Re- Re- Hedging Own Retained Total Non- Total
capital premium reserve acquisition organisation reserve valuation and shares earnings controlling equity
account reserve reserve translation interests
(unaudited) £m £m £m £m £m £m £m £m £m £m £m £m
30 June 2022
Balance at 197 - - - (946) 5 (38) (26) 2,769 1,961 17 1,978
1 January 2022
Profit for the period - - - - - - - - 64 64 1 65
Other comprehensive - - - - - - 125 - - 125 - 125
income/(loss) for the period
Total comprehensive - - - - - - 125 - 64 189 1 190
Income for the period
Dividends paid - - - - - - - - (43) (43) (1) (44)
Share settlement of share-based payment awards - - - - - - - 6 (6) - - -
Own shares acquired for employee trusts - - - - - - - (3) - (3) - (3)
Credit arising on share- - - - - - - - - 8 8 - 8
based payment awards
Balance at 197 - - - (946) 5 87 (23) 2,792 2,112 17 2,129
30 June 2022
Equity attributable to equity holders of the parent
Share Share Merger Reverse Re- Re- Hedging Own Retained Total Non- Total
capital premium reserve acquisition organisation reserve valuation and shares earnings controlling equity
account reserve reserve translation interests
(unaudited) £m £m £m £m £m £m £m £m £m £m £m £m
30 June 2021 (unaudited)
Balance at 141 17 1,384 (1,182) - 4 (41) (27) 1,383 1,679 19 1,698
1 January 2021
Profit for the period - - - - - - - - 1 1 1 2
Other comprehensive - - - - - - (17) - 1 (16) (1) (17)
income/(loss) for the period
Total comprehensive - - - - - - (17) - 2 (15) - (15)
(loss)/income for the period
Rights issue 56 259 - - - - - - - 315 - 315
Rights issue costs - (6) - - - - - - - (6) - (6)
Scheme of Arrangement: Cancellation of existing shares and reserves (197) (1,384) 1,182 669 - - - - - - -
(270)
Scheme of Arrangement: 197 1,418 - - (1,615) - - - - - - -
Issue of ordinary shares
Capital reduction - (1,418) - - - - - - 1,418 - - -
Dividends paid - - - - - - - - (16) (16) (1) (17)
Share settlement of share-based payment awards - - - - - - - 3 (3) - - -
Credit arising on share- - - - - - - - - 6 6 - 6
based payment awards
Balance at 197 - - - (946) 4 (58) (24) 2,790 1,963 18 1,981
30 June 2021
Equity attributable to equity holders of the parent
Share Share Merger Reverse Re-organisation Re- Hedging Own Retained Total Non- Total
capital premium reserve acquisition reserve valuation and shares earnings controlling equity
account reserve reserve translation interests
£m £m £m £m £m £m £m £m £m £m £m £m
31 December 2021
Balance at 141 17 1,384 (1,182) - 4 (41) (27) 1,383 1,679 19 1,698
1 January 2021
Profit for the year - - - - - - - - 5 5 3 8
Other comprehensive - - - - - 1 3 - 3 7 - 7
income for the year
Total comprehensive - - - - - 1 3 - 8 12 3 15
Income for the year
Rights issue 56 259 - - - - - - - 315 - 315
Rights issue costs - (6) - - - - - - - (6) - (6)
Scheme of Arrangement: Cancellation of existing shares and reserves (197) (1,384) 1,182 669 - - - - - - -
(270)
Scheme of Arrangement: 197 1,418 - - (1,615) - - - - - - -
Issue of ordinary shares
Capital reduction - (1,418) - - - - - - 1,418 - - -
Dividends paid - - - - - - - - (47) (47) (2) (49)
Share settlement of share-based payment awards - - - - - - - 3 (3) - - -
Own shares acquired for employee trusts - - - - - - - (2) - (2) - (2)
Decrease in non-controlling interests - - - - - - - - - - (3) (3)
Credit arising on share- - - - - - - - - 10 10 - 10
based payment awards
Balance at 197 - - - (946) 5 (38) (26) 2,769 1,961 17 1,978
31 December 2021
Condensed Consolidated Cash Flow Statement
for the six months ended 30 June 2022
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2022 2021 2021
(unaudited) (unaudited)
Notes £m £m £m
Cash flows from operating activities 18 (27) 24 111
Investing activities
(Purchase)/sale of financial investments (10) 9 11
Settlement of derivative financial instruments - 5 5
Interest received 2 1 2
Dividends from associates and joint ventures 13 10 15
Expenditure on intangible fixed assets (14) (16) (35)
Purchase of property, plant and equipment (8) (14) (23)
Deferred consideration paid (4) (7) (14)
Sale/(investment) in associates 1 (1) (1)
Acquisition consideration paid - (451) (451)
Cash acquired with acquisitions - 202 202
Net cash flows from investment activities (20) (262) (289)
Financing activities
Dividends paid 11 (43) (16) (47)
Dividends paid to non-controlling interests (1) (1) (2)
Proceeds of rights issue - 315 315
Issue costs of rights issue - (6) (6)
Purchase of non-controlling interest - - (3)
Own shares acquired for employee trusts (3) - (2)
Net borrowing/(repayment) of bank loans(1) 25 40 (5)
Net (repayment)/borrowing from related party(1) (47) 39 27
Funds received from issue of Sterling Notes - - 249
Repayment/repurchase of Sterling Notes - - (200)
Bank facility arrangement fees and debt issue costs (3) - (2)
Payment of lease liabilities (17) (16) (28)
Net cash flows from financing activities (89) 355 296
Net (decrease)/increase (136) 117 118
in cash and overdrafts
Cash and cash equivalents 767 649 649
at the beginning of the period
Effect of foreign exchange rate changes 44 (5) -
Net cash and cash equivalents 19 675 761 767
at the end of the period
Cash and cash equivalents 788 793 784
Overdrafts (113) (32) (17)
Net cash and cash equivalents 19 675 761 767
at the end of the period
1. The Group utilises credit facilities throughout the year,
entering into numerous short term bank and other loans where maturities are
less than three months. The turnover is high and the volume is large and
resultant flows are presented net. Further details are set out in Note 15.
Notes to the Condensed Consolidated Financial Statements
for the six months ended 30 June 2022
1. General information
The condensed consolidated financial information for the six months ended 30
June 2022 has been prepared in accordance with the Disclosure and Transparency
Rules ('DTR') of the Financial Conduct Authority and with IAS 34 'Interim
Financial Reporting' as adopted and endorsed by the UK Endorsement Board.
This condensed financial information should be read in conjunction with the
statutory Group Financial Statements of TP ICAP Group plc for the year ended
31 December 2021 (the '2021 Group Financial Statements') which were prepared
in accordance with UK adopted International Financial Reporting Standards
('IFRSs').
The Group Financial Statements have been reported on by the Company's
auditors, Deloitte LLP, and have been delivered to the Registrar of Companies.
The report of the auditors on those financial statements was unqualified, did
not draw attention to any matters by way of emphasis and did not contain a
statement under Article 113A of the Companies (Jersey) Law 1991.
The condensed consolidated financial information for the six months ended 30
June 2022 has been prepared using accounting policies consistent with the 2021
Group Financial Statements. The interim information, together with the
comparative information contained in this report for the year ended 31
December 2021, does not constitute statutory financial statements within the
meaning of Article 105 of the Companies (Jersey) Law 1991. The financial
information is unaudited but has been reviewed by the Company's auditor,
Deloitte LLP, and their report appears at the end of the Interim Management
Report.
2. Basis of preparation
(a) Basis of accounting
The Condensed Consolidated Financial Statements have been prepared on the
historical cost basis, except for the revaluation of certain financial
instruments.
The Directors have a reasonable expectation that the Group has adequate
resources to continue in operational existence for the foreseeable future.
Accordingly, the going concern basis continues to be used in preparing these
Condensed Consolidated Financial Statements.
The Condensed Consolidated Financial Statements are rounded to the nearest
million pounds (expressed as £m), except where otherwise indicated.
(b) Basis of consolidation
The Group's Condensed Consolidated Financial Statements incorporate the
financial information of the Company and entities controlled by the Company
made up to each reporting period. Under IFRS 10 control is achieved where the
Company exercises power over an entity, is exposed to, or has rights to,
variable returns from its involvement with the entity and has the ability to
use its power to affect the returns from the entity.
(c) Accounting policies
Except as described below, the accounting policies applied in these Condensed
Consolidated Financial Statements are the same as those applied in the Group's
Consolidated Financial Statements as at and for the year ended 31 December
2021.
The following new Standards and Interpretations have been endorsed by the UK
Endorsement Board and are effective from 1 January 2022 but they do not have a
material effect on the Group's financial statements:
Ø Annual Improvements to IFRS 2018- 2020;
Ø Amendments to IAS 37: Onerous Contracts-Cost of Fulfilling a Contract;
Ø Amendments to IAS 16: Property, Plant and Equipment: Proceeds before
Intended Use; and
Ø Amendments to IFRS 3: Reference to the Conceptual Framework.
(d) Use of estimates and judgements
For the year ended 31 December 2021 the Group's critical accounting estimates
and judgements, which are stated on pages 113 and 177 of the Annual Report and
Accounts 2021, were those that relate to provisions for liabilities, the
impairment of goodwill and intangible assets and acquisition accounting.
As discussed in Note 5 - Segmental Analysis, at the beginning of 2022 the
Group's Executive Committee, as the Group's Chief Operating Decision Maker,
changed the information that they regularly review for purposes of allocating
resources and assessing performance. This resulted in a change in the
operating segments and reporting units. The Group has allocated goodwill to
the new reporting units using a relative value approach. The relative values
of the new reporting units required the directors to make judgements and
estimates to establish recoverable values on which the allocation was based.
No additional goodwill arises as a result of this process, however changes in
assumptions would change the relative values of the new reporting units and
therefore the amount of goodwill allocated to them. The judgements and
estimates that were used to determine the relative values were:
Judgements
Recoverable values reflect forecast cash flows which are subject to a high
degree of uncertainty, especially in volatile market conditions or for new
business activities. The assumptions on which the cash flow forecasts were
evaluated to reflect current market conditions and management's best estimate
of future performance.
Estimates
The future cash flows of the Groups of Cash Generating Units ('CGUs') are
sensitive to the cash flows projected for the periods for which detailed
forecasts are available and to assumptions regarding the long-term pattern of
sustainable cash flows thereafter.
The rates used to discount future expected cash flows can have a significant
effect on a CGU's valuation. The discount rate incorporates inputs reflecting
a number of financial and economic variables, including the risk-free interest
rate in the region concerned and a premium for the risk of the business being
evaluated. These variables are subject to fluctuations in external market
rates and economic conditions beyond management's control.
In addition, the Group completed an assessment of any potential goodwill
impairment for all reporting units immediately prior to the reallocation and
determined that no impairment existed (Note 12).
3. Related party transactions
The total amount included in trade receivables due from related parties as at
30 June 2022 was £5m (31 December 2021: £5m) and the amount included in
trade payables due to related parties as at 30 June 2022 was £4m (31 December
2021: £2m). Loans from a related party amounted to £nil as at 30 June 2022
(31 December 2021: £51m).
4. Principal risks and uncertainties
Robust risk management is fundamental to the achievement of the Group's
objectives. The Group identifies the risks to which it is exposed as a
result of its business objectives, strategy and operating model, and
categorises those risks into five 'risk objectives': Financial position,
Operational effectiveness and resilience, Regulatory standing, Reputation and
Business strategy. The risks identified within each of these categories,
along with an explanation of how the Group seeks to manage or mitigate these
risk exposures can be found on pages 80 to 85 of the latest Annual Report
which is available at www.tpicap.com (http://www.tpicap.com) . The Directors
do not consider that the principal risks and uncertainties have changed since
the publication of the Annual Report for the year ended 31 December 2021.
Risks and uncertainties, which could have a material impact on the Group's
performance over the remaining six months of the financial year are discussed
in the Interim Management Report.
5. Segmental analysis
Products and services from which reportable segments derive their revenues
The Group has a matrix management structure. The Group's Chief Operating
Decision Maker ('CODM') is the Executive Committee ('ExCo') which operates as
a general executive management committee under the direct authority of the
Board. The ExCo members regularly review operating activity on a number of
bases, including by business division and by legal ownership which is
structured geographically based on the region of incorporation for TP ICAP
legacy entities plus Liquidnet.
Following the redomiciliation of the Group's parent in February 2021, the
operational responsibility of entities was aligned with their legal ownership
and as a result the Group at that time considered that the Primary Operating
Segments continued to be the geographical regions of incorporation being
Americas, EMEA, APAC and Corporate/Treasury. Liquidnet, acquired in March
2021 with its own separate international legal structure, was managed
separately by the CODM, representing its own separate primary operating
segment, even though it itself had operations across Americas, EMEA and APAC
and represented a significant component of the Agency Execution business
division.
In 2022, as a consequence of the inclusion of Liquidnet into Agency Execution,
the balance of the CODM review of operating activity and allocation of the
Group's resources had become more focused on business division. This structure
is now considered to represent the more appropriate view for the purposes of
Group resource allocation and assessment of the nature and financial effects
of the business activities in which the Group engages.
Whilst the Group's Primary Operating Segments are now by business division,
individual entities and the legal ownership of such entities continue to
operate with discrete management teams and decision making and governance
structures. Each regional sub-group has its own independent governance
structure including CEOs, board members and Sub-Group regional Conduct and
Governance Committees with separate autonomy of decision making and the
ability to challenge the implementation of Group level strategy and
initiatives within its region. In the EMEA regional sub-group, in particular,
there are also independent non-executive directors on the regional Board of
directors that further strengthens the independence and judgement of the
governance framework.
Information regarding the Group's revised primary operating segments is
reported below:
Analysis by primary operating segment
Six months ended 30 June 2022 Global Broking Energy & Commodities Agency Execution Parameta Solutions Corporate Total
£m £m £m £m £m £m
Revenue
External 626 195 168 91 - 1,080
Inter-divisional 10 2 - - (12) -
636 197 168 91 (12) 1,080
Total front-office costs
External (412) (133) (113) (35) - (693)
Inter-divisional - - - (12) 12 -
(412) (133) (113) (47) 12 (693)
Contribution 224 64 55 44 - 387
Net management and support cost (103) (34) (33) (7) (29) (206)
Other operating income - - - - 4 4
Adjusted EBITDA 121 30 22 37 (25) 185
Depreciation expense (9) (3) (8) (1) (7) (28)
Amortisation expense (6) (2) (6) - (1) (15)
Adjusted EBIT 106 25 8 36 (33) 142
Six months ended 30 June 2021 Global Broking(1) Energy & Commodities(1) Agency Execution(1) Parameta Solutions Corporate(1) Total
(restated)
(restated) (restated)
(restated)
£m £m £m £m £m £m
Revenue
External 565 186 103 82 - 936
Inter-divisional 10 1 - - (11) -
575 187 103 82 (11) 936
Total front-office costs
External (357) (123) (67) (30) - (577)
Inter-divisional - - - (11) 11 -
(357) (123) (67) (41) 11 (577)
Contribution 218 64 36 41 - 359
Net management and support cost(1) (111) (35) (24) (8) (30) (208)
Other operating income 1 - - - 3 4
Adjusted EBITDA(1) 108 29 12 33 (27) 155
Depreciation expense (9) (3) (6) (1) (5) (24)
Amortisation expense (6) (2) (5) - (1) (14)
Adjusted EBIT(1) 93 24 1 32 (33) 117
Year ended 31 December 2021 Global Broking(1) Energy & Commodities(1) Agency Execution(1) Parameta Solutions(1) Corporate Total
(restated)
(restated) (restated) (restated)
(restated)
£m £m £m £m £m £m
Revenue
External 1,086 367 246 166 - 1,865
Inter-divisional 19 3 - - (22) -
1,105 370 246 166 (22) 1,865
Total front-office costs
External (694) (248) (161) (60) - (1,163)
Inter-divisional - - - (22) 22 -
(694) (248) (161) (82) 22 (1,163)
Contribution 411 122 85 84 - 702
Net management and support cost(1) (203) (63) (63) (12) (56) (397)
Other operating income 2 - - - 8 10
Adjusted EBITDA(1) 210 59 22 72 (48) 315
Depreciation expense (16) (5) (14) (2) (15) (52)
Amortisation expense (13) (4) (11) - (2) (30)
Adjusted EBIT(1) 181 50 (3) 70 (65) 233
1. Following the change in the Group's Primary Operating Segment from
a regional (geographic) to a divisional basis, management & support costs,
Adjusted EBITDA and Adjusted EBIT for each division has been restated to
remove the IFRS 16 interest charge, previously charged to divisional Adjusted
EBIT. The restatement aligns with IFRS statutory reporting where the IFRS 16
interest cost is disclosed within Group finance costs. This results in a
reduction in management & support costs and a corresponding increase in
Adjusted EBITDA and EBIT, for June 2021 as follows: Global broking: £4m;
Energy & Commodities: £1m; Agency Execution: £1m and at the Corporate
level, management & support costs have increased by £6m with a
corresponding decrease in Adjusted EBIT. For December 2021 the restatements
are: Global broking: £8m; Energy & Commodities: £3m; Agency Execution:
£3m; Parameta: £1m and at the Corporate level, management & support
costs have increased by £15m with a corresponding decrease in Adjusted EBIT.
There is no restatement to the consolidated Group Adjusted EBITDA or EBIT for
either period.
Analysis of significant items
Six months ended 30 June 2022 Restructuring Disposals, acquisitions and investment in new businesses Legal and regulatory matters Total
and other related costs
£m £m £m £m
Employment, compensation and benefits costs 12 - (1) 11
Premises and related costs 2 - - 2
Deferred consideration - 8 - 8
Acquisition costs - 1 - 1
Net foreign exchange losses - 4 - 4
Other general and administration costs 2 - 2 4
Total included within general and administration costs 4 13 2 19
Depreciation and impairment of PPE and ROUA 8 - - 8
Amortisation and impairment of intangible assets - 21 - 21
Total included within operating costs 24 34 1 59
Other Operating Income - (16) - (16)
Net finance cost - 1 - 1
Total significant items before tax 24 19 1 44
Taxation of significant items (8)
Total significant items after tax 36
Six months ended 30 June 2021 Restructuring Disposals, acquisitions and investment in new businesses Goodwill impairment Legal and regulatory matters Total
and other related costs
£m £m £m £m £m
Employment, compensation and benefits costs 4 5 - - 9
Premises and related costs 2 - - - 2
Deferred consideration - - - - -
Charge relating to significant legal and regulatory settlements - - - 5 5
Pension scheme past service and settlement costs 1 - - - 1
Acquisition costs - 8 - - 8
Net losses on derivative instruments - 8 - - 8
Net foreign exchange gains - (5) - - (5)
Other general and administration costs 3 - - 6 9
Total included within general and administration costs 6 11 - 11 28
Depreciation and impairment of PPE and ROUA 2 - - - 2
Amortisation and impairment of intangible assets - 21 - - 21
Total significant items before tax 12 37 - 11 60
Taxation of significant items 9
Total significant items after tax 69
Impairment of investment in associates - reflected together with Share of 5
results of associates and joint ventures
Total significant items 74
Year ended 31 December 2021 Restructuring and other related costs Disposals, acquisitions and investment in new businesses Goodwill impairment Legal and regulatory matters Total
£m £m £m £m £m
Employment, compensation and benefits costs 12 - - - 12
Premises and related costs 9 - - - 9
Deferred consideration - 2 - - 2
Charge relating to significant legal and regulatory settlements - - - 6 6
Pension scheme past service and settlement costs 1 - - - 1
Acquisition costs - 8 - - 8
Net loss on derivative instruments - 8 - - 8
Net foreign exchange gains - (4) - - (4)
Other general and administration costs 4 13 - 9 26
Total included within general and administration costs 14 27 - 15 56
Depreciation and impairment of PPE and ROUA 16 - - - 16
Amortisation and impairment of intangible assets - 52 - - 52
Total included within operating costs 42 79 - 15 136
Included in finance costs 16 1 - - 17
Total significant items before tax 58 80 - 15 153
Taxation of significant items (21)
Total significant items after tax 132
Impairment of investment in associates - reflected with share of results of 11
associates and joint ventures
Total significant items 143
Adjusted profit reconciliation
Six months ended 30 June 2022 Adjusted Significant items Reported
£m £m £m
EBIT/operating profit 142 (43) 99
Net finance costs (26) (1) (27)
Profit before tax 116 (44) 72
Taxation (29) 8 (21)
Profit after tax 87 (36) 51
Share of profit from associates and joint ventures 14 - 14
Profit for the period 101 (36) 65
Six months ended 30 June 2021 Adjusted Significant items Reported
£m £m £m
EBIT/operating profit 117 (60) 57
Net finance costs (29) (29)
Profit before tax 88 (60) 28
Taxation (21) (9) (30)
Profit after tax 67 (69) (2)
Share of profit from associates and joint ventures/loss on sale 9 (5) 4
Profit for the period 76 (74) 2
Year ended 31 December 2021 Adjusted Significant items Reported
£m £m £m
EBIT/operating profit 233 (136) 97
Net finance costs (56) (17) (73)
Profit before tax 177 (153) 24
Taxation (44) 21 (23)
Profit after tax 133 (132) 1
Share of profit from associates and joint ventures 18 (11) 7
Profit for the period 151 (143) 8
Six months ended 30 June 2022 Global Broking Energy & Commodities Agency Execution Parameta Solutions Eliminations Total
£m £m £m £m £m £m
Revenue by type
Name Passing brokerage 488 172 4 8 (1) 671
Executing Broker brokerage 20 22 28 - - 70
Matched Principal brokerage 119 2 75 - - 196
Introducing Broker brokerage - - 61 - - 61
Data & Analytics price information fees 9 1 - 83 (11) 82
636 197 168 91 (12) 1,080
Six months ended 30 June 2021 Global Broking Energy & Commodities Agency Execution Parameta Solutions Eliminations Total
£m £m £m £m £m £m
Revenue by type
Name Passing brokerage 446 165 3 10 (1) 623
Executing Broker brokerage 10 19 22 - - 51
Matched Principal brokerage 110 2 33 - - 145
Introducing Broker brokerage - - 45 - - 45
Data & Analytics price information fees 9 1 - 72 (10) 72
575 187 103 82 (11) 936
Year ended 31 December 2021 Global Broking Energy & Commodities Agency Execution Parameta Solutions Eliminations Total
£m £m £m £m £m £m
Revenue by type
Name Passing brokerage 861 325 6 17 (2) 1,207
Executing Broker brokerage 25 37 43 - - 105
Matched Principal brokerage 202 5 111 - - 318
Introducing Broker brokerage - - 86 - - 86
Data & Analytics price information fees 17 3 - 149 (20) 149
1,105 370 246 166 (22) 1,865
Revenue by country
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2022 2021 2021
£m £m £m
United Kingdom (inc. Channel Isles) 430 428 750
United States of America 386 334 654
Rest of the world 264 174 461
1,080 936 1,865
6. Operating costs
Operating costs comprise:
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2022 2021 2021
£m £m £m
Broker compensation costs 501 451 882
Other staff costs 159 143 258
Share-based payment charge 9 6 12
Charge relating to employee long-term benefits - - -
Employee Compensation and benefits - divisionally allocated 669 600 1,152
Technology and related costs 104 91 191
Premises and related costs 15 17 37
Adjustments to deferred consideration 8 - 2
Charge/(credit) relating to significant legal and regulatory settlements - 5 6
Pension scheme past service and settlement costs - 1 1
Acquisition costs 1 8 20
Expected credit loss adjustment 2 - -
Net foreign exchange (gains)/losses (17) (3) 3
Net losses on derivative instruments 9 10 12
Other administrative costs 138 93 204
General and administrative expenses 260 222 476
Depreciation of property, plant and equipment 12 10 23
Impairment of property, plant and equipment 6 - 10
Depreciation of right-of-use assets 16 16 29
Impairment of right of use asset 2 - 6
Depreciation and impairment of PPE and ROUA 36 26 68
Amortisation of other intangible assets 15 14 30
Impairment of other intangible assets - - 6
Amortisation of intangible assets arising on consolidation 21 21 46
Amortisation and impairment of intangible assets 36 35 82
1,001 883 1,778
7. Other operating income
Other operating income comprises:
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2022 2021 2021
£m £m £m
Business relocation grants 1 1 3
Employee related insurance receipts 1 1 2
Management fees from associates 1 1 2
Legal settlement receipts - - 1
Acquisition related income(1) 16 - -
Other receipts 1 1 2
20 4 10
Note
1. Acquisition related income relates to funds received following
arbitration in connection with the purchase of Liquidnet. The arbitration was
completed after the one year measurement period applicable to the acquisition.
8. Finance income
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2022 201 2021
£m £m £m
Interest receivable and similar income 1 1 2
Interest receivable on finance lease receivables 1 - 1
2 1 3
9. Finance costs
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2022 2021 2021
£m £m £m
Interest payable on bank and other loan facilities 1 1 2
Interest payable on bank and other loans 1 1 2
Interest payable on Sterling Notes January 2024 6 11 22
Interest payable on Sterling Notes May 2026 7 7 13
Interest payable on Sterling Notes November 2028 3 - 1
Interest payable on Liquidnet Vendor Loan Notes 1 - 1
Other interest payable - 1 1
Amortisation of debt issue and bank facility costs 1 1 2
Borrowing costs 20 22 44
Interest payable on lease liabilities 9 6 14
Amortisation of options premium - 2 2
Premium on repurchase of Sterling Notes January 2024 - - 16
29 30 76
10. Earnings per share
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2022 2021 2021
Basic 8.2p 0.1p 0.7p
Diluted 8.1p 0.1p 0.7p
The calculation of basic and diluted earnings per share is based on the
following number of shares:
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2022 2021 2021
No. (m) No. (m) No. (m)
(restated) (restated)
Basic weighted average shares 778.6 737.7 759.3
Contingently issuable shares 8.5 7.9 8.9
Diluted weighted average shares 787.1 745.6 768.2
The earnings used in the calculation of basic and diluted earnings per share
are set out below:
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2022 2021 2021
£m £m £m
Earnings for the period 65 2 8
Non-controlling interests (1) (1) (3)
Earnings attributable to equity holders of the parent 64 1 5
11. Dividends
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2022 2021 2021
£m £m £m
Amounts recognised as distributions to
equity holders in the period:
Final dividend for the year ended 31 December 2020 - 16 16
of 2p per share
Interim dividend for the year ended 31 December 2021 - - 31
of 4.0p per share
Final dividend for the year ended 31 December 2021 43 - -
of 5.5p per share
43 16 47
An interim dividend of 4.5 pence per share will be paid on 4 November 2022 to
all shareholders on the Register of Members on 7 October 2022.
As at 30 June 2022 the TP ICAP plc EBT held 9,228,078 TP ICAP Group plc 25p
ordinary shares (31 December 2021: 9,100,625) and has waived its rights to
dividends.
12. Intangible assets arising on consolidation
Goodwill Other Total
£m £m £m
As at 1 January 2022 1,180 582 1,762
Amortisation of acquisition related intangibles - (21) (21)
Effect of movements in exchange rates 45 23 68
As at 30 June 2022 1,225 584 1,809
Other intangible assets at 30 June 2022 represent customer relationships of
£582m (31 December 2021: £580m), business brands and trademarks of £2m (31
December 2021: £2m) that arise through business combinations. Customer
relationships are being amortised between 10 and 20 years.
Goodwill arising through business combinations is allocated to groups of
cash-generating units ('CGUs'), reflecting the lowest level at which the Group
monitors and tests goodwill for impairment purposes. The CGU groupings are as
follows:
30 June 31 December 2021
2022 (reallocated)
£m £m
Goodwill allocated to CGU grouping
Global Broking 484 466
Energy & Commodities 150 150
Parameta Solutions 345 336
Agency Execution (excluding Liquidnet) 43 39
Liquidnet 203 189
1,225 1,180
As a result of the change in the Primary Operating Segments as at 1 January
2022, from the geographic grouping of CGUs to a Business Division grouping of
CGUs the goodwill allocated to the regional CGU groupings has been reallocated
to each Business Division based the relative value of those Business
Divisions. The goodwill arising on the Liquidnet acquisition has not been
reallocated and is reviewed and tested as its own group of CGUs. Immediately
prior to the reallocation, the Regional CGUs were tested for impairment. No
impairments were identified.
The Group's annual impairment testing of its CGUs is undertaken each
September. Between annual tests the Group reviews each CGU for impairment
triggers that could adversely impact the valuation of the CGU and, if
necessary, undertakes additional impairment testing. No impairment triggers
as at 30 June 2022 were identified for the CGUs except for Global Broking and
Liquidnet which are discussed below.
Determining whether goodwill is impaired requires an estimation of the
recoverable amount of each CGU. The recoverable amount is the higher of its
value in use ('VIU') or its fair value less cost of disposal ('FVLCD'). VIU
is a pre-tax valuation, using pre-tax cash flows and pre-tax discount rates
which is compared with the pre-tax carrying value of the CGU, whereas FVLCD is
a post-tax valuation, using post-tax cash flows, post-tax discount rates and
other post-tax observable valuation inputs, which is compared with a post-tax
carrying value of the CGU. The CGU's recoverable amount is compared with its
carrying value to determine if an impairment is required.
The VIU for Global Broking is sensitive to changes in expected cash flows,
growth rates and the discount rate. As at June 22, the impact of inflation on
expected cash flows, coupled with a change in the discount rate, triggered a
full impairment review. Future projections are based on the most recent
financial forecasts considered by the Board which are used to project cash
flows for the next five years. After this period a steady state cash flow is
used to derive a terminal value for the CGU. Annual growth rates of 0.5% to
2027 and nil thereafter have been used with pre-tax discount rate of 12.5%.
The calculations have been subject to stress tests reflecting reasonably
possible changes in key assumptions. No impairment was identified as at 30
June 2022 although the CGU remains sensitive to reasonable possible changes in
the assumptions.
Changes in discount rates and/or revenue assumptions, reflecting inherent
uncertainties in any long-term forecasting, including potential effects of
Brexit in EMEA and other structural changes, would impact the respective
carrying value of the CGU. The CGU's value would equate to its carrying
value should the discount rate or revenue growth assumptions over the forecast
period change to the breakeven rate, or revenues used in the terminal value
fall by the percentage in the table below:
Valuation discount rate Breakeven discount rate Valuation growth rate Breakeven growth rate Changes in terminal value revenues
CGU % % % % %
Global Broking 12.5% 17.8% 0.5% (1.8%) (15.0%)
As Liquidnet was measured on a FVLCD basis at 31 December 2021, the fall in
global equity markets since that date has triggered an impairment review. The
full impairment test did not identify an impairment at 30 June 2022 although
the outcome is highly sensitive to changes in valuation assumptions. As at
30 June 2022 the recoverable amount for Liquidnet was based on its FVLCD.
The Income Approach was used for the FVLCD valuation under which the CGU had
a FVLCD in excess of its carrying value.
The key assumptions for the Income Approach are those regarding expected cash
flows, CGU growth rates and the discount rate. Future projections are based on
the most recent financial forecasts considered by the Board which are used to
project cash flows for the next five years. After this period a steady state
cash flow is used to derive a terminal value for the CGU. Annual growth
rates on existing business of 2.8% to 2027 and 1% thereafter have been used
with post tax discount rate of 11.1%. Projected cash flows for new business
lines have been projected to 2027 with growth thereafter at 2%, and have been
discounted at a post-tax discount rate of 15%, reflecting the greater
uncertainty associated with these projections. The calculations have been
subject to stress tests reflecting reasonably possible changes in key
assumptions.
Under this approach the recoverable amount for Liquidnet exceeded its carrying
value, but is sensitive to changes in the cash flow projections for new
business lines to 2027. An annualised reduction in the projected revenues
for new business lines of c.50% pa over the period to 2027, would eliminate
the headroom. The impact on future cash flows resulting from lower new
business inflows or falling growth rates does not reflect any management
actions that would be taken under such circumstances.
13. Trade and other receivables
30 June 30 June 31 December
2022 2021 2021
(restated)(1)
£m £m £m
Non-current receivables
Finance lease receivables 38 4 30
Other receivables 18 25 14
56 29 44
Current receivables
Trade receivables 460 383 351
Amounts due from clearing organisations 58 32 73
Deposits paid for securities borrowed 1,734 1,281 1,516
Finance lease receivables 1 1 1
Other debtors 38 22 19
Accrued income 15 13 14
Owed by associates and joint ventures 5 5 5
Prepayments 99 100 86
Corporation tax 4 5 3
2,414 1,842 2,068
1 As set out in Note 2(f) of the Group's 2021 Annual Report, the Group
changed its accounting policy for regular way Matched Principal transactions
from trade date accounting to settlement date. As a result, line items in the
Group's balance sheets for 30 June 2021 have been restated. Details are set
out in Note 24.
Deposits paid for securities borrowed arise on collateralised stock lending
transactions. Such trades are complete only when both the collateral and stock
for each side of the transaction are returned. The above analysis reflects the
receivable side of such transactions. Corresponding deposits received for
securities loaned are shown in 'Trade and other payables'. The Group measures
loss allowances for these balances under the general approach reflecting the
probability of default based on the credit rating of the counterparty together
with an assessment of the loss, after the sale of collateral, that could arise
as a result of default. As at 30 June 2022, the provision for expected credit
losses amounted to less than £1m (2021: less than £1m).
The Group measures the loss allowance for trade receivables at an amount equal
to the lifetime expected credit loss. The expected credit losses on trade
receivables are estimated using a provision matrix by reference to past
default experience of the debtor and an analysis of the debtor's current
financial position, adjusted for factors that are specific to the debtors,
general economic conditions and an assessment of both the current as well as
the forecast direction of conditions at the reporting date.
14. Financial assets and financial liabilities at fair value
through profit or loss
30 June 30 June 31 December
2022 2021 2021
(restated)
£m £m £m
Financial assets at fair value through profit or loss
Matched Principal financial assets 167 73 37
Fair value gains on unsettled Matched Principal transactions 696 486 121
863 559 158
Financial liabilities at fair value through profit or loss
Matched Principal financial liabilities (6) (5) (1)
Fair value losses on unsettled Matched Principal transactions (696) (486) (119)
(702) (491) (120)
Notional contract amount of unsettled Matched Principal transactions
Unsettled Matched Principal transactions 57,812 148,846 65,968
Fair value gains and losses on unsettled Matched Principal transactions
represent the price movement between trade date and the reporting date on
regular way transactions prior to settlement. Matched Principal transactions
arise where securities are bought from one counterparty and simultaneously
sold to another counterparty. Settlement of such transactions is primarily on
a delivery vs. payment basis and typically take place within a few business
days of the transaction date according to the relevant market rules and
conventions.
The notional contract amounts of unsettled Matched Principal transactions
indicate the aggregate value of buy and sell transactions outstanding at the
balance sheet date. They do not represent amounts at risk.
15 Trade and other payables
30 June 30 June 31 December
2022 2021 2021
(restated)(1)
£m £m £m
Trade payables 134 134 89
Amounts due to clearing organisations(1) 31 35 47
Finance lease payables - - 2
Deposits received for securities loaned 1,710 1,274 1,504
Deferred consideration 4 11 7
Other creditors 14 20 19
Accruals 338 293 283
Owed to associates and joint ventures 4 3 2
Tax and social security 26 25 22
Deferred income 4 3 2
2,265 1,798 1,977
1 As set out in Note 2(f) of the Group's 2021 Annual Report, the Group
changed its accounting policy for regular way Matched Principal transactions
from trade date accounting to settlement date. As a result, line items in the
Group's balance sheets for 30 June 2021 have been restated. Details are set
out in Note 24.
16. Interest bearing loans and borrowings
Current Non-current Total
30 June 2022 £m £m £m
Overdrafts 113 - 113
Loans from related party - - -
Bank loans 25 - 25
Sterling Notes January 2024 6 246 252
Liquidnet Vendor Loan Notes March 2024 41 41
Sterling Notes May 2026 1 249 250
Sterling Notes November 2028 1 247 248
146 783 929
31 December 2021
Overdrafts 17 - 17
Loans from related party 51 - 51
Sterling Notes January 2024 6 246 252
Liquidnet Vendor Loan Notes March 2024 1 37 38
Sterling Notes May 2026 1 249 250
Sterling Notes November 2028 1 247 248
77 779 856
All amounts are stated after unamortised transaction costs.
Settlement facilities and overdrafts
Where the Group purchases securities under matched principal trades but is
unable to complete the sale immediately, the Group's settlement agents
finances the purchase through the provision of an overdraft secured against
the securities and any collateral placed at the settlement agents. As at 30
June 2022, overdrafts for the provision of settlement finance amounted to
£113m (December 2021: £17m).
Loans from related party
In August 2020, the Group entered into a Yen 10bn committed revolving credit
facility with The Tokyo Tanshi Co., Ltd, a related party, that matures in
February 2024. Subsequent to the 30 June 2022, the Group has agreed an
extension to the maturity to August 2024. As at 30 June, the 10bn Yen
committed facility equated to £62m. Facility commitment fees of 0.64% on the
undrawn balance are payable on the facility. Arrangement fees of less than
£1m are being amortised over the maturity of the facility.
As at 30 June 2022, the facility was undrawn. During the period, the maximum
amount drawn was Yen 10bn (£62m), and the average amount drawn was Yen 9.4bn
(£57m). The Group used the credit facility for most of the period, entering
into several short term bank loans with maturities of less than three months.
The turnover is quick and the volume is large and resultant flows are
presented net in the Group's cash flow statement in accordance with IAS 7
'Cash Flow'.
Bank credit facilities and bank loans
The Group refinanced its main bank revolving credit facility in May 2022
increasing its capacity to £350m (previously £270m) and with a new initial
maturity of May 2025. Facility commitment fees of 0.7% per annum on the
undrawn balance are payable on the facility. Arrangement fees of £3m are
being amortised over the maturity of the facility. As at 30th June 2022, £25m
was drawn. Amounts drawn down are reported as bank loans in the above table.
During the period, the maximum amount drawn was £140m, and the average
amount drawn was £50m. Interest and facility fees of less than £1m were
incurred in the six months to 30 June 2022.
Sterling Notes: Due January 2024
In January 2017 the Group issued £500m unsecured Sterling Notes due January
2024. The Notes have a fixed coupon of 5.25% payable semi-annually, subject to
compliance with the terms of the Notes. In May 2019, the Group repurchased
£69m of the Notes and a further £184m were repurchased in November 2021.
Accrued interest at 30 June 2022 amounted to £6m. Unamortised issue costs
were less than £1m.
Liquidnet Vendor Loan Notes Due March 2024
In March 2021, as part of the purchase consideration of Liquidnet, the Group
issued $50m (£41m) unsecured Loan Notes due March 2024. The Notes have a
fixed coupon of 3.2% paid annually. Accrued interest at 30 June 2022 was less
than £1m.
Sterling Notes: Due May 2026
In May 2019 the Group issued £250m unsecured Sterling Notes due May 2026. The
Notes have a fixed coupon of 5.25% paid semi-annually, subject to compliance
with the terms of the Notes. Accrued interest at 30 June 2022 was £1m.
Unamortised issue costs were £1m.
Sterling Notes: Due November 2028
In November 2021 the Group issued £250m unsecured Sterling Notes due November
2028. The Notes have a fixed coupon of 2.625% paid semi-annually, subject to
compliance with the terms of the Notes. Accrued interest at 30 June 2022 was
£1m. Unamortised issue costs were £3m.
17. Lease liabilities
The maturity analysis of lease liabilities is as follows:
30 June 31 December 2021
2022
£m £m
Year 1 48 41
Year 2 43 40
Year 3 40 34
Year 4 37 39
Year 5 34 31
Onwards 193 189
395 374
Less interest (93) (88)
302 286
Included in current liabilities 33 34
Included in non-current liabilities 269 252
302 286
18. Reconciliation of operating result (EBIT) to net cash from
operating activities
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2022 2021 2021
£m £m £m
EBIT/operating profit 99 57 97
Adjustments for:
- Share-based payment charge 8 6 10
- Pension scheme's administration costs - - 1
- Pension scheme past service and settlement costs - 1 1
- Depreciation of property, plant and equipment 12 10 23
- Loss on disposal of property, plant and equipment - - 1
- Impairment of property, plant and equipment 6 10
- Depreciation of right-of-use assets 16 16 29
- Impairment of right-of-use assets 2 - 6
- Amortisation of intangible assets 15 14 30
- Impairment of intangible assets - 6
- Amortisation of intangible assets arising on consolidation 21 21 46
- Remeasurement of deferred consideration 8 - 2
- Exchange loss of Vendor Loan Notes 4
Operating cash flows before movement in working capital 191 125 262
Increase in trade and other receivables (53) (54) (16)
Increase in net Matched Principal related balances (154) (47) (36)
Decrease in net balances with Clearing Organisations 3 41 12
(Increase)/decrease in net stock lending balances (2) 5 6
Increase/(decrease) in trade and other payables 26 12 (14)
Increase/(decrease) in provisions 5 (4) (2)
Increase/(decrease) in non-current liabilities 2 (2) (3)
Cash generated from operations 18 76 209
Income taxes paid (17) (24) (39)
Fees paid on bank and other loan facilities (1) (1) (2)
Interest paid (19) (20) (42)
Interest paid - finance leases (8) (7) (15)
Net cash from operating activities (27) 24 111
19. Analysis of net debt including lease liabilities
1 January Cash Acquired with subsidiaries Non-cash Exchange 30 June
2022 flow items differences 2022
£m £m £m £m £m £m
Cash and cash equivalents(1) 784 (40) 44 788
Overdrafts (17) (96) - (113)
767 (136) 44 675
Financial investments 115 10 7 132
Bank loan due within one year - (25) (25)
Loans from related party (51) 47 4 -
Sterling Notes January 2024 (252) 6 (6) (252)
Sterling Notes May 2026 (250) 7 (7) (250)
Sterling Notes November 2028 (248) 3 (3) (248)
Liquidnet Vendor Loan Notes (38) 1 - (4) (41)
Total debt excluding leases (839) 39 (16) - (816)
Lease liabilities (286) 25 (23) (18) (302)
Total financing liabilities (1,125) 64 (39) (18) (1,118)
Net debt including lease liabilities (243) (62) (39) 33 (311)
1. Principal changes plus payment of interest and debt issue costs where
applicable
Cash and cash equivalents comprise cash at bank and other short term highly
liquid investments with an original maturity of three months or less. As at
30 June 2022 cash and cash equivalents, net of overdrafts, amounted to £675m
(December 2021: £767m) of which £100m (December 2021:£77m) represent
amounts subject to regulatory restrictions and are not readily available to be
used for other purposes within the Group. Cash at bank earns interest at
floating rates based on daily bank deposit rates. Short term deposits are
made for varying periods of between one day and three months depending on the
immediate cash requirements of the Group, and earn interest at the respective
short term deposit rates.
Financial investments comprise government debt securities, term deposits and
restricted funds held with banks and clearing organisations.
Non-cash items represent additions to lease liabilities, accrued interest and
the amortisation of debt issue costs.
20. Provisions
Property Re-structuring Legal Total
and other
£m £m £m £m
At 1 January 2022 16 5 22 43
Charge to income statement 2 3 4 9
Utilisation of provisions (1) (1) (1) (3)
Effect of movements in exchange rates 1 - - 1
At 30 June 2022 18 7 25 50
Included in current liabilities 12
Included in non-current liabilities 38
50
Property provisions outstanding as at 30 June 2022 relate to provisions in
respect of building dilapidations, represents the estimated cost of making
good dilapidations and disrepair on various leasehold buildings.
Restructuring provisions outstanding as at 30 June 2022 relate to termination
and other employee related costs. The movements during the Period reflects
the actions taken under the Group's reorganisation plan. It is expected that
these obligations will continue to be discharged during 2023.
Legal and other provisions include provisions for legal claims brought against
subsidiaries of the Group together with provisions against obligations for
certain long-term employee benefits and non-property related onerous
contracts. At present the timing and amount of any payments are uncertain
and provisions are subject to regular review. It is expected that the
obligations will be discharged over the next 24 years.
Yen LIBOR Class Actions
The Group has entered into binding settlement agreements with the plaintiffs
in Laydon v. Mizuho Bank, Ltd. et al. and Sonterra Capital Master Fund, Ltd.
et al. in order to settle these class actions relating to the alleged
manipulation of Yen LIBOR and Euroyen TIBOR benchmark interest rates. A
motion seeking approval of these settlement is pending before the Court.
Assuming final approval which the Group believes to be probable, the Group
will be required to pay the plaintiffs US$2.4m (£2.0m) and has provided for
this amount. Separately, pursuant to these settlements and consistent with
its indemnity obligations, NEX International Limited (f/k/a ICAP plc) will
also be required to pay US$2.4m (£2.0m) in order to resolve claims against
ICAP plc and ICAP Europe Limited. This has been recorded as a provision and
an indemnification asset receivable from NEX.
21. Contingent liabilities
Contingent liabilities represent material cases or investigations where the
Group considers the risk of a material outflow is possible, but not probable,
or where the Group assesses and reports the risk to be probable, but are
unable to make a reliable estimate to establish a provision.
Bank Bill Swap Reference Rate case
On 16 August 2016, a complaint was filed in the United States District Court
for the Southern District of New York naming Tullett Prebon plc, ICAP plc,
ICAP Australia Pty LTD and Tullett Prebon (Australia) Pty. Limited as
defendants together with various Bank Bill Swap Reference Rate ('BBSW')
setting banks. The complaint alleges collusion by the defendants to fix
BBSW-based derivatives prices through manipulative trading during the fixing
window and false BBSW rate submissions. On 26 November 2018, the Court
dismissed all of the claims against the TP ICAP defendants and certain other
defendants. On 28 January 2019, the Court ordered that a stipulation signed by
the plaintiffs and the TP ICAP defendants meant that the TP ICAP defendants
were not required to respond to any Proposed Second Amended Class Action
Complaint ('PSAC') that the plaintiffs were seeking to file. On 3 April 2019
the plaintiffs filed a PSAC, however the TP ICAP defendants have no obligation
to respond. The plaintiffs have reserved the right to appeal the dismissal of
the TP ICAP defendants but have not as yet done so. It is not possible to
predict the ultimate outcome of the litigation or to provide an estimate of
any potential financial impact.
Labour claims - ICAP Brazil
ICAP do Brasil Corretora De Títulos e Valores Mobiliários Ltda ('ICAP
Brazil') is a defendant in 8 (31 December 2021: 8) pending lawsuits filed in
the Brazilian Labour Court by persons formerly associated with ICAP Brazil
seeking damages under various statutory labour rights accorded to employees
and in relation to various other claims including wrongful termination, breach
of contract and harassment (together the 'Labour Claims'). The Group estimates
the maximum potential aggregate exposure in relation to the Labour Claims
classified with possible loss risk, including any potential social security
tax liability, to be BRL 31.7m (£5.1m) (31 December 2021: 51.6m (£7.4m)).
The Group is the beneficiary of an indemnity from NEX in relation to any
liabilities in respect of four of the 8 Labour Claims insofar as they relate
to periods prior to completion of the Group's acquisition of ICAP. This
includes a claim that is indemnified by a predecessor to ICAP Brazil byway of
escrowed funds in the amount of BRL 28m (£4m). Apart from estimated losses of
£0.1m which have already been provided for, the Labour Claims are at various
stages of their respective proceedings and are pending an initial witness
hearing, the court's decision on appeal or a ruling on a motion for
clarification. The Group intends to contest liability in each of these matters
and to vigorously defend itself. Unless otherwise noted, it is not possible to
predict the ultimate outcome of these actions.
Flow case - Tullett Prebon Brazil
In December 2012, Flow Participações Ltda and Brasil Plural Corretora de
Câmbio, Títulos e Valores ('Flow') initiated a lawsuit against Tullett
Prebon Brasil S.A. Corretora de Valores e Câmbio and Tullett Prebon Holdings
do Brasil Ltda alleging that the defendants have committed a series of unfair
competition misconducts, such as the recruitment of Flow's former employees,
the illegal obtainment and use of systems and software developed by the
plaintiffs, as well as the transfer of technology and confidential information
from Flow and the collusion to do so in order to increase profits from
economic activities. The amount currently claimed is BRL 350m (£55.1m) (31
December 2021: BRL 295m (£39m)). The Group intends to vigorously defend
itself but there is no certainty as to the outcome of these claims. Currently,
the case is in an early evidentiary phase and awaiting the commencement of
expert testimony.
LIBOR Class actions
The Group is currently defending the following LIBOR related actions:
(i) Stichting LIBOR Class Action
On 15 December 2017, the Stichting Elco Foundation, a Netherlands-based claim
foundation, filed a writ initiating litigation in the Dutch court in Amsterdam
on behalf of institutional investors against ICAP Europe Limited ('IEL'), ICAP
plc, Cooperative Rabobank U.A., UBS AG, UBS Securities Japan Co. Ltd, Lloyds
Banking Group plc, and Lloyds Bank plc. The litigation alleges manipulation by
the defendants of the JPY LIBOR, GBP LIBOR, CHF LIBOR, USD LIBOR, EURIBOR,
TIBOR, SOR, BBSW and HIBOR benchmark rates, and seeks a declaratory judgment
that the defendants acted unlawfully and conspired to engage in improper
manipulation of benchmarks. If the plaintiffs succeed in the action, the
defendants would be responsible for paying costs of the litigation, but each
allegedly impacted investor would need to prove its own actual damages. It is
not possible at this time to determine the final outcome of this litigation,
but IEL has factual and legal defences to the claims and intends to defend the
lawsuit vigorously. A hearing took place on 18 June 2019 on Defendants motions
to dismiss the proceedings. On 14 August 2019 the Dutch Court issued a ruling
dismissing ICAP plc from the case entirely but keeping certain claims against
IEL relating solely to JPY LIBOR. On 9 December 2020, the Dutch Court issued a
final judgement dismissing the Foundation's claims in their entirety. In March
2021, the Foundation filed a writ to appeal this final judgement which remains
pending. The Group is covered by an indemnity from NEX in relation to any
outflow in respect of the ICAP entities with regard to these matters. It is
not possible to estimate any potential financial impact in respect of this
matter at this time.
(ii) Swiss LIBOR Class Action
On 4 December 2017, a class of plaintiffs filed a Second Amended Class Action
Complaint in the matter of Sonterra Capital Master FundLtd. et al. v. Credit
Suisse Group AG et al. naming as defendants, among others, TP ICAP plc,
Tullett Prebon Americas Corp., Tullett Prebon (USA) Inc., Tullett Prebon
Financial Services LLC, Tullett Prebon (Europe) Limited, Cosmorex AG, ICAP
Europe Limited, and ICAP Securities USA LLC (together, the 'Companies'). The
Second Amended Complaint generally alleges that the Companies conspired with
certain bank customers to manipulate Swiss Franc LIBOR and prices of Swiss
Franc LIBOR based derivatives by disseminating false pricing information in
false run-throughs and false prices published on screens viewed by customers
in violation of the Sherman Act (anti-trust) and RICO. On 16 September 2019,
the Court granted the Companies' motions to dismiss in their entirety. The
plaintiffs appealed the dismissal to the United States Court of Appeals for
the Second Circuit. Based upon a Second Circuit ruling in an unrelated case,
the parties have jointly moved to remand the case to the United States
District Court for the Southern District of New York for further
proceedings. The matter has now been remanded to the Southern District of
New York. The Companies intend to contest liability in the matter and to
vigorously defend themselves. It is not possible to predict the ultimate
outcome of this action or to provide an estimate of any potential financial
impact.
(iii) Euribor Class Action
On 13 August 2015, the ICAP Europe Limited, along with ICAP plc, was named as
a defendant in a Fourth Amended Class Action Complaint filed in the United
States District Court by lead plaintiff Stephen Sullivan asserting claims of
Euribor manipulation. Defendants briefed motions to dismiss for failure to
state a claim and lack of jurisdiction, which were fully submitted as of 23
December 2015. On 21 February 2017, the Court issued a decision dismissing a
number of foreign defendants, including the ICAP Europe Limited and ICAP plc,
out of the lawsuit on the grounds of lack of personal jurisdiction. Because
the action continued as to other defendants, the dismissal decision for lack
of personal jurisdiction has not yet been appealed. However, the plaintiffs
announced on 21 November 2017 that they had reached a settlement with the two
remaining defendants in the case. As a part of their settlement, the two bank
defendants have agreed to turn over materials to the plaintiffs that may be
probative of personal jurisdiction over the previously dismissed foreign
defendants. The remaining claims in the litigation were resolved by a
settlement which the Court gave final approval to on 17 May 2019. Plaintiffs
filed a notice of appeal on 14 June 2019, appealing the prior decisions on the
motion to dismiss and the denial of leave to amend. Defendants filed a
cross-notice of appeal on 28 June 2019 appealing aspects of the Court's prior
rulings on the motion to dismiss that were decided in the Plaintiffs' favor.
These appeals have been stayed since August 2019 pending a ruling in an
unrelated appellate matter involving similar issues. In December 2021, the
unrelated appeal was decided and the stay of the appeal and cross appeal was
lifted and commencing in May 2022 a briefing schedule was implemented. The
motions are anticipated to be fully briefed by November 2022 but the appeal
and cross appeal are not anticipated to be ruled upon until sometime in 2023.
It is not possible to predict the ultimate outcome of this action at this
stage in proceedings or to provide an estimate of any potential financial
impact. The Group is covered by an indemnity from NEX in relation to any
outflow in respect of the ICAP entities with regard to these matters.
ICAP Securities Limited, Frankfurt branch - Frankfurt Attorney General
administrative proceedings
On 19 December 2018, ICAP Securities Limited, Frankfurt branch ('ISL') was
notified by the Attorney General's office in Frankfurt notifying ISL that it
had commenced administrative proceedings against ISL and criminal proceedings
against former employees and a former director of ISL, in respect of aiding
and abetting tax evasion by Rafael Roth Financial Enterprises GmbH ('RRFE').
It is possible that a corporate administrative fine may be imposed on ISL and
earnings derived from the criminal offence confiscated. ISL has appointed
external counsel and is in the process of investigating the activities of the
relevant desk from 2006-2009. This investigation is complicated as the
majority of relevant records are held by NEX and NEX failed to disclose its
engagement with the relevant authorities prior to the sale of ICAP to Tullett
Prebon in 2016. The Group has issued proceedings against NEX in respect of (i)
breach of warranties under the sale and purchase agreement, and (ii) an
indemnity claim under the tax deed entered into in connection with the IGBB
acquisition in relation to these matters. Since the proceedings are at an
early stage, details of the alleged wrongdoing or case against ISL are not yet
available, and it is not possible at present to provide a reliable estimate of
any potential financial impact on the Group.
ICAP Securities Limited and The Link Asset and Securities Company Limited -
Proceedings by the Cologne Public Prosecutor
On 11 May 2020, TP ICAP learned that proceedings have been commenced by the
Cologne Public prosecutor against ICAP Securities Limited ('ISL') and The Link
Asset and Securities Company Ltd ('Link') in connection with criminal
investigations into individuals suspected of aiding and abetting tax evasion
between 2004 and 2012. It is possible that the Cologne Public Prosecutor may
seek to impose an administrative fine against ISL or Link and confiscate the
earnings that ISL or Link allegedly derived from the underlying alleged
criminal conduct by the relevant individuals. ISL and Link have appointed
external lawyers to advise them. The Group has issued proceedings against NEX
in respect of (i) breach of warranties under the sale and purchase agreement,
and (ii) an indemnity claim under the tax deed entered into in connection with
the IGBB acquisition in relation to these matters. Since the proceedings are
at an early stage, details of the alleged wrongdoing or case against ISL and
Link are not yet available, and it is not possible at present to provide a
reliable estimate of any potential financial impact on the Group.
Portigon Ag v. TP ICAP plc
TP ICAP plc is a defendant in an action filed by Portigon AG in July 2021 in
the Supreme Court of the State of New York County of Nassau alleging losses
relating to certain so called "cum ex" transactions allegedly arranged by the
Group between 2005 and 2007. In June 2022, the Court dismissed the action
for lack of personal jurisdiction. Should the plaintiffs seek to appeal or
to amend their complaint, the Group intends to contest liability in the matter
and to vigorously defend itself. It is not possible to predict the ultimate
outcome of this action or to provide an estimate of any potential financial
impact.
MM Warburg AG v TP ICAP Markets Limited, The Link Asset and Securities Company
Limited and others
TPIM and Link are defendants in a claim filed in Hamburg by Warburg on 31
December 2020, but which only reached TPIM and Link on 26 October 2021. The
claim relates to certain German "cum-ex" transactions that took place between
2007 and 2011. In relation to those transactions Warburg has been ordered to
pay the German tax authorities EUR 185 million and is subject to a criminal
confiscation order of EUR 176.5 million. Warburg's claims are based on
contract, tort and joint and several liability, are for compensation for the
amount it has been ordered to pay to the tax authorities, the amount of the
criminal confiscation order, further indemnification and interest. TPIM and
Link intend to contest liability in the matter and based on legal advice and
an assessment of the claim as at 30 June 2022, the Group considers it is able
to vigorously defend itself. Whilst it is not possible to predict the
ultimate outcome of this action, the Group does not expect a material adverse
financial impact on the Group's results or net assets as a result of this
case.
Commodities and Futures Trading Commission-Bond issuances investigation
ICAP Global Derivatives Limited ('IGDL'), ICAP Energy LLC ('Energy'), ICAP
Europe Limited ('IEL'), Tullett Prebon Americas Corp. ('TPAC'), tpSEF Inc.
('tpSEF'), Tullett Prebon Europe Limited ('TPEL') Tullett Prebon (Japan)
Limited ('TPJL') and Tullett Prebon (Australia) Limited ('TPAL') are currently
responding to an investigation by the CFTC in relation to the pricing of
issuances utilising certain of TP ICAP's indicative broker pricing screens and
certain recordkeeping matters including in relation to employee use of
personal devices for business communications and other books and records
matters. The investigation is still in the fact-finding phase and the Group
is co-operating with the CFTC in its enquiries. It is not possible to predict
the ultimate outcome of the investigation or to provide an estimate of any
potential financial impact at this time. As the relevant matters that occurred
prior to the Group's acquisition of the ICAP Global Broking Business ('IGBB')
from ICAP were not disclosed to the Group prior to completion of the
acquisition, the Group has initiated a court action against ICAP's successor
company, NEX, for breach of warranty in respect of the ICAP entities.
General note
The Group operates in a wide variety of jurisdictions around the world and
uncertainties therefore exist with respect to the interpretation of complex
regulatory, corporate and tax laws and practices of those territories.
Accordingly, and as part of its normal course of business, the Group is
required to provide information to various authorities as part of informal and
formal enquiries, investigations or market reviews. From time to time the
Group's subsidiaries are engaged in litigation in relation to a variety of
matters. The Group's reputation may also be damaged by any involvement or the
involvement of any of its employees or former employees in any regulatory
investigation and by any allegations or findings, even where the associated
fine or penalty is not material.
Save as outlined above in respect of legal matters or disputes for which a
provision has not been made, notwithstanding the uncertainties that are
inherent in the outcome of such matters, currently there are no individual
matters which are considered to pose a significant risk of material adverse
financial impact on the Group's results or net assets.
The Group establishes provisions for taxes other than current and deferred
income taxes, based upon various factors which are continually evaluated, if
there is a present obligation as a result of past events, it is probable that
an outflow of resources embodying economic benefits will be required to settle
the obligation and a reliable estimate of the amount of the obligation can be
made.
In the normal course of business, certain of the Group's subsidiaries enter
into guarantees and indemnities to cover trading arrangements and/or the use
of third-party services or software.
22. Financial instruments
(a) Categorisation of financial assets and liabilities
FVTOCI
equity instruments
FVTPL FVTOCI Total
Financial Assets trading instruments debt instruments Amortised carrying
cost amount
30 June 2022 £m £m £m £m £m
Non-current financial assets
measured at fair value
Equity securities - - 19 - 19
Corporate debt securities - 2 - - 2
Non-current financial assets not measured at fair value
Finance lease receivables - - - 38 38
Other receivables - - - 18 18
- 2 19 56 77
Current financial assets
measured at fair value
Matched Principal financial assets 167 - - - 167
Fair value gains on unsettled Matched Principal transactions 696 - - - 696
Government debt securities - 81 - - 81
Current financial assets
Not measured at fair value
Term deposits - - - 51 51
Other debtors - - - 38 38
Accrued income - - - 15 15
Owed to associates and joint ventures - - - 5 5
Trade receivables - - - 460 460
Amounts due from clearing organisations - - - 58 58
Deposits paid for securities borrowed - - - 1,734 1,734
Finance lease receivables - - - 1 1
Cash and cash equivalents - - - 788 788
863 81 - 3,150 4,094
Total financial assets 863 83 19 3,206 4,171
Financial Liabilities Mandatorily at FVTPL Other financial liabilities Total
carrying amount
Non-current Current Non-current Current
30 June 2022 £m £m £m £m £m
Financial liabilities
measured at fair value
Matched Principal financial liabilities - 6 - - 6
Fair value losses on unsettled Matched Principal transactions - 696 - - 696
Deferred consideration 59 4 - - 63
59 706 - - 765
Financial liabilities
Not measured at fair value
Overdrafts - - - 113 113
Bank loans - - - 25 25
Liquidnet Vendor Loan Notes - - 41 - 41
Sterling Notes January 2024 - - 246 6 252
Sterling Notes May 2026 - - 249 1 250
Sterling Notes November 2028 - - 247 1 248
Other creditors - - - 14 14
Accruals(1) - - - 111 111
Owed to associates and joint ventures - - - 4 4
Trade payables - - - 134 134
Amounts payable to clearing organisations - - - 31 31
Deposits received for - - - 1,710 1,710
securities loaned
Lease liabilities - - 269 33 302
- - 1,052 2,183 3,235
Total financial liabilities 59 706 1,052 2,183 4,000
1. Accruals of £227m are not recorded as financial liabilities.
(b) Maturity profile of financial liabilities
As at 30 June 2022, the contractual maturities, including future interest
obligations, of the Group's financial liabilities were as follows:
Contractual maturities of financial and lease liabilities Between Between Total
Less than 3 and 12 1 and 5 Over contractual
3 months months years 5 years cash flows
30 June 2022 £m £m £m £m £m
Matched Principal financial liabilities 6 - - - 6
Settlement of open Matched Principal purchases(1) 57,801 - - - 57,801
Deposits received for 1,710 - - - 1,710
securities loaned
Trade payables 125 9 - - 134
Amount due to clearing organisations 31 - - - 31
Other creditors 9 2 3 - 14
Accruals 14 95 2 - 111
Owed to associates and joint venture 4 - - - 4
Lease liabilities 12 36 154 193 395
Overdrafts 113 - - - 113
Bank loans 25 - - - 25
Liquidnet Vendor Loan Note March 2024 - 1 43 - 44
Sterling Notes January 2024 6 6 260 - 272
Sterling Notes May 2026 - 13 289 - 302
Sterling Notes November 2028 - 7 26 260 293
Deferred consideration 3 1 59 - 63
59,859 170 836 453 61,318
1 Settlement of open Matched Principal purchases represents the payment
in exchange for Matched Principal financial assets pending their onward
sale. The onward sale results in inflows from the settlement of related open
Matched Principal sales.
(c) Fair value measurements recognised in the statement of
financial position
The following table provides an analysis of the financial instruments that are
measured subsequent to initial recognition at fair value, grouped into Levels
1 to 3 based on the degree to which the fair value is observable:
Ø Level 1 fair value measurements are those derived from quoted prices
(unadjusted) in active markets for identical assets or liabilities;
Ø Level 2 fair value measurements are those derived from inputs other than
quoted prices included within Level 1 that are observable for the asset or
liability, either directly (i.e. as prices) or indirectly (i.e. derived from
prices); and
Ø Level 3 fair value measurements are those derived from valuation techniques
that include inputs for the asset or liability that are not based on
observable market data (unobservable inputs).
Level 1 Level 2 Level 3 Total
As at 30 June 2022 £m £m £m £m
Financial assets
measured at fair value
Matched Principal financial assets 167 - - 167
Fair value gains on unsettled Matched Principal transactions 696 - - 696
Equity instruments - 10 9 19
Corporate debt securities - - 2 2
Government debt securities 81 - - 81
Financial liabilities
measured at fair value
Matched Principal financial liabilities (6) - - (6)
Fair value losses on unsettled Matched Principal transactions (696) - - (696)
Deferred consideration - (2) (61) (63)
242 8 (50) 200
There were no transfers between Level 1 and 2 during the Period.
Reconciliation of Level 3 fair value movements:
Equity instruments Debt securities Deferred consideration(at FVTPL) Total
(at FVTOCI) (at FVTOCI)
£m £m £m £m
Balance as at 1 January 2022 9 2 (53) (42)
Net change in fair value - - (3) (3)
- included in 'administrative expenses'
Effect of movements in exchange rates - - (5) (5)
Balance as at 30 June 2022 9 2 (61) (50)
23. Reconciliation of shareholders' funds
(a) Share capital, Share premium account.
The following table shows an analysis of the changes in share capital, share
premium and merger reserve attributable to the equity shareholders of TP ICAP
Group plc.
Share capital Share premium account Total
£m £m £m
Balance as at 1 January and 30 June 2022 197 - 197
(b) Other reserves
Re-organisation reserve Re-valuation reserve Hedging and translation Own shares Total
£m £m £m £m £m
Balance as at 1 January 2022 (946) 5 (38) (26) (1,005)
Exchange differences on translation of foreign operations - - 129 - 129
Taxation on components of other comprehensive income - - (4) - (4)
Total comprehensive income/(loss) - - 125 - 125
Share settlement of share-based payment awards - - - 6 6
Own shares acquired for employee trusts - - - (3) (3)
Balance as at 30 June 2022 (946) 5 87 (23) (877)
(c) Total equity
Attributable to the equity holders of the parent
Total from 22(a) Total from 22(b) Retained earnings Total Non-controlling interests Total equity
£m £m £m £m £m £m
Balance as at 1 January 2022 197 (1,005) 2,769 1,961 17 1,978
Profit for the period - - 64 64 1 65
Exchange differences on translation of foreign operations - 129 - 129 - 129
Taxation on components of other comprehensive income - (4) - (4) - (4)
Total comprehensive income/(loss) - 125 64 189 1 190
Dividends paid - - (43) (43) (1) (44)
Share settlement of share-based payment awards - 6 (6) - - -
Own shares acquired for employee trusts (3) - (3) - (3)
Credit arising on share-based payment awards - - 8 8 - 8
Balance as at 30 June 2022 197 (877) 2,792 2,112 17 2,129
24. Impact of change in Accounting policy on 30 June 2021 reported
balances
As set out in Note 2(f) of the Group's 2021 Annual Report, the Group changed
its accounting policy for regular way Matched Principal transactions from
trade date accounting to settlement date. As a result, line items in the
Group's balance sheets for 30 June 2021 have been restated. Details are set
below:
30 June 30 June 2021
2021 (as restated)
(as reported)
£m £m
Trade and other receivables
Settlement balances 74,473 -
Deposits paid for securities borrowed 1,274 1,281
Amounts due from clearing organisations(1) 44 32
Trade receivables 351 383
Financial assets at FVTPL
Matched Principal financial assets - 73
Fair value gains on unsettled Matched Principal transactions - 486
Gross assets 76,142 2,255
Trade and other payables
Settlement balances (74,445) -
Deposits received for securities loaned (1,272) (1,274)
Amounts due to clearing organisations(1) (2) (35)
Trade payables (102) (134)
Financial liabilities at FVTPL
Matched Principal financial liabilities - (5)
Fair value losses on unsettled Matched Principal transactions - (486)
Gross liabilities (75,821) (1,934)
Net assets 321 321
1 Amounts due to and from clearing organisations were reported as part of
trade receivables and payable in June 2021 and now, after restatement, are
reported separately.
----------------------------------------------------------------------------------------------------
Statement of Directors' Responsibilities
Each of the Directors who are Directors as at the date of this Statement of
Directors' Responsibilities confirm to the best of their knowledge that:
· the condensed set of financial statements has been prepared in
accordance with UK adopted IAS 34 'Interim Financial Reporting', IAS 34
'Interim Financial Reporting' as issued by the International Accounting
Standards Board ('IASB') and IAS 34 'Interim Financial Reporting' as adopted
by the European Union;
· the condensed set of financial statements gives a true and fair
view of the assets, liabilities, financial position and profit or loss of the
Group as required by DTR 4.2.4R; and
· the Interim Management Report herein includes a fair review of
the information required by DTR 4.2.7R and DTR 4.2.8R.
The Directors are responsible for the maintenance and integrity of the
corporate and financial information included on the Company's website.
Legislation in the United Kingdom governing the preparation and dissemination
of financial information differs from legislation in other jurisdictions.
By order of the Board
Robin Stewart
Chief Financial Officer
10 August 2022
Independent Review Report to TP ICAP Group plc
(the 'Company' and/or the 'Group')
Conclusion
We have been engaged by the Company to review the condensed consolidated set
of financial statements in the interim financial report for the six months
ended 30 June 2022 which comprises the condensed consolidated income
statement, the condensed consolidated statement of comprehensive income,
condensed consolidated balance sheet, the condensed consolidated statement of
changes in equity, the condensed consolidated cash flow statement and related
Notes 1 to 24.
Based on our review, nothing has come to our attention that causes us to
believe that the condensed set of financial statements in the interim
financial report for the six months ended 30 June 2022 is not prepared, in all
material respects, in accordance with United Kingdom adopted International
Accounting Standard 34 and the Disclosure Guidance and Transparency Rules of
the United Kingdom's Financial Conduct Authority.
Basis for Conclusion
We conducted our review in accordance with International Standard on Review
Engagements (UK) 2410 "Review of Interim Financial Information Performed by
the Independent Auditor of the Entity" issued by the Financial Reporting
Council for use in the United Kingdom (ISRE (UK) 2410). A review of interim
financial information consists of making inquiries, primarily of persons
responsible for financial and accounting matters, and applying analytical and
other review procedures. A review is substantially less in scope than an audit
conducted in accordance with International Standards on Auditing (UK) and
consequently does not enable us to obtain assurance that we would become aware
of all significant matters that might be identified in an audit. Accordingly,
we do not express an audit opinion.
As disclosed in note 1, the annual financial statements of the Group are
prepared in accordance with United Kingdom adopted International Financial
Reporting Standards as issued by the IASB. The condensed consolidated set of
financial statements included in this interim financial report has been
prepared in accordance with United Kingdom adopted International Accounting
Standard 34, "Interim Financial Reporting".
Conclusion Relating to Going Concern
Based on our review procedures, which are less extensive than those performed
in an audit as described in the Basis for Conclusion section of this report,
nothing has come to our attention to suggest that the directors have
inappropriately adopted the going concern basis of accounting or that the
directors have identified material uncertainties relating to going concern
that are not appropriately disclosed.
This Conclusion is based on the review procedures performed in accordance with
ISRE (UK) 2410; however, future events or conditions may cause the entity to
cease to continue as a going concern.
Responsibilities of the directors
The directors are responsible for preparing the interim financial report in
accordance with the Disclosure Guidance and Transparency Rules of the United
Kingdom's Financial Conduct Authority.
In preparing the interim financial report, the directors are responsible for
assessing the Group's ability to continue as a going concern, disclosing as
applicable, matters related to going concern and using the going concern basis
of accounting unless the directors either intend to liquidate the Company or
to cease operations, or have no realistic alternative but to do so".
Auditor's Responsibilities for the review of the financial information
In reviewing the interim financial report, we are responsible for expressing
to the Group a conclusion on the condensed consolidated set of financial
statements in the interim financial report. Our Conclusion, including our
Conclusion Relating to Going Concern, are based on procedures that are less
extensive than audit procedures, as described in the Basis for Conclusion
paragraph of this report.
Use of our report
This report is made solely to the Company in accordance with ISRE (UK) 2410.
Our work has been undertaken so that we might state to the Company those
matters we are required to state to it in an independent review report and for
no other purpose. To the fullest extent permitted by law, we do not accept or
assume responsibility to anyone other than the Company, for our review work,
for this report, or for the conclusions we have formed.
Deloitte LLP
Statutory Auditor
London, UK
10 August 2022
GLOSSARY
APM
ALTERNATIVE PERFORMANCE MEASURES
Alternative performance measures ('APMs') are complementary to measures
defined within International Financial Reporting Standards ('IFRS') and are
used by management to explain the Group's business performance and financial
position. They include common industry metrics, as well as measures management
and the Board consider are useful to enhance the understanding of its
performance and allow meaningful comparisons between periods, Regions and
Business Segments. The APMs reported are monitored consistently across the
Group to manage performance on a monthly basis.
APMs are defined below. Complementary definition, commentary, and outlook of
those APMs considered important in measuring the delivery of the Group's
strategic priorities can be found above. Detailed reconciliations of APMs to
their nearest IFRS Income Statement equivalents and adjusted APMs can be found
in this section, if not readily identifiable above.
The APMs the Group uses are:
Term Definition
Adjusted EBIT Earnings before net interest, tax significant items and share of equity
accounted investments' profit after tax. Used interchangeably with adjusted
operating profit.
Adjusted EBIT, excluding Russian P&L charges Adjusted EBIT less £32m of Russian P&L charges.
Adjusted EBIT margin Adjusted EBIT margin is adjusted EBIT expressed as a percentage of reported
revenue and is calculated by dividing adjusted EBIT by reported revenue for
the period.
Adjusted EBIT margin, excluding Russian P&L charges. Adjusted EBIT margin, excluding Russian P&L charges is adjusted EBIT,
excluding Russian P&L charges expressed as a percentage of reported
revenue and is calculated by dividing adjusted EBIT, excluding Russian P&L
charges by reported revenue for the period.
Adjusted EBITDA Earnings before net interest, tax, depreciation, amortisation of intangible
assets, significant items and share of equity accounted investments' profit
after tax.
Adjusted performance Measure of performance excluding the impact of significant items.
Broking contribution Represents total broking revenues less total front office costs of the Global
Broking, Energy & Commodities and Agency Execution divisions (excluding
Liquidnet), inclusive of the revenue internally generated to the Parameta
Solutions business.
Broking contribution margin Broking contribution margin is Broking contribution expressed as a percentage
of reported revenue and is calculated by dividing Broking contribution by
reported Broking revenue.
Constant Currency Comparison of current period results with the prior year will be impacted by
movements in foreign exchange rates versus GBP, the Group's presentation
currency. In order to present a better comparison of underlying performance in
the period, the Group retranslates foreign denominated prior period results at
current period exchange rates.
Contribution Contribution represents revenue less the direct costs of generating that
revenue.
Contribution margin Contribution margin is contribution expressed as a percentage of reported
revenue and is calculated by dividing contribution by reported revenue.
Diversified revenue Sum of Energy & Commodities, Agency Execution and Parameta Solutions
revenue.
Earnings Used interchangeably with Profit for the period or year.
EBIT Earnings before net interest and tax.
Term Definition
EBITDA Earnings before net interest, tax, depreciation, amortisation of intangible
assets and share of equity accounted investments' profit after tax.
Significant Items Items that distort period-on-period or year-on-year comparisons, which are
excluded in order to improve predictability and understanding of the
underlying trends of the business, to arrive at adjusted operating and profit
measures.
A.1 Operating costs by type
H1 2022 IFRS Significant Adjusted Allocated as Allocated as
Reported items Front Office Support
£m £m £m £m £m
Employment, compensation and benefits 669 (11) 658 524 134
General and administrative expenses 260 (19) 241 169 72
Depreciation and impairment of PPE and ROUA 36 (8) 28 - 28
Amortisation and impairment of intangible assets 36 (21) 15 - 15
Operating expenses 1,001 (59) 942 693 249
H1 2021 IFRS Significant Adjusted Allocated as Allocated as
Reported items Front Office Support
£m £m £m £m £m
Employment, compensation and benefits 600 (9) 591 468 123
General and administrative expenses 222 (28) 194 109 85
Depreciation and impairment of PPE and ROUA 26 (2) 24 - 24
Amortisation and impairment of intangible assets 35 (21) 14 - 14
Operating expenses 883 (60) 823 577 246
A2. Adjusted earnings per share
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2022 2021 2021
£m £m £m
Adjusted profit (Note 5) 101 76 151
Non-controlling interests (1) (1) (3)
Adjusted earnings 100 75 148
Weighted average number of shares (for Basic EPS - Note 10) 778.6 737.7 759.3
Adjusted Basic EPS 12.8p 10.2p 19.5p
Weighted average number of shares (for Diluted EPS - Note 10) 787.1 745.6 768.2
Adjusted Diluted EPS 12.7p 10.1p 19.3p
A3. Adjusted EBITDA and Contribution
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2022 2021 2021
£m £m £m
Adjusted EBIT (Note 5) 142 117 233
Add: Depreciation of PPE and ROUA (Note 6 and A1) 28 24 52
Add: Amortisation of intangibles (Note 6 and A1) 15 14 30
Adjusted EBITDA 185 155 315
Less: Operating income (Note 7, excluding acquisition related) (4) (4) (10)
Add: Management and support costs (Financial and Operating review - 206 208 397
Operating Expenses)
Contribution 387 359 702
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