REG - TP ICAP Group plc - Half-year Report
09/08/2023 07:00
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RNS Number : 7192I TP ICAP Group plc 09 August 2023
TP ICAP Group plc
LEI: 2138006YAA7IRVKKGE63
9 August 2023
TP ICAP Group plc
Interim management report for the 6 months ended 30 June 2023
Nicolas Breteau, CEO of the Group, said:
"Our focus on productivity, contribution, and tight cost management, generated
an uplift in profit and EBIT margin. Energy & Commodities delivered a
strong performance, as energy markets normalised. Overall, Group revenue
increased by 1%, following a strong performance last year, when the revenue
base was up 7% (excluding the Liquidnet acquisition).
Our transformation, and diversification, initiatives are going well. The
rollout of Fusion, our award-winning electronic platform, is on track, with an
increasing focus on client adoption. Liquidnet now has two major banks
connected to the Dealer-to-Client Credit proposition, with a third in the
final stages. Parameta Solutions has launched energy-related indices, in
partnership with General Index, a leader in this sector. Energy &
Commodities is growing in Environmentals; there are more opportunities in the
provision of energy-related data to Parameta Solutions, and voluntary and
mandatory carbon credits.
Dynamic capital management is a key element of our strategy. The £100m of
cash we targeted in the first half last year has been freed up 6 months ahead
of schedule; it will be used to pay down debt. We are also announcing,
starting today, a share buyback programme of £30m, and will continue to
assess opportunities to free up cash to further invest in the business, pay
down more debt, and/or return more capital to shareholders. An interim
dividend of 4.8 pence per share, up 7%, will be paid to shareholders on 3
November 2023."
Results for the Period
Statutory results:
H1 2023 H1 2022
Revenue £1,132m £1,080m
EBIT £109m £99m
EBIT margin 9.6% 9.2%
Profit before tax £91m £72m
Profit for the period £66m £64m
Basic EPS 8.4p 8.2p
Interim dividend per share 4.8p 4.5p
Weighted average shares in issue (basic) 781.3m 778.6m
Adjusted results (excluding significant items):
H1 2023 H1 2022 H1 2022
Constant Currency
Revenue £1,132m £1,080m £1,125m
EBITDA £200m £185m £196m
EBIT £163m £142m £153m
EBIT Margin 14.4% 13.1% 13.6%
Profit before tax £146m £116m
Profit for the period £117m £100m
Basic EPS 15.0p 12.8p
Weighted average shares in issue (basic) 781.3m 778.6m
A table reconciling Reported to Adjusted figures is included in the Financial
and Operating Review on page 12.
The percentage movements referred to in the highlights, CEO Review, and
Financial and Operating Review below, are in constant currency (unless stated
otherwise), to reflect the underlying performance of the business, before the
impact of foreign exchange movements year-on-year. Constant currency refers to
prior year comparatives being retranslated at current year foreign exchange
rates. Approximately 60% of the Group's revenue and approximately 40% of costs
are US Dollar denominated.
Financial highlights
Resilient revenues and tight cost management
· Group revenue up 1% (+5% in reported currency), following strong
performance in H1 2022 when revenue base, excluding Liquidnet acquisition,
grew 7%;
· Following a strong H1 2022 comparator, Global Broking (GB)
revenue down 1%. FX & Money Markets generated low single digit growth;
Rates marginally declined;
· GB revenue per broker increased 6%, GB contribution per broker up
24% (+9% excluding H1 2022 Russian provisions): headcount reduction and focus
on contribution;
· Energy & Commodities (E&C) revenue up 12% as markets
normalised. Strong performances across Oil, Gas and Power;
· Parameta Solutions revenue increased by 5%. Liquified Natural Gas
(LNG) indices launched in partnership with General Index;
· Liquidnet division revenue reduced by 6%. Cash equities revenue
down 22%, in line with decline in block market volumes; mitigated by strong
growth in rest of division (e.g. Relative Value), with revenue up 22%;
· Delivered £38m (annualised) Liquidnet integration cost synergies
(target of at least £30m), six months ahead of schedule.
Increased margins and profitability
· Adjusted EBIT up 7% (+15% in reported currency) to £163m (H1
2022: £153m). Focus on contribution in GB, tight cost management, and strong
E&C performance;
· Reported EBIT increased 10% to £109m (H1 2022: £99m);
· Adjusted EBIT margin increased to 14.4% (H1 2022: 13.6%).
Dynamic capital management: reducing debt, interim dividend up 7%, launching a
£30m buyback programme
Reducing debt by £100m
· Targeted £100m of cash, generated by opportunities following
Jersey re-domiciliation, freed up six months ahead of schedule; being used to
reduce debt and other financing obligations. Decreases future net finance
costs, increases investment grade rating headroom. Cash being used, for
example, to pay the Liquidnet Vendor Loan Note (c. £40m);
Interim dividend increases by 7%
· Group is cash generative with a prudent capital management
framework. Buyback sits alongside a clear dividend policy: 50% pay-out ratio
of adjusted post-tax earnings for year as a whole;
· An interim dividend per share of 4.8 pence, up 7% (H1 2022: 4.5
pence), will be paid on 3 November 2023, to shareholders on the register at
close of business on 27 September 2023.
£30m buyback programme:
· Group announcing, starting today, a share buyback programme of
£30m. Buyback funded by a range of initiatives, following Jersey
re-domiciliation, as well as cash generation;
· Alongside ongoing investment opportunities, continue to assess
opportunities to free up cash to pay down more debt, and/or return further
capital to shareholders.
Strategic highlights
Transforming: Fusion on track
· Fusion implemented on 44% of in-scope GB desks; dedicated focus
on client adoption - number of unique client logins (Rates) up 43% in 12
months;
Diversification: Energy & Commodities, Parameta Solutions, Liquidnet
Energy & Commodities
· Environmentals:
o Environmentals a significant diversification opportunity as Energy
Transition progresses; first carbon credit trade executed in Brazil;
o Greater collaboration with Parameta Solutions to bring more Energy &
Commodities data solutions to market, including real-time pricing.
· Digital Assets:
o Fusion Digital Assets, institutional trading venue for spot crypto assets,
live in May. First Bitcoin/USD pairs trade successfully completed.
Parameta Solutions:
· Approved by European Securities and Markets Authority (ESMA) as a
recognised benchmark administrator. First inter-dealer broker to administer
OTC benchmarks and indices across UK/Europe;
· Launched liquified natural gas (LNG) indices, in partnership with
General Index;
· Consolidation of Parameta Solutions companies well progressed:
will enable Parameta to pursue a broader range of commercial options,
including more external data partnerships.
Liquidnet:
· Diversifying Equities franchise: algorithmic, programme and
inter-region trading. Algorithmic trading capability now includes alerts to
traders of incremental block trading opportunities;
· Two major banks connected to the Dealer-to-Client (D2C) Credit
proposition; Third major bank in final stages.
Outlook
Our market-leading businesses are well positioned. Central banks are committed
to deploying monetary policy to combat inflation; energy markets are
normalising. These trends benefit our Global Broking and Energy &
Commodities divisions. Demand for Parameta Solutions' high-quality OTC data is
growing. The Liquidnet division, which broke even at the half year, will
continue to diversify its equities franchise and roll out the credit
proposition to more major banks. More broadly, current foreign exchange
effects, particularly the recent appreciation of Sterling against the US
Dollar, could continue in the second half: approximately 60% of our revenues
are denominated in US Dollars.
We are on track to deliver our 2023 Capital Markets Day targets, in line with
our full year 2022 guidance. We will continue to seek to free up more cash to
pay down more debt, and/or return capital to shareholders, subject to our
balance sheet requirements and investment opportunities.
In July, in constant currency, there was strong single-digit growth in Group
revenue, when compared with the corresponding period last year.
H1 2023 results presentation
The Group will hold an in-person presentation and Q&A at 09:00 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/854-1116-36619/en
(https://streamstudio.world-television.com/854-1116-36619/en)
Joining by telephone
United Kingdom (Toll Free): +44 800 358 1035
United Kingdom Toll: +44 20 4587 0498
United States (Toll Free): +1 855 979 6654
United States (Toll): +1 646 787 9445
Participant access code: 044967
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 at
https://tpicap.com/tpicap/investors/reports-and-presentations
(https://tpicap.com/tpicap/investors/reports-and-presentations) .
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.
· We are 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 28 countries,
supporting brokers with award-winning and market-leading technology.
CEO review
Introduction
The successful execution of our strategy enables us to deliver sustainable
shareholder value in the medium term. Our strategy has three components:
transformation, diversification and dynamic capital management.
Our transformation, exemplified by our focus on Fusion, is on track; client
adoption is a major emphasis for us. Our diversification continues at pace,
including greater collaboration in the energy-related data sector between
Parameta Solutions and Energy & Commodities. We have also identified more
Energy Transition opportunities in the broking of voluntary, and mandatory,
carbon credits and battery metals like cobalt and lithium. Liquidnet is
building out the Credit proposition and diversifying the Equities franchise,
at a challenging time for stock markets.
Turning to dynamic capital management, we have freed up £100 million of cash
six months ahead of schedule; this will be used to pay down debt and other
financing obligations. We are announcing an interim dividend of 4.8 pence per
share, up 7%. In addition, we are today commencing a £30m share buyback
programme. We will continue to assess opportunities to free up more cash to
continue investing in the business, pay down debt, and/or return further
capital to shareholders.
Market developments
The Federal Reserve has increased rates 11 times since March 2022, from near
zero to the 5% - 5.25% range. The Bank of England increased its benchmark rate
14 times in a broadly similar timeframe: the base rate is now at its highest
level for 15 years. Against this backdrop, Global Broking, with its
market-leading Rates franchise, is well positioned.
Energy markets normalised following a challenging 2022 when heightened
geopolitical uncertainty led to a pronounced reduction in trading volumes.
This year there has been greater global demand (and supply) for oil. During
the first half, global oil demand increased by 1.8 million barrels a day
(mbpd) to 101.6 mbpd. ICE Gasoil volatility declined from an average of 68% in
H1 2022 to 39% in H1 2023. Energy & Commodities benefitted from these
developments.
We see continued strong demand for oil and natural gas, key segments for our
business. Recent projections from the International Energy Agency (IEA)
anticipate that global oil demand will grow by 6% by 2028. The IEA also
expects renewables to become the largest source of global electricity
generation by early 2025. External analysis we commissioned suggests there
will be material growth in the voluntary, and mandatory, carbon credit
sectors. Our brokers are active across all the energy sectors, both
traditional and renewables, so we expect to benefit from these trends.
Equity markets were challenging again. Whilst there was some improvement in
stock market performances, many institutions maintained a "risk-off" approach.
This impacted block trading activity, a key focus for Liquidnet. HSBC recently
noted that US/Canada/Developed Europe (Liquidnet's main markets) had recorded
combined outflows in equities of $36bn since the beginning of the year. In
June, the combined cash holdings of all equity funds were at their highest
since the onset of the Covid-19 pandemic three years ago. Consequently, the
latest McLagan survey (Q1 2023), found that the global equities commission
wallet was 16% lower year-on-year, the lowest level since Q1 2019.
Global spending on financial market data and news increased by 4.7% to a
record $37.3 billion last year. Other key growth areas include ESG and
energy-related trading data. The former is now a $1bn market and growing
rapidly, particularly in Europe which accounts for about 60% of the overall
spend(1). These are growing areas of focus for Parameta Solutions, working
closely with our Energy & Commodities division, and external partners like
General Index (see below).
1. Source: EY
Resilient revenues, tight cost management, and increased profitability
Following a strong H1 2022 comparator (7% ahead of H1 2021, excluding
Liquidnet), Group revenue was up 1%, or 5% on a reported currency basis. Total
revenue generated by Global Broking, our largest division, declined by 1%,
following the revenue base increasing by 8% in the same period last year. As
energy markets normalised, Energy & Commodities leveraged its market
leading position with revenues up 12%. There were strong performances from the
division's three main asset classes: Oil, Gas and Power.
Revenues at Liquidnet declined by 6%. Cash equities revenue decreased by 22%,
in line with the reduction in large block trades(1), driven by the "risk-off"
approach adopted by many institutions. The asset classes in the rest of the
division performed strongly, with revenue up 22%, driven by growth in the
Relative Value business.
Parameta Solutions recorded a 5% increase in revenue. The comparative period
included strong recoveries from client data audits, which did not recur in the
current period.
Global Broking has a market-leading position. Parameta Solutions is the
leading provider of inter-dealer OTC data; accounting for around three
quarters of this market. In Liquidnet, EMEA market share in the key 5x
Large-in-Scale market declined from 35.3% in H1 2022 to 33.2% in H1 2023;
share of the US market (top 5 Agency Alternative Trading Systems venues) was
broadly maintained (H1 2022: 23.3%; H1 2023: 23.0%).
Tight cost control was a key feature of our performance. We delivered £38m in
annualised Liquidnet integration cost synergies, substantially exceeding our
target (£30m) six months ahead of schedule.
At the Group level, there was an increase in our contribution margin to 38.8%
(H1 2022: 36.2%). Adjusted EBIT was up 7%; drivers included an uptick in
Global Broking's EBIT through a greater focus on contribution, and a reduction
in broker headcount. Global Broking revenue per broker was up 6%; contribution
per broker increased by 24% (+9% when excluding Russian provisions in H1
2022). Energy & Commodities delivered a strong performance: its EBIT
increased by 52%. Our overall focus on contribution, and our cost management
initiatives, meant that our adjusted EBIT margin increased to 14.4% (H1 2022:
13.6%).
1. 5x Large-in-Scale (LIS) volumes declined 32% (EMEA), while US Agency
Alternative Trading Systems (ATS) volumes declined 20%
Transformation
Fusion: A key enabler
Fusion, our award-winning electronic platform, is at the heart of our
transformation. It has a wide range of features: aggregated liquidity for
specific asset classes, price discovery, seamless trade execution, and single
login access. There is a growing demand for real-time analytics, compliance
and risk management, and surveillance tools. Fusion will be able to meet these
needs, as well as providing deep liquidity, multi-asset solutions, and
post-trade services.
The Fusion rollout is in line with our plans: it is now live on 44% of
in-scope Global Broking desks, including Rates (50%) and FX (57%). Work is
underway to roll it out across our Credit business. Fusion is live on TP and
ICAP Interest rate Options, ICAP European Government Bonds, and ICAP
Inflation. In FX, Fusion has been implemented in 1-month Non-Deliverable
Forwards and FX options. Key future launches include the completion of the TP
ICAP Sterling Hub and FX Forwards.
In Energy & Commodities, we are embedding a new Order Management System
(OMS), as a precursor to launching Fusion. Work is underway to launch Fusion
Digital Assets; we expect to bring it to market in the coming months. Good
progress is being made on consolidating our global environmental products
liquidity onto one screen, benefitting brokers and clients alike.
Moving forward with adoption
Our brokers are at the heart of the adoption process. We have a dedicated
sales team who work with our brokers, and clients, during the process. The
number of unique client logins for Rates, our largest Global Broking asset
class, increased by 43% in 12 months.
A key element of the adoption process is anticipating our clients' future
architecture requirements. One example is the growing need for bespoke APIs,
chat-based connectivity through Teams, etc, and semi-automated workflows. It
is for that reason that we completed in April the purchase of a minority stake
in ipushpull, the UK fintech firm and our Fusion partner. This is all about
accelerating the delivery of live data, and workflow, to clients. In short,
Fusion is transforming our business, and our technology.
Diversification
Our diversification strategy is focused on winning new clients, expanding into
different asset classes, growing these asset classes, and generating more
non-broking revenue.
Energy & Commodities
Broker for the energy transition
Energy & Commodities is the leading OTC broker in its field. The division
operates a successful multi-brand approach through Tullett Prebon, ICAP and
PVM.
We are well placed to maximise the continued growth in traditional energy
sectors like oil and gas. There is a substantial opportunity for us to grow,
and diversify, revenues through an even greater focus on Environmentals,
including battery metals, biofuels, and green hydrogen. Another area that we
plan to expand in is the broking of voluntary, and mandatory, carbon credit
products. Research from Shell estimates that by 2030, the voluntary carbon
credit market is expected to grow by at least five times (from $2bn in 2021).
Recent developments include the completion of our first carbon credit trade in
Brazil. Brazil could account for almost half the global growth in the
voluntary carbon market in the next ten years(1). We rolled out our Fusion
platform in Norway for their green certificates market and in Europe for the
voluntary carbon credit market. Fusion will be integral to the accelerated
collaboration between Parameta Solutions and Energy & Commodities.
1 Source: ICC-WayCarbon study, November 2022
Digital Assets
It has been an eventful period for the emerging digital assets sector,
especially given the well-publicised collapses in the retail sector. As we are
solely focused on the institutional market and operate a segregated model, we
expect to benefit from this trend. The underlying movement towards
digitalisation is in place. Recent research from Goldman Sachs suggests that
up to 10% of global GDP will be stored, and transacted, by 2025-27, with the
help of blockchain technology.
Having obtained FCA registration late last year as a crypto asset exchange
provider, we successfully completed in May our first live trade (an XBT/USD
pairs trade) through Fusion Digital Assets. We also see opportunities in the
tokenisation of various asset classes, particularly bonds. Work is underway in
this space, involving our Global Broking, Liquidnet, and Energy &
Commodities divisions.
Parameta Solutions
Parameta Solutions is a key part of our diversification strategy. The division
is expanding its product range, moving into new client segments, and
broadening its distribution channels. Parameta Solutions has been approved as
an ESMA-recognised benchmark administrator: the first inter-dealer broker to
administer OTC benchmarks, and indices, across Europe and the UK. There is
real scope for us to introduce more competition into this market for the
benefit of clients.
Another feature of Parameta's business model is the development of a range of
external partnerships. In this way, the division can expand its proposition
and reach new client segments. A good example is the launch of Liquified
Natural Gas Indices in collaboration with Energy & Commodities and General
Index, a leading energy and commodities data provider. We aim to source real
time energy-related pricing through Energy & Commodities and provide our
Parameta clients with a range of relevant data products. Our expansion into
the brokered voluntary and mandatory carbon credits markets should provide
another fruitful stream of data to market to our clients.
Parameta Solutions generates considerable value for the Group. The division is
a significant enabler for our diversification and a major source of
high-quality, recurring revenue and cash flow. Substantial value will be
delivered for our shareholders through the successful execution of our
Parameta strategy.
Our Parameta growth strategy is about harnessing the valuable data generated
by our businesses and external partners. Operationally, Parameta Solutions is
already separate from the Group with, for example, its own management team.
New internal agreements are now in place, to enhance the effective sharing of
data between Parameta Solutions, Global Broking, and Energy & Commodities.
Work is well progressed on the consolidation of the Parameta Solutions'
companies. When complete, this will enable Parameta Solutions to pursue a
broader range of commercial options, including more partnerships with third
party data providers.
Liquidnet
Liquidnet is a global, multi-asset, technology-led agency execution
specialist. The division provides execution in 49 markets across the equity
and fixed income sectors. A leading buyside player, Liquidnet provides the
group with client (buyside) and product (cash equities and primary/secondary
credit markets) diversification.
We continue to invest in the Credit rollout whilst rightsizing the Equities
cost base and ensuring its franchise is ready for market normalisation. Taking
all these factors in the round, the Liquidnet division broke even in the first
half, despite ongoing investment in the Credit proposition.
In Equities, Liquidnet has been pursuing an "all market conditions" strategy.
This means growing its client base, and product capabilities, in algorithmic
trading, programme trading, and inter-region trading. Developments included
adding new features to our algorithm offering. We added Surge Opportunity,
enabling our clients to identify block trading opportunities more easily
through regular alerts. Progress is being made in programme trading where
revenue increased by 14%.
Credit: A strategic opportunity
Electronification continues to develop in the credit markets. In the US and
European markets, electronic activity is estimated to account for between
40-50% of the market. In APAC, around 5-10% of the market is currently
electronic. Liquid products are transitioning more easily to electronic
trading. Complex products, however, often require the use of request-for-quote
protocols, which account for the bulk of the electronic activity.
Our strategy is to provide a broad Credit proposition covering the primary and
secondary markets. We are seeking, as a challenger in these markets, to
generate as much liquidity as possible. Greater liquidity encourages more
market participants to use our platform: a win-win for the client and
Liquidnet. We have leveraged our unique Blotter Sync technology - the
automatic daily download of buyside orders - by deploying it in Credit; it was
originally developed by Liquidnet for the equities market.
Our proposition covers buy and sell side clients, the key trading protocols
(RFQ, Dark Pool etc), and the main market structures (Dealer-to-Dealer (D2D),
Dealer-to-Client (D2C) etc.). Our presence and liquidity, is growing. The
buyside network, for example, has increased by 27% in 12 months; trade volumes
are up 40%. We are seeing growing use of the ecosystem by dealers: they are
central to growing liquidity. We now have two major banks on our D2C protocol,
with a third major bank in the final stages of certification - a key liquidity
driver.
Dynamic capital management - significant progress
Dynamic capital management is an important strategic priority. This means
reducing our debt, and returning surplus capital to shareholders, subject to
our ongoing business investment opportunities and balance sheet requirements.
Freeing up cash; paying down debt
The re-domiciliation of the Group in 2021 has enabled our dynamic capital
management strategy. We committed to freeing up £100m of cash before the end
of 2023, which we have achieved ahead of time. Sources of the £100m include
the remittance of the pension surplus, following the wind down of our Defined
Benefit Scheme, and the capital released from the consolidation of
broker-dealer entities in the US.
This cash is being used to pay down debt and other financing obligations over
the next 12 months, reducing our future net finance costs, and increasing our
investment grade headroom. It will be used, for example, to pay the Liquidnet
Vendor Loan Note (c. £40m), maturing in March 2024.
Clear dividend policy
We remain committed to our dividend policy: a 50% pay-out ratio of adjusted
post-tax earnings for the year as a whole. An interim dividend of 4.8 pence,
up 7%, will be paid on 3 November 2023 to eligible shareholders.
Launching a £30m buyback programme
Today, we have announced a share buyback programme of £30m. A separate RNS is
available on our website at [link
(https://tpicap.com/tpicap/regulatory-hub/regulatory-news) ]. The buyback is
being funded by a range of initiatives, following the Jersey re-domiciliation,
and cash generation. In commencing the buyback programme, we believe we have
struck the appropriate balance between our continued, and substantial
investment, in our organic prospects e.g. Fusion, Liquidnet Credit, and
Parameta Solutions, reducing our debt at a time when interest rates are high,
and our well-defined dividend policy. Subject to our balance sheet and
business investment opportunities, we will continue to assess opportunities to
free up cash and pay down more debt, and/or return further capital to
shareholders.
Nicolas Breteau
Executive Director and Chief Executive Officer
9 August 2023
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Financial and operating review
Introduction
In the first six months of 2023, the Group delivered a good financial
performance, with continued business momentum. Group revenue increased 5% to
£1,132m from increased market volatility (1% in constant currency).
Global Broking, our largest and market leading division continued to benefit
from volatility during the first half driven by strong secondary market
volumes. Rates had another strong period benefiting from market volatility,
interest rate rises and the high inflationary backdrop in the first six
months.
In Energy & Commodities, the first half reflected improved market
conditions following a challenging 2022. European gas and power prices
normalised during the period which lowered client margin requirements
resulting in improved trading volumes.
In Liquidnet, the Equities platform experienced a continuation of the
challenging market conditions encountered last year with revenue declining in
line with the market. The high interest rate environment has kept investors
underweight in equities resulting in low activity levels in block trading:
Liquidnet's key market segment. The relative value business performed
strongly. We continue to invest in the credit platform opportunity and are
making good progress.
Parameta Solutions, our market-leading provider of inter-dealer OTC data,
delivered strong revenue growth leveraging increased demand for high quality
financial markets data. The comparative period included substantial one-off
revenue items relating to client data audits.
We continue to work on broker productivity and are pleased with the improved
performance in the first half in which we delivered a contribution margin of
38.8% compared with 35.9% in H1 2022.
The Group's management and support costs (excluding FX losses) remained
broadly flat compared to prior period, with the impact of the ongoing
inflationary pressures largely offset by the delivery of further cost synergy
savings on the integration of Liquidnet into the Group. We have now delivered
£38m of annualised integration cost synergies since the acquisition of
Liquidnet, exceeding our target of at least £30m, six months ahead of
schedule.
The Group's adjusted EBIT margin increased from 13.1% to 14.4% in reported
currency. The Group reported EBIT of £109m increased by 10% from £99m in H1
2022 benefitting from the strength of our broking franchise.
The Group incurred significant items of £55m pre-tax (H1 2022: £44m), of
which around two thirds are non-cash, in reported earnings. Further details on
significant items are on page 15.
The Group has freed up c.£100m of cash, six months ahead of schedule, that
will be used to reduce debt. The Board has also announced its intention to
implement an ordinary share buyback programme of up to £30m which will
commence today. In addition, the Board is announcing an interim ordinary
dividend of 4.8 pence per share, up 7% that will be paid to shareholders on 3
November 2023.
Robin Stewart
Executive Director and Chief Financial Officer
9 August 2023
Key financial and performance metrics
£m H1 2023 H1 2022 H1 2022 Reported Constant Currency Change
Reported(2) Constant Currency(2) change
Revenue 1,132 1,080 1,125 5% 1%
Reported
- EBIT 109 99 108 10% 1%
- EBIT margin 9.6% 9.2% 9.6%
Adjusted
- Contribution 439 388 407 13% 8%
- Contribution margin 38.8% 35.9% 36.2% nm nm
- EBITDA 200 185 196 8% 2%
- EBIT 163 142 153 15% 7%
- EBIT margin 14.4% 13.1% 13.6% nm nm
Average:
- Broker headcount(3) 2,496 2,672 2,672 -7%
- Revenue per broker(1) (£'000) 379 332 344 14% 10%
- Contribution per broker(1) (£'000) 148 113 118 31% 25%
Period end:
- Broker headcount(3) 2,467 2,641 2,641 -7% -
- Total headcount 5,170 5,153 5,153 0% -
1. Revenue per broker and contribution per broker are calculated as
external revenue and contribution of Global Broking, Energy & Commodities
and Liquidnet (excluding the Acquired Liquidnet platform) divided by the
average brokers for the year. The Group revenue and contribution per broker
excludes revenue and contribution from Parameta Solutions and Liquidnet
Division.
2. Prior year numbers are restated to reflect change in management of
Technology costs which are now part of the Corporate support costs base.
3. Post Trade Solutions revenue associated costs and headcount has
been reclassified from Parameta Solutions to Global Broking and Liquidnet from
October 22 onwards.
Income Statement
Whilst not a substitute for IFRS, management believe adjusted figures provide
more information to better understand the underlying performance. These
adjusted measures, and other alternative performance measures ('APMs'), are
also used by management for planning and to measure the Group's performance.
H1 2023 Adjusted Significant Reported
items
£m
Revenue 1,132 - 1,132
Employment, compensation and benefits (697) (3) (700)
General and administrative expenses (239) (19) (258)
Depreciation and impairment of PPE and ROUA (22) (12) (34)
Amortisation and impairment of intangible assets (15) (22) (37)
Operating expenses (973) (56) (1,029)
Other operating income 4 2 6
EBIT 163 (54) 109
Net finance expense (17) (1) (18)
Profit before tax 146 (55) 91
Tax (40) 9 (31)
Share of net profit of associates and joint ventures 12 (5) 7
Non-controlling interests (1) - (1)
Earnings 117 (51) 66
Basic average number of shares (millions) 781.3 781.3 781.3
Basic EPS (pence per share) 15.0p (6.5)p 8.4p
Diluted average number of shares 796.0 796.0 796.0
Diluted EPS 14.7p (6.4)p 8.3p
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)
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 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
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 to support comparison on an underlying basis.
Revenue by division
Total Group revenue in H1 2023 of £1,132m was 1% higher than the prior
period (5% in reported currency). Global Broking revenue was down 1%, against
a very strong performance in the prior period. Energy & Commodities
revenue increased by 12%, supported by improved market activity particularly
in power and gas. In Liquidnet, revenue was 6% lower than prior period, due to
the continued challenging market conditions affecting Liquidnet's key market
segments in equities. The relative value business performance was strong. In
credit, we continue to invest in the platform to capitalise on the
opportunities offered by a shift to electronic trading. Parameta Solutions was
up 5%, as it continued to benefit from growing demand for high quality
financial markets data.
H1 2023 H1 2022 H1 2022 Reported currency Constant currency change
£m (restated(1) (restated(1) constant currency) change
reported currency)
By Business Division
Rates 299 294 302 2% -1%
Credit 60 59 62 2% -3%
FX & Money Markets 159 149 155 7% 3%
Equities 127 128 133 -1% -5%
Inter-division revenue 11 10 11 10% 0%
Total Global Broking 656 640 663 3% -1%
Energy & Commodities 229 195 205 17% 12%
Inter-division revenue(2) 2 2 2 n/m n/m
Total Energy & Commodities 231 197 207 17% 12%
Total Liquidnet(3) 169 173 180 -2% -6%
Data & Analytics 89 82 87 9% 2%
Inter-division revenue(2) 2 - - n/m n/m
Total Parameta Solutions(4) 91 82 87 11% 5%
Inter-division eliminations(2) (15) (12) (12) 25% 25%
Total Revenue 1,132 1,080 1,125 5% 1%
1. Post Trade Solutions revenue associated costs and headcount has
been reclassified from Parameta Solutions to Global Broking and Liquidnet from
October 22 onwards.
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 revenue and
Parameta Solutions inter-division costs are eliminated upon the consolidation
of the Group's financial results.
3. As previously announced in our Q3 Trading Update on 1 November
2022, the Liquidnet division includes the Liquidnet platform (the acquired
business), COEX Partners, ICAP Relative Value, and from 1 October 2022
onwards, MidCap Partners following the transfer from Global Broking).
4. In previous reporting, Parameta Solutions included D&A and Post
Trade Solutions (PTS). The Matchbook and ClearCompress brands within PTS are
now reported under Global Broking, while e-Repo is now reported in the
Liquidnet division.
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 in the relevant business divisions. 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 2023 H1 2022 H1 2022 Reported
(restated(1) reported currency) (restated(1) constant currency) change Constant
currency
change
Front office costs
- Global Broking(2) 384 415 430 -7% -11%
- Energy & Commodities(2) 152 133 139 14% 9%
- Liquidnet(2) 124 115 119 8% 4%
- Parameta Solutions(2) 33 29 30 14% 10%
Total front office costs 693 692 718 0% -3%
Management and support costs
- Employment costs 151 136 139 11% 9%
- Technology and related costs 45 44 45 2% 0%
- Premises and related costs 13 13 13 0% 0%
- Depreciation and amortisation 37 43 44 -14% -16%
- Other administrative costs 26 26 29 0% -10%
Total management & support costs 272 262 270 4% 1%
- FX (gains)/losses 8 (12) (12) -167% -167%
Total management & support costs incl. FX (gains)/losses 280 250 258 12% 9%
Total adjusted operating costs 973 942 976 3% 0%
Significant items 56 59 59 -5% -5%
Total operating expenses 1,029 1,001 1,035 3% -1%
1. Post Trade Solutions revenue was reclassified from Parameta
Solutions to Global Broking and Liquidnet from October 22 onwards.
2. 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.
Total front office costs of £693m are predominantly variable with revenue,
and reduced by 3% compared with H1 2022 (costs remained flat in reported
currency). Total management & support costs excluding FX (gains)/losses of
£272m remained broadly flat versus the prior period. The FX impact from
retranslating cash and financial assets reversed a £12m gain in the prior
period to an £8m loss in the first half.
The total operating expenses of £1,029m, reduced by 1% compared with H1 2022
(3% higher in reported currency).
We have maintained tight cost discipline and the Group's management and
support costs (excluding FX losses) remained broadly flat compared to prior
period. The impact of the ongoing inflationary pressures and our continuing
investment in the credit opportunity in Liquidnet have been largely offset by
the delivery of further cost synergy savings on the integration of Liquidnet
into the Group. We have now delivered £38m of annualised integration cost
synergies since the acquisition of Liquidnet, exceeding our target of at least
£30m, six months ahead of schedule.
During H1 2023, we incurred total strategic IT investment spend of £10m(H1
2022 £17m), of which £7m (H1 2022 £11m) was capitalised.
Capital and liquidity management
Capital management
Following the TP ICAP successful domiciliation from the UK to Jersey, Channel
Islands in February 2021, the Group identified opportunities to unlock
approximately £100m of cash from the business by the end of 2023.
We made significant progress in the first half and have now accomplished our
target of freeing up c.£100m, six months ahead of schedule.
The cash generated or freed up from this initiative will enable the Group to
reduce its overall debt and other liabilities by the end of Q1 2024 as
previously announced.
In line with strategic emphasis on dynamic capital management, the Board
remains committed to identifying and returning any potential surplus capital
to shareholders, subject to the ongoing assessment of our balance sheet and
investment requirements. In that regard, we are announcing today a share
buyback programme of up to £30m. The buyback is being funded by the release
of further cash. We will continue to assess opportunities to free up more cash
to pay down more debt, and/or initiate further buybacks.
Liquidity management
In April of this year, we issued a £250m Sterling Notes maturing 2030 under
the Group's EMTN programme. The proceeds were used to partially repay £210m
of the outstanding Sterling Notes maturing in 2024, with the surplus funds
carried forward to meet the balance that matures in Q1 2024. The Group has
also extended the £350m syndicated Revolving Credit Facility (RCF) for a
further year to 31 May 2026. The Yen10bn RCF we have with our JV partner in
Japan has also been extended to 19 August 2025, subsequent to 30 June 2023.
Significant items
Significant items are categorised as below:
Restructuring and related costs
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 enough in size and nature to
warrant exclusion from adjusted measures. Costs for other smaller scale
restructuring are included within adjusted results.
Disposals, acquisitions and investments in new businesses
Costs, and any related income, related to disposals, acquisitions and
investments in new business are transaction dependent. They 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. They are considered to be core to
supporting the operations of the business.
Legal and regulatory matters
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 estimations
involved, the costs and recoveries of which could vary significantly
year-on-year.
The table below shows the significant items in H1 2023 vs H1 2022, of which
around two thirds of the total costs are non-cash.
H1 2023 H1 2022
£m Total Total
Restructuring & related costs
- Property rationalisation(1) 15 10
- Liquidnet integration 3 3
- Group cost saving programme - 11
- Business restructuring(2) 2 -
Subtotal 20 24
Disposals, acquisitions and investment in new business
- Amortisation of intangible assets arising on consolidation 22 21
- Liquidnet acquisition related(3) 6 (15)
- Foreign exchange (2) 4
- Adjustment to deferred consideration(4) (5) 8
Subtotal 21 18
Legal & regulatory matters(5) 13 1
Total pre-financing and tax 54 43
- Financing: Liquidnet interest expense on Vendor Loan Notes 1 1
Total post-financing cost 55 44
Tax relief (9) (8)
Associate write down(6) 5 -
Total 51 36
1. £15m Property rationalisation costs include costs relating to
exiting the remaining floor in Liquidnet's New York office.
2. £2m of Business restructuring costs include the ongoing work to
simplify the group's legal entity structure and free up capital.
3. £6m of Liquidnet acquisition costs relating to settling commercial
and regulatory matters arising from the Liquidnet acquisition.
4. £(5)m adjustment to deferred consideration includes the reversal
of deferred consideration on the Liquidnet earnout in the light of recent
performance in the equities business.
5. £13m Legal & regulatory matters includes costs related to
proceedings issued by the Frankfurt and Cologne Prosecutors, civil claims
relating to "cum-ex", the defence of LIBOR actions and settlement, costs
related to the Company bringing a warranty claim against NEX Group and costs
related to ongoing regulatory investigations.
6. £5m write down relates to the impairment of the Group's carrying
value of an associate company - Corretaje e Informacion Monetaria Y de Divisas
SA (CIMD).
Net finance expense
The adjusted net finance expense of £17m (reported net finance expense
£18m), is comprised of £21m interest expense and £8m of lease financing
costs, offset by £12m interest income. This is a £9m reduction compared with
£26m in H1 2022 reflecting the following:
· £10m increase in interest income from higher interest on cash
balances.
· £2m reduction in interest on finance leases liabilities and on
RCF, offset by a £1m increase in other interest expense.
· £2m net interest expense increase from the £4m interest on the
new £250m 2030 Sterling Notes partly offset by £2m reduction in the interest
expense on the 2024 Sterling Notes, £210m of which were repaid during the
period, (refer Debt finance section for further details).
Group Tax
The effective rate of tax on adjusted profit before tax is 27.4% (H1 2022:
25.0%). The increase in the effective rate of tax on adjusted profit is
primarily due to the increase in the UK corporation tax rate from 19% to 25%
in 2023. The effective rate of tax on reported profit before tax is 34.1%
(H1 2022: 29.2%).
Basic EPS
The average number of shares used for the H1 2023 basic EPS calculation is
781.3m (H1 2022: 778.6m) which reflects 788.7m shares in issue less 8.8m
shares held by the TP ICAP plc Employee Benefit Trust ('EBT') at 31 December
2022 plus 1.4m of time-apportioned movements in shares in 2023 held by the EBT
used to acquire and settle deferred share awards.
The TP ICAP plc EBT has waived its rights to dividends.
The reported Basic EPS for H1 2023 was 8.4p (H1 2022: 8.2p) and adjusted Basic
EPS for H1 2023 was 15.0p (H1 2022: 12.8p).
Dividend
An interim dividend of 4.8 pence per share, up 7%, (H1 2022: 4.5 pence) will
be paid on 3 November 2023 to shareholders on the register, at close of
business on 27 September 2023.
The Group targets a dividend cover of approximately two times on adjusted
post-tax earnings, whilst maintaining the flexibility to return surplus
capital through buybacks or special dividends.
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 13 October 2023.
Group Guidance
Based on our strategy and business model, as well as our current macroeconomic
assumptions, for FY 2023 the Group maintains the guidance provided at our FY
2022 preliminary results on 15 March 2023 with the exception of net finance
expense which is now expected to be lower at c.£43m from previously guided
£49m. This is the result of higher interest income as we manage our cash more
efficiently.
Performance by Primary Operating Segment (Divisional basis)
The Group presents below the results of its business by Primary Operating
Segment with a focus on revenue and APMs used to measure and assess
performance.
H1 2023
Corp/
£m GB(2,5) E&C LN2,(5) PS(2,5) Elim Total
Revenue:
- External 645 229 169 89 - 1,132
- Inter-division(1,6) 11 2 - 2 (15) -
656 231 169 91 (15) 1,132
Total front office costs:
- External (384) (152) (124) (33) - (693)
- Inter-division(1,6) (2) - (13) 15 -
(386) (152) (124) (46) 15 (693)
Contribution 270 79 45 45 - 439
Contribution margin 41.2% 34.2% 26.6% 49.5% - 38.8%
Net management and support costs:
- Management & support costs (124) (37) (35) (6) (41) (243)
- Other operating income 1 - - - 3 4
Adjusted EBITDA(4) 147 42 10 39 (38) 200
Adjusted EBITDA margin 22.4% 18.2% 5.9% 42.9% n/m 17.7%
- Depreciation and amortisation (14) (4) (9) (1) (9) (37)
Adjusted EBIT(4) 133 38 1 38 (47) 163
Adjusted EBIT margin 20.3% 16.5% 0.6% 41.8% n/m 14.4%
Average broker headcount 1,774 599 123 n/a n/a 2,496
Average sales headcount - - 306 n/a n/a 306
Revenue per broker (£'000)(3) 364 382 593 n/a n/a 379
Contribution per broker (£'000)(3) 152 132 163 n/a n/a 148
H1 2022 (reported currency)
Corp/
£m GB(2,5) E&C LN2,(5) PS(2,5) Elim Total
Revenue:
- External 630 195 173 82 - 1,080
- Inter-division(1,6) 10 2 - - (12) -
640 197 173 82 (12) 1,080
Total front office costs:
- External (415) (133) (116) (29) - (693)
- Inter-division(1,6) - - - (12) 12 -
(415) (133) (116) (41) 12 (693)
Contribution 225 64 57 41 - 387
Contribution margin 35.2% 32.5% 32.9% 50.0% - 35.8%
Net management and support costs:
- Management & support costs (99) (34) (32) (4) (37) (206)
- Other operating income - - - - 4 4
Adjusted EBITDA(4) 126 30 25 37 (33) 185
Adjusted EBITDA margin 19.7% 15.2% 14.5% 45.1% - 17.1%
- Depreciation and amortisation (19) (5) (15) (1) (3) (43)
Adjusted EBIT(4) 107 25 10 36 (36) 142
Adjusted EBIT margin 16.7% 12.7% 5.8% 43.9% n/m 13.1%
Average broker headcount 1,895 638 139 n/a n/a 2,672
Average sales headcount 311 n/a n/a 311
Revenue per broker (£'000)(3) 332 306 424 n/a n/a 332
Contribution per broker (£'000)(3) 119 100 86 n/a n/a 113
H1 2022 (constant currency)
Corp/
£m GB(2, 5) E&C LN2,,(5) PS(2,5) Elim Total
Revenue:
- External 652 206 180 87 - 1,125
- Inter-division(1,6) 11 1 - - (12) -
663 207 180 87 (12) 1,125
Total front office costs:
- External (430) (139) (119) (30) - (718)
- Inter-division(1,6) - - - (12) 12 -
(430) (139) (119) (42) 12 (718)
Contribution 233 68 61 45 - 407
Contribution margin 35.1% 32.9% 33.9% 51.7% - 36.2%
Net management and support costs:
- Management & support costs (103) (35) (36) (6) (34) (214)
- Other operating income - - - - 4 4
Adjusted EBITDA(4) 130 33 25 39 (30) 197
Adjusted EBITDA margin 19.5% 15.9% 13.9% 44.8% n/m 17.5%
- Depreciation and amortisation (18) (6) (15) (1) (4) (43)
Adjusted EBIT(4) 112 27 10 38 (34) 153
Adjusted EBIT margin 16.9% 13.0% 5.6% 43.7% - 13.6%
Average broker headcount 1,895 638 139 n/a n/a 2,672
Average sales headcount 311 n/a n/a 311
Revenue per broker (£'000)(3) 344 323 439 n/a n/a 344
Contribution per broker (£'000)(3) 123 107 94 n/a n/a 118
GB = Global Broking; E&C = Energy & Commodities; LN = Liquidnet;
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 revenue and
Parameta Solutions inter-division costs are eliminated upon the consolidation
of the Group's financial results.
2. Post Trade Solutions revenue and front office costs have been
reclassified from Parameta Solutions to Global Broking and Liquidnet. Post
Trade Solutions revenue reported in H1 2022 of £9m has been reclassified as
follows: Rates (Global Broking): £4m & Liquidnet Platform: £5m. Post
Trade Solutions front office costs reported in H1 2022 of £6m has been
reclassified as follows: Rates (Global Broking): £(3)m & Liquidnet
Platform: £(3)m.
3. Revenue per broker and contribution per broker are calculated as
external revenue and contribution of Global Broking, Energy & Commodities
and Liquidnet (excluding the acquired Liquidnet platform) divided by the
average brokers for the year. The Group revenue and contribution per broker
excludes revenue and contribution from Parameta Solutions and Liquidnet
Division.
4. 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.
5. Wrightsons and Paris Research desks were transferred from Parameta
Solutions into Global Broking and Liquidnet divisions respectively, reflecting
the change in focus of business activities.
6. Market data service agreement and benchmark administration service
agreement between Parameta Solutions and Global Broking & Energy &
Commodities have been formalised effective 1 Jan 2023 whereby Parameta
provides services to these divisions.
Global Broking
Global Broking revenue of £656m (which represents 58% of total Group revenue)
was 1% lower than the prior period (3% higher in reported currency), with the
performance underpinned by another strong period for Rates, and was only 1%
lower than the exceptional H1 we saw in 2022. Market volatility remained high
during the first half of the year driving strong secondary market volumes due
to high inflation and further monetary policy tightening by Central Banks
across our main markets.
Revenue in Rates (our most profitable asset class comprising 46% of Global
Broking revenue and 26% of total Group revenue) slightly decreased by 1% to
£299m, although 2022 was an exceptionally strong year for Rates with the
return of interest rate rises and an inflationary backdrop. Revenue increased
in FX & Money Markets by 3%, while we saw declines in Credit Equities of
3% and 5% respectively.
The Americas revenues were up 2% driven by Rates and Equities asset classes
outperforming. Conversely, EMEA revenues were down 4% driven by Rates and
Equities underperformance. APAC revenues were stable, dropping 1% against H1
2022.
Revenue per broker increased by 6%, reflecting a reduction in the average
number of brokers and stable revenue. Contribution per broker increased by 24%
albeit H1 2022 figures contained Russian losses. Excluding these losses
contribution per broker was up 9%.
Front office costs were 10% lower in the period, due to the non-recurrence of
the £31m P&L charge relating to Russian exposures in H1 2022, and a
reduction in revenue combined with a lower number of average brokers. In
constant currency, the contribution margin was 41.2% compared with 35.1% in
the prior period (35.2% in reported currency) and 39.8% before the impact of
Russia related provision in H1 2022.
Management and support costs (including depreciation and amortisation and net
of other operating income) increased by 13% to £137m and the adjusted EBIT
was £133m, with a margin of 20.3% (H1 2022: £112m, 16.9% in constant
currency and £107m, 16.7% in reported currency). Before the impact of Russian
losses, the H1 2022 adjusted EBIT margin was 21.6%.
Energy & Commodities (E&C)
E&C revenue of £231m, which represents 20% of total Group revenue was 12%
higher than prior period (17% higher in reported currency), with increases
across most asset classes and in particular, power and gas.
Benchmark oil and gas prices converged towards long-term averages during the
period. Notably, following a mild winter, European gas and power prices
returned to normal ranges which facilitated the return of market participants,
and improved trading volumes. EMEA revenue were up 17%. The Americas and Asia
businesses also performed well, delivering a 7% increase respectively against
prior period.
Front office costs, which are variable with revenue were 9% higher than the
prior year. This resulted in a contribution margin of 34.2% compared with
32.9% in prior period (H1 2022: 32.9% in constant and 32.5% in reported
currency).
Management and support costs (including depreciation and amortisation and net
of other operating income) were flat at £41m compared to prior period.
Resulting adjusted EBIT was £38m in H1 2023, with an adjusted EBIT margin of
16.5% (H1 2022: £27m, 13.0% in constant currency and £25m, 12.7% in reported
currency).
Liquidnet Division(1)
Liquidnet's revenue of £169m, which represents 15% of total Group revenue was
down 6% (2% lower in reported currency).
The Liquidnet equities platform saw a continuation of the challenging market
conditions with revenue down 22% versus the prior period. The high interest
rate environment kept investors underweight in equities with low activity
levels in dark trading, block trading and larger block trading, which is
Liquidnet's key market segment. US ATS block market volume amongst its top
five competitors was down 20%, while in EMEA the Large-in-Scale market volumes
reduced by 25% and the 5x Large-in-Scale market volumes reduced by 32%.
Despite this lower revenue the equities platform was broadly breakeven in the
period. Liquidnet's market share in its core block segments remained
relatively stable.
The rest of the division, including the Relative value business, Rates,
Futures, FX and Credit, had a strong performance, with revenue up 22% compared
to H1 2022. We continue to invest in the credit platform, which has seen
growth in the first half. Credit platform offers substantial opportunity and
its unique offering will give us a strong competitive advantage.
Front office costs of £124m increased by £5m or 4% over prior period. The
resulting contribution was £45m (H1 2022: £61m in constant currency and
£57m in reported currency) with a contribution margin of 26.6% (H1 2022:
33.9% in constant currency and 32.9% in reported currency).
Management and support costs (including depreciation and amortisation and net
of other operating income) of £44m in H1 2023 reduced 14% compared with prior
period (H1 2022: £51m in constant currency and £47m in reported currency),
mainly from cost management actions in the first half.
As a result the Liquidnet division was marginally profitable in H1 compared
with the significant loss we reported for full year 2022 that was driven by
adverse market conditions we saw in the second half of the year.
1. As previously announced in our Q3 Trading Update on 1 November 2022,
the Liquidnet division includes the Liquidnet platform (the acquired
business), COEX Partners, ICAP Relative Value, and from 1 October 2022
onwards, MidCap Partners (following the transfer from Global Broking).
Parameta Solutions(1)
Revenue of £91m, which represents 8% of total Group revenue, was 5% higher
than the prior period (11% in reported currency). Over 96% of total revenue in
the period was subscription-based and, therefore, recurring. Net new recurring
sales together with one-off sales contributed to revenue growth, however,
recoveries from client data audits were lower than the strong prior period.
ClearConsensus, our independent price verification tool that provides clients
greater efficiency, improved measurement of fair value, enhanced risk
management and potential capital optimisation. , continues to make made good
progress.
We also launched new indices covering Liquified Natural Gas (LNG) markets, in
partnership is with General Index, a challenger benchmark provider in
commodity markets.
Front office costs of £46m increased by 10% resulting in contribution of
£45m (H1 2022: £42m in constant currency and £41m in reported currency)
with a contribution margin of 49.5% (H1 2022: 51.7% in constant currency and
50.0% in reported currency).
Management and support costs (including depreciation and amortisation and net
of other operating income) of £7m was flat compared with prior period and
adjusted EBIT also held flat at £38m compared to the prior period. Adjusted
EBIT margin was 41.8% (H1 2022: 43.7% in constant currency and 43.9% in
reported currency)
1 In previous reporting, Parameta Solutions included D&A and Post
Trade Solutions (PTS). The Matchbook and ClearCompress brands within PTS are
now reported under Global Broking, while e-Repo is now reported in the
Liquidnet division.
Cash Flow
The table below shows the changes in cash and debt for the year ending 30 June
2023 and 30 June 2022.
H1 2023 H1 2022
EBIT reported 109 99
Depreciation, amortisation and other non-cash items 73 92
Operating cash flow before movement in working capital 182 191
Change in Net Matched Principal balances and balances with clearing (8) (154)
organisations
Movements in working capital 47 (19)
Taxes and Interest paid (80) (45)
Operating cash flow 141 (27)
Capital expenditure (23) (22)
Deferred consideration paid on prior acquisitions (1) (4)
Receipt of UK pension surplus 46 -
Other investing activities 18 6
Investing activities 40 (20)
Dividends paid to shareholders (62) (43)
Sterling Notes refinancing 39 -
Net fund (paid) from drawdowns of facilities - (22)
Other financing activities (21) (24)
Financing activities (44) (89)
Change in cash 137 (136)
Foreign exchange movements (46) 44
Cash at the beginning of the period 888 767
Cash at the end of the period 979 675
The Group's net cash balance of £979m, increased by £91m in the first half.
Operating cashflow in H1 2023 of £141m was driven mainly by a lower change in
net matched principal balances arising on failed trades, but also a working
capital inflow of £47m (2022: £19m outflow) that reflects a significant
improvement in collection of trade receivables. The operating cashflow also
includes an additional £16m of tax arising on the repayment of the £46m
surplus cash received from the wind-up process of the defined benefit pension
scheme in the UK shown within Investing activities.
The Financing activities outflow of £44m includes the increased final
dividend for 2022 of £62m (H1 2022: £43m) and a £39m net cash inflow being
the residual proceeds of the 2030 £250m Sterling Note issued to refinance
most of the £250m note maturing in January 2024. (Refer Debt finance section
for further details). The strengthening of GBP, particularly against the USD,
resulted in a foreign exchange loss of £46m (H1 2022: gain of £44m).
Debt finance
The composition of the Group's outstanding debt is summarised below.
At 30 At 31 At 30
June December June
2023 2022 2022
£m £m £m
5.25% £247m Sterling Notes January 2024(1) 37 253 252
5.25% £250m Sterling Notes May 2026(1) 250 250 250
2.625% £250m Sterling Notes November 2028(1) 249 248 248
7.875% £250m Sterling Notes April 2030(1) 251 - -
Loan from related party (RCF with Totan) - - -
Revolving credit facility drawn - banks - - 25
Sub Total 786 751 775
3.2% Liquidnet Vendor Loan Notes 40 43 41
Overdrafts 4 - 113
Debt (used as part of net (funds)/debt) 831 794 929
Lease liabilities 261 279 302
Total debt 1,092 1,073 1,231
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 gross debt of £831m as of the 30th June 2023, increased compared
to £794m as at 31st December 2022. In April 2023, the Group issued a £250m
Sterling Note maturing in April 2030, the proceeds of which were used to repay
£210m of the January 2024 Sterling Notes. The residual proceeds of the new
issue are held as cash and the remaining £37m of the outstanding 2024 Notes
will be repaid at maturity early next year.
The Group extended the maturity of its main bank revolving credit facility by
12 months to May 2026; as at 30th June 2023 this facility was undrawn. The
Group also has access to a Yen10bn Totan facility that, as at 30th June 2023,
was undrawn and subsequently has been extended to August 2025.
Exchange rates
The income statements, and balance sheets, of the Group's businesses whose
functional currencies are not GBP are translated into GBP at average and
period end exchange rates respectively. The most significant exchange rates
for the Group are the USD 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 had a mixed impact on the Group's P&L in
2023. The average rate for the period is lower than H1 2022 for both USD and
EUR against GBP, which has had an absolute benefit for Group trading
performance period on period, with approximately 60% of Group revenue and
approximately 40% of costs in USD. However, the overall strengthening of GBP
over the six month period has generated a significant loss in the P&L that
reflects the retranslation of non-GBP cash and financial assets at the period
end. In H1 2022 this impact generated a profit.
Average Period End
H1 2023 H1 2022 FY 2022 H1 2023 H1 2022 FY 2022
US Dollar $1.23 $1.31 $1.24 $1.27 $1.21 $1.20
Euro €1.14 €1.19 €1.18 €1.17 €1.16 €1.13
Pensions
The defined benefit pension scheme (the Scheme) in the UK is currently in the
final stages of being wound up and is expected to be completed in H2 2023.
During 2022 the Trustee completed the buy-out of the Scheme's principal
pension liabilities, a process that transferred each pension obligation from
the Scheme to Rothesay Life, and the remaining Scheme's obligations were
discharged in H1 2023. Following the settlement of the Scheme's liabilities,
the Trustee distributed the cash surplus in the Scheme to the Group of £30m,
representing £46m of remaining Scheme assets less applicable taxes at 35%
amounting to £16m.
During the wind-up period, benefits that were augmented represented a past
service cost and were recorded as a significant item in the Income Statement.
Costs associated with the settlement of the Scheme's liabilities are also
recorded as a significant item in the Income Statement and these amounted to
less than £1m in the first half (H1 2022: less than £1m).
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 the Investment Firms
Prudential Regime (IFPR) 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.
Climate Change Considerations
We are in the process of considering how material climate-related issues
affect our business strategy. In 2022, this has been carried forward by
engagement with senior management across the business. The high-level climate
change impact assessment has highlighted areas of exposure across our key
sites and business operations. We have also strengthened our understanding of
the exposure of our largest suppliers to climate change and the level of their
own emissions.
Our understanding of the impact of climate change grew as a result of our
engagement in 2022. By the end of 2023, following the completion of a detailed
qualitative, and quantitative, scenarios analysis, we expect to have mapped
out how climate-related issues might affect financial performance (e.g.,
revenue, costs) and financial position (e.g., assets, liabilities) and to have
that understanding inform our business plans.
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Condensed Consolidated Income Statement
for the six months ended 30 June 2023
Notes Six months ended 30 June 2023 Six months ended 30 June 2022 Year ended 31 December
£m £m 2022
£m
Revenue 5 1,132 1,080 2,115
Employment, compensation and benefits 6 (700) (669) (1,320)
General and administrative expenses 6 (258) (260) (506)
Depreciation and impairment of PPE and ROUA 6 (34) (36) (58)
Amortisation and impairment of intangible assets 6 (37) (36) (98)
Total operating costs 6 (1,029) (1,001) (1,982)
Other operating income 7 6 20 30
EBIT/operating profit 109 99 163
Finance income 8 12 2 8
Finance costs 9 (30) (29) (58)
Profit before tax 91 72 113
Taxation (31) (21) (36)
Profit after tax 60 51 77
Share of results of associates and joint ventures 7 14 29
Profit for the period 67 65 106
Attributable to:
Equity holders of the parent 66 64 103
Non-controlling interests 1 1 3
67 65 106
Earnings per share
- Basic 10 8.4p 8.2p 13.2p
- Diluted 10 8.3p 8.1p 13.0p
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Condensed Consolidated Statement of Comprehensive Income
for the six months ended 30 June 2023
Notes Six months Six months Year
ended ended ended
30 June 30 June 31 December
2023 2022 2022
(unaudited) (unaudited)
£m £m £m
Profit for the period 67 65 106
Items that will not be reclassified subsequently to profit or loss:
Remeasurement of defined benefit pension schemes 25 46 - -
Equity investments at FVTOCI (1) - -
- net change in fair value
Taxation relating to items not reclassified 25 (16) - -
29 - -
Items that may be reclassified subsequently to profit or loss:
Effect of changes in exchange rates on (93) 129 153
translation of foreign operations
Taxation 2 (4) (5)
(91) 125 148
Other comprehensive (loss)/ income for the period (62) 125 148
Total comprehensive income for the period 5 190 254
Attributable to:
Equity holders of the parent 5 189 250
Non-controlling interests - 1 4
5 190 254
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Condensed Consolidated Balance Sheet
as at 30 June 2023
30 June 30 June 31 December
2023 2022 2022
(unaudited) (unaudited)
Notes £m £m £m
Non-current assets
Intangible assets arising on consolidation 12 1,711 1,809 1,780
Other intangible assets 96 93 97
Property, plant and equipment 103 124 110
Investment properties 13 12 - -
Right-of-use assets 143 187 165
Investment in associates 45 50 63
Investment in joint ventures 40 34 34
Other investments 22 22 23
Deferred tax assets 12 7 15
Retirement benefit assets 25 - 1 1
Other long-term receivables 14 33 56 51
2,217 2,383 2,339
Current assets
Trade and other receivables 14 1,949 2,414 2,198
Financial assets at fair value through profit or loss 15 367 863 264
Financial investments 20 169 132 174
Cash and cash equivalents 20 983 788 888
3,468 4,197 3,524
Total assets 5,685 6,580 5,863
Current liabilities
Trade and other payables 16 (1,961) (2,265) (2,149)
Financial liabilities at fair value through profit or loss 15 (351) (702) (255)
Interest bearing loans and borrowings 17 (87) (146) (9)
Lease liabilities 18 (37) (33) (29)
Current tax liabilities (38) (46) (37)
Short-term provisions 21 (16) (12) (9)
(2,490) (3,204) (2,488)
Net current assets 978 993 1,036
Non-current liabilities
Interest bearing loans and borrowings 17 (744) (783) (785)
Lease liabilities 18 (224) (269) (250)
Deferred tax liabilities (76) (97) (85)
Long-term provisions 21 (34) (38) (31)
Other long-term payables (6) (59) (60)
Retirement benefit obligations 25 (2) (1) (3)
(1,086) (1,247) (1,214)
Total liabilities (3,576) (4,451) (3,702)
Net assets 2,109 2,129 2,161
Equity
Share capital 24 197 197 197
Other reserves 24 (939) (877) (854)
Retained earnings 24 2,834 2,792 2,800
Equity attributable to equity holders of the parent 2,092 2,112 2,143
Non-controlling interests 24 17 17 18
Total equity 2,109 2,129 2,161
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Condensed Consolidated Statement of Changes in Equity
for the six months ended 30 June 2023
Equity attributable to equity holders of the parent (Note 24)
Share Re- Re- Hedging Own Retained Total Non- Total
capital organisation reserve valuation and shares earnings controlling equity
reserve translation interests
£m £m £m £m £m £m £m £m £m
30 June 2023 (unaudited)
Balance at 197 (946) 5 109 (22) 2,800 2,143 18 2,161
1 January 2023
Profit for the period - - - - - 66 66 1 67
Other comprehensive - - (1) (90) - 30 (61) (1) (62)
income/(loss) for the period
Total comprehensive - - (1) (90) - 96 5 - 5
Income for the period
Dividends paid - - - - - (62) (62) (1) (63)
Share settlement of share-based payment awards - - - - 8 (9) (1) - (1)
Own shares acquired for employee trusts - - - - (2) - (2) - (2)
Credit arising on share- - - - - - 9 9 - 9
based payment awards
Balance at 197 (946) 4 19 (16) 2,834 2,092 17 2,109
30 June 2023
30 June 2022 (unaudited)
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
31 December 2022
Balance at 197 (946) 5 (38) (26) 2,769 1,961 17 1,978
1 January 2022
Profit for the year - - - - - 103 103 3 106
Other comprehensive - - - 147 - - 147 1 148
income for the year
Total comprehensive - - - 147 - 103 250 4 254
Income for the period
Dividends paid - - - - - (78) (78) (3) (81)
Share settlement of share-based payment awards - - - - 7 (7) - - -
Own shares acquired for employee trusts - - - - (3) - (3) - (3)
Credit arising on share- - - - - - 13 13 - 13
based payment awards
Balance at 197 (946) 5 109 (22) 2,800 2,143 18 2,161
31 December 2022
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Condensed Consolidated Cash Flow Statement
for the six months ended 30 June 2023
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2023 2022 2022
(unaudited) (unaudited)
Notes £m £m £m
Cash flows from operating activities 19 141 (27) 324
Investing activities
Sale/(purchase) of financial investments 20 4 (10) (50)
Interest received 10 2 7
Dividends from associates and joint ventures 9 13 15
Expenditure on intangible fixed assets (17) (14) (35)
Purchase of property, plant and equipment (6) (8) (18)
Sale of property, plant and equipment - - 12
Deferred consideration paid (1) (4) (10)
(Investment)/disposal in associates and joint ventures (5) 1 1
Receipt of pension scheme surplus(2) 25 46 - -
Net cash flows from investment activities 40 (20) (78)
Financing activities
Dividends paid 11 (62) (43) (78)
Dividends paid to non-controlling interests (1) (1) (3)
Own shares acquired for employee trusts (2) (3) (3)
Dividend equivalent paid on equity share-based awards (1) - -
Net borrowing of bank loans(1) - 25 -
Net repayment to related party(1) - (47) (47)
Funds received from issue of Sterling Notes 17 249 - -
Repurchase of Sterling Notes 17 (210) - -
Bank facility arrangement fees and debt issue costs (2) (3) (3)
Payment of lease liabilities 20 (15) (17) (29)
Net cash flows from financing activities (44) (89) (163)
Net increase/(decrease) in cash and overdrafts 20 137 (136) 83
Cash and cash equivalents 888 767 767
at the beginning of the period
Effect of foreign exchange rate changes 20 (46) 44 38
Net cash and cash equivalents 20 979 675 888
at the end of the period
Cash and cash equivalents 20 983 788 888
Overdrafts 20 (4) (113) -
Net cash and cash equivalents 20 979 675 888
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 quick and the volume is large and resultant
flows are presented net. Further details are set out in Note 17.
2. Represents the cash inflow resulting from the repayment of the UK pension
scheme surplus by the Trustees. £16m of associated tax is included in "income
taxes paid", reported in cash flows from operating activities.
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Notes to the Condensed Consolidated Financial Statements
for the six months ended 30 June 2023
1. General information
The condensed consolidated financial information for the six months ended 30
June 2023 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 2022 (the '2022 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 2023 has been prepared using accounting policies consistent with the 2022
Group Financial Statements, with the addition of the accounting policy on
Investment Properties disclosed in Note 13. The interim information,
together with the comparative information contained in this report for the
year ended 31 December 2022, 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 and Investment Properties held at fair values at the end of each
reporting period.
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 and for Investment Properties as described in Note
13, 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 2022.
The following new Standards and Interpretations have been endorsed by the UK
Endorsement Board and are effective from 1 January 2023 but they do not have a
material effect on the Group's financial statements:
Ø IFRS 17 'Insurance Contracts' including Amendments to IFRS 17;
Ø Amendments to IAS 12 'Income Taxes', Deferred Tax related to Assets and
Liabilities arising from a Single Transaction;
Ø Amendments to IAS 8 'Accounting policies', Changes in Accounting Estimates
and Errors - Definition of Accounting Estimates;
Ø Amendments to IAS 1 'Presentation of Financial Statements' and IFRS
Practice Statement 2 - 'Disclosure of Accounting policies'; and
Ø Amendments to IAS 12 'Income Taxes', International Tax Reform-Pillar Two
Model Rules. In respect of this amendment the Group has applied the mandatory
exception from recognising and disclosing information about deferred tax
assets and liabilities related to Pillar 2 income taxes.
(d) Use of estimates and judgements
For the year ended 31 December 2022 the Group's critical accounting estimates
and judgements, which are stated on pages 109 and 163 to 164 of the Annual
Report and Accounts 2022, were those that relate to provisions for
liabilities, and the impairment of goodwill and intangible assets.
3. Related party transactions
The total amount included in trade receivables due from related parties as at
30 June 2023 was £4m (31 December 2022: £4m) and the amount included in
trade payables due to related parties as at 30 June 2023 was £4m (31 December
2022: £3m). Loans from a related party amounted to £nil as at 30 June 2023
(31 December 2022: £nil).
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 76 to 81 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 2022.
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 reflecting individual entities region of
incorporation.
The balance of the CODM review of operating activity and allocation of the
Group's resources is primarily focused on business division and this is
considered to represent the most appropriate view for the assessment of the
nature and financial effects of the business activities in which the Group
engages.
Whilst the Group's Primary Operating Segments are 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 strengthen the independence and judgement of the
governance framework.
Information regarding the Group's primary operating segments is reported
below:
Analysis by primary operating segment
Six months ended 30 June 2023 Global Broking Energy & Commod-ities Liquidnet Parameta Solutions Corporate Total
£m £m £m £m £m £m
Revenue
External 645 229 169 89 - 1,132
Inter-divisional 11 2 - 2 (15) -
656 231 169 91 (15) 1,132
Total front office costs
External (384) (152) (124) (33) - (693)
Inter-divisional (2) - - (13) 15 -
(386) (152) (124) (46) 15 (693)
Contribution 270 79 45 45 - 439
Net management and support cost (124) (37) (35) (6) (41) (243)
Other operating income 1 - - - 3 4
Adjusted EBITDA 147 42 10 39 (38) 200
Depreciation and impairment of PPE and ROUA (10) (3) (2) (1) (6) (22)
Amortisation and impairment of intangibles (4) (1) (7) - (3) (15)
Adjusted EBIT 133 38 1 38 (47) 163
Six months ended 30 June 2022 Global Broking (restated) Energy & Commodi-ties Liquidnet (formerly Agency Execution) Parameta Solutions Corporate (restated) Total
(restated) (restated)
£m £m £m £m £m £m
Revenue
External(1) 630 195 173 82 - 1,080
Inter-divisional 10 2 - - (12) -
640 197 173 82 (12) 1,080
Total front office costs
External(2) (415) (133) (116) (29) - (693)
Inter-divisional - - - (12) 12 -
(415) (133) (116) (41) 12 (693)
Contribution(3) 225 64 57 41 - 387
Net management and support cost(4) (99) (34) (32) (4) (37) (206)
Other operating income - - - - 4 4
Adjusted EBITDA(5) 126 30 25 37 (33) 185
Depreciation and impairment of PPE and ROUA(6) (12) (3) (9) (1) (3) (28)
Amortisation and impairment of intangibles(7) (7) (2) (6) - - (15)
Adjusted EBIT(8) 107 25 10 36 (36) 142
June 2022 divisional results have been restated to reflect the divisional
changes reported in the 2022 Annual Report, together with the additional desk
changes reported for H1 2023. The restatements are as follows:
1. Revenue for Global Broking increased by £4m, Liquidnet increased by
£5m and Parameta Solutions reduced by £9m. There is no restatement of Group
Total revenues.
2. Total front office costs for Global Broking have increased by £3m,
Liquidnet have increased by £3m and Parameta Solutions reduced by £6m. There
is no restatement of Group Total front end costs.
3. As a result of the restatements in footnotes 1 and 2 above,
divisional contribution for Global Broking increased by £1m, Liquidnet
increased by £2m and Parameta Solutions reduced by £3m. There is no
restatement of Group contribution.
4. As a result of the restatements in footnotes 1 and 2 above,
divisional net management and support costs for Global Broking decreased by
£4m, Liquidnet decreased by £1m, Parameta Solutions decreased by £3m and
Corporate increased by £8m. There is no restatement of Group Net management
and support costs.
5. As a result of the above restatements Adjusted EBITDA for Global
Broking increased by £5m, Liquidnet increased by £3m and Corporate reduced
by £8m. There is no restatement to the consolidated Group Adjusted EBITDA.
6. Divisional depreciation and impairment of PPE and ROUA for Global
Broking increased by £3m, Liquidnet increased by £1m and Corporate decreased
by £4m. There is no restatement of Group depreciation and impairment.
7. Divisional amortisation and impairment of intangible for Global
Broking increased by £1m and Corporate decreased by £1m. There is no
restatement of Group amortisation.
8. As a result of the above restatements Adjusted EBIT for Global
Broking increased by £1m, Liquidnet increased by £2m and Corporate reduced
by £3m. There is no restatement to the consolidated Group Adjusted EBIT.
Year ended 31 December 2022 Global Broking(1) Energy & Commodities(1) Liquidnet(1) Parameta Solutions(1) Corporate Total
(restated) (restated) (restated)
(restated)
£m £m £m £m £m £m
Revenue
External(1) 1,231 384 325 175 - 2,115
Inter-divisional 22 3 - - (25) -
1,253 387 325 175 (25) 2,115
Total front office costs
External(2) (782) (263) (244) (61) - (1,350)
Inter-divisional - - - (25) 25 -
(782) (263) (244) (86) 25 (1,350)
Contribution(3) 471 124 81 89 - 765
Net management and support cost(4) (224) (65) (80) (8) (43) (420)
Other operating income 2 - - - 10 12
Adjusted EBITDA 249 59 1 81 (33) 357
Depreciation and impairment of PPE and ROUA (20) (6) (12) (2) (9) (49)
Amortisation and impairment of intangibles (16) (4) (13) - - (33)
Adjusted EBIT 213 49 (24) 79 (42) 275
As a consequence of desk moves in H1 2023, divisional results for December
2022 have been restated as follows:
1. Revenue for Global Broking increased by £2m and Parameta reduced by
£2m. There is no restatement for Group Total revenues.
2. Front office costs for Global Broking increased by £2m, Liquidnet
reduced by £2m and Parameta reduced by £2m. There is a £2m restatement for
Group Total front-office costs.
3. As a result of the restatements in 1 and 2 above, divisional
contribution for Liquidnet increased by £2m and Group contribution increased
by £2m.
4. Divisional net management and support costs for Liquidnet increased
by £2m and Group net management and support costs increased by £2m.
Analysis of significant items
Six months ended 30 June 2023 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 3 - - 3
Premises and related costs 3 - - 3
Deferred consideration - (5) - (5)
Charge relating to significant legal and regulatory settlements - - 15 15
Net foreign exchange gains - (2) - (2)
Other general and administration costs 2 6 - 8
Total included within general and administration costs 5 (1) 15 19
Depreciation and impairment of PPE and ROUA 12 - - 12
Amortisation and impairment of intangible assets - 22 - 22
Total included within operating costs 20 21 15 56
Other operating income - - (2) (2)
Net finance cost - 1 - 1
Total significant items before tax 20 22 13 55
Taxation of significant items (9)
Total significant items after tax 46
Impairment of investment in associates (included within Share of results of 5
associates and joint ventures)
Total significant items 51
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
Year ended 31 December 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 24 - - 24
Premises and related costs 1 - - 1
Deferred consideration - 8 - 8
Charge relating to significant legal and regulatory settlements - - 6 6
Pension scheme past service and settlement costs - - 1 1
Remeasurement of employee long-term benefits (7) - - (7)
Gain on disposal of property, plant and equipment (3) - - (3)
Gain on derecognition of right-of-use assets/lease liabilities (3) - - (3)
Net foreign exchange losses - 4 - 4
Other general and administration costs 20 5 - 25
Total included within general and administration costs 8 17 7 32
Depreciation and impairment of PPE and ROUA 9 - - 9
Amortisation and impairment of intangible assets - 65 - 65
Total included within operating costs 41 82 7 130
Other operating income - (16) (2) (18)
Included in finance income - 1 - 1
Total significant items before tax 41 67 5 113
Taxation of significant items (22)
Total significant items after tax 91
Adjusted profit reconciliation
Six months ended 30 June 2023 Adjusted Significant items Reported
£m £m £m
EBIT/operating profit 163 (54) 109
Net finance costs (17) (1) (18)
Profit before tax 146 (55) 91
Taxation (40) 9 (31)
Profit after tax 106 (46) 60
Share of profit from associates and joint ventures 12 (5) 7
Profit for the period 118 (51) 67
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
Year ended 31 December 2022 Adjusted Significant items Reported
£m £m £m
EBIT/operating profit 275 (112) 163
Net finance costs (49) (1) (50)
Profit before tax 226 (113) 113
Taxation (58) 22 (36)
Profit after tax 168 (91) 77
Share of profit from associates and joint ventures 29 - 29
Profit for the period 197 (91) 106
Revenue by type
Six months ended 30 June 2023 Global Broking Energy & Commodities Liquidnet Parameta Solutions Eliminations Total
£m £m £m £m £m £m
Name Passing brokerage 480 200 11 - - 691
Executing Broker brokerage 24 26 43 - - 93
Matched Principal brokerage 141 3 72 - - 216
Introducing Broker brokerage - - 43 - - 43
Data & Analytics price information fees 11 2 - 91 (15) 89
656 231 169 91 (15) 1,132
Six months ended 30 June 2022 Global Broking Energy & Commodities Liquidnet (formerly Agency Execution) Parameta Solutions Eliminations Total
(restated) (restated (restated)
£m £m £m £m £m £m
Name Passing brokerage(1) 492 172 8 - (1) 671
Executing Broker brokerage(2) 19 22 29 - - 70
Matched Principal brokerage(3) 106 2 88 - - 196
Introducing Broker brokerage(4) 13 - 48 - - 61
Data & Analytics price information fees(5) 10 1 - 82 (11) 82
640 197 173 82 (12) 1,080
June 2022 divisional revenue and associated classification by type have been
restated to reflect the divisional changes reported in the 2022 Annual Report,
together with the additional desk changes reported for H1 2023. The
restatements are as follows:
1. Total name passing brokerage for Global Broking increased by £4m,
Liquidnet increased by £4m and Parameta Solutions decreased by £8m.
2. Total executive broker brokerage for Global Broking decreased by
£1m, Liquidnet increased by £1m.
3. Total matched principal brokerage for Global Broking decreased by
£13m and Liquidnet increased by £13m.
4. Total introducing broker brokerage for Global Broking increased by
£13m for Liquidnet decreased by £13m.
5. Total Data & Analytics price information fees for Global Broking
increased by £1m and for Parameta decreased by £1m.
Year ended 31 December 2022 Global Broking Energy & Commodities Liquidnet Parameta Solutions Eliminations Total
(restated) (restated)
£m £m £m £m £m £m
Name Passing brokerage 949 337 16 - - 1,302
Executing Broker brokerage 40 42 64 - - 146
Matched Principal brokerage 240 5 155 - - 400
Introducing Broker brokerage - - 90 - - 90
Data & Analytics price information fees 24 3 - 175 (25) 177
1,253 387 325 175 (25) 2,115
As a consequence of desk moves in H1 2023, divisional revenue and associated
classification by type for December 2022 have been restated as follows:
1 Data & Analytics price information fees for Global Broking
increased by £2m and Parameta decreased by £2m.
Revenue by country
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2023 2022 2022
(restated)
£m £m £m
United Kingdom and Channel Islands(1) 416 430 814
United States of America 419 386 779
Rest of the world(1) 297 264 522
1,132 1,080 2,115
1. December 2022 restated to reclassify £71m relating to the Channel
Islands.
6. Operating costs
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2023 2022 2022
(restated) (restated)
£m £m £m
Broker compensation costs(1) 531 507 1,033
Other staff costs(1) 156 153 267
Share-based payment charge 13 9 20
Employment compensation and benefits 700 669 1,320
Technology and related costs 107 104 216
Premises and related costs 17 15 28
Gains on disposal of property, plant and equipment - - (3)
Gains on derecognition of right-of-use assets/lease liabilities - - (3)
Adjustments to deferred consideration (5) 8 8
Charge relating to significant legal and regulatory settlements 15 - 7
Pension scheme past service and settlement costs - - 1
Remeasurement of long-term employee benefits - - (7)
Acquisition costs - 1 6
Impairment losses on trade receivables - 2 5
Net foreign exchange losses/(gains) 3 (17) (21)
Net loss on FX derivative instruments 3 9 11
Other administrative costs 118 138 258
General and administrative expenses 258 260 506
Depreciation of property, plant and equipment 11 12 23
Impairment of property, plant and equipment 5 6 5
Depreciation of right-of-use assets 11 16 26
Impairment of right of use asset 7 2 4
Depreciation and impairment of PPE and ROUA 34 36 58
Amortisation of other intangible assets 15 15 33
Amortisation of intangible assets arising on consolidation 22 21 45
Impairment of intangible assets arising on consolidation - - 20
Amortisation and impairment of intangible assets 37 36 98
1,029 1,001 1,982
1. Broker compensation costs and other staff costs in June 2022 have
been increased and decreased respectively by £6m, and in December 2022 by
£1m,, reflecting a reclassification of certain staff as broking.
7. Other operating income
Other operating income comprises:
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2023 2022 2022
£m £m £m
Acquisition-related income(1) - 16 16
Business relocation grants 1 1 2
Employee-related insurance receipts 1 1 4
Management fees from associates 1 1 1
Legal settlement receipts 2 - 4
Other receipts 1 1 3
6 20 30
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
2023 2022 2022
£m £m £m
Interest receivable and similar income 11 1 6
Interest receivable on finance lease receivables 1 1 2
12 2 8
9. Finance costs
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2023 2022 2022
£m £m £m
Fees on bank and other loan facilities 1 1 2
Interest on bank and other loans - 1 2
Interest on Sterling Notes January 2024 4 6 13
Interest on Sterling Notes May 2026 7 7 13
Interest on Sterling Notes November 2028 3 3 7
Interest on Sterling Notes April 2030 4 - -
Interest on Liquidnet Vendor Loan Notes 1 1 1
Other interest 1 - 1
Amortisation of debt issue and bank facility costs 1 1 2
Borrowing costs 22 20 41
Interest on lease liabilities 8 9 17
30 29 58
10. Earnings per share
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2023 2022 2022
Basic 8.4p 8.2p 13.2p
Diluted 8.3p 8.1p 13.0p
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
2023 2022 2022
No. (m) No. (m) No. (m)
Basic weighted average shares 781.3 778.6 779.1
Contingently issuable shares 14.7 8.5 11.5
Diluted weighted average shares 796.0 787.1 790.6
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
2023 2022 2022
£m £m £m
Earnings for the period 67 65 106
Non-controlling interests (1) (1) (3)
Earnings attributable to equity holders of the parent 66 64 103
11. Dividends
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2023 2022 2022
£m £m £m
Amounts recognised as distributions to
equity holders in the period:
Final dividend for the year ended 31 December 2021 - 43 43
of 5.5p per share
Interim dividend for the year ended 31 December 2022 - - 35
of 4.5p per share
Final dividend for the year ended 31 December 2022 62 - -
of 7.9p per share
62 43 78
An interim dividend of 4.8 pence per share will be paid on 3 November 2023 to
all shareholders on the Register of Members on 27 September 2023.
As at 30 June 2023 the TP ICAP plc EBT held 6,971,159 TP ICAP Group plc 25p
ordinary shares (31 December 2022: 8,803,320) and has waived its rights to
dividends.
12. Intangible assets arising on consolidation
Goodwill Other Total
£m £m £m
As at 1 January 2023 1,232 548 1,780
Amortisation of acquisition related intangibles - (22) (22)
Effect of movements in exchange rates (30) (17) (47)
As at 30 June 2023 1,202 509 1,711
As at 30 June 2023 the gross cost of goodwill and other intangible assets
arising on consolidation amounted to £1,452m and £811m respectively (31
December 2022: £1,482m and £833m). Cumulative amortisation and impairment
charges amounted to £250m for goodwill and £302m for other intangible assets
arising on consolidation (31 December 2022: £250m and £285m).
Other intangible assets at 30 June 2023 represent customer relationships of
£508m (31 December 2022: £546m), business brands, and trademarks of £1m (31
December 2022: £2m) that arise through business combinations.
Goodwill
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 2022
2023
£m £m
Goodwill allocated to CGU grouping
Global Broking 481 489
Energy & Commodities 152 156
Parameta Solutions 335 342
Liquidnet - Agency Execution 40 40
Liquidnet platform (formerly Liquidnet - acquired business) 194 205
1,202 1,232
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. As at 30 April 2023
impairment triggers were identified for the Liquidnet - Platform CGU (formerly
Liquidnet - acquired business) which is discussed below. There were no new
impairment triggers as at 30 June 2023.
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.
- Liquidnet platform (formerly Liquidnet - acquired business)
The Liquidnet platform was previously tested for impairment as at 30 September
2022. As a result of the continued fall in the equity markets, resultant
downward pressure on the business and expected delay in the recovery,
management revised the forecasts downward for the equities business.
Owing to these factors, Liquidnet's financial performance triggered an
impairment review as at 30 April 2023. The impairment assessment was performed
based on estimating the FVLCD of the CGU, using the Income Approach, which did
not identify an impairment. The key assumptions for the Income Approach are
those regarding expected revenue and terminal growth rates, and the discount
rate. Future projections are based on the most recent financial budgets
considered by the Board which are then used to project cash flows for the next
five years and for the terminal value. Growth rates on the five-year projected
revenues, growth rates on terminal value cash flows and discount rates used in
the FVLCD calculations together with their respective breakeven rates were as
follows:
Valuation discount rates Breakeven discount rates Valuation revenue growth rates Breakeven revenue growth rates Valuation terminal value growth rates Breakeven terminal value growth rates
Liquidnet platform % % % % % %
April 2023 10.0% 11.2% 13.4% 12.4% 2.4% 0.7%
September 2022 10.9% 12.3% 14.7% 13.1% 2.4% 0.5%
December 2021 10.8% 11.4% 3.0% 1.7% 1.0% 0.3%
The calculations have been subject to stress tests reflecting reasonably
possible changes in key assumptions in the growth rates and the discount rate
as indicated in the table above. The impact on future cash flows resulting
from falling growth rates does not reflect any management actions that would
be taken under such circumstances. The Income Approach valuation is based on
management forecasts which are unobservable and is therefore a Level 3 fair
value.
As shown in the table above, a 1.2% rise in the discount rate from 10.0% as at
the assessment date to 11.2% would eliminate the excess of the recoverable
amount of the CGU compared to its carrying value and a further 1% rise in the
discount rate to 12.2% would result in a £40m reduction of the carrying value
of the CGU, to be recognised as an impairment charge to the income statement.
The expected compound annual revenue growth rate has decreased from 14.7% as
at September 2022 to 13.4% as at April 2023.
For the Equities business, management expects revenue to return to pre-Covid
levels by 2028. A combination of new management initiatives and forecast 4%
annual growth in the existing business is expected to result in an overall
annual revenue growth rate in the Equities business of 6.9% (September 2022:
6.7%).
Given the increased estimation uncertainty in forecasting for new business
lines, there is an increased risk that the management is not able to achieve
the expected levels of income from the new initiatives and as a result the
excess of the recoverable amount of the CGU may reduce. A 14% success rate
in achieving new initiatives would eliminate the excess of the recoverable
amount, and without the initiatives there would be a reduction of £10m in the
carrying value of the CGU, to be recognised as an impairment charge to the
income statement.
The existing business has continued to perform below forecasts in 2023, with a
recovery expected from 2024. Below table shows sensitivity to the annual
growth rate in the existing equities business. In a scenario of no growth in
existing business would result in a £49m reduction of the carrying value of
the CGU, to be recognised as an impairment charge to the income statement.
The table below shows the sensitivities to change in growth rate assumptions
on existing business. These stresses assume all other assumptions including
margins remain unchanged.
Breakeven revenue growth rate (Surplus) /Impairment at 2% Impairment at Impairment at no growth
growth rate 1% growth rate
Liquidnet existing equities business % £m £m £m
April 2023 1.8% (6) 22 49
For the Credit platform, the valuation includes revenue growth from the
roll-out of the platform, resulting in a compound annual growth rate of 47%
(September 2022: 61%) over five years. A 5% reduction in growth rate from
47% to 42% would eliminate the excess of the recoverable amount of the CGU
compared to its carrying value.
Other intangible assets
Other intangible assets at 30 June 2023 represent customer relationships,
business brands and trademarks that arise through business combinations.
Customer relationships are amortised over a period of between 10 and 20 years.
Other intangible assets, along with other finite life assets, are subject to
impairment trigger assessment at least annually. As at 30 April 2023, the
Liquidnet customer relationships were subject to a full impairment review.
Impairment assessment did not identify an impairment. The valuation of
customer lists is based on the 'Multi-period Excess Earnings Methodology' or
'MEEM'. MEEM is a version of the Income Approach which seeks to estimate the
value by determining the net present value of the forecast post-tax profits
generated by the asset as of the valuation date, and reflects assumptions
regarding customer churn, operating profits and margins, contributory asset
charges, tax rates and discount rates. As these inputs are unobservable,
this is a Level 3 valuation.
Following the adjustment to the customer relationships' carrying value, the
asset will continue to be amortised over its remaining useful life, but
remains sensitive to reasonable possible changes in the assumptions. A
reduction in annual operating profits of £3m from 2023 would impair the asset
by £20m, and a 1% increase in the discount rate would impair the asset by
£7m.
13. Investment properties
Reconciliation of carrying amount: £m
Balance as at 1 January 2023 -
Reclassification from finance lease receivables 6
Reclassification from right-of-use-assets 6
Effect of movements in exchange rates -
Balance as at 30 June 2023 12
As at 30 June 2023 all investment properties remained unlet. An unlet
property was reclassified from finance lease receivables during the period.
Amounts recognised in profit or loss: £m
Direct operating expenses from property that did not generate rental income 2
Fair value (gains)/losses recognised in operating costs -
Accounting for Investment Properties
Investment properties, principally office buildings, are held for long-term
rental yields and are not occupied by the Group. When the use of a property
changes from owner-occupied to unlet, or sub-let under an operating lease, it
is classified as an investment property.
Where the Group is an intermediate lessor, it is required to account for its
interests in the head lease and the sub-lease separately. The Group assesses
the classification of each sub-lease with reference to the right-of-use asset
arising from the head lease, not with reference to the underlying asset.
Sub-leases classified as operating leases are included within investment
properties and those classified as finance leases are reported as finance
lease receivables.
When a right-of-use-asset is reclassified to investment property, the
right-of-use-asset is first remeasured to fair value then reclassified. Any
gain or loss arising on this remeasurement of the right-of-use asset is
recognised in profit or loss.
Subsequent to initial recognition, investment property is measured at fair
value. Gains or losses arising from changes in the fair value of investment
property are included in profit or loss in the period in which they arise.
Fair value is based on valuation methods, such as recent prices or discounted
cash flow projections. Valuations are performed as at the financial position
date by professional valuers who hold recognised and relevant professional
qualifications and have recent experience in the location and category of the
investment property being valued. These valuations form the basis for the
carrying amounts in the consolidated financial statements. The fair value
measurement for all of the investment properties has been categorised as a
Level 3 fair value based on the inputs to the valuation technique used.
14. Trade and other receivables
30 June 30 June 31 December
2023 2022 2022
(restated)
£m £m £m
Non-current receivables
Finance lease receivables 26 38 38
Other receivables 7 18 13
33 56 51
Current receivables
Trade receivables(1) 348 449 382
Amounts due from clearing organisations 54 58 77
Deposits paid for securities borrowed 1,375 1,734 1,575
Finance lease receivables 5 1 2
Other debtors(1) 45 49 30
Accrued income 12 15 15
Owed by associates and joint ventures 4 5 4
Prepayments 102 99 109
Corporation tax 4 4 4
1,949 2,414 2,198
1. Trade receivables have been reduced by £11m and other debtors
increased by £11m from that reported in June 2022 as a result of a
reclassification of certain non-trading balances due from brokers.
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 2023, the provision for expected credit
losses amounted to less than £1m (2022: 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.
15. Financial assets and financial liabilities at fair value
through profit or loss
30 June 30 June 31 December
2023 2022 2022
£m £m £m
Financial assets at fair value through profit or loss
Matched Principal financial assets 19 167 9
Fair value gains on unsettled Matched Principal transactions 348 696 255
367 863 264
Financial liabilities at fair value through profit or loss
Matched Principal financial liabilities (2) (6) -
Fair value losses on unsettled Matched Principal transactions (349) (696) (255)
(351) (702) (255)
Notional contract amount of unsettled Matched Principal transactions
Unsettled Matched Principal transactions 87,022 57,812 209,762
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.
16. Trade and other payables
30 June 30 June 31 December
2023 2022 2022
(restated)
£m £m £m
Trade payables(1) 44 46 24
Amounts due to clearing organisations 25 31 46
Deposits received for securities loaned 1,361 1,710 1,573
Deferred consideration 49 4 1
Other creditors(1) 93 102 108
Accruals 359 338 369
Owed to associates and joint ventures 4 4 3
Tax and social security 23 26 22
Deferred income 3 4 3
1,961 2,265 2,149
1. Trade payables have been reduced by £88m and other creditors increased
by £88m from those reported in June 2022 as a result of certain non-trading
balances due to customers being reclassified.
17. Interest bearing loans and borrowings
Current Non-current Total
30 June 2023 £m £m £m
Overdrafts 4 - 4
Sterling Notes January 2024 37 - 37
Liquidnet Vendor Loan Notes March 2024 40 - 40
Sterling Notes May 2026 1 249 250
Sterling Notes November 2028 1 248 249
Sterling Notes April 2030 4 247 251
87 744 831
31 December 2022
Sterling Notes January 2024 6 247 253
Liquidnet Vendor Loan Notes March 2024 1 42 43
Sterling Notes May 2026 1 249 250
Sterling Notes November 2028 1 247 248
9 785 794
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 2023, overdrafts for the provision of settlement finance amounted to £4m
(December 2022: £nil).
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
August 2025. As at 30 June 2023, the 10bn Yen committed facility equated to
£54m. Facility commitment fees of 0.64% on the undrawn balance are payable on
the facility.
As at 30 June 2023, the facility was undrawn. During the period, the maximum
amount drawn was Yen 8bn (£44m at June closing rates), and the average amount
drawn was Yen 6.8bn (£37m at June closing rates). 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 has a £350m committed revolving facility that matures in May 2026.
Facility commitment fees of 0.7% on the undrawn balance are payable on the
facility. Arrangement fees of £3m were paid in 2022 and are being amortised
over the maturity of the facility.
As at 30 June 2023, the revolving credit facility was undrawn. During the
period, the maximum amount drawn was £40m (June 2022: £140m), and the
average amount drawn was £4m (June 2022: £50m). The Group utilises the
credit facility throughout the period, entering into numerous short-term bank
loans where maturities are 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'.
Interest and facility fees of £1m were incurred to 30 June 2023 (June 2022:
less than £1m).
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, in November 2021 the Group repurchased £184m of the Notes
and in April 2023 a further £210m of the Notes were repurchased. Accrued
interest at 30 June 2023 amounted to £1m. Issue costs of less than £1m were
written off following the repurchase in April 2023. No unamortised issue
costs remain.
At 30 June 2023, the fair value of the Notes (Level 1) was £36m (December
2022: £241m).
Interest of £4m was incurred in the period (June 2022: £6m). The
amortisation expense of issue costs in the period was less than £1m (June
2022: 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 (£39m at period end exchange rates) unsecured Loan Notes due
March 2024. The Notes have a fixed coupon of 3.2% paid annually. Accrued
interest at 30 June 2023 was less than £1m.
At 30 June 2023, the fair value of the Notes (Level 2) was $45m(£35m)
(December 2022: $44m (£37m)).
Interest of £1m was incurred in the period (June 2022: £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 2023 was £1m.
Unamortised issue costs were £1m.
At 30 June 2023, the fair value of the Notes (Level 1) was £231m (December
2022: £232m).
Interest of £7m was incurred in the period (June 2022: £7m). The
amortisation expense of issue costs in the period was less than £1m (June
2022: less than £1m).
Sterling Notes: Due November 2028
In November 2021 the Group issued £250m unsecured Sterling Notes due November
2028. The Notes were issued at a discount of £1m, raising £249m before issue
costs. 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 2023 was
£1m. Unamortised discount and issue costs were £2m.
At 30 June 2023, the fair value of the Notes (Level 1) was £185m (December
2022: £184m).
Interest of £3m was incurred in the period (June 2022: £3m). The
amortisation expense of discount and issue costs in the period was less than
£1m (June 2022: less than £1m).
Sterling Notes: Due April 2030
In April 2023 the Group issued £250m unsecured Sterling Notes due April 2030.
The Notes were issued at a discount of £1m, raising £249m before issue
costs. The Notes have a fixed coupon of 7.875% paid semi-annually, subject
to compliance with the terms of the Notes. Accrued interest at 30 June 2023
was £4m. Unamortised discount and issue costs were £3m.
At 30 June 2023, the fair value of the Notes (Level 1) was £238m.
Interest of £4m was incurred in the period. The amortisation expense of
discount and issue costs in the period was less than £1m.
18. Lease liabilities
The maturity analysis of lease liabilities is as follows:
30 June 31 December 2022
2023
£m £m
Year 1 38 46
Year 2 37 40
Year 3 36 37
Year 4 34 35
Year 5 29 30
Onwards 155 172
329 360
Less: future interest expense (68) (81)
261 279
Included in current liabilities 37 29
Included in non-current liabilities 224 250
261 279
19. 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
2023 2022 2022
£m £m £m
EBIT/operating profit 109 99 163
Adjustments for:
- Share-based payment charge 9 8 13
- Pension scheme administration costs - - 1
- Pension scheme past service and settlement costs - - 1
- Depreciation of property, plant and equipment 11 12 23
- Gain on disposal of property, plant and equipment - - (3)
- Impairment of property, plant and equipment 5 6 5
- Gain on derecognition of right-of-use asset/lease liability - - (3)
- Depreciation of right-of-use assets 11 16 26
- Impairment of right-of-use assets 7 2 4
- Amortisation of intangible assets 15 15 33
- Amortisation of intangible assets arising on consolidation 22 21 45
- Impairment of intangible assets arising on consolidation - - 20
- Remeasurement of deferred consideration (5) 8 8
- Unrealised foreign exchange (gain)/loss of Vendor Loan Notes (2) 4 5
Operating cash flows before movement in working capital 182 191 341
Decrease/(increase) in trade and other receivables 28 (53) (24)
(Increase)/decrease in net Matched Principal related balances (8) (154) 27
Decrease/(increase) in net balances with Clearing Organisations 1 3 (1)
(Increase)/decrease in net stock lending balances (13) (2) 12
Increase in trade and other payables 20 26 76
Increase/(decrease) in provisions 11 5 (4)
Increase in non-current liabilities - 2 3
Cash generated from operations 221 18 430
Income taxes paid (49) (17) (51)
Fees paid on bank and other loan facilities (1) (1) (2)
Interest paid (22) (19) (36)
Interest paid - finance leases (8) (8) (17)
Net cash from operating activities 141 (27) 324
20. Analysis of net funds/(debt) including lease liabilities
1 January Cash Non-cash Exchange 30 June
2023 flow items differences 2023
£m £m £m £m £m
Cash and cash equivalents 888 141 - (46) 983
Overdrafts - (4) - (4)
888 137 - (46) 979
Financial investments 174 (4) - (1) 169
Sterling Notes January 2024 (253) 220(1) (4) - (37)
Sterling Notes May 2026 (250) 7(2) (7) - (250)
Sterling Notes November 2028 (248) 3(2) (4) - (249)
Sterling Notes April 2030 - (247)(3) (4) - (251)
Liquidnet Vendor Loan Notes (43) 1(2) - 2 (40)
Total debt excluding leases liabilities (794) (16) (19) 2 (827)
Lease liabilities (279) 23(4) (15) 10 (261)
Total financing liabilities (1,073) 7 (34) 12 (1,088)
Net funds/(debt) (11) 140 (34) (35) 60
1. Relates to principal repurchased of £210m reported as a cash outflow
from financing activities plus £10m of interest paid reported as a cash
outflow from operating activities.
2. Relates to interest paid reported as a cash outflow from operating
activities.
3. Relates to principal received of £249m less £2m of debt issue costs
reported as a cash outflow from financing activities.
4. Relates to interest paid of £8m reported as a cash outflow from
operating activities and principal paid of £15m reported as a cash outflow
from financing activities.
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 2023 cash and cash equivalents, net of overdrafts, amounted to £979m
(December 2022: £888m) of which £115m (December 2022: £104m) 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 the recognition and derecognition of lease
liabilities, accrued interest and the amortisation of debt issue costs.
21. Provisions
Property Re-structuring Legal Total
and other
£m £m £m £m
At 1 January 2023 13 7 20 40
Charge to income statement - - 16 16
Utilisation of provisions - (1) (4) (5)
Effect of movements in exchange rates (1) - - (1)
At 30 June 2023 12 6 32 50
Included in current liabilities 16
Included in non-current liabilities 34
50
Property provisions outstanding as at 30 June 2023 relate to provisions in
respect of building dilapidations and represent the estimated cost of making
good dilapidations and disrepair on various leasehold buildings.
Restructuring provisions outstanding as at 30 June 2023 relate to termination
and other employee related costs. It is expected that these obligations will
continue to be discharged by 2024.
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 19 years.
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 Fund Ltd. 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. The Group has entered
into settlement agreements to resolve this matter. On May 16, 2023, the
United States District Court granted preliminary approval of those
settlements. Pending final approval by the class, which the Group believes
to be probable, the legacy "Tullett" defendants have paid $2.1m (£1.6m) into
escrow having provided for this amount. Separately and consistent with its
indemnity obligations, Nex International Limited (formerly known as ICAP plc)
has, in order to resolve claims against the four "ICAP" broker defendants
(ICAP Europe Limited, ICAP Securities USA LLC, NEX Group plc and Intercapital
Capital Markets LLC) paid $2.1m (£1.6m) into escrow pending final class
approval. This has been recorded as a provision and settlement, together
with the receipt of an indemnification asset from NEX.
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 remains open and the Group is co-operating with
the CFTC in its enquiries. Whilst it is not possible to predict the ultimate
outcome of the investigation, the Group has made a provision reflecting
management's best estimate as at this date of the cost of settling the
investigation. The actual outcome may differ significantly from management's
current estimate. 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 legal proceedings against ICAP's successor company, NEX Limited, for
breach of warranty in respect of the ICAP entities.
Supplier contractual dispute
The Group is party to numerous contractual arrangements with its suppliers
some of which, in the normal course of business, may become subject to dispute
over a party's compliance with the terms of the arrangement. In respect of
one such matter the Group has provided £5m (US$6.8m), reflecting the Group's
settlement offer, pending the conclusion of ongoing commercial negotiations.
Negotiations were concluded in July 2023 and the matter will be settled at the
amount of the offer. As the settlement is commercially sensitive no further
disclosure is considered to be appropriate.
22. Contingent liabilities
Contingent liabilities represent material cases, investigations or other
matters 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 2022: 7) 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,
including any potential social security tax liability, to be BRL 39.0m
(£6.4m) (31 December 2022: BRL 31.7m (£5.3m)). 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
28.0m (£4.6m). Apart from an estimated loss of £0.1m which has 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 384m (£62.6m) (31
December 2022: BRL 354m (£59.1m)). 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) 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 have been fully briefed 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 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') (now TP
ICAP Markets Limited) 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') (now TP ICAP
Markets Limited) 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 (now TP ICAP Finance 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. In July 2022,
the plaintiffs filed a motion with the Court for reconsideration as well as a
notice of appeal. The plaintiff's motion for reconsideration was denied and
the plaintiffs have appealed the dismissal of its claims. 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
TP ICAP Markets Limited ('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 refunded EUR 185 million to the German tax authorities and is
subject to a criminal confiscation order of EUR 176.5 million. It has also
been ordered to repay a further EUR 60.8 million to the German tax authorities
and is subject to a related civil claim for EUR 48.8 million. Warburg's claims
are based primarily on joint and several liability and are for compensation
for the amount it has been ordered to pay to the tax authorities, the amount
of the criminal confiscation order, the amount claimed against it in the civil
claim plus further indemnification and interest. TPIM and Link are
contesting liability in the matter and 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
Securities Exchange Commission Information Request
In October 2022, Liquidnet Inc. received an information request from the SEC
Division of Enforcement seeking documents and information relating to the
operation of Liquidnet Inc.'s three ATS systems. The information request
covers the period of 1 October 2019 to date. Liquidnet Inc. is fully
cooperating with the SEC staff. It is not possible to predict the outcome of
this early stage of the matter.
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.
The Group is party to numerous contractual arrangements with its suppliers
some of which, in the normal course of business, may become subject to dispute
over a party's compliance with the terms of the arrangement. Such disputes
tend to be resolved through commercial negotiations but may ultimately result
in legal action by either or both parties.
23. Financial instruments
(a) Categorisation of financial assets and liabilities
Financial Assets FVTPL FVTOCI FVTOCI Amortised Total
trading instruments debt instruments equity instruments cost carrying
amount
30 June 2023 (unaudited) £m £m £m £m £m
Non-current financial assets
measured at fair value
Equity securities - - 20 - 20
Corporate debt securities - 2 - - 2
Non-current financial assets not measured at fair value
Finance lease receivables - - - 26 26
Other receivables - - - 7 7
- 2 20 33 55
Current financial assets
measured at fair value
Matched Principal financial assets 19 - - - 19
Fair value gains on unsettled Matched Principal transactions 348 - - - 348
Government debt securities - 102 - - 102
Current financial assets
not measured at fair value
Term deposits - - - 67 67
Other debtors - - - 45 45
Accrued income - - - 12 12
Owed to associates and joint ventures - - - 4 4
Trade receivables - - - 348 348
Amounts due from clearing organisations - - - 54 54
Deposits paid for securities borrowed - - - 1,375 1,375
Finance lease receivables - - - 5 5
Cash and cash equivalents - - - 983 983
367 102 - 2,893 3,362
Total financial assets 367 104 20 2,926 3,417
Financial Liabilities Mandatorily at FVTPL Other financial liabilities Total
carrying amount
Non-current Current Non-current Current
30 June 2023 (unaudited) £m £m £m £m £m
Financial liabilities
measured at fair value
Matched Principal financial liabilities - 2 - - 2
Fair value losses on unsettled Matched Principal transactions - 349 - - 349
Deferred consideration 1 49 - - 50
1 400 - - 401
Financial liabilities
Not measured at fair value
Overdrafts - - - 4 4
Loans from related party - - - - -
Bank loans - - - - -
Liquidnet Vendor loan Notes - - - 40 40
Sterling Notes January 2024 - - - 37 37
Sterling Notes May 2026 - - 249 1 250
Sterling Notes November 2028 - - 248 1 249
Sterling Notes April 2030 247 4 251
Other creditors - - - 93 93
Accruals(1) - - 2 108 110
Owed to associates and joint ventures - - - 4 4
Trade payables - - - 44 44
Amounts payable to clearing organisations - - - 25 25
Deposits received for - - - 1,361 1,361
securities loaned
Lease liabilities - - 224 37 261
- - 970 1,759 2,729
Total financial liabilities 1 400 970 1,759 3,130
1. Accruals of £249m are not recorded as financial liabilities
(b) Maturity profile of financial liabilities
As at 30 June 2023, 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 2023 (unaudited) £m £m £m £m £m
Matched Principal financial liabilities 2 - - - 2
Settlement of open Matched Principal purchases(1) 43,510 - - - 43,510
Deposits received for 1,361 - - - 1,361
securities loaned
Trade payables 44 - - - 44
Amount due to clearing organisations 25 - - - 25
Other creditors 93 - - - 93
Accruals 108 - 2 - 110
Owed to associates and joint venture 4 - - - 4
Lease liabilities 10 28 136 155 329
Overdrafts 4 - - - 4
Liquidnet Vendor Loan Note March 2024 - 41 - - 41
Sterling Notes January 2024 - 38 - - 38
Sterling Notes May 2026 - 13 276 - 289
Sterling Notes November 2028 - 7 26 253 286
Sterling Notes April 2030 - 20 79 289 388
Deferred consideration - 49 1 - 50
45,161 196 520 697 46,574
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 2023 (unaudited) £m £m £m £m
Financial assets
measured at fair value
Matched Principal financial assets 19 - - 19
Fair value gains on unsettled Matched Principal transactions 348 - - 348
Equity instruments - 11 9 20
Corporate debt securities - - 2 2
Government debt securities 102 - - 102
Investment Properties - - 12 12
Financial liabilities
measured at fair value
Matched Principal financial liabilities (2) - - (2)
Fair value losses on unsettled Matched Principal transactions (349) - - (349)
Deferred consideration - - (50) (50)
118 11 (27) 102
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) Investment Properties (at FVTPL) Total
(at FVTOCI) (at FVTOCI)
£m £m £m £m £m
Balance as at 1 January 2023 10 2 (56) - (44)
Additions during the period - - - 12 12
Amounts settled during the period - - 1 - 1
Net change in fair value(1) - - 5 - 5
Effect of movements in exchange rates (1) - - - (1)
Balance as at 30 June 2023 9 2 (50) 12 (27)
1. Included in 'administrative expenses' for items at FVTPL.
24. 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 Total
£m £m
Balance as at 1 January and 30 June 2023 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 2023 (946) 5 109 (22) (854)
Exchange differences on translation of foreign operations - - (92) - (92)
Equity investments at FVTOCI - (1) - - (1)
- net change in fair value
Taxation on components of other comprehensive income - - 2 - 2
Total comprehensive income/(loss) - (1) (90) - (91)
Share settlement of share-based payment awards - - - 8 8
Own shares acquired for employee trusts - - - (2) (2)
Balance as at 30 June 2023 (946) 4 19 (16) (939)
(c) Total equity
Attributable to the equity holders of the parent
Total from 24(a) Total from 24(b) Retained earnings Total Non-controlling interests Total equity
£m £m £m £m £m £m
Balance as at 1 January 2023 197 (854) 2,800 2,143 18 2,161
Profit for the period - - 66 66 1 67
Remeasurement of defined benefit pension schemes - - 46 46 - 46
Exchange differences on translation of foreign operations - (92) - (92) (1) (93)
Equity investments at FVTOCI - (1) - (1) - (1)
- net change in fair value
Taxation on components of other comprehensive income - 2 (16) (14) - (14)
Total comprehensive income/(loss) - (91) 96 5 - 5
Dividends paid - - (62) (62) (1) (63)
Share settlement of share-based payment awards - 8 (9) (1) - (1)
Own shares acquired for employee trusts - (2) - (2) - (2)
Credit arising on share-based payment awards - - 9 9 - 9
Balance as at 30 June 2023 197 (939) 2,834 2,092 17 2,109
25. Retirement benefits
(a) Defined benefit schemes
The Group has a defined benefit pension scheme in the UK and a small number of
schemes operated in other countries. The overseas schemes are not significant
in the context of the Group.
30 June 31 December 2022
2023
Balance Sheet £m £m
UK Scheme - -
Overseas schemes - retirement benefit assets - 1
Overseas schemes - retirement benefit obligations (2) (3)
30 June 31 December 2022
2023
Other comprehensive income £m £m
UK Scheme
- credit arising on the application of the asset ceiling (46) (1)
- taxation 16 -
Overseas scheme remeasurements - 1
(30) -
(b) UK Defined benefit scheme
The Group has one defined benefit pension scheme, the Tullett Prebon Pension
Scheme (the 'Scheme'), in the UK that is currently in the final stages of
being wound up, the wind-up having commenced in 2019. The Principal Employer
is TP ICAP Group Services Limited.
During 2022 the Trustee completed the buy-out of the Scheme's principal
pension liabilities, a process that transferred each pension obligation from
the Scheme to Rothesay Life, and the remaining Scheme's obligations (less than
£1m) were discharged during the first half of 2023. Following the
settlement of the Scheme's liabilities, the Trustee repaid a net £30m to the
Group, representing £46m of remaining Scheme assets less applicable taxes at
35%, amounting to £16m. The wind-up of the Scheme will be completed by the
end of 2023.
The Trustee's agreement to repay the surplus removed the previous requirement
to apply IFRIC 14's asset recognition ceiling. Changes as a result of the
removal of the asset ceiling have been recorded in Other Comprehensive Income.
In 2022 the Group applied the asset ceiling restricting the recognition of
the Scheme's surplus.
During the wind-up period benefits that were augmented represented a past
service cost and were recorded as a significant item in the Income Statement.
Costs associated with the settlement of the Scheme's liabilities are also
recorded as a significant item in the Income Statement as and when incurred.
Settlement costs incurred in the period were less than £1m (June 2022: £1m).
Movements in the Scheme's retirement benefit asset during the period,
including the impact of the asset ceiling were as follows:
Fair value of Scheme assets Present value of Scheme liabilities Application of asset ceiling Balance Sheet carrying value
£m £m £m £m
Balance as at 1 January 2023 45 - (45) -
Deemed interest 1 - (1) -
Reversal of 'asset ceiling' - - 46 46
Balance prior to repayment of surplus 46 - - 46
Repayment of surplus (pre-tax) (46) - - (46)
Balance as at 30 June 2023 - - - -
26. Events after the balance sheet date
On 9 August 2023, TP ICAP Group plc announced that it will commence a share
buyback programme of its ordinary shares for a maximum consideration of £30m.
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
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
9 August 2023
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
INDEPENDENT REVIEW REPORT TO TP ICAP Group plc
Conclusion
We have been engaged by the company to review the condensed set of financial
statements in the interim financial report for the six months ended 30 June
2023 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
26..
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 2023 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 accounting
standards as issued by the IASB. The condensed 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 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
9 August 2023
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
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, defined below, are considered important in measuring the delivery of the
Group's strategic priorities. Detailed reconciliations of APMs to their
nearest IFRS Income Statement equivalents and adjusted APMs can be found in
this section, if not readily identifiable elsewhere within this Interim
Statement.
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 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 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.
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 is calculated as the sum of Broking contribution and
Parameta Solutions contribution.
Contribution margin Contribution margin is contribution expressed as a percentage of reported
revenue and is calculated by dividing contribution by reported revenue.
Divisional contribution Represents Divisional revenues less Divisional front office costs, inclusive
of the revenue and front office costs internally generated between Global
Broking, Energy & Commodities and Parameta Solutions.
Divisional contribution margin Divisional contribution margin is Divisional contribution expressed as a
percentage of Divisional revenue and is calculated by dividing Divisional
contribution by Divisional revenue.
Earnings Used interchangeably with Profit for the period or year.
EBIT Earnings before net interest and tax.
EBITDA Earnings before net interest, tax, depreciation, amortisation of intangible
assets and share of equity accounted investments' profit after tax.
Net finance expense Finance income less finance costs.
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 2023 IFRS Significant Adjusted Allocated as Allocated as
Reported items Front Office Support
£m £m £m £m £m
Employment costs 700 (3) 697 531 166
General and administrative expenses 258 (19) 239 162 77
958 (22) 936 693 243
Depreciation and impairment of PPE and ROUA 34 (12) 22 - 22
Amortisation and impairment of intangible assets 37 (22) 15 - 15
1,029 (56) 973 693 280
H1 2022 IFRS Significant Adjusted Allocated as Allocated as
Reported items Front Office Support
(restated) (restated)
£m £m £m £m £m
Employment costs(1) 669 (11) 658 522 136
General and administrative expenses(2) 260 (19) 241 170 71
929 (30) 899 692 207
Depreciation and impairment of PPE and ROUA 36 (8) 28 - 28
Amortisation and impairment of intangible assets 36 (21) 15 - 15
Operating expenses(3) 1,001 (59) 942 692 250
June 2022 divisional operating expenses have been restated to reflect the
divisional changes reported in the 2022 Annual Report, together with the
additional desk changes reported for H1 2023. The restatements are as follows:
1. Employment costs for front office decreased by £2m and for support
increased by £2m.
2. General and administrative expenses for front office increased by £1m
and for support decreased by £1m.
3. Total operating expenses for front office decreased by £1m and for
support increased by £1m.
Year end 2022 IFRS Significant Adjusted Allocated as Allocated as
Reported items Front Office Support (restated)
(restated)
£m £m £m £m £m
Employment costs(1) 1,320 (24) 1,296 1,029 267
General and administrative expenses(2) 506 (32) 474 321 153
1,826 (56) 1,770 1,350 420
Depreciation and impairment of PPE and ROUA 58 (9) 49 _ 49
Amortisation and impairment of intangible assets 98 (65) 33 _ 33
Operating expenses(3) 1,982 (130) 1,852 1,350 502
As a consequence of desk moves in H1 2023, divisional operating expenses for
December 2022 have been restated as follows:
1. Employment costs for front office increased by£1m and for support
decreased by £1m.
2. General and administrative expenses for front office decreased by £3m
and for support increased by £3m.
3. Total operating expenses for front office decreased by £2m and for
support increased by £2m.
A2. Adjusted earnings per share
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2023 2022 2022
£m £m £m
Adjusted profit (Note 5) 118 101 197
Non-controlling interests (1) (1) (3)
Adjusted earnings 117 100 194
Weighted average number of shares (for Basic EPS - Note 10) 781.3 778.6 779.1
Adjusted Basic EPS 15.0p 12.8p 24.9p
Weighted average number of shares (for Diluted EPS - Note 10) 796.0 787.1 790.6
Adjusted Diluted EPS 14.7p 12.7p 24.5p
A3. Adjusted EBITDA and Contribution
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2023 2022 2022
(restated)
£m £m £m
Adjusted EBIT (Note 5) 163 142 275
Add: Depreciation of PPE and ROUA (Note 6 and A1) 22 28 49
Add: Amortisation of intangibles (Note 6 and A1) 15 15 33
Adjusted EBITDA 200 185 357
Less: Operating income (Note 7) (6) (4) (30)
Add: Operating income reported as significant items (Note 5) 2 - 18
Add: Management and support costs (A1)(1) 243 206 420
Contribution 439 387 765
1. Management and support costs and contribution increased by £2m (see
A1 above).
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