Global broking firm TP ICAP (TCAP) has produced a positive surprise with its full year earnings, sending the shares up 5% to 319p.
While the headline numbers show a sharp drop in profits due to a goodwill writedown, on an underlying basis both operating and pre-tax profits were up 5% to £276m and £245m respectively.
The firm, which is the result of a takeover of ICAP by rival Tullet Prebon, gets the majority of its revenue from being the middle-man between investment banks and other large financial institutions.
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Due to the combined headwinds of increased regulation, rising costs and uncertainties over Brexit, the firm warned last summer that earnings wouldn’t meet its previous forecasts, sending its shares down over 30% in a day.
The warning cost the then chief executive John Phizackerley his job as he was the architect of the takeover in 2016.
Having ‘got its grief in early’, the firm spent the second half of last year with its head down and managed to grind out an increase in broking income despite challenging market conditions.
Interest rates, the main fee-earning part of the broking business, saw a 5% increase in revenue while equities saw an impressive 18% increase helped by increased volatility in the final quarter of the year.
The second-biggest business, energy and commodities trading, saw a small dip in turnover but the new-ish data & analytics business saw sales grow by 8% to make a meaningful contribution to revenue and margins.
The broking activity generates huge amounts of data and once it has been ‘cleaned’ and anonymised clients will pay good money if they feel it can give them an edge in trading.
TP ICAP has merged its salesforces and is developing new products so that it can get more revenues and better margins out of the data business.
It has also made preparations for Brexit with a new subsidiary in Paris for EU clients to trade with each other and has moved one of its platforms to the Netherlands, although the new chief executive agrees it is hard to gauge the likelihood of impact of a ‘no-deal’ scenario right now.
