TP ICAP launches buyback after positive interims

The inter-dealer broking and data firm TP ICAP (TCAP) reported better-than-expected interim results after the company’s decision to domicile in Jersey, along with tight cost management and the rollout of a new dealing platform freed up about £100mn of cash ahead of schedule in the first half. The market’s mood was also lifted by a £30mn share buyback and the company’s shares marked up by 9 per cent on the day.

What the market noticed were marked signs of operational gearing coming into play after a 4 per cent rise in reported revenues led to a 26 per cent rise in pre-tax profits to £91mn. Management said that cost control and improved productivity had contributed to the stability of the cost base, though a slight problem might be the appreciation of UK sterling against the dollar, which makes up 60 per cent of TCAP’s reported earnings, and the associated forex volatility.

Another contributing factor was the £38mn of savings that came through from the integration of Liquidnet, which was £8mn more than forecast and six months earlier than expected. Overall, management expects to hit the targets it outlined at the company’s recent capital markets day.

However, it wasn’t all easy going for the company. With its clients taking a “risk-off” approach the demand for block trading in equities was noticeably lower, with the commission wallet down 16 per cent year-on-year, the lowest level since 2019.

Broker Numis puts TP ICAP at a forward price/earnings ratio of 10 for 2023, falling to 7 the following year, and reckons that interest rate tightening will help the company’s long struggling inter-dealer broker business. We tend to agree. Buy.

Last IC view: Hold, 148p, 10 Aug 2022