"Bad as expected" was the verdict of analysts at Numis Securities on the half-year performance of interdealer broker Tullett Prebon (TLPR). But it wasn’t quite as bad as the reported figures suggest. Adjust for exceptionals - largely related to a cost-cutting programme - and underlying pre-tax profit fell 31 per cent to £43.2m.
That poor result reflects calm market conditions. A lack of volatility depresses trading volumes, which in turn hits Tullett’s revenues and earnings. Matters aren’t being helped by tougher regulation. Harsher capital and liquidity rules have left the group’s bank customers with a diminished appetite for risk and a reduced ability to trade. Numis thinks interdealer brokers themselves will struggle to avoid tougher regulatory scrutiny following the Libor-rigging scandal.
That said, Tullett has worked hard to adapt to these tough conditions. Most notably, the group has taken the axe to its cost base, and its cost-reduction programme should cut fixed annual costs by over £40m. The group has also tried to bolster its exposure to healthier markets, which explains its £94m acquisition in May of PVM Oil Associates, a major oil instruments broker. Crucially, crude oil is the most actively traded commodity in the world.
Numis expects full-year pre-tax profit of £67.4m, giving EPS of 32.8p (from £99.6m and 36p in 2013).
TULLETT PREBON (TLPR) | ||||
|---|---|---|---|---|
| ORD PRICE: | 242p | MARKET VALUE: | £527m | |
| TOUCH: | 241-242p | 12-MONTH HIGH: | 400p | LOW: 234p |
| DIVIDEND YIELD: | 7.0% | PE RATIO: | 19 | |
| NET ASSET VALUE: | 171p* | NET CASH: | £31.9m | |
| Half-year to 30 Jun | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2013 | 440 | 52.5 | 18.5 | 5.6 |
| 2014 | 360 | 8.9 | 1.3 | 5.6 |
| % change | -18 | -83 | -93 | - |
Ex-div: 22 Oct Payment: 13 Nov *Includes intangible assets of £295m or 135p a share | ||||
