TP ICAP launches new £30mn share buyback

The inherent volatility of global broking services meant that inter-dealer broker TP ICAP (TCAP) has struggled to deliver a consistent performance. However, the company managed to build on its promising half-year, as demand for energy and commodities broking and data services helped to boost underlying profits.  

The results were sufficiently ahead of consensus that the ensuing upgrades moved the shares 10 per cent higher on the day, with an additional £30mn share buyback announcement adding to the overall sunny sentiment.  

There were also signs that acquired businesses have started to mature. With TCAP targeting data as a key driver of its profitability, the Parameta data business showed 8 per cent revenue growth on a subscription base of 96 per cent. This now means that data makes up 23 per cent of the company’s total revenues, reducing its reliance on volatile broking services.

The company’s bottom line was also helped by far higher than expected savings of £43mn, compared with a forecast £30mn, from the integration of the Liquidnet acquisition. Overall, the combination of savings and operational gearing meant that cash conversion for the full year was an impressive 124 per cent, which TCAP has used to pay down debt and fund its buyback programmes.

Management flagged the interesting possibility that Parameta might get its own minority initial public offering as it believes that the value of the business isn’t currently recognised.

Peel Hunt values the shares at a price/earnings ratio of 7 for 2024, with a straight yield of 7 per cent before capital returns. There seems to be more to come from TCAP, and we stick with the current recommendation. Buy.    

Last IC view: Buy, 168p, 16 Aug 2023