Don't be fooled by the apparent leap in interdealer broker ICAP's (IAP) full-year earnings. Adjust for exceptionals and acquisition and disposal costs, and pre-tax profit fell 4 per cent year on year to £272m, as the group continued to struggle with tough conditions. ICAP was also hit with a £55m fine back in September in relation to the role played by some ICAP brokers in yen Libor manipulation.
Most importantly for ICAP, trading volumes remain under pressure as its bank customers downsize to suit today's tougher regulatory environment. Low interest rates and muted exchange-rate volatility have also depressed activity levels. In fact, profit at the voice-based global broking business - which generates around two-thirds of group revenue - slumped 12 per cent to £92m.
However, chief executive Michael Spencer is upbeat about ICAP's plan to refocus on areas that could see future growth. He reckons "70 per cent of the business has growth potential", reflecting ICAP's shift towards better-performing electronic, risk-management and post-trade services. Performance in these areas still looks patchy, however: the electronic broking division's profit fell 5 per cent to £107m.
Pending downgrades, broker Numis Securities was expecting EPS of 33.5p for 2015 (33.2p in 2014).
ICAP (IAP) | ||||
|---|---|---|---|---|
| ORD PRICE: | 391.2p | MARKET VALUE: | £2.53bn | |
| TOUCH: | 390.9-391.2p | 12-MONTH HIGH: | 463p | LOW: 307p |
| DIVIDEND YIELD: | 5.6% | PE RATIO: | 25 | |
| NET ASSET VALUE: | 145p* | NET DEBT: | 9% | |
| Year to 31 Mar | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2010 | 1.61 | 247 | 25.5 | 17.6 |
| 2011 | 1.74 | 233 | 28.1 | 30 |
| 2012 | 1.68 | 217 | 21.1 | 22 |
| 2013 | 1.47 | 66 | 6.7 | 22 |
| 2014 | 1.40 | 122 | 15.7 | 22 |
| % change | -5 | +85 | +134 | - |
Ex-div: 2 Jul Payment: 25 Jul *Includes intangible assets of £1bn, or 159p a share | ||||
