Tullett Prebon PLC Half Yearly Report (2295U)

TIDMTLPR

RNS Number : 2295U

Tullett Prebon PLC

28 July 2015

TULLETT PREBON PLC

Financial and Interim Management Report

For the six months ended 30 June 2015

Tullett Prebon plc (the "Company") today announced its results for the six months ended 30 June 2015.

Operational Summary

   --       Revenue up 15%, Operating profit up 20% 
   --       Outstanding performance from PVM 
   --       Acquisition of MOAB strengthens Energy in the Americas 
   --       Resilient performance from the broking business 
   --       Strong contribution from Information Sales and RMS 
   --       Tullett Prebon Information named best data provider for fifth consecutive year 

Financial Highlights

Underlying, before exceptional and acquisition related items

   --      Revenue GBP415.7m (2014: GBP360.3m) 
   --      Operating profit GBP60.6m (2014: GBP50.3m) 
   --      Operating margin 14.6% (2014: 14.0%) 
   --      Profit before tax GBP52.9m (2014: GBP43.2m) 
   --      Basic EPS 17.7p (2014: 16.0p) 

Reported, after exceptional and acquisition related items

   --      Profit before tax GBP111.1m (2014: GBP8.9m) 
   --      Basic EPS 36.2p (2014: 1.3p) 

A table showing Underlying and Reported figures for each period detailing the exceptional and acquisition related items is included in the Financial Review.

Dividend

As in previous years, the interim dividend for 2015 has been set at a level equal to 50% of the final dividend paid for the previous year. This approach to setting the interim dividend is expected to continue.

The 5.6p per share interim dividend will be paid on 12 November 2015 to shareholders on the register at close of business on 23 October 2015.

John Phizackerley, Chief Executive of Tullett Prebon plc, commented:

"The actions that were taken during 2014 to develop the business and to better align the cost base with the lower level of activity have resulted in a 15% increase in revenue to GBP415.7m and a 20% increase in underlying operating profit to GBP60.6m.

The performance of PVM since the completion of the acquisition in November last year has been strong. The Company's Information Sales and Risk Management Services businesses have also performed strongly. The level of activity in the wholesale OTC financial markets has been more stable during the first half than in recent periods although activity has continued to be relatively subdued. There has been higher volatility in some financial markets in 2015 compared with a year ago, but despite the economic and political dramas that have been playing during the first half of the year, volatility and trading volumes in many product areas have continued to be sporadic.

The Company's goal is to become the world's most trusted source of liquidity in hybrid OTC markets and the best operator in global voice broking. The Company's plan is to build revenue and raise the quality and quantity of earnings through further diversification of the client base, continued expansion into Energy and commodities, and building scale in the Americas and Asia Pacific, whilst preserving the business's core franchises."

Forward-looking statements:

This document contains forward-looking statements with respect to the financial condition, results and business of the Company. By their nature, forward-looking statements involve risk and uncertainty and there may be subsequent variations to estimates. The Company's actual future results may differ materially from the results expressed or implied in these forward-looking statements.

Enquiries:

Stephen Breslin, Head of Communications

Tullett Prebon plc

Direct: [phone]

   email:    [e-mail] 

Craig Breheny, Director

Brunswick Group LLP

Direct: [phone]

   email:    [e-mail] 

Further information on the Company and its activities is available on the Company's website: www.tullettprebon.com

Overview

The actions that were taken during 2014 to develop the business and to better align the cost base with the lower level of activity have resulted in a 15% increase in revenue to GBP415.7m and a 20% increase in underlying operating profit to GBP60.6m.

The performance of PVM Oil Associates Limited and its subsidiaries ("PVM") since the completion of the acquisition in November last year has been strong. The business's main activities are in crude oil and petroleum products, and the business has benefited from the higher level of activity in the oil and related products markets due to the significant changes in the oil price experienced since the start of the second half of 2014. PVM's revenue in the first six months of 2015 was 35% higher than in the equivalent period in 2014.

The Company's Information Sales and Risk Management Services businesses have also performed strongly, with revenue in the first half up 17% to GBP27.2m. The Information Sales business has benefited from the expansion of its geographical presence, the enhancement of its sales capability and the extension of the data content it provides to customers, including the crude, refined and middle distillates data generated by PVM.

The level of activity in the wholesale OTC financial markets has been more stable during the first half than in recent periods, although activity has continued to be relatively subdued reflecting the structural and cyclical factors affecting the interdealer broker industry. Market volumes continue to be adversely affected by the more onerous regulatory environment applicable to many of our bank customers whose trading activity has been suppressed by the deleveraging of their balance sheets and lower risk appetite. There has been higher volatility in some financial markets in 2015 compared with a year ago, but despite the economic and political dramas that have been playing during the first half of the year, volatility and trading volumes in many product areas have continued to be sporadic. Revenue has picked up in Asia Pacific and in some products in the Americas, but the continuation of the low interest rate conditions and compressed bond market spreads in Europe has further dampened activity in many markets in our largest region. Broking revenue, excluding PVM, in the first half of the year of GBP336.5m was 3% lower than in the first half of 2014 at constant exchange rates.

The benefits of the actions taken during 2014 to reduce headcount and other fixed costs which were designed to preserve the variable nature of broker compensation and to reduce it as a percentage of broking revenue have been reflected in an improvement in the business's contribution margin in the first half of the year. Broker compensation as a percentage of revenue, excluding PVM, has reduced by 1.1% points to 55.6%.

The investments being made in strategy and business development and in the implementation of enhanced cultural, compliance, and risk governance frameworks have resulted in an increase in management and support costs and one-off project costs in the first half which has partly offset the benefit of the improvement in contribution margin. The underlying operating profit margin achieved in the first half of 2015 of 14.6% is 0.6% points higher than in the equivalent period last year.

Strategy and Business Development

Following the conclusion of the global strategic review that was initiated last year the Company hosted a Capital Markets Day for institutional investors and analysts in June. The presentation materials are available on the Company's website. John Phizackerley, Chief Executive, articulated the Company's goal to become the world's most trusted source of liquidity in hybrid OTC markets and the best operator in global voice broking; and the Company's plan to build revenue and raise the quality and quantity of earnings through further diversification of the client base, continued expansion into Energy and commodities, and building scale in the Americas and Asia Pacific, whilst preserving the business's core franchises.

One of the outputs of the strategic review was the launch of ten key initiatives, the "10 Arrows", each of which has a number of projects and work streams which are designed to optimise the existing business and to pursue opportunities to add new high quality revenue and earnings to the group.

The first four arrows are focused on building revenue in the most attractive areas of our markets.

- We will seek to add brokers to maintain and grow our presence in those products with high relative market attractiveness and where we have a high relative ability to compete, and to invest in those products that have high market attractiveness but where our presence can be developed.

   -     We will seek to continue to build our activities in Energy and commodities. 

- The financial markets are evolving and we will look to extend our broking offering to service clients who have not traditionally been served by the interdealer brokers in those products where the market is receptive to a broadening of the client base.

- We will continue to develop our Information Sales business where our product suite and delivery channels can be further developed.

The remaining arrows are focused on improving the functions in the business that support the revenue generating divisions.

- We will invest in our technology including both front office and back office systems and realign the mix between owned and outsourced platforms to maximise our own intellectual property to seek to ensure that the hybrid voice broking business and Information Sales have the technology richness and capability that customers seek.

- We will invest in our client relationship management function and introduce new focus and discipline to how we target and cover existing and new clients to seek to broaden and institutionalise client relationships.

   -     We will develop our capability to source, execute and integrate acquisitions.