Shareholders in the world's largest inter-dealer, Icap, broker have endured a torrid time. After a profit warning in February - which came a month after chief executive Michael Spencer sold over 3.3m shares in the company - analysts heavily downgraded pre-tax profit estimates to between £295m and £315m.
In the event statutory profits came in at £247m, and that was after operating profits were boosted by £53m as a result of sterling's weakness against other currencies.
To be fair, underlying pre-tax profits were only 5 per cent lower at £333m, and it was the unsuccessful push into creating a full service agency for cash equities in Europe and Asia Pacific that dented profits. The expansion envisaged failed to materialise, and Icap sensibly closed down the operation, but not before incurring trading losses of £18m and closure costs of £52m.
Nearly 40 per cent of group income comes from trading in interest rates derivatives, and revenue here slipped from £678m to £630m. And while interest rate swap volumes were higher, profits declined because of a shift in the product mix towards lower margin short-dated transactions. On a positive note, increased volatility in currency markets helped to lift foreign exchange revenue 19 per cent to £292m. Brokers' estimates are under review following the results.
More analysis of company results
| ICAP(IAP) | ||||
|---|---|---|---|---|
| ORD PRICE: | 374p | MARKET VALUE: | £2.45bn | |
| TOUCH: | 373-374p | 12-MONTH HIGH: | 479p | LOW: 291p |
| DIVIDEND YIELD: | 4.7% | PE RATIO: | 15 | |
| NET ASSET VALUE: | 183p* | NET DEBT: | 12% | |
| Year to 31 Mar | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2006 | 0.92 | 193 | 19.6 | 10.00 |
| 2007 | 1.11 | 214 | 19.3 | 12.30 |
| 2008 | 1.30 | 275 | 26.4 | 15.65 |
| 2009 | 1.59 | 285 | 28.2 | 17.05 |
| 2010 | 1.61 | 247 | 25.5 | 17.55 |
| % change | +1 | -13 | -10 | +3 |
Ex-div: 21 Jul Payment: 20 Aug *Includes intangible assets of £1.56bn, or 238p a share | ||||
