REG - TP ICAP PLC - Financial and Interim Management Report <Origin Href="QuoteRef">TCAPI.L</Origin> - Part 3
08/08/2017 07:07
- Part 3: For the preceding part double click ID:nRSH3394Nb
Six monthsended30 June2017 Six monthsended30 June2016 Yearended31 December2016
£m £m £m
Profit for the period 58 29 44
Non-controlling interests (1) - (1)
Earnings 57 29 43
Acquisition, disposal and integration costs (Note 6) 53 20 63
Exceptional items (Note 6) 5 5 2
Taxation (14) (3) (5)
Underlying earnings 101 51 103
11. Dividends
Six monthsended30 June2017 Six monthsended30 June2016 Yearended31 December2016
£m £m £m
Amounts recognised as distributions toequity holders in the period:
Second interim dividend for the year ended 31 December 2016 of 11.25p per share 27 - -
Interim dividend for the year ended 31 December 2016of 5.6p per share - - 14
Final dividend for the year ended 31 December 2015of 11.25p per share - 27 27
27 27 41
An interim dividend of 5.6p per share will be paid on 10 November 2017 to all
shareholders on the Register of Members on 13 October 2017.
As at 30 June 2017 the Tullett Prebon plc Employee Benefit Trust 2007 held
2,668,144 ordinary shares (2016: 1,927,575 ordinary shares) and has waived its
rights to dividends.
12. Retirement benefits
The Group has a defined benefit pension scheme in the UK and a small number of
schemes operated in other countries.
30 June2017 30 June2016 31 December2016
£m £m £m
Defined benefit scheme surplus - UK 58 116 100
Defined benefit schemes deficit - Overseas (4) - (4)
Movements in the UK Scheme's assets and liabilities were as follows:
30 June2017 30 June2016 31 December2016
£m £m £m
Fair value of Scheme assets:
Opening balance 317 290 290
Deemed interest income 4 5 10
Return on Scheme assets (excluding deemed interest) (56) 45 51
Benefits paid/transfers out (5) (7) (33)
Administrative expenses - - (1)
Closing balance 260 333 317
Present value of Scheme liabilities:
Opening balance (217) (202) (202)
Deemed interest cost (3) (3) (7)
Settlement gains - - 4
Actuarial gains/(losses) 13 (19) (45)
Benefits paid/transfers out 5 7 33
(202) (217) (217)
Scheme surplus 58 116 100
During the six months to June 2017, the Trustees of the Scheme purchased a
bulk annuity policy with an insurance company that covered all of the Scheme's
liabilities. The policy is in the name of the Scheme and is a Scheme asset.
The purchase of the policy represents a bulk annuity 'buy-in' and has been
accounted for in accordance with the requirements of IAS 19 'Employee
Benefits'. Under IAS 19, the accounting value of the purchased policy is set
to be equal to the value of the liabilities covered, calculated using the
current IAS 19 actuarial assumptions for the defined benefit obligation. As
the actual purchase price of the policy was higher than the accounting value
of the policy, a reduction in the Scheme's assets was recorded. This
reduction is included within the Return on Scheme assets (excluding deemed
interest) and reported as part of the Group's 'Remeasurement of defined
benefit pension schemes' included within the Condensed Consolidated Statement
of Comprehensive Income.
13. Reconciliation of operating result to net cash from operating
activities
Six monthsended30 June2017 Six monthsended30 June2016 Yearended31 December2016
£m £m £m
Operating profit 86 45 73
Adjustments for:
- Share-based compensation expense 2 3 4
- Pension scheme's administration costs - - 1
- Depreciation of property, plant and equipment 6 4 8
- Amortisation of intangible assets 12 4 8
- Pension scheme settlement gains - - (4)
- Acquisition related share-based payment charge 5 5 17
- Amortisation of intangible assets arising on consolidation 20 1 2
- Loss on derecognition of intangible assets 2 - -
- Remeasurement of deferred consideration - 1 2
- Gain on disposal of available-for-sale investments (1) - -
- Non-cash movement in FVTPL balances (1) - 1
Decrease in provisions for liabilities and charges (5) (14) (17)
Increase/(decrease) in non-current liabilities 2 - (1)
Operating cash flows before movement in working capital 128 49 94
Increase in trade and other receivables (33) (9) (18)
Increase in net settlement and trading balances (27) (4) (2)
(Decrease)/increase in trade and other payables (37) (14) 23
Cash generated from operations 31 22 97
Income taxes paid (17) (11) (17)
Interest paid (6) (4) (21)
Net cash from operating activities 8 7 59
14. Analysis of net funds
1 January2017 Cashflow Non-cashitems Exchangedifferences 30 June2017
£m £m £m £m £m
Cash 657 8 - (13) 652
Cash equivalents 41 3 - (1) 43
Overdrafts (2) (5) - - (7)
Cash and cash equivalents 696 6 - (14) 688
Financial assets 90 (15) - (4) 71
Total funds 786 (9) - (18) 759
Bank loan due within one year (467) 470 (3) - -
Notes due after one year (80) (497) - - (577)
(547) (27) (3) - (577)
Total net funds 239 (36) (3) (18) 182
Cash and cash equivalents comprise cash at bank and other short term highly
liquid investments with an original maturity of three months or less. 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 assets comprise short term government securities, term deposits and
restricted funds held with banks and clearing organisations.
In January 2017 the Group issued £500m unsecured Sterling Notes due January
2024. The Notes have a fixed coupon of 5.25% paid semi-annually, subject to
compliance with the terms of the Notes. Debt issue costs amounted to £3m.
Proceeds were used to repay the £470m bank loan.
15. Contingent liabilities
FCA investigation
Tullett Prebon Europe Limited ('TPEL') is currently under investigation by the
FCA in relation to certain trades undertaken between 2008 and 2011, including
trades which are risk free, which are alleged to have no commercial rationale
or economic purpose, on which brokerage is paid, and trades on which brokerage
may have been improperly charged. As part of its investigation, the FCA is
considering the extent to which during the relevant period (i) TPEL's systems
and controls were adequate to manage the risks associated with such trades and
(ii) whether certain of TPEL's managers were aware of, and/or managed
appropriately the risks associated with, the trades. The FCA is also reviewing
the circumstances surrounding a failure in 2011 by TPEL to discover certain
audio files and produce them to the FCA in a timely manner. As the
investigation is ongoing, it is not possible to predict its ultimate outcome
and accordingly any potential liability and/or financial impact cannot
currently be reliably estimated.
Bank Bill Swap Reference Rate case
On 16 August 2016, a new litigation was filed in the United States District
Court for the Southern District of New York naming the Company, ICAP plc, ICAP
Australia Pty LTD ('IAPL') 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. Each of the defendants named above
intend to defend the litigation vigorously. 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 Varoles Mobiliários Ltda ('ICAP Brazil')
is a defendant in 16 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 to be BRL 48.4m. ICAP
Brazil may also be exposed to a potential social security tax liability in
relation to the Labour claims. The Group is covered by an indemnity from NEX
in relation to any outflow in respect of the Labour claims.
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 182m. Tullett intends
to vigorously defend itself but there is no certainty as to the outcome of
these claims. The case is currently in an early evidentiary phase and it is
stayed pending discussion before the Superior Court of Justice regarding the
production of evidence. Therefore, the case is not anticipated to be resolved
in 2017.
ISDA Fix
The CFTC and other government agencies have requested information from the NEX
Group in relation to the setting of the US dollar segment of a benchmark known
as ISDA Fix. ICAP plc's successor firm, NEX, continues to co-operate with the
agencies' inquiries into the setting of that rate. ICAP Capital Markets LLC
('ICM') was the collection agent for ISDA Fix panel bank submissions in US
dollars, but was not a panel member itself. It is not possible to predict the
ultimate outcome of the CFTC investigation or to provide an estimate of any
potential financial impact. In September and October 2014, five class actions
were filed alleging injury due to purported manipulation of the USD ISDA Fix
rate. ICM is a defendant in those actions, which have now been consolidated
into a single action, along with several ISDA Fix panel banks. Pursuant to the
terms of the sale and purchase agreement between the Company and NEX it was
agreed that ICM would transfer its activities and business to the Company but
that ICM would not be transferred to the Company's ownership at completion. It
was further agreed that in the event of any claims or losses arising in
relation to ISDA Fix, these would be for the account of NEX. It is not
possible to predict the ultimate outcome of the litigation or the CFTC's
enquiries or to provide an estimate of any potential financial impact. The
Company and its Group may nevertheless suffer financial loss either directly
or as a consequence of damage to its reputation as a result of these matters.
Swaps civil litigation
In December 2016, ICAP SEF (US) LLC and ICAP Global Derivatives Limited were
named in a class action alleging that they and certain dealer banks colluded
to prevent buy side customers from accessing all-to-all anonymous electronic
trading platforms and therefore prevented buy side customers from getting
access to the best interest rate swap prices. The actions generally asserted
claims of violation of antitrust laws and unjust enrichment. Each of ICAP SEF
(US) LLC and ICAP Global Derivatives Limited intend to defend these litigation
claims vigorously. It is not possible to predict the ultimate outcome of the
litigation or to provide an estimate of any potential financial impact. The
Company expects that it will benefit from the warranty provisions of the sale
and purchase agreement with NEX such that any outflow in respect of the ICAP
entities with regard to this litigation will be borne by NEX. In July 2017,
the Court dismissed the claims against ICAP SEF (US) LLC and ICAP Global
Derivatives Limited. No subsidiary of the Group is therefore currently named
as a defendant in relation to this class action.
General note
From time to time the Company's subsidiaries are engaged in litigation in
relation to a variety of matters, and it is required to provide information to
regulators and other government agencies as part of informal and formal
enquiries or market reviews. The Company'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.
In the normal course of business, certain of the Company's subsidiaries enter
into guarantees and indemnities to cover trading arrangements and/or the use
of third party services or software.
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, there are no individual matters which
are considered to pose a significant risk of material adverse financial impact
on the Company's results or net assets.
The Group operates in a wide variety of jurisdictions around the world and
uncertainties therefore exist with respect to the interpretation of complex
tax laws and practices of those territories. 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.
16. Allocation of other comprehensive income within Equity
Equity attributable to equity holders of the parent
Re-valuationreserve Hedgingandtranslation Ownshares Retainedearnings Total Non-controllinginterests Totalequity
£m £m £m £m £m £m £m
Six months ended 30 June 2017(unaudited)
Available-for-sale investments:
- Revaluation gains - - - - - - -
- Revaluation gains transferred to income statement (1) - - - (1) - (1)
(1) - - - (1) - (1)
Effect of changes in exchange rates on translation of foreign operations - (34) - - (34) - (34)
Remeasurement of the defined benefit pension scheme - - - (43) (43) - (43)
Taxation on components of other comprehensive income - (1) - 15 14 - 14
Other comprehensive income for the period (1) (35) - (28) (64) - (64)
Six months ended 30 June 2016(unaudited)
Available-for-sale investments - revaluation gains 1 - - - 1 - 1
Effect of changes in exchange rates on translation of foreign operations - 34 - - 34 - 34
Remeasurement of the definedbenefit pension scheme - - - 26 26 - 26
Taxation on components of other comprehensive income - - - (9) (9) - (9)
Other comprehensive income for the period 1 34 - 17 52 - 52
Year ended 31 December 2016
Available-for-sale investments - revaluation gains 1 - - - 1 - 1
Effect of changes in exchange rates on translation of foreign operations - 59 - - 59 - 59
Remeasurement of the defined benefit pension scheme - - - 6 6 - 6
Taxation on components of other comprehensive income - - - (2) (2) - (2)
Other comprehensive income for the year 1 59 - 4 64 - 64
17. Fair value of financial instruments carried at fair value
The accounting policies, control framework and hierarchy used to determine
fair values at 30 June 2017 are consistent with those applied in the Group
Financial Statements for the year ended 31 December 2016.
Financial instruments carried at fair value and bases of valuation:
Level 1 Level 2 Level 3 Total
As at 30 June 2017 (unaudited) £m £m £m £m
Available-for-sale investments
- unlisted - 8 9 17
- listed 2 - - 2
Loans and receivables - - - -
Financial assets
- short term government securities 24 - - 24
- financial assets at FVTPL - 42 - 42
Financial liabilities
- financial liabilities at FVTPL - (42) - (42)
26 8 9 43
As at 31 December 2016
Available-for-sale investments
- unlisted - 8 9 17
- listed 3 - - 3
Loans and receivables - - 3 3
Financial assets
- short term government securities 18 - - 18
- financial assets at FVTPL - 92 - 92
Financial liabilities
- financial liabilities at FVTPL - (93) - (93)
21 7 12 40
There were no transfers between Level 1 and 2 during the period.
Reconciliation of Level 3 fair value movements:
£m
Balance as at 1 January 2017 12
Disposals (3)
Balance as at 30 June 2017 9
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Directors' Responsibility Statement
The Directors confirm, to the best of their knowledge, that the condensed set
of financial statements has been prepared in accordance with IAS 34 'Interim
Financial Reporting' as adopted by the European Union, and that 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
Andrew Baddeley
Chief Financial Officer
8 August 2017
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Independent Review Report to TP ICAP plc
Introduction
We have been engaged by the Company to review the condensed set of financial
statements in the half year report for the six months ended 30 June 2017 which
comprises the Condensed Consolidated Income Statement, the Condensed
Consolidated Statement of Comprehensive Income, the Condensed Consolidated
Balance Sheet, the Condensed Consolidated Statement of Changes in Equity, the
Condensed Consolidated Cash Flow Statement and related Notes 1 to 17. We have
read the other information contained in the half year report and considered
whether it contains any apparent misstatements or material inconsistencies
with the information in the condensed set of financial statements.
This report is made solely to the Company in accordance with International
Standard on Review Engagements (UK and Ireland) 2410 'Review of Interim
Financial Information Performed by the Independent Auditor of the Entity'
issued by the Auditing Practices Board. Our work has been undertaken so that
we might state to the Company those matters we are required to state to them
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.
Directors' responsibilities
The half year report is the responsibility of, and has been approved by, the
Directors. The Directors are responsible for preparing the half year report
in accordance with the Disclosure and Transparency Rules of the United
Kingdom's Financial Conduct Authority.
As disclosed in Note 1, the annual financial statements of the Group are
prepared in accordance with IFRSs as adopted by the European Union. The
condensed set of financial statements included in this half year report has
been prepared in accordance with International Accounting Standard 34 'Interim
Financial Reporting', as adopted by the European Union.
Our responsibility
Our responsibility is to express to the Company a conclusion on the condensed
set of financial statements in the half year report based on our review.
Scope of Review
We conducted our review in accordance with International Standard on Review
Engagements (UK and Ireland) 2410 'Review of Interim Financial Information
Performed by the Independent Auditor of the Entity' issued by the Auditing
Practices Board for use in the United Kingdom. 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 Ireland) 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.
Conclusion
Based on our review, nothing has come to our attention that causes us to
believe that the condensed set of financial statements in the half year report
for the six months ended 30 June 2017 is not prepared, in all material
respects, in accordance with International Accounting Standard 34 as adopted
by the European Union and the Disclosure and Transparency Rules of the United
Kingdom's Financial Conduct Authority.
Deloitte LLP
Statutory Auditor
London, UK
8 August 2017
This information is provided by RNS
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