Adjust for exceptionals, mainly reorganisation and legal costs, and underlying pre-tax profit slipped 11 per cent to £99.6m last year at interdealer broker Tullett Prebon (TLPR) - a tad below analysts' expectations.
That's not so surprising. Interdealer brokers do best when markets are volatile, as more trading activity means more revenues. But markets in 2013 were pretty calm overall, and not much has changed so far this year. Indeed, revenue in the first two months of this year is 12 per cent down on the same period last year, with management expecting conditions to remain challenging. Matters haven't been helped by greater regulation. Tougher capital and liquidity rules have left Tullett's bank customers with a reduced risk appetite, while regulatory reform of the over-the-counter derivatives market has also hit trading volumes.
In response, Tullett has focused on costs. Underlying administrative expenses fell 4 per cent in 2013, with broker compensation costs cut to 58.3 per cent of broking revenue, from 59.8 per cent in 2012. But regulatory-driven spending, relating to new electronic platforms and compliance, is offsetting the gains.
Numis Securities expects adjusted pre-tax profit of £98.8m for 2014, giving EPS of 34.7p (from 36p in 2013).
TULLETT PREBON (TLPR) | ||||
|---|---|---|---|---|
| ORD PRICE: | 326p | MARKET VALUE: | £710m | |
| TOUCH: | 325-326p | 12-MONTH HIGH: | 400p | LOW: 239p |
| DIVIDEND YIELD: | 5.2% | PE RATIO: | 11 | |
| NET ASSET VALUE: | 182p* | NET CASH: | £55.2m | |
| Year to 31 Dec | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2009 | 948 | 157 | 51.8 | 15.00 |
| 2010 | 909 | 141 | 50.5 | 15.75 |
| 2011 | 910 | 119 | 41.3 | 16.50 |
| 2012 | 851 | -38 | -28.1 | 16.85 |
| 2013 | 804 | 84 | 30.1 | 16.85 |
| % change | -6 | - | - | - |
Ex-div: 23 Apr Payment: 15 May *Includes intangible assets of £297m, or 137p a share | ||||
