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ICAP facing headwinds

Second-half trading is likely to be tougher as banks reduce their appetite for risk
November 16, 2011

Headline figures showed Icap delivering a strong improvement in first-half profits, but the inter-dealer broker's preferred performance measure showed profits adjusted for exceptional items ahead by just 2 per cent at £186m.

IC TIP: Hold at 350p

The first-half performance was affected by a series of one-off events including an extended holiday break in the UK in April, while volumes in May were up against a tough comparative from the previous year, which left revenues flat for the half-year. However, volatility in global financial markets produced record trading volume for Icap in the second quarter to end September.

On the core voice broking side, a slight improvement in revenue from operations in Europe and the Middle East was offset by a 5 per cent fall in the US, mainly as a result of continued losses sustained in Brazil, where break even is not expected before 2012/13. As a result, core voice broking operating profits declined 11 per cent to £85m on revenues down 3 per cent to £608m.

In the higher margin electronic broking business, increased volatility helped to boost total average daily volumes by 17 per cent to $880bn (£556bn) and underpinned a 5 per cent rise in both revenues and operating profits to £160m and £67m, respectively.

Numis Securities is forecasting full-year adjusted EPS of 36.3p (2011: 39.9p).

ICAP (IAP)
ORD PRICE:350pMARKET VALUE:£2.3bn
TOUCH:350-351p12-MONTH HIGH:575pLOW: 344p
DIVIDEND YIELD:5.9%PE RATIO:12
NET ASSET VALUE:188p*NET DEBT:17%

Half-year to 30 SepTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
201086711614.55.27
201186715115.46.00
% change-+30+6+14

Ex-div: 4 Jan

Payment: 10 Feb

Includes intangible assets of £1.4bn, or 214p a share