REG - TP ICAP PLC - Financial and Interim Management Report <Origin Href="QuoteRef">TCAPI.L</Origin> - Part 2
08/08/2017 07:07
- Part 2: For the preceding part double click ID:nRSH3394Na
TP ICAP Pro forma
Revenue 430 398 828
Underlying operating profit 67 50 117
Underlying operating profit margin 15.6% 12.6% 14.1%
Finance income 3 2 5
Finance costs (10) (1) (11)
Underlying profit before tax 60 51 111
Tax (11) (15) (26)
Effective tax rate 18% 29% 23%
Share of JVs and associates less non-controlling interests 2 2 4
Net income 51 38 89
Exceptionals items (4) - (4)
Acquisition, disposal and integration costs (18) - (18)
Earnings 29 38 67
Weighted average basic shares in issue 242.7m 310.3m 553.0m
Underlying EPS 21.0p 12.2p 16.1p
Reported EPS 11.9p 12.2p 12.1p
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Condensed Consolidated Income Statement
for the six months ended 30 June 2017
Six months ended30 June 2017 (unaudited) Underlying Acquisition,disposalandintegrationcosts Exceptionalitems Total
Notes £m £m £m £m
Revenue 5 925 - - 925
Administrative expenses (787) (53) (5) (845)
Other operating income 7 6 - - 6
Operating profit 5,6 144 (53) (5) 86
Finance income 8 3 - - 3
Finance costs 9 (18) - - (18)
Profit before tax 129 (53) (5) 71
Taxation (33) 13 1 (19)
Profit after tax 96 (40) (4) 52
Share of results of associates and joint ventures 6 - - 6
Profit for the period 102 (40) (4) 58
Attributable to:
Equity holders of the parent 101 (40) (4) 57
Non-controlling interests 1 - - 1
102 (40) (4) 58
Earnings per share
- Basic 10 18.3p 10.3p
- Diluted 10 18.0p 10.1p
Six months ended30 June 2016 (unaudited)
Revenue 5 430 - - 430
Administrative expenses (365) (17) (5) (387)
Other operating income 7 2 - - 2
Operating profit 5,6 67 (17) (5) 45
Finance income 8 3 - - 3
Finance costs 9 (10) (3) - (13)
Profit before tax 60 (20) (5) 35
Taxation (11) 2 1 (8)
Profit after tax 49 (18) (4) 27
Share of results of associates 2 - - 2
Profit for the period 51 (18) (4) 29
Attributable to:
Equity holders of the parent 51 (18) (4) 29
Non-controlling interests - - - -
51 (18) (4) 29
Earnings per share
- Basic 10 21.0p 11.9p
- Diluted 10 20.1p 11.5p
Year ended31 December 2016 Underlying Acquisition,disposalandintegrationcosts Exceptionalitems Total
Notes £m £m £m £m
Revenue 5 892 - - 892
Administrative expenses (763) (57) (6) (826)
Other operating income 7 3 - 4 7
Operating profit 5,6 132 (57) (2) 73
Finance income 8 5 - - 5
Finance costs 9 (15) (6) - (21)
Profit before tax 122 (63) (2) 57
Taxation (22) 5 - (17)
Profit after tax 100 (58) (2) 40
Share of results of associates 4 - - 4
Profit for the period 104 (58) (2) 44
Attributable to:
Equity holders of the parent 103 (58) (2) 43
Non-controlling interests 1 - - 1
104 (58) (2) 44
Earnings per share
- Basic 10 42.5p 17.8p
- Diluted 10 41.0p 17.2p
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Condensed Consolidated Statement of Comprehensive Income
for the six months ended 30 June 2017
Six monthsended30 June2017(unaudited) Six monthsended30 June2016(unaudited) Yearended31 December2016
£m £m £m
Profit for the period 58 29 44
Items that will not be reclassified subsequently to profit or loss:
Remeasurement of defined benefit pension schemes (43) 26 6
Taxation relating to items not reclassified 15 (9) (2)
(28) 17 4
Items that may be reclassified subsequently to profit or loss:
Available-for-sale investments:
- Revaluation gains - 1 1
- Revaluation gains transferred to income statement (1) - -
(1) 1 1
Effect of changes in exchange rates on translation of foreign operations (34) 34 59
Taxation relating to items that may be reclassified (1) - -
(36) 35 60
Other comprehensive income for the period (64) 52 64
Total comprehensive income for the period (6) 81 108
Attributable to:
Equity holders of the parent (7) 81 107
Non-controlling interests 1 - 1
(6) 81 108
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Condensed Consolidated Balance Sheet
as at 30 June 2017
30 June2017(unaudited) 30 June2016(unaudited) 31 December2016
Notes £m £m £m
Non-current assets
Intangible assets arising on consolidation 1,681 372 1,713
Other intangible assets 68 22 70
Property, plant and equipment 32 26 36
Investment in associates 56 6 54
Investment in joint ventures 4 - 8
Available-for-sale investments 19 10 23
Deferred tax assets 25 4 27
Retirement benefit assets 12 58 116 100
Other long term receivables 19 - 18
1,962 556 2,049
Current assets
Trade and other receivables 43,992 12,919 23,160
Financial assets 71 18 90
Cash and cash equivalents 688 352 696
44,751 13,289 23,946
Total assets 46,713 13,845 25,995
Current liabilities
Trade and other payables (43,978) (12,927) (23,238)
Interest bearing loans and borrowings - (141) (467)
Current tax liabilities (47) (15) (42)
Short term provisions (20) (10) (19)
(44,045) (13,093) (23,766)
Net current assets 706 196 180
Non-current liabilities
Interest bearing loans and borrowings (577) (79) (80)
Deferred tax liabilities (174) (43) (197)
Long term provisions (4) (7) (9)
Other long term payables (21) (25) (21)
Retirement benefit obligations 12 (4) - (3)
(780) (154) (310)
Total liabilities (44,825) (13,247) (24,076)
Net assets 1,888 598 1,919
Equity
Share capital 139 61 139
Share premium 17 17 17
Merger reserve 1,378 179 1,378
Other reserves (1,151) (1,136) (1,111)
Retained earnings 1,484 1,475 1,475
Equity attributable toequity holders of the parent 1,867 596 1,898
Non-controlling interests 21 2 21
Total equity 1,888 598 1,919
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Condensed Consolidated Statement of Changes in Equity
for the six months ended 30 June 2017
Equity attributable to equity holders of the parent
Sharecapital Sharepremiumaccount MergerReserve Reverseacquisitionreserve Re-valuationreserve Hedgingandtranslation Ownshares Retainedearnings Total Non-controllinginterests Totalequity
£m £m £m £m £m £m £m £m £m £m £m
30 June 2017 (unaudited)
Balance at 1 January 2017 139 17 1,378 (1,182) 2 75 (6) 1,475 1,898 21 1,919
Profit for the period - - - - - - - 57 57 1 58
Other comprehensiveincome for the period - - - - (1) (35) - (28) (64) - (64)
Total comprehensiveincome for the period - - - - (1) (35) - 29 (7) 1 (6)
Dividends paid - - - - - - - (27) (27) (1) (28)
Own shares acquired for employee trusts - - - - - - (4) - (4) - (4)
Credit arising on share-based payment awards - - - - - - - 7 7 - 7
Balance at 30 June 2017 139 17 1,378 (1,182) 1 40 (10) 1,484 1,867 21 1,888
30 June 2016 (unaudited)
Balance at 1 January 2016 61 17 179 (1,182) 1 16 - 1,448 540 2 542
Profit for the period - - - - - - - 29 29 - 29
Other comprehensiveincome for the period - - - - 1 34 - 17 52 - 52
Total comprehensiveincome for the period - - - - 1 34 - 46 81 - 81
Dividends paid - - - - - - - (27) (27) - (27)
Own shares acquired for employee trusts - - - - - - (6) - (6) - (6)
Credit arising on share-based payment awards - - - - - - - 8 8 - 8
Balance at 30 June 2016 61 17 179 (1,182) 2 50 (6) 1,475 596 2 598
31 December 2016
Balance at 1 January 2016 61 17 179 (1,182) 1 16 - 1,448 540 2 542
Profit for the year - - - - - - - 43 43 1 44
Other comprehensive income for the year - 1 59 - 4 64 - 64
Total comprehensive income for the year - - - 1 59 - 47 107 1 108
Dividends paid - - - - - - - (41) (41) (1) (42)
Own shares acquired for employee trusts - - - - - - (6) - (6) - (6)
Issue of ordinary shares 78 - 1,206 - - - - - 1,284 - 1,284
Share issue costs - - (7) - - - - - (7) - (7)
Non-controlling interests arising on acquisitions - - - - - - - - - 19 19
Credit arising on share-based payment awards - - - - - - - 21 21 - 21
Balance at 31 December 2016 139 17 1,378 (1,182) 2 75 (6) 1,475 1,898 21 1,919
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Condensed Consolidated Cash Flow Statement
for the six months ended 30 June 2017
Six monthsended30 June2017(unaudited) Six monthsended30 June2016(unaudited) Yearended31 December2016
Notes £m £m £m
Cash flows from operating activities 13 8 7 59
Investing activities
Sale of financial assets 15 6 2
Sale of available-for-sale investments 4 - -
Interest received 2 1 2
Dividends from associates and joint ventures 8 2 2
Expenditure on intangible fixed assets (12) (4) (14)
Purchase of property, plant and equipment (4) (1) (3)
Deferred consideration paid (3) - (3)
Cash acquired with acquisitions - - 316
Net cash flows from investment activities 10 4 302
Financing activities
Dividends paid 11 (27) (27) (41)
Dividends paid to non-controlling interests (1) - (1)
Share issue costs (7) - -
Own shares acquired for employee trusts (4) (6) (6)
Drawdown of revolving credit facility - - 140
Repayment of maturing Sterling Notes - - (141)
Funds received from issue of Sterling Notes 500 - -
Funds received from bank debt - - 470
Repayment of bank debt (470) - -
Repayment of revolving credit facility - - (140)
Repayment of loan acquired with ICAP - - (330)
Debt issue and bank facility arrangement costs (3) (2) (4)
Net cash flows from financing activities (12) (35) (53)
Net increase/(decrease)in cash and cash equivalents 6 (24) 308
Cash and cash equivalentsat the beginning of the period 696 359 359
Effect of foreign exchange rate changes (14) 17 29
Net cash and cash equivalentsat the end of the period 14 688 352 696
Cash and cash equivalents 695 352 698
Overdrafts (7) - (2)
Net cash and cash equivalentsat the end of the period 688 352 696
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Notes to the Condensed Consolidated Financial Statements
for the six months ended 30 June 2017
1. General information
The condensed consolidated financial information for the six months ended 30
June 2017 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 by the European Union ('EU'). This condensed
financial information should be read in conjunction with the statutory Group
Financial Statements for the year ended 31 December 2016 which were prepared
in accordance with International Financial Reporting Standards ('IFRSs') as
adopted by the EU.
The statutory Group Financial Statements for the year ended 31 December 2016
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 section 498(2) or (3) of
the Companies Act 2006.
The condensed consolidated financial information for the six months ended 30
June 2017 has been prepared using accounting policies consistent with IFRSs.
The interim information, together with the comparative information contained
in this report for the year ended 31 December 2016, does not constitute
statutory financial statements within the meaning of section 434 of the
Companies Act 2006. The financial information is unaudited but has been
reviewed by the Company's auditor, Deloitte LLP, and their report appears at
the end of the Interim Management Report.
2. Basis of preparation
(a) Basis of accounting
The Condensed Consolidated Financial Statements have been prepared on the
historical cost basis, except for the revaluation of certain financial
instruments.
The Directors have a reasonable expectation that the Group has adequate
resources to continue in operational existence for the foreseeable future.
Accordingly, the going concern basis continues to be used in preparing these
Condensed Consolidated Financial Statements.
The Condensed Consolidated Financial Statements are rounded to the nearest
million pounds (expressed as £m), except where otherwise indicated.
(b) Basis of consolidation
The Group's Condensed Consolidated Financial Statements incorporate the
financial information of the Company and entities controlled by the Company
made up to each reporting period. Under IFRS 10 control is achieved where the
Company exercises power over an entity, is exposed to, or has rights to,
variable returns from its involvement with the entity and has the ability to
use its power to affect the returns from the entity.
(c) Presentation of the Income Statement
The Group maintains a columnar format for the presentation of its Condensed
Consolidated Income Statement. The columnar format enables the Group to
continue its practice of aiding the understanding of its results by presenting
its underlying profit. This is the profit measure used to calculate
underlying EPS (Note 10) and is considered to be the most appropriate as it
better reflects the Group's underlying earnings. Underlying profit is
reconciled to profit before tax on the face of the Condensed Consolidated
Income Statement, which also includes acquisition, disposal and integration
costs and exceptional items.
The column 'acquisition, disposal and integration costs' includes: any gains,
losses or other associated costs on the full or partial disposal of
investments, associates, joint ventures or subsidiaries and costs associated
with a business combination that do not constitute fees relating to the
arrangement of financing; amortisation or impairment of intangible assets
arising on consolidation; any re-measurement after initial recognition of
contingent consideration which has been classified as a liability, and any
gains or losses on the revaluation of previous interests.
The column may also include items such as gains or losses on the settlement of
pre-existing relationships with acquired businesses and the re-measurement of
liabilities that are above the value of indemnification.
Acquisition-related integration costs include costs associated with exit or
disposal activities, which do not meet the criteria of discontinued
operations, including costs for employee and lease terminations, or other exit
activities. Additionally, these costs include expenses directly related to
integrating and reorganising acquired businesses and include items such as
employee retention costs, recruiting costs, certain moving costs, certain
duplicative costs during integration and asset impairments.
Items which are of a non-routine nature and material, when considering both
size and nature, are disclosed separately to give a clearer presentation of
the Group's results. These are shown as 'exceptional items' on the face of
the Condensed Consolidated Income Statement.
(d) Accounting policies
The same accounting policies, presentation and methods of computation have
been followed in the Condensed Consolidated Financial Statements as applied in
the Group's latest annual audited Group Financial Statements for the year
ended 31 December 2016.
3. Related party transactions
Related party transactions are described in Note 36 to the 2016 statutory
Group Financial Statements. There have been no material changes in the nature
or value of related party transactions in the six months ended 30 June 2017.
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 impacts': Capital, Liquidity, Reputation,
Regulatory standing and Access to capital markets. 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 32 to
37 of the latest Annual Report which is available at 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 2016. 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 is organised by geographic reporting segments which are used for the
purposes of resource allocation and assessment of segmental performance by
Group management. These are the Group's reportable segments under IFRS 8
'Operating Segments'.
Revenue arising in each geographic reportable segment is derived from four
business divisions; Global Broking, Energy & Commodities, Institutional
Services, and Data & Analytics. Revenue for the six months ended 30 June 2016
and for the year ended 31 December 2016 has been classified by business
division having been previously reported by the former product groupings of
Energy & Commodities, Interest Rate Derivatives, Fixed Income, Treasury
Products, Equities, and Information Sales and Risk Management Services.
Information regarding the Group's operating segments is reported below:
Six monthsended30 June2017 Six monthsended30 June2016 Yearended31 December2016
£m £m £m
Revenue
EMEA 462 234 481
Americas 333 134 280
Asia Pacific 130 62 131
925 430 892
Operating profit
EMEA 92 47 98
Americas 39 11 18
Asia Pacific 13 9 16
Underlying operating profit 144 67 132
Acquisition, disposal and integration costs (Note 6) (53) (17) (57)
Exceptional items (Note 6) (5) (5) (2)
Reported operating profit 86 45 73
Finance income 3 3 5
Finance costs (18) (13) (21)
Profit before tax 71 35 57
Taxation (19) (8) (17)
Profit of consolidated companies 52 27 40
Share of results of associates and joint ventures 6 2 4
Profit for the period 58 29 44
There are no inter-segment sales included in segment revenue.
Six monthsended30 June2017 Six monthsended30 June2016 Yearended31 December2016
Revenueby Business Division £m £m £m
- Rates 279 105 215
- Credit 65 40 78
- FX & Money Markets 111 68 137
- Emerging Markets 120 45 94
- Equities 95 28 57
Global Broking 670 286 581
Energy & Commodities 182 117 244
Institutional Services 16 4 17
Data & Analytics 57 23 50
925 430 892
Other segmental information
30 June2017 30 June2016 31 December2016
£m £m £m
Segment assets
EMEA - UK 25,520 7,711 8,400
EMEA - Other 816 99 61
Americas 19,401 5,937 16,569
Asia Pacific 283 98 278
46,020 13,845 25,308
Unallocated goodwill arising on the acquisition of ICAP 693 - 687
46,713 13,845 25,995
Segment liabilities
EMEA - UK 24,795 7,305 7,686
EMEA - Other 805 94 50
Americas 19,072 5,802 16,193
Asia Pacific 153 46 147
44,825 13,247 24,076
Segmental assets and liabilities exclude all inter-segment balances.
The Group continues to review the assets and liabilities it acquired with ICAP
together with their associated fair values. As permitted by IFRS 3 'Business
Combinations', this review will be completed during the 12 month 'measurement
period' ending on 30 December 2017. Goodwill will be allocated to relevant
Cash Generating Units, ('CGU's') on completion of the measurement period
review, and within the time limit permitted by IAS 36 'Impairment of assets'.
6. Acquisition, disposal and integration costs, and Exceptional items
Acquisition, disposal and integration costs comprise:
Six monthsended30 June2017 Six monthsended30 June2016 Yearended31 December2016
£m £m £m
ICAP acquisition costs - 5 17
ICAP integration costs 28 5 19
Acquisition related share-based payment charge 5 5 17
Amortisation of intangible assets arising on consolidation 20 1 2
Adjustments to acquisition consideration - 1 2
53 17 57
Finance costs (Note 9) - 3 6
53 20 63
Taxation (13) (2) (5)
40 18 58
ICAP integration costs comprise:
Six monthsended30 June2017 Six monthsended30 June2016 Yearended31 December2016
£m £m £m
Employee related costs 16 1 7
Premises and equipment 1 - 1
Other administrative costs 11 4 11
28 5 19
Exceptional items comprise:
Six monthsended30 June2017 Six monthsended30 June2016 Yearended31 December2016
£m £m £m
Pension scheme settlement gain - - (4)
Charge relating to cost improvement programmes 5 5 6
5 5 2
Taxation (1) (1) -
4 4 2
7. Other operating income
Other operating income represents receipts such as rental income, royalties,
insurance proceeds, settlements from competitors and business relocation
grants. Costs associated with such items are included in administrative
expenses.
8. Finance income
Six monthsended30 June2017 Six monthsended30 June2016 Yearended31 December2016
£m £m £m
Interest receivable and similar income 2 1 2
Deemed interest arising on the defined benefit pension scheme surplus 1 2 3
3 3 5
9. Finance costs
Underlying Acquisitionrelated Total
£m £m £m
30 June 2017 (unaudited)
Interest and fees payable on bank facilities 1 - 1
Interest payable on Sterling Notes July 2024 11 - 11
Interest payable on Sterling Notes June 2019 2 - 2
Other interest payable 1 - 1
Amortisation of debt issue and bank facility costs 3 - 3
Total borrowing costs 18 - 18
30 June 2016 (unaudited)
Interest and fees payable on bank facilities 1 1 2
Interest payable on Sterling Notes July 2016 5 - 5
Interest payable on Sterling Notes June 2019 2 - 2
Other interest payable 1 - 1
Amortisation of debt issue and bank facility costs 1 2 3
Total borrowing costs 10 3 13
31 December 2016
Interest and fees payable on bank facilities 4 3 7
Interest payable on Sterling Notes July 2016 5 - 5
Interest payable on Sterling Notes June 2019 4 - 4
Other interest payable 1 - 1
Amortisation of debt issue and bank facility costs 1 3 4
Total borrowing costs 15 6 21
10. Earnings per share
Six monthsended30 June2017 Six monthsended30 June2016 Yearended31 December2016
Basic - underlying 18.3p 21.0p 42.5p
Diluted - underlying 18.0p 20.1p 41.0p
Basic earnings per share 10.3p 11.9p 17.8p
Diluted earnings per share 10.1p 11.5p 17.2p
The calculation of basic and diluted earnings per share is based on the
following number of shares:
Six monthsended30 June2017 Six monthsended30 June2016 Yearended31 December20161
No. (m) No. (m) No. (m)
Basic weighted average shares 552.4 242.7 242.3
Contingently issuable shares 9.9 10.4 9.1
Diluted weighted average shares 562.3 253.1 251.4
Note:
The 310,314,296 shares issued to acquire ICAP at the end of December 2016 had
a nil weighting when calculating the weighted average number of shares as at
31 December 2016 because the shares were issued at the end of the year and
none of the earnings related to the newly issued shares.
The earnings used in the calculation of underlying, basic and diluted earnings
per share are set out below:
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