The knives have been out at Tullett Prebon (TLPR). Last year the interdealer broker posted underlying operating profit of £101m, a 13 per cent decline on 2013, as historically low interest rates continue to reduce traffic in fixed income and currency trades. Management had little choice but to cut fixed costs in response.
The broker vacated office space and culled 166 front-office staff, in addition to 51 ancillary workers. These measures will reduce annual costs by around £45m, an estimated three-quarters of which will flow through into operating profits. The full benefits of the rationalisation have yet to emerge, but last year it helped keep the operating margin broadly flat at 14.3 per cent (from 14.4 per cent in 2013).
Conditions, however, remain challenging. Management said trading volumes have been hit by a "more onerous regulatory environment". But the overriding problem is the subdued level of volatility in financial markets as bond yields show little sign of reversing their long decline.
And shareholders hoping for a litigation windfall will be disappointed. Management confirmed that there are no plans to return any of the $100m (£65m) that Tullett received from BGC Partners to settle claims of broker poaching.
Peel Hunt predicts 2015 EPS of 34.9p, rising to 37.9p next year.
| TULLETT PREBON (TLPR) | ||||
|---|---|---|---|---|
| ORD PRICE: | 336p | MARKET VALUE: | £817m | |
| TOUCH: | 335-336p | 12-MONTH HIGH: | 355p | LOW: 234p |
| DIVIDEND YIELD: | 5% | PE RATIO: | 30 | |
| NET ASSET VALUE: | 190p* | NET CASH: | £67m | |
| Year to 31 Dec | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2010 | 909 | 141.0 | 50.5 | 15.75 |
| 2011 | 910 | 119.0 | 41.3 | 16.50 |
| 2012 | 851 | -38.0 | -28.1 | 16.85 |
| 2013 | 804 | 84.4 | 30.1 | 16.85 |
| 2014 | 704 | 33.5 | 11.2 | 16.85 |
| % change | -12 | -60 | -63 | - |
Ex-div: 23 Apr Payment: 14 May *Includes intangible assets of £357m, or 146p a share | ||||
