Tullett Prebon PLC Half Yearly Report -2-

- We will work within a robust investment framework so that we allocate capital and resources to areas where we can create the most value, taking account of risks and the impact of regulation.

- We are developing our HR function and processes to focus on hiring and training the next generation of brokers and to manage compensation appropriately to encourage good long term cultural behaviours.

- We have been overly modest about the qualities of our business and our achievements, and we will seek to improve our brand awareness and coverage.

During the first half of this year work has continued on the business optimisation projects and work streams that flow from the 10 Arrows.

Our broker headcount has increased by a net 48 heads since the end of the year, with over 40% of that net increase in Energy and commodities. During the first half we have established our presence in environmental products in North America, commenced the broking of iron ore in Europe, and expanded our activities in base and precious metals in Europe. We have started broking MSCI futures and ETFs in London. We have hired a team to establish our presence in corporate and sovereign bonds in Asia who will commence with the business in the second half.

The Company has, today, announced the acquisition of MOAB Oil, Inc. ("MOAB") a leading independent broker of physical and financial instruments in the energy markets in the United States.

MOAB is entirely focused on energy products, and its expertise includes physical gasoline, gasoline blending components, oil product swaps, ethanol and ethanol derivatives, natural gas financial derivatives, crude oil, distillates, weather and power products. MOAB has long-established relationships with major oil companies, gasoline blenders, the oil trading divisions of investment banks and other trading firms.

The business generated revenue of $23.7m (GBP14.4m) in 2014, with 23 brokers based in Norwalk, Connecticut.

The acquisition of MOAB complements the acquisition of PVM and further establishes the group's leading position in the Energy sector, significantly increasing the scale of the group's activities in broking crude oil and energy products in North America.

We have continued to expand the data sets provided by our Information Sales business with the inclusion of nuclear fuel and biofuel data. We were proud to announce that our Information Sales business was awarded, for the fifth consecutive year, the title of Best Data Provider (Broker) at the Inside Market Data Awards in May. This award, which is determined by an independent ballot of end-users, reaffirms our position as the leading provider of the highest quality independent price information and data from the global OTC markets.

We continue to launch new products and provide innovative solutions to our clients. Our alternative investments team has launched TP-AIME, the first screen-based matching engine to better facilitate secondary market transactions in a range of alternative investments. The platform also facilitates auctions in hedge fund, private equity and real estate fund interests.

We have concluded from the strategic review that interdealer brokers remain secure at the heart of the global financial services industry, facilitating efficient and effective trading in the wholesale OTC financial markets, and that the majority of OTC product markets, which are not characterised by continuous trading, depend upon the intervention and support of voice brokers for their liquidity and effective operation.

We are wholly committed to the hybrid voice broking model, and to developing the technology and services that support it. This is where the business is positioned, and we aim to be the best operator and best provider of liquidity and trusted partner to our clients.

The broking business in all three regions is supported by the deployment of the group's electronic broking platforms. The platforms facilitate client trading through electronic execution or with voice broker support, and provide a range of functionality including streaming prices, analytics, and auction capability, and operate as highly efficient front end order management and trade capture systems for both brokers and customers. We have continued to roll out our tpSWAPDEAL platform and in May we launched tpIRODEAL, a new platform for interest rate options that gives clients in this asset class much improved functionality and transparency.

We continue to see the evolving regulatory landscape affecting the OTC markets as an opportunity, albeit one that requires investment.

Our swap execution facility in the United States, tpSEF, continues to operate successfully, providing swap execution services across the five major asset classes utilising many of the group's electronic broking platforms to satisfy the regulatory requirements relating to trade execution, trade reporting, audit trail, and submission to clearing. Third party analysis of the notional volume of trades reported through SEFs, and our own intelligence, leads us to conclude that our market share in the interest rate swap market in the USA, the largest asset class within the scope of the SEF requirements, has been maintained.

In Europe, the implementation of EMIR, which contains provisions governing mandatory clearing requirements and trade reporting requirements for derivatives, is coming into effect in stages as the various technical standards are agreed. The legislative framework governing permissible trade execution venues, and governance and conduct of business requirements for trading venues, (MiFID II) and a new regulation (MiFIR), is expected to become effective at the beginning of 2017. As the detailed rules and requirements are agreed and published, the business will execute its plans to adapt its technology and services to comply with the new regulations.

Key Financial and Performance Indicators

Our key financial and performance indicators for the first half of 2015 compared with those for the first half of 2014 are summarised in the table below.

 
                                           H1 2015     H1 2014      Change 
                                        ----------  ----------  ---------- 
 
 Broking Revenue (excluding PVM)         GBP336.5m   GBP337.4m        -3%* 
 Information Sales / RMS Revenue          GBP26.9m    GBP22.9m       +16%* 
  (excluding PVM) 
 Total Revenue (excluding PVM)           GBP363.4m   GBP360.3m        -1%* 
 
 Total Revenue (including PVM)           GBP415.7m   GBP360.3m        +15% 
 
 Underlying Operating profit              GBP60.6m    GBP50.3m        +20% 
 Underlying Operating margin                 14.6%       14.0%   +0.6% pts 
 
 Average broker headcount (excluding 
  PVM)                                       1,613       1,654         -2% 
 Average broker headcount (including 
  PVM)                                       1,745 
 
 Average revenue per broker (GBP'000) 
 
   *    excluding PVM                          209         204        n/c* 
 
   *    including PVM                          222 
 
 Broker compensation costs : broking 
  revenue 
 
   *    excluding PVM                        55.6%       56.7%   -1.1% pts 
 
   *    including PVM                        55.7% 
 
 Period end broker headcount 
 
   *    excluding PVM                        1,617       1,595         +1% 
 
   *    including PVM                        1,750 
 
 Period end broking support headcount 
  (excluding PVM)                              744         733         +2% 
 
  *At constant exchange rates 
 

Operating Review

The tables below analyse revenue by region and by product group, and underlying operating profit by region, for the first half of 2015 compared with the equivalent period in 2014.

Revenue

The Group reports its results in GBP. A significant proportion of the Group's activity is conducted through businesses whose functional currency is not GBP and the reported revenue is therefore impacted by the movement in the foreign exchange rates used to translate the revenue from those operations. The tables therefore show revenue for the first half of 2014 translated at the same exchange rates as those used for 2015, with growth rates calculated on the same basis. The revenue figures as reported for 2014 are shown in Note 5 to the Condensed Consolidated Financial Statements.

The commentary below reflects the presentation in the tables.

 
 Revenue by product group                 H1 2015   H1 2014 
                                             GBPm      GBPm     Change 
 
 Treasury Products                           96.0      99.4        -3% 
 Interest Rate Derivatives                   76.2      71.6        +6% 
 Fixed Income                                93.6     105.6       -11% 
 Equities                                    21.5      21.6        -0% 
 Energy                                     101.2      47.3      +114% 
 Information Sales and Risk Management 
  Services                                   27.2      23.2       +17% 
                                         --------  --------  --------- 
 At constant exchange rates                 415.7     368.7       +13% 
 Exchange translation                                 (8.4) 
 Reported                                   415.7     360.3       +15% 
                                         ========  ========  ========= 
 

Total revenue in the first half of 2015 was 13% higher than in the first half of 2014. The benefit from the inclusion of PVM, growth in Information Sales and RMS, and a pickup in the level of activity in Interest Rate Derivatives in Europe and Asia Pacific, has been partly offset by lower volumes in the traditional interdealer broker product groups of Fixed Income and Treasury Products (FX and cash).

Revenue from Energy has more than doubled, reflecting the inclusion of PVM, higher levels of activity in the oil markets generally, and the development of our activities in this sector in all three regions. Energy is now the business's largest product group by revenue.