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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| ICAP | LSE:IAP | London | Ordinary Share | GB0033872168 | ORD 10P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 469.70 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From May 2019 to May 2024
TIDMIAP
RNS Number : 2729P
ICAP PLC
16 November 2016
Press release
Half year results for the six months ended 30 September 2016
Resilient performance despite ongoing market headwinds
London 16 November 2016 - ICAP plc (IAP.L), a leading markets operator and provider of post trade risk mitigation and information services, announces today its results for the six months ended 30 September 2016.
Hot Features
Premium
GBPm Half year Half year Change
to 30 September to 30 September (%)
2016 (H1 2015 (H1
2016/17) 2015/16)
(restated)
--------------------------------------- ------------------ ------------------ -----------
Continuing
Revenue 254 229 11
Trading* profit before tax 51 55 (7)
Profit before tax 66 37 78
--------------------------------------- ------------------ ------------------ -----------
Profit for the period (after tax,
including discontinued) 86 78 10
--------------------------------------- ------------------ ------------------ -----------
Pence
--------------------------------------- ------------------ ------------------ -----------
Trading EPS (basic) 13.7p 13.0p 5
EPS (basic) 13.2p 12.0p 10
Interim dividend per share 6.6p 6.6p -
--------------------------------------- ------------------ ------------------ -----------
* before acquisition and disposal costs and exceptional items (note 1)
Group highlights
-- The transaction with Tullett Prebon (the Transaction) has received FCA clearance and remains on track to complete this year, subject to outstanding change of control consents
-- Group revenue from continuing operations increased by 11%, and was flat on a constant currency basis
-- Trading profit before tax from continuing operations decreased 7% to GBP51 million -- Profit before tax from continuing operations increased 78% to GBP66 million
-- Signed three year $65 million deal with China Foreign Exchange Trade System (CFETS) to deliver technology for electronic execution services
-- Market share gains in trading activity on Electronic Markets in US Treasuries, Asian NDFs and FX Forwards
-- Added ENSO Financial Analytics (ENSO) and Abide Financial (Abide) to the Group, complementing our ability to support customers across the transaction lifecycle
-- ICAP's global hybrid voice broking and information business's trading profit before tax for the period increased 28% to GBP59 million; trading profit margin increased by 2 percentage points to 14%
-- Interim dividend payment to shareholders maintained at 6.6p per share
Michael Spencer, Group Chief Executive Officer, said: "Throughout ICAP's 30 year history, we have always prided ourselves on being forward thinking for the benefit of our customers. Our strategic advantage lies in our unique networks, our strong product pipeline and our compelling value proposition. That is why we recently won the CFETS mandate and we continue to see market share gains at BrokerTec and EBS Direct. We have recently added both ENSO and Abide to the Group, complementing our ability to support our customers across the transaction lifecycle.
"These are uncertain times for global financial markets as we try to understand the impact of both the Brexit vote and the very recent US election. Despite this uncertainty, it is important that we continue to invest wisely in our product portfolio and financial technology incubator, Euclid Opportunities, to achieve long term profitable growth. In the absence of unforeseen circumstances, we plan to hold the dividend at 22.0p for this year.
"I am excited to be in the final phase of the Transaction before the launch of NEX Group plc. We are pleased that the FCA has recently cleared the Transaction with Tullett Prebon. We remain optimistic that the Transaction will complete by the end of the year, however the Transaction requires other change of control consents to be received before completion can occur. Tullett Prebon is responsible for and working to secure those outstanding clearances.
"While we continue along the slow journey to more normal market conditions I am confident that the fundamental strengths of the business will provide an excellent platform for NEX Group plc's long term growth and success."
Analysts and investors briefing
There will be a briefing for analysts and investors at 9.30am (GMT) on Wednesday 16 November 2016 at 2 Broadgate, London EC2M 7UR. An audiocast of the presentation will be available later that day at www.icap.com
Contacts
+44(0)20 7050
Alex Dee Head of Investor Relations 7420
+44(0)20 7818
Bryony Scragg UK Communications 9689
+44(0)20 7379
Neil Bennett Maitland 5151
Introduction to NEX Group plc presentation
Following the half year results presentation of ICAP plc (ICAP), Michael Spencer alongside other members of the senior management team will present an Introduction to NEX Group plc (NEX) as it will trade following the completion of the Transaction, which will focus on the Group's long term competitive advantage and growth opportunities.
The following new information will be provided for NEX:
- Progressive dividend policy with an initial base of 40%-50% of NEX's post tax trading profit
- Margin aspiration to drive towards 40% for each of the business segments in the medium term
- Technology spend: Level of spend in Electronic Markets has peaked, further investment expected in Post Trade Risk and Information
- Effective group tax rate of 23%-25%
- A capital light business model with pro forma gross debt of GBP515 million and net debt of GBP225 million
- Approximately GBP110 million cash is expected to be required for regulatory liquidity purposes
- GBP40 million of regulatory capital held in subsidiaries
- Over the medium term free cash flow conversion is expected to be 80%-90%
Presentation of information
This document comprises the half year results to 30 September 2016 for ICAP and its subsidiary undertakings (together 'ICAP' or 'the Group'). It contains the Interim Management Report, Directors' Statement of Responsibilities and Financial Statements together with the Independent Auditor's Review Report, as required by the Financial Conduct Authority's (FCA) Disclosure and Transparency Rules (DTR). The Financial Statements and related notes are prepared in accordance with IAS34 'Interim Financial Reporting'.
Cautionary statement regarding forward-looking statements
This Half-Yearly Financial Report contains certain forward-looking statements with respect to the financial condition, results of operations and business of the Group.
Certain statements that are not historical facts, including statements about the Group's beliefs and expectations, are forward-looking statements. Words such as 'expects', 'anticipates', 'intends', 'plans', 'believes', 'seeks', 'estimates', 'potential' and 'reasonably possible', variations of these words and similar expressions are intended to identify forward-looking statements. These statements are based on current plans, estimates and projections, and therefore undue reliance should not be placed on them. Forward-looking statements speak only as of the date they are made, and it should not be assumed that they have been revised or updated in the light of new information or subsequent events.
Forward-looking statements involve inherent risks and uncertainties. Readers are cautioned that a number of factors could cause actual results to differ, in some instances materially, from those anticipated or implied in any forward-looking statement.
About ICAP
ICAP is a leading markets operator and provider of post trade risk mitigation and information services. The Group matches buyers and sellers in the wholesale markets in interest rates, credit, commodities, FX, emerging markets and equity derivatives through electronic and voice networks. Through our post trade risk and information services ICAP helps its customers manage and mitigate risks in their portfolios. For more information go to www.icap.com
Interim Management Report
Review of operations
Financial performance
In November 2015, ICAP announced that it had entered into a Transaction which will, when completed, involve the disposal of ICAP's global hybrid voice broking and information business, including its associated technology and broking platforms (including iSwap and Fusion), certain of its joint ventures and its associates (together IGBB), to Tullett Prebon. On completion of the Transaction with Tullett Prebon, the ICAP brand will be transferred to Tullett Prebon and the remaining business comprising of Electronic Markets and Post Trade Risk and Information services will be renamed NEX Group plc.
Consistent with the presentation in the 2016 Annual Report, the Group's performance for the six months ended 30 September 2016 is reported in the consolidated income statement separately for continuing and discontinued operations (net of tax). Discontinued performance for the year includes IGBB's performance, adjusted for certain provisions in the sale and purchase agreement (SPA).
In the review of operations, financial performance is presented on a NEX basis, therefore only for continuing operations, unless stated otherwise.
GBPm H1 2016/17 H1 2015/16
(restated)
--------------------------- ---- ------------ --- -------------
Revenue 254 229
Trading profit before
tax 51 55
--------------------------------- ------------ --- -------------
For the six months ended 30 September 2016, the Group reported continuing revenue of GBP254 million, 11% ahead of the prior period on a reported basis and flat on a constant currency basis. A 6% increase in Post Trade Risk and Information (PTRI) revenue to GBP113 million, on a constant currency basis, was partly offset by a 2% decrease in Electronic Markets revenue to GBP139 million, on a constant currency basis.
The Group's continuing trading performance was impacted by the ongoing combination of structural and cyclical factors including historically low and negative interest rates, low levels of volatility and bank deleveraging resulting in reduced risk appetite from bank customers. This was partly offset by the increase in trading activity in emerging market currency pairs on EBS Market, and a greater demand for post trade products such as triReduce and triResolve.
Consistent with NEX's growth strategy, ICAP 's ongoing investment in new products and services continues to impact the Group's continuing trading operating profit margin which fell to 26% (H1 2015/16: 29%). In addition, this was also impacted by changes in the product mix within the PTRI business, the consolidation of ENSO for the first time and a change to direct billing within Information Services. The Group's continuing trading profit before tax of GBP51 million was 7% down on the prior year mainly due to an increase in net finance costs.
Dividend
Consistent with previous practice, ICAP's interim dividend per share has been calculated at 30% of the prior year's full year dividend. An interim dividend of 6.6p per share (H1 2015/16 - 6.6p per share) covering the six month period to 30 September 2016 will be paid on 25 January 2017 to shareholders on the register at 9 December 2016. The shares will be quoted ex-dividend from 8 December 2016.
Outlook
ICAP's deep insights into the needs of its customers, along with its investments in technology, strong relationships with its partners and its ability to embrace change means that it continues to grow its addressable market and deliver returns for its shareholders. The very recent US election has prompted an increase in trading activity. It is, however, too early to assume that the prolonged period in which we have experienced subdued market conditions has come to an end. Nevertheless, management remains confident that the fundamental strengths of the business will provide an excellent platform for NEX's long term growth.
Management change
In July 2016, ICAP announced that Gil Mandelzis, CEO of EBS BrokerTec, has decided to step down from his position. Michael Spencer, CEO of ICAP, said: "Gil Mandelzis has been a truly outstanding leader of our Electronic Markets division, playing a central role in the successful expansion and integration of the EBS and BrokerTec businesses. Gil co-founded Traiana back in 2000, a business ICAP acquired in 2007, and has undoubtedly made a lasting and meaningful contribution to the evolution of the foreign exchange and fixed income industries. He has decided, however, that his career should now take a different direction and we have accepted this."
In September 2016, Seth Johnson, who joined ICAP in 1992 and most recently was Head of Strategy at ICAP's Global Broking division, was appointed CEO of EBS BrokerTec. As Head of Strategy for Global Broking, Seth has been responsible for growing revenues, improving the application of technology to the company's business model, and expanding customer coverage. Seth previously led the expansion of ICAP's Electronic Markets product portfolio as Chief Executive Officer of BrokerTec and CEO of the ICAP Securities & Derivatives Exchange (ISDX). Seth will continue to sit on the ICAP Global Executive Management Group and will report directly to ICAP CEO Michael Spencer.
Electronic Markets
EBS BrokerTec is a leading electronic trading business operating platforms in FX and fixed income. These platforms offer efficient and effective trading solutions to customers in more than 50 countries across a range of instruments including spot FX, FX Forwards, US Treasuries, European government bonds and EU and US repo. These electronic platforms are built on ICAP's bespoke networks connecting participants in financial markets.
Continuing operations H1 2016/17 H1 2015/16 Change
- Revenue (%)
GBPm (restated)
--------------------------- ------------------------ ------------ --- ------------- -----------
BrokerTec 70 64 9
EBS 64 64 -
CFETS 4 - n/a
Other 1 1 -
----------------------------------------------------- ------------ --- ------------- -----------
Total revenue -reported 139 129 8
-constant currency 142 (2)
---------------------------------------------------- ------------ --- ------------- -----------
Trading operating
profit 43 44 (2)
----------------------------------------------------- ------------ --- ------------- -----------
Trading operating
profit margin (%) 31 34 (3ppt)
----------------------------------------------------- ------------ --- ------------- -----------
For the six months ended 30 September 2016, Electronic Markets revenue decreased by 2% on a constant currency basis and increased by 8% on a reported basis to GBP139 million (H1 2015/16 - GBP129 million) as a result of its dollar exposure. The trading operating profit decreased to GBP43 million (H1 2015/16 - GBP44 million) and the trading operating profit margin decreased to 31%.
BrokerTec
BrokerTec is a global electronic trading platform for the trading of US Treasuries, European government bonds and US and European repos. BrokerTec facilitates trading for institutions, banks and non-bank professional trading firms.
For the six months ended 30 September 2016, revenue was flat on a constant currency basis and increased by 9% on a reported basis to GBP70 million (H1 2015/16 - GBP64 million) as a result of the platform's dollar exposure. This performance reflects a 10% decrease in US Treasury average daily volume to $154 billion, a 1% increase in US repo to $213 billion and a 3% decrease in European repo to EUR173 billion. The revenue impact was partly offset by BrokerTec's tariff structure which provides for volume-based tiered pricing.
During the period BrokerTec increased its market share in the interdealer US Treasury on-the-run segment as its customer's prioritised price and trade transparency. Whilst trading activity during the period benefitted from a combination of central bank actions and the uncertainty created by the UK referendum on Brexit, it did not have the same level of trading activity as the speculation around the timing of an increase in US interest rates and central bank action in China in the comparable period.
The repo market remains pivotal to the effective functioning of almost all financial markets, and provides an efficient source of collateralised money market funding. During the period both the US and European markets continued to face regulatory headwinds as reduced balance sheet allocation remains an inhibiter of activity. Despite a tough competitive environment BrokerTec has built on its market share in repo and has recently launched several enhancements to the functionality of the platform.
Activity in European government bonds was episodic and benefited from a move in UK interest rates following the UK referendum and the ongoing uncertainty over the monetary policy outlook. In general, European markets were hampered by subdued risk appetite and inventory reductions over the summer months.
The development of BrokerTec Direct, the innovative fully disclosed and relationship-based electronic platform for the trading of on-the-run US Treasuries, continues to on-board new customers with a focus on attracting major dealer liquidity providers.
EBS
EBS, an electronic FX business, is a reliable and trusted source of orderly, executable and genuine liquidity across major and emerging market currencies. It has responded to changing market dynamics by transitioning from a business with a single offering to one that can support multiple execution methods and multiple ways of trading through a common distribution network.
For the six months ended 30 September 2016, revenue decreased by 10% on a constant currency basis and was flat on a reported basis at GBP64 million (H1 2015/16 - GBP64 million) reflecting a 14% decrease in average daily volume to $81 billion. Whilst trading activity in Asian currencies remained buoyant, activity levels in G7 currencies were subdued as volatility generated by central bank actions in the comparable period were not repeated.
EBS Market, the exchange-like platform, has maintained its position as a primary interbank venue for the trading of the world's most actively traded currency pairs, including euro/dollar and dollar/yen. During the period EBS Market's strategic efforts to gain traction and create liquidity in both offshore Chinese renminbi (CNH) and non-deliverable forwards (NDFs) has proved successful with average daily volume growing by more than 10% and 20% respectively compared with the comparable period. As a result dollar/ CNH is now the third most actively traded currency pair on the platform.
EBS Direct, the platform that allows liquidity providers to stream tailored prices directly to liquidity consumers has continued to grow steadily. The platform now has more than 44 liquidity providers compared to 25 last year and over 470 liquidity consumers using the service compared to 400 last year. Average daily volume on the platform increased to more than $20 billion, up 22% on the same period last year. FX forwards, a significant part of the FX market in which EBS has never previously participated, have continued to grow month on month.
EBS eFix, the matching service that enables customers to execute Fix interest electronically on the EBS Market platform has continued to demonstrate significant growth. Average daily volume has increased by more than 80% over the comparable period to more than $1.5 billion matched per day.
In September, as a direct response to EBS customers' desire for improved and faster data provision, EBS launched EBS Live Ultra. The new service will significantly improve price discovery, enhance the light pool (also known as lit) FX market and increase market transparency, efficiency and liquidity.
CFETS
In June, ICAP announced that CFETS, China's official inter-bank market trading platform and infrastructure provider, has chosen EBS BrokerTec to deliver the underlying technology for fixed income and FX electronic execution services in mainland China. The deal, valued at $65 million over a three year period, will see ICAP expand into China, a key growth market for the business, with EBS BrokerTec establishing a local office and development centre in Shanghai.
Post Trade Risk and Information
The Post Trade Risk and Information business operates leading market infrastructure for post trade processing and risk management across multiple asset classes and enables users of financial products to reduce operational and system-wide risks. The services offered by the PTRI business enable customers to increase the efficiency of trading, clearing and settlement and facilitate the effective management of capital and associated cost.
The portfolio risk services business comprises: Reset and TriOptima which identify, neutralise, reconcile and remove risk within portfolios of derivatives transactions; Traiana, which provides pre trade risk and post trade processing solutions; the information and data sales business; and ENSO, which provides insight on counterparty credit risk, collateral management, portfolio financing and treasury.
Continuing operations H1 2016/17 H1 2015/16 Change
- Revenue (%)
GBPm (restated)
------------------------------ ------------------------ ------------ --- ------------- -----------
TriOptima 42 35 20
Information Services 21 16 31
Traiana 27 26 4
Reset 19 18 6
ENSO 4 - n/a
Total revenue -reported 113 95 19
-constant currency 107 6
------------------------------------------------------- ------------ --- ------------- -----------
Trading operating profit 32 31 3
-------------------------------------------------------- ------------ --- ------------- -----------
Trading operating profit
margin (%) 28 33 (5ppt)
-------------------------------------------------------- ------------ --- ------------- -----------
For the six months ended 30 September 2016, revenue increased by 6% on a constant currency basis and by 19% on a reported basis to GBP113 million (H1 2015/16 - GBP95 million). Trading operating profit increased to GBP32 million (H1 2015/16 - GBP31 million). The trading operating profit margin decreased to 28% as a result of a combination of factors including increased investment in Traiana, consolidation of ENSO for the first time and a change to direct billing within Information Services.
TriOptima
TriOptima, through triReduce and triResolve, is a leader in risk mitigation solutions for Over The Counter (OTC) derivatives, primarily through the elimination and reconciliation of outstanding transactions. It continues to benefit from the strategic alignment of its offerings with the G20 policy objectives of transparency and risk reduction in the financial system.
For the six months ended 30 September 2016, revenue increased 2% on a constant currency basis and increased by 20% on a reported basis to GBP42 million (H1 2015/16 - GBP35 million) driven by increased demand for triReduce portfolio compression and uptake of the portfolio reconciliation service, triResolve.
The stringent leverage ratio included within the Basel III rules continues to drive demand from banks for the triReduce compression service. During the period, triReduce terminated a further $94 trillion of gross notional outstanding (H1 2015/16 - $87 trillion), taking the total eliminated since launch to $862 trillion. This significant achievement includes compression across a broad range of products: cleared and uncleared interest rate products in 27 currencies, credit default swaps, commodity swaps, inflation swaps, cross currency swaps, and FX forwards for more than 210 financial institutions. TriOptima delivers triReduce compression for cleared trades in collaboration with several clearing houses including LCH, SGX, Nasdaq and CME. TriOptima also offers triReduce to CLS members for FX forwards.
Strong demand for triResolve, the reconciliation service, continues to be driven by both standard portfolio reconciliation, as required by regulation and the new repository reconciliation service to validate reported data for trade repositories globally. The number of institutions using the triResolve service has increased from 1,686 during H1 2015/16, who participated in 384,000 party-to-party reconciliations each month, to more than 1,800 in H1 2016/17, who participated in 398,000 party-to-party reconciliations each month.
In May, triResolve announced that it is collaborating with The Depository Trust & Clearing Corporation (DTCC) to reconcile data reported to Asian regulators. triResolve's Repository Reconciliation service is actively reconciling data reported to DTCC's Global Trade Repository by institutions regulated by the Monetary Authority of Singapore, the Australian Securities and Investments Commission and the Hong Kong Monetary Authority.
triResolve Margin, which TriOptima launched in April, supports its customers following the introduction of the new uncleared margin rules. It connects triResolve's existing award-winning portfolio reconciliation tool, case management workflow and dispute analytics to AcadiaSoft's MarginSphere(R). By linking the margin call and portfolio reconciliation process together triResolve Margin drives efficiency through straight through processing
triCalculate continues to grow and sign new customers. It is a centralised risk analytics service which provides a web-based service to price, report and validate risk calculations using transparent and consistent models across a wide range of asset classes, data sources, and business units.
Information Services
ICAP Information Services (IIS) delivers independent data solutions to financial market participants. ICAP Indices, the index arm of IIS, develops and publishes a range of transaction-based indices. IIS generates subscription-based fees from a diversified global suite of products and services, while ICAP Indices' fee structure is based on assets under management of the products which are linked to the proprietary indices as well as licensing other index administrators for the use of ICAP data in their indices.
For the six months ended 30 September 2016, revenue increased by 24% on a constant currency basis and 31% on a reported basis to GBP21 million (H1 2015/16 - GBP16 million) partly driven by a change to bill some customers directly, increasing both revenue, and the related operating expenses. The IIS product and service range includes real-time and historical data from the Group's electronic trading venues, EBS BrokerTec, as well as from partners.
In July, in collaboration with EBS BrokerTec, IIS launched the EBS CNH Benchmark, the first fully electronic, trade-backed reference rate for the offshore CNH market. The benchmark has been launched following considerable interest from a number of major Chinese banks and senior onshore authorities.
In September 2016 it was announced that IIS together with Wind Information Co., Ltd, a leading provider of financial data in China, had extended their market data portfolio to include real-time US Treasury pricing and global FX spot rates. This follows the partnership signed in early 2015 between the two parties to provide CNH and end-of-day US Treasury data in China.
Traiana
Traiana operates the leading market infrastructure for cross-asset pre and post trade processing, risk management and regulatory compliance across the world. Its solutions and the Harmony network have become the market standard for post trade processing of FX, exchange traded derivatives, fixed income, CDS and synthetic and cash equity transactions. Traiana's Harmony network connects more than 750 global banks, broker/dealers, buy side firms and trading platforms.
For the six month ended 30 September 2016, revenue decreased by 7% on a constant currency basis and increased by 4% on a reported basis at GBP27 million (H1 2015/16 - GBP26 million) as the reduction in FX- related volume-based services was only partly offset by the increase in other cross assets subscription based services mainly the Client Link service to the Buy Side and Tier 2/3 banks.
Traiana continues to innovate and diversify its business into other asset classes, delivering network based solutions for all financial market participants, while also continuing to innovate in FX. In June, both Barclays and UBS went live on its Harmony CCP Connect for Equities platform. These new banks will further enhance the netting benefits already seen by the market through automated central clearing of OTC equity trades. Some of the largest equity broker dealers, including Credit Suisse, Deutsche Bank, Instinet and J.P. Morgan, are already using Harmony CCP Connect to automate the matching and central clearing of their OTC equity contract for difference trades at their preferred clearing houses.
During the period, Traiana's equity swaps solution saw a threefold growth in allocation as clients embrace the post-trade efficiencies. Growth has been particularly strong in the Asia Pacific region reflecting the strong adoption of electronic trading in these markets, increased access by global buy-side firms and increased focus on straight-through-processing services by global equity prime brokers.
Reset
Reset is a provider of risk mitigation services, reducing basis risk within trading portfolios in interest rate derivative, FX, inflation, and options markets.
For the six months ended 30 September 2016, revenue decreased by 5% on a constant currency basis and increased by 6% on a reported basis to GBP19 million (H1 2015/16 - GBP18 million). The core business continues to be affected by low short dated interest rate volatility and further dampened volatility as a result of the quantitative easing programme of the European Central Bank (ECB).
ENSO
ENSO is changing the way that hedge funds and prime brokers communicate and enhance relationships by offering a suite of analytics and tools that provide its hedge fund clients with a macro view of all their relationships across multiple prime brokers and counterparties. Their services deliver data and insight on counterparty credit risk, collateral management, portfolio financing and treasury. At the same time, all of these counterparties can connect and directly engage through ENSO's network.
In April 2016, through Euclid Opportunities (Euclid), ENSO was acquired by ICAP.
Euclid Opportunities
Euclid identifies and provides investment to emerging financial technology firms providing new platforms, business models and technologies that have the potential to drive efficiency, transparency and scale across the transaction life cycle for the financial services industry.
In October 2016, ICAP announced that it had acquired Abide, following a previous investment by Euclid in July 2015. Abide will become a subsidiary of ICAP's PTRI division. Following the acquisition, Abide will integrate its regulatory reporting hub and venues with Traiana's connectivity and ICAP's Approved Publication Arrangement reporting service providing PTRI's client base with a full spectrum of integrated reporting solutions
During the period, Euclid co-led the funding round of Cloud9 Technologies, a cloud-based trading communication provider and OpenGamma, a provider of open source financial software and derivatives risk analytics tools. In addition Euclid joined the Utility Settlement Coin, a collaboration between UBS, BNY Mellon, Deutsche Bank, Santander and Clearmatics, which is exploring future implementation of an asset-backed digital cash instrument.
ICAP Global Broking Business
The ICAP Global Broking Business is active in wholesale markets across all asset classes as shown below:
Revenue by asset class H1 2016/17 H1 2015/16 Change
(%)
GBPm (restated)
------------------------------ ------------------------ ------------ --- ------------- -----------
Rates 130 119 9
Commodities 58 56 4
Emerging markets 61 57 7
Equities 58 57 2
FX and money markets 35 33 6
Credit 16 18 (11)
iSwap 2 2 -
-------------------------------------------------------- ------------ --- ------------- -----------
Global Broking including
iSwap 360 342 5
-------------------------------------------------------- ------------ --- ------------- -----------
Information Services 26 24 8
-------------------------------------------------------- ------------ --- ------------- -----------
Total revenue -reported 386 366 5
-constant currency 389 (1)
Trading operating
profit 55 43 28
-------------------------------------------------------- ------------ --- ------------- -----------
Trading operating
profit margin (%) 14 12 2ppt
-------------------------------------------------------- ------------ --- ------------- -----------
For the six months ended 30 September 2016, the trading performance of IGBB benefitted from volatility after the Brexit referendum. This was partly offset by a combination of the ongoing structural and cyclical factors such as historically low interest rates and bank deleveraging which impacted trading activity. Excluding the closed desks and on a constant currency basis, Global Broking revenue remained flat against the prior year.
Trading operating profit grew strongly to GBP55 million resulting in an operating margin of 14% (H1 2015/16 - 12%). The increase in the operating margin versus last year reflects the benefit of a change in the product mix and the benefits of the 2014/15 cost saving programme that are now fully coming through. In addition, the broker compensation pay-out ratio improved to 49.6% for the period (H1 2015/16 - 50.4%). This has reduced from 57% in FY2013/14.
Rates
The rates business comprises interest rate derivatives, government bonds, repos and financial futures. Rate products contribute the largest share of IGBB's revenue of which interest rate derivatives represent the most significant component. For the six months ended 30 September 2016, revenue increased by 9% on a reported basis.
Trading activity in interest rate derivatives benefitted from the volatility created by the Brexit referendum, the reduction of interest rates in the UK and the reinstatement of quantitative easing by the Bank of England. In addition, trading activity in dollar interest rate derivatives was fuelled by speculation around US interest rates and increased issuance. In contrast, reduced liquidity following the US Federal Reserve's decision not to change US interest rates dampened US government bonds activity.
The relative value desk continues to grow and expand its footprint and has benefitted from US interest rate speculation and increased market share.
Commodities
The commodities business comprises energy (including electricity, crude oil, refined products, natural gas, coal, and alternative fuels), environmental markets, forward freight derivatives, metals, agriculture and soft commodities.
For the six months ended 30 September 2016, revenue increased by 4% on a reported basis. An increase in trading activity in metals and North American electricity was more than offset by subdued conditions in alternative fuels and softs and agriculture.
In October 2016, initial completion documents were signed to transfer ICAP's London-based desks responsible for providing broking services in relation to fuel oil, crude oil, middle distillates, oil futures and options, along with ancillary New York-based and Singapore-based desks to INTL FCStone Ltd. Final completion is expected by the end of the year.
Emerging Markets
ICAP is active in emerging markets across Asia Pacific, Latin America, Central and Eastern Europe and Africa. Emerging market revenue includes domestic activity in local markets and cross border activity in globally traded emerging market money and interest rate products. For the six months ended 30 September 2016, revenue increased by 7%.
Increased market confidence, corporate earnings and government commitment resulted in an improvement in the Brazil business performance whilst Latin American products were boosted by local currency appreciation and speculation around Colombian interest rates. Central and Eastern European markets have seen an increase in activity due to post Brexit volatility. High activity in Turkish products was driven by political instability and the recent failed military coup. Asian products have experienced challenging conditions, with the CNH forwards market lacking volatility due to the tightening of the onshore short term rate. Matching sessions have driven improvement in emerging markets.
Equities
The Equities business principally comprises equity derivatives. For the six months ended 30 September 2016, revenue increased by 2% due to uncertainty around Brexit and continued low interest rate environment affecting global equity markets.
FX and money markets
The FX and money markets business comprises spot, forwards and cash products. For the six months ended 30 September 2016, revenue increased by 6%.
FX volatility remained at low levels due to compressed volumes and a contracting market. FX volumes benefitted from volatility around the time of the Brexit referendum however, continue to be impacted by low risk appetite and the low interest rate environment.
Credit
The credit business comprises corporate bonds and credit derivatives. Revenue for the six months ended 30 September 2016 decreased by 11% as balance sheet constraints, resulting in low bank bond inventory, continue to reduce secondary market activity in all regions.
Scrapbook, an e-solution for the corporate bond market, continues to gain traction. In addition, CrossTrade, ICAP's first buy side offering launched in December 2015, has now been launched in the Americas in addition to EMEA.
Summary consolidated income statement
GBPm H1 H1
2016/17 2015/16
(restated)
------------------------------------------------------ ---------- --- -------------
Trading operating profit 67 67
Net finance costs (16) (13)
Share of profit of joint ventures after
tax - 1
Trading profit before tax from continuing
operations 51 55
Tax (8) (8)
====================================================== ========== === =============
Trading profit for the period from continuing
operations 43 47
Acquisition and disposal costs, net of
tax - continuing operations 10 (6)
Exceptional items, net of tax - continuing
operations 6 -
------------------------------------------------------ ---------- --- -------------
Profit for the period from continuing operations 59 41
Trading profit for the period from discontinued
operations 46 37
Exceptional items, net of tax - discontinued
operations (19) -
====================================================== ========== === =============
Profit for the period 86 78
====================================================== ========== === =============
Trading EPS (basic) 13.7 13.0
------------------------------------------------------ ---------- --- -------------
Trading profit before tax
Continuing trading profit before tax for the six months ended 30 September 2016 was down GBP4 million (decreased by 7%), mainly driven by a GBP3 million increase in net finance expense on the prior year as there were increased drawdowns on the Revolving Credit Facility (RCF) and an increase in the Japanese yen loan.
Tax
The Group's trading Effective Tax Rate (ETR) is 19% (H1 2015/16 - 17%) with continuing trading ETR at 16% and discontinued trading ETR 22%. Excluding discrete prior year tax adjustments, the Group's trading ETR and continuing trading ETR are both 22%.
Trading EPS
Trading EPS (basic) increased by 5% to 13.7p (30 September 2015 - 13.0p), reflecting an increase in the trading profit for the period.
Acquisition and disposal costs
Acquisition and disposal costs in the period in relation to continuing operations were an income of GBP7 million (H1 2015/16 expense - GBP18 million) before a tax credit of GBP3 million (H1 2015/16 tax credit - GBP12 million). The favourable movement of GBP25 million in Group's acquisition and disposal costs before tax on the prior period is attributable to GBP19 million fair value gain arising from increased investment in ENSO and a GBP6 million decrease on the amortisation of intangibles arising on consolidation.
There were no discontinued acquisition and disposal costs during the period (H1 2015/16 - GBPnil).
Exceptional items
Exceptional items in relation to continuing operations in the period was a gain of GBP8 million (H1 2015/16 - GBPnil), comprising a GBP5 million release of an onerous lease provision as previously vacated office space has now been sublet and a GBP3 million income from an insurance recovery relating to past legal costs.
There were GBP22 million (H1 2015/16 - GBPnil) of exceptional items costs recognised in the period relating to discontinued operations, which is GBP19 million (H1 2015/16 - GBPnil) after tax. The discontinued exceptional costs represent Transaction-related costs including GBP12 million cost of sale and separation costs that were incurred and GBP10 million provided at 30 September 2016.
The provision at 30 September 2016 does not include certain additional Transaction-related costs that are anticipated to be incurred before the Transaction completes as they do not meet the provision recognition criteria at 30 September 2016.
Free cash flow
Group
GBPm H1 2016/17 H1 2015/16
--------------------------------------- ------------ ---------------
Cash generated from operating
activities before exceptional
items paid 108 129
Interest and tax (33) (28)
---------------------------------------- ------------ ---------------
Cash flow from trading activities 75 101
Capital expenditure (41) (33)
Dividends from associates,
joint ventures and investments 6 4
---------------------------------------- ------------ ---------------
Trading free cash flow 40 72
Free cash flow conversion (%) 45% 86%
---------------------------------------- ------------ ---------------
Trading free cash flow generated during the period was GBP40 million, a conversion rate of 45% (H1 2015/16 - 86%). The reduced conversion of GBP40 million (when compared to trading profit for the period of GBP89 million) in the period is primarily explained by a GBP50 million adverse movement in working capital.
The first half cash conversion has always been lower due to seasonality. H1 2015/16 conversion of 86% included GBP36 million favourable impact from short-term timing differences driven by movements in restricted funds and initially unsettled trades at the balance sheet date.
Balance sheet
The Group's net assets at 30 September 2016 were GBP1,150 million, GBP132 million higher than the 31 March 2016 position (GBP1,018 million), principally reflecting profit for the period of GBP86 million and a GBP144 million gain for the retranslation of foreign currency net assets driven by the weakening of sterling during the period. This was partially offset by the GBP100 million payment of the 2015/16 final dividend.
Debt
Group As at 30 September As at 31 As at 30 September
GBPm 2016 March 2016 2015
Long-term borrowings (585) (519) (564)
Short-term borrowings (153) (145) (62)
------------------------------- ---------------------- ---------------- -----------------------
Total gross borrowings (738) (664) (626)
Cash and cash equivalents 493 516 493
------------------------------- ---------------------- ---------------- -----------------------
Net debt (245) (148) (133)
------------------------------- ---------------------- ---------------- -----------------------
Restricted funds 100 59 34
------------------------------- ---------------------- ---------------- -----------------------
The Group's overall funding position remains strong given the maturity profile of its committed financings, the manageable level of gross debt and the committed undrawn headroom under its core credit facility.
Short-term borrowings are comprised of JPY 18 billion Japanese yen loan (equivalent to GBP137 million), which matures in January 2017 and GBP16 million overdrafts related to short-term timing differences on trade settlements. At 30 September 2016, the Group had committed undrawn headroom under its core credit facility of GBP277 million (31 March 2016 - GBP425 million, 30 September 2015 - GBP253 million).
EUR100 million of the 5 year EUR350 million senior notes and EUR15 million of the 10 year senior notes are designated as net investment hedges. The remaining foreign currency debt is swapped to GBP using a combination of long-term and short-term FX contracts.
As at 30 September 2016 the Group's long-term issuer default rating on senior debt remained unchanged from 31 March 2016 at BBB (stable) with Fitch and Baa3 (stable) with Moody's.
Net debt at 30 September 2016 of GBP245 million has increased by GBP97 million on the 31 March 2016 position of GBP148 million. The increase in the net debt position resulted from usual seasonality of major cash flows including the dividend payment of GBP100 million in July 2016, GBP42 million to acquire a subsidiary and available-for-sale investment interests in emerging financial technology firms in PTRI and an GBP11 million payment in relation to exceptional expenses. Trading free cash flow for the period of GBP40 million and GBP16 million FX gain on net cash partially offset the adverse movement on the net debt position.
Regulatory capital
ICAP operates its business under an investment firm waiver, which currently runs until December 2017. The waiver modifies the basis on which regulatory capital is assessed and, at 30 September 2016, ICAP had GBP1 billion (31 March 2016 - GBP0.8 billion) of headroom on this basis.
The effect of the waiver is to exclude goodwill and other intangibles from the assessment and, in doing so, allows the Group to undertake acquisitions using debt rather than equity finance. In the absence of a waiver the Group's consolidated regulatory capital requirement would increase by approximately GBP0.5 billion.
Following the disposal of IGBB, it is expected that the retained Group will not be subject to consolidated regulatory capital requirements. NEX will have 7 regulated subsidiaries compared to the current 39 regulated subsidiaries (which includes IGBB).
Risk
Details of the Group's approach to risk management and its risk profile were set out on pages 16 to 21 of the 2016 Annual Report. As of 30 September 2016, the directors have reviewed the Group's risk profile in the context of current market conditions and the outlook for the remaining six months of the financial year. In addition, they have reconsidered previous statements made on risk appetite, risk governance and internal controls and do not consider there to be any significant changes since the 2016 Annual Report.
Directors' statement of responsibilities
The directors confirm that, to the best of their knowledge, this condensed set of financial statements has been prepared in accordance with IAS34 'Interim Financial Reporting' as adopted by the European Union, and that the interim management report and the condensed set of financial statements herein includes a fair review of the information required by DTR 4.2.7R and DTR 4.2.8R, namely:
-- an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements, and a description of the principal risks and uncertainties for the remaining six months of the financial year; and
-- material related party transactions in the first six months of the financial year and any material changes in the related party transactions described in the 2016 Annual Report.
Going concern basis
The financial statements are prepared on the going concern basis, as the directors are satisfied that the Group has the resources to continue in business for the foreseeable future. In making this assessment, the directors have considered a wide range of information relating to present and future conditions, including the Group's profitability, liquidity requirements, plans and financing arrangements.
Changes in directors
A list of current directors is maintained on the ICAP plc website www.icap.com.
By order of the board
Stuart Bridges
Group Finance Director
16 November 2016
Consolidated income statement
Half year to 30 September
2016
--------------------------------- --------- --------- --------------- ------------- -------
Acquisition
and disposal Exceptional
Trading costs items Total
Note GBPm GBPm GBPm GBPm
--------------------------------- --------- --------- --------------- ------------- -------
Revenue 2 254 - - 254
Operating expenses (187) (13) 8 (192)
Other income - 20 - 20
--------------------------------- --------- --------- --------------- ------------- -------
Operating profit 67 7 8 82
Finance income - - - -
Finance costs (16) - - (16)
Share of profits of associates
after tax - - - -
Share of profits of joint
ventures after tax - - - -
--------------------------------- --------- --------- --------------- ------------- -------
Profit before tax from
continuing operations 51 7 8 66
Tax 7 (8) 3 (2) (7)
--------------------------------- --------- --------- --------------- ------------- -------
Profit for the period from
continuing operations 43 10 6 59
Profit for the period from
discontinued operations 4 46 - (19) 27
--------------------------------- --------- --------- --------------- ------------- -------
Profit for the period 89 10 (13) 86
--------------------------------- --------- --------- --------------- ------------- -------
Attributable to:
Owners of the Company 90 10 (13) 87
Non-controlling interests (1) - - (1)
--------------------------------- --------- --------- --------------- ------------- -------
89 10 (13) 86
--------------------------------- --------- --------- --------------- ------------- -------
Earnings per ordinary share
(pence)
- basic 5 13.7 13.2
- diluted 5 13.4 13.0
--------------------------------- --------- --------- --------------- ------------- -------
Half year to 30 September
2015
--------------------------------- --------- ------------ ------------------ ---------------- ----------
Acquisition
and disposal Exceptional
Trading costs items Total
(restated) Note GBPm GBPm GBPm GBPm
--------------------------------- --------- ------------ ------------------ ---------------- ----------
Revenue 2 229 - - 229
Operating expenses (162) (18) - (180)
Other income - - - -
--------------------------------- --------- ------------ ------------------ ---------------- ----------
Operating profit 67 (18) - 49
Finance income 1 - - 1
Finance costs (14) - - (14)
Share of profits of associates -
after tax - - -
Share of profits of joint
ventures after tax 1 - - 1
--------------------------------- --------- ------------ ------------------ ---------------- ----------
Profit before tax from
continuing operations 55 (18) - 37
Tax 7 (8) 12 - 4
--------------------------------- --------- ------------ ------------------ ---------------- ----------
Profit for the period from
continuing operations 47 (6) - 41
Profit for the period from
discontinued operations 4 37 - - 37
--------------------------------- --------- ------------ ------------------ ---------------- ----------
Profit for the period 84 (6) - 78
--------------------------------- --------- ------------ ------------------ ---------------- ----------
Attributable to:
Owners of the Company 85 (6) - 79
Non-controlling interests (1) - - (1)
--------------------------------- --------- ------------ ------------------ ---------------- ----------
84 (6) - 78
--------------------------------- --------- ------------ ------------------ ---------------- ----------
Earnings per ordinary share
(pence)
- basic 5 13.0 12.0
- diluted 5 12.7 11.8
--------------------------------- --------- ------------ ------------------ ---------------- ----------
Consolidated statement of comprehensive
income
----------------------------------------------- ------------------ --- ---------------------
Half year
Half year to 30 September
to 30 September 2015
2016 GBPm
GBPm (restated)
----------------------------------------------- ------------------ --- ---------------------
Profit for the period 86 78
----------------------------------------------- ------------------ --- ---------------------
Other comprehensive income/(expense) from
continuing operations
----------------------------------------------- ------------------ --- ---------------------
Items that will be reclassified subsequently
to profit or loss when specific conditions
are met:
----------------------------------------------- ------------------ --- ---------------------
Net movement on cash flow hedges (3) -
Exchange differences 100 (4)
Other comprehensive income/(expense) for
the period, net of tax, from continuing
operations
Other comprehensive income/(expense) for 97 (4)
the period, net of tax, from discontinued
operations 44 (4)
----------------------------------------------- ------------------ --- ---------------------
Total comprehensive income for the period 227 70
----------------------------------------------- ------------------ --- ---------------------
Total comprehensive income attributable
to:
Owners of the Company 223 71
Non-controlling interests 4 (1)
----------------------------------------------- ------------------ --- ---------------------
227 70
----------------------------------------------- ------------------ --- ---------------------
Consolidated balance sheet
--------------------------------------------- --------- ------------ -------------- ---------------
As at 30 As at As at 30
September 31 March September
2016 2016 2015
Note GBPm GBPm GBPm
--------------------------------------------- --------- ------------ -------------- ---------------
Assets
Non-current assets
Intangible assets arising on consolidation 10 982 826 898
Intangible assets arising from
development expenditure 104 88 114
Property and equipment 35 30 38
Investment in joint ventures 7 6 13
Investment in associates 46 52 114
Deferred tax assets 4 13 8
Trade and other receivables 20 9 10
Available-for-sale investments 12 9 19
--------------------------------------------- --------- ------------ -------------- ---------------
1,210 1,033 1,214
--------------------------------------------- --------- ------------ -------------- ---------------
Current assets
Trade and other receivables 91,283 59,461 17,592
Available-for-sale investments - - 1
Cash and cash equivalents 9 174 157 493
Restricted funds 9 45 26 34
Held for sale assets 4 19,905 21,393 4
--------------------------------------------- --------- ------------ -------------- ---------------
111,407 81,037 18,124
--------------------------------------------- --------- ------------ -------------- ---------------
Total assets 112,617 82,070 19,338
--------------------------------------------- --------- ------------ -------------- ---------------
Liabilities
Current liabilities
Trade and other payables (91,281) (59,464) (17,550)
Borrowings 8 (137) (64) (62)
Tax payable (39) (41) (30)
Provisions (11) (8) (18)
Held for sale liabilities 4 (19,293) (20,861) (2)
--------------------------------------------- --------- ------------ -------------- ---------------
(110,761) (80,438) (17,662)
--------------------------------------------- --------- ------------ -------------- ---------------
Non-current liabilities
Trade and other payables (24) (12) (29)
Borrowings 8 (585) (519) (564)
Deferred tax liabilities (82) (67) (70)
Retirement benefit obligations (4) (3) (6)
Provisions (11) (13) (17)
--------------------------------------------- --------- ------------ -------------- ---------------
(706) (614) (686)
--------------------------------------------- --------- ------------ -------------- ---------------
Total liabilities (111,467) (81,052) (18,348)
--------------------------------------------- --------- ------------ -------------- ---------------
Net assets 1,150 1,018 990
--------------------------------------------- --------- ------------ -------------- ---------------
Equity
Capital and reserves
Called up share capital 66 66 66
Share premium account 454 454 454
Other reserves 74 77 79
Translation 243 104 35
Retained earnings 270 276 314
--------------------------------------------- --------- ------------ -------------- ---------------
Equity attributable to owners of
the Company 1,107 977 948
Non-controlling interests 43 41 42
--------------------------------------------- --------- ------------ -------------- ---------------
Total equity 1,150 1,018 990
--------------------------------------------- --------- ------------ -------------- ---------------
The consolidated Financial Statements, including accompanying notes, were approved by the board on 16 November 2016 and were signed on its behalf by:
Stuart Bridges
Group Finance Director
Consolidated statement of changes in equity
Half year to 30 September 2016
----------------------------------------------------------------------------------------------------------------------------------------------------
Attributable
to owners
Share Share Other Retained of the Non-controlling
GBPm capital premium reserves Translation earnings Company interests Total
------------------- ------------ ------------ ------------- ---------------- ------------- ----------------- -------------------- ----------
Balance at
1 April 2016 66 454 77 104 276 977 41 1,018
Profit for
the period - - - - 87 87 (1) 86
Other
comprehensive
income/(expense)
for the period,
net of tax
Cash flow
hedges - - (3) - - (3) - (3)
Exchange
differences - - - 139 - 139 5 144
Total
comprehensive
income/(expense)
for the period - - (3) 139 87 223 4 227
Treasury shares
awarded - - - - 2 2 - 2
Other movements
in
non-controlling
interests - - - - - - (1) (1)
Share-based
payments in
the period - - - - 5 5 - 5
Dividends
paid in the
period - - - - (100) (100) (1) (101)
Balance at
30 September
2016 66 454 74 243 270 1,107 43 1,150
------------------- ------------ ------------ ------------- ---------------- ------------- ----------------- -------------------- ----------
Half year to 30 September 2015
-----------------------------------------------------------------------------------------------------------------------------------------------------
Attributable
to owners
Share Share Other Retained of the Non-controlling
GBPm capital premium reserves Translation earnings Company interests Total
------------------- ------------ ------------ ------------- ---------------- ------------- ----------------- -------------------- ----------
Balance at 1
April 2015 66 454 79 43 330 972 46 1,018
Profit for the
period - - - - 79 79 (1) 78
Other
comprehensive
income/(expense)
for the period,
net of tax
Cash flow hedges - - - - - - - -
Exchange
differences
Revaluation - - - (8) - (8) - (8)
gains/(losses)
realised in the
period - - - - - - - -
------------------- ------------ ------------ ------------- ---------------- ------------- ----------------- -------------------- ----------
Total
comprehensive
income/(expense)
for the period - - - (8) 79 71 (1) 70
Treasury shares
awarded - - - - 1 1 - 1
Other movements
in
non-controlling - - - - - - (3) (3)
Share-based
payments - - - - 3 3 - 3
Dividends paid
in the period - - - - (99) (99) - (99)
Balance at 30
September 2015 66 454 79 35 314 948 42 990
------------------- ------------ ------------ ------------- ---------------- ------------- ----------------- -------- ---------- ----------
Consolidated statement of cash flow
---------------------------------------------- --------- --------------------- ---------------------
GBPm Half year Half year
to 30 September to 30 September
Note 2016 2015
---------------------------------------------- --------- --------------------- ---------------------
Cash flows from operating activities 9 64 97
---------------------------------------------- --------- --------------------- ---------------------
Cash flows from investing activities
Dividends received from associates 4 3
Dividends received from joint ventures 1 1
Other equity dividends received 1 -
Payments to acquire property and equipment (8) (7)
Intangible development expenditure (33) (26)
Acquisition of available-for-sale investments (2) (4)
Acquisition of interests in businesses (36) -
Acquisition of associates (4) (17)
Net cash flows from investing activities (77) (50)
---------------------------------------------- --------- --------------------- ---------------------
Cash flows from financing activities
Dividends paid to owners of the Company (100) (99)
Dividends paid to non-controlling interests (1) -
Proceeds from exercise of share options 2 1 Repayment of borrowings - (126) Funds received from borrowing, net of fees 115 228 ---------------------------------------------- --------- --------------------- --------------------- Net cash flows from financing activities 16 4 ---------------------------------------------- --------- --------------------- --------------------- Net increase in cash and cash equivalents 3 51 Net cash and cash equivalents at beginning of period 9 433 448 FX adjustments 41 (13) ---------------------------------------------- --------- --------------------- --------------------- Net cash and cash equivalents at end of period 9 477 486 ---------------------------------------------- --------- --------------------- --------------------- Net cash and cash equivalents consists of: Cash and cash equivalents 9 493 493 Overdraft 9 (16) (7) Net cash and cash equivalents at end of period 477 486 ---------------------------------------------- --------- --------------------- ---------------------
Cash flows of discontinued operations
The consolidated statement of cash flow above includes discontinued operations. Cash inflows from operating activities of GBP6 million, cash outflows from investing activities of GBP5 million and cash outflows from financing activities of GBP1 million were incurred in the period relating to the discontinued business.
1 Basis of preparation ======================
Notes to the Financial Statements
(a) Basis of preparation
The condensed consolidated financial statements for the half year to 30 September 2016 do not constitute statutory accounts as defined in section 434 of the Companies Act 2006. The condensed consolidated financial statements are unaudited but have been reviewed by the auditors, PricewaterhouseCoopers LLP, and their report is set out at the end of this document. The 2016 Annual Report has been filed with the Registrar of Companies. The report of the auditors on those accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under section 498 of the Companies Act 2006.
The condensed consolidated financial statements for the half year to 30 September 2016 have been prepared in accordance with the DTR4.2 of the FCA and with IAS34 'Interim Financial Reporting' as issued by the International Accounting Standards Board (IASB) and endorsed by the European Union (EU). These condensed consolidated financial statements should be read in conjunction with the 2016 Annual Report which was prepared in accordance with IFRSs as issued by the IASB and endorsed by the EU at that date.
The accounting policies applied in the preparation of the condensed consolidated financial statements are consistent with those applied in the preparation of the 2016 Annual Report.
The preparation of financial information requires the use of estimates and assumptions about future conditions. The use of available information and the application of judgement are inherent in the formation of estimates; actual results in the future may differ from those reported. The significant judgements and estimates applied by the Group in these consolidated financial statements have been applied on a basis consistent with the 2016 Annual Report.
In November 2015, the Group announced that it had entered into the Transaction which will, when completed, involve the disposal of IGBB to Tullet Prebon. The disposal is subject to approvals from regulatory authorities across multiple jurisdictions. The Group is committed to a plan to sell having signed the SPA with Tullett Prebon and it is anticipated that the required regulatory approvals will be obtained.
The IGBB business disposal meets the criteria of IFRS5 for held for sale classification. The criteria for held for sale are met as the business is available for sale in its present condition, and the sale is highly probable.
The results of the IGBB business, subject to certain provisions in the SPA, are presented as discontinued operations in the consolidated income statement as the sale is a single co-ordinated plan to dispose of a separate major line of business. The assets and liabilities attributable to IGBB, also subject to certain provisions in the SPA, are presented as held for sale assets and liabilities on the face of the balance sheet.
Presentation of primary statements
The Group maintains a columnar format for the presentation of its consolidated income statement. The columnar format enables the Group to continue its practice of improving the understanding of its results by presenting its trading profit. This is the profit measure used to calculate trading EPS and is considered to be the most relevant as it better reflects the Group's trading earnings.
Profit before acquisition and disposal costs and exceptional items are reconciled to profit before tax on the face of the consolidated income statement. On the face of the consolidated income statement basic and diluted EPS have been disclosed.
When the Group has disposed of or intends to dispose of a business component that represents a major line of business or geographic area of operations, it classifies such operations as discontinued. The post-tax profit or loss of the discontinued operations is shown as a single line on the face of the consolidated income statement, separate from the other results of the Group. The consolidated income statement for the comparative periods is restated to show the discontinued operations separate from those generated by the continuing operations.
(b) Future accounting developments
At 30 September 2016, the following standards have been issued by the IASB which are not effective for these consolidated financial statements:
-- In July 2014, the IASB issued IFRS9 'Financial Instruments', which will replace IAS39 'Financial Instruments: Recognition and Measurement'. The standard will become effective for annual periods beginning on or after 1 January 2018. ICAP intends to adopt IFRS9 for its financial statements for the year ended 31 March 2019;
-- In May 2014, the IASB issued IFRS15 'Revenue from Contracts with Customers', which will replace IAS18 'Revenue' and IAS11 'Construction Contracts' and other related interpretations on revenue recognition. The standard will become effective for annual periods beginning on or after 1 January 2018. ICAP intends to adopt IFRS15 for its financial statements for the year ended 31 March 2019; and
-- In January 2016, the IASB issued IFRS16 'Leases', which will replace IAS17 'Leases' and other related interpretations on leases. The standard will become effective for annual periods beginning on or after 1 January 2019. ICAP intends to adopt IFRS16 for its financial statements for the year ended 31 March 2020.
2 Segmental information =======================
The basis of identifying segments and measuring segmental results is set out on page 89 of the 2016 Annual Report.
Half year to 30 September 2016
--------------------------------------------------------------------------------------------------------------
Post Trade
Electronic Risk and Global
GBPm Markets Information Broking Group
------------------------------------------ --------------- ----------------- ------------- --- ----------
Continuing operations:
Revenue 139 113 2 254
Trading operating profit 43 32 (8) 67
Profit from associates - - - [ -
Profit from joint ventures - - - -
========================================== =============== ================= ============= === ==========
Continuing trading EBIT* 43 32 (8) 67
Reconciliation to the consolidated
income statement:
Continuing operations:
Continuing trading EBIT* 67
Trading net finance cost** (16)
========================================== =============== ================= ============= === ==========
Trading profit before tax 51
Acquisition and disposal costs 7
Exceptional items 8
------------------------------------------ --------------- ----------------- ------------- --- ----------
Profit before tax from continuing
operations 66
Tax on continuing operations (7)
------------------------------------------ --------------- ----------------- ------------- --- ----------
Profit for the period from continuing
operations 59
------------------------------------------ --------------- ----------------- ------------- --- ----------
Profit for the period from discontinued
operations, net of tax 27
------------------------------------------ --------------- ----------------- ------------- --- ----------
Profit for the period 86
------------------------------------------ --------------- ----------------- ------------- --- ----------
Other segmental information
for Group (including discontinued):
Trading operating profit margin 29% 34% 9% 19%
Trading EBIT* 41 47 34 122
Trading depreciation 4 2 2 8
Trading amortisation 10 5 6 [ 21
Trading EBITDA*** 55 54 42 151
Capital expenditure 24 9 8 41
------------------------------------------ --------------- ----------------- ------------- --- ----------
* Trading EBIT is the trading profit before deducting net finance cost and tax.
** Given the Group's debt financing arrangements are managed centrally through a treasury function, ICAP plc Board does not incorporate net finance cost in the assessment of the segments' performance.
*** Trading EBITDA is the trading profit before deducting net finance cost, tax and amortisation and depreciation charges. Segments' trading EBITDA best represents the cash generated from their ongoing operations.
Half year to 30 September 2015
--------------------------------------------------------------------------------------------------------------
Post Trade
Electronic Risk and Global
GBPm (restated) Markets Information Broking Group
------------------------------------------ --------------- ----------------- ------------- --- ----------
Continuing operations:
Revenue 129 95 5 229
Trading operating profit 44 31 (8) 67
Profit from associates - (1) 1 [ -
Profit from joint ventures - - 1 1
========================================== =============== ================= ============= === ==========
Continuing trading EBIT* 44 30 (6) 68
Reconciliation to the consolidated
income statement:
Continuing operations:
Continuing trading EBIT* 68
Trading net finance cost** (13)
========================================== =============== ================= ============= === ==========
Trading profit before tax 55
Acquisition and disposal costs (18)
Exceptional items -
------------------------------------------ --------------- ----------------- ------------- --- ----------
Profit before tax from continuing
operations 37
Tax on continuing operations 4
------------------------------------------ --------------- ----------------- ------------- --- ----------
Profit for the period from continuing
operations 41
------------------------------------------ --------------- ----------------- ------------- --- ----------
Profit for the period from discontinued
operations, net of tax 37
------------------------------------------ --------------- ----------------- ------------- --- ----------
Profit for the period 78
------------------------------------------ --------------- ----------------- ------------- --- ----------
Other segmental information
for Group (including discontinued):
Trading operating profit margin 31% 38% 7% 18%
Trading EBIT* 40 44 30 114
Trading depreciation 2 1 4 7
Trading amortisation 10 2 6 [ 18
Trading EBITDA*** 52 47 40 139
Capital expenditure**** 17 8 7 33
------------------------------------------ --------------- ----------------- ------------- --- ----------
* Trading EBIT is the trading profit before deducting net finance cost and tax.
** Trading EBITDA is the trading profit before deducting net finance cost, tax and amortisation and depreciation charges. Segments' trading EBITDA best represents the cash generated from their ongoing operations.
*** Given the Group's debt financing arrangements are managed centrally through a treasury function, the ICAP plc board does not incorporate net finance cost in the assessment of the segments' performance.
**** Total capital expenditure for the Group includes GBP1 million investment made to develop corporate intangible assets, which are not segment specific.
GBPm Half year to 30 September Half year to 30 September
2016 2015 (restated)
----------------------------------------- -------------------------------------------------------- --- --- --- -------------------------------------------------------------
Discontinued Discontinued
Continuing (note 4) Group Continuing (note 4) Group
----------------------------------------- --------------- --- ----------------- --- ---------- --- --- ------------------- --- --- ----------------- --- --- ----------
Revenue
* Electronic Markets
* Post Trade Risk and Information 139 2 141 129 2 131
113 26 139 95 24 119
* Global Broking 2 358 360 5 340 345
----------------------------------------- --------------- --- ----------------- --- ---------- --- --- ------------------- --- --- ----------------- --- --- ----------
254 386 640 229 366 595
----------------------------------------- --------------- --- ----------------- --- ---------- --- --- ------------------- --- --- ----------------- --- --- ----------
Trading operating
profit
* Electronic Markets
* Post Trade Risk and Information 43 (2) 41 44 (4) 40
32 15 47 31 14 45
* Global Broking (8) 42 34 (8) 33 25
----------------------------------------- --------------- --- ----------------- --- ---------- --- --- ------------------- --- --- ----------------- --- --- ----------
67 55 122 67 43 110
----------------------------------------- --------------- --- ----------------- --- ---------- --- --- ------------------- --- --- ----------------- --- --- ----------
3 Exceptional items
========================
GBPm Half year to
30 September
2015
Half year to
30 September
2016 (restated)
--------------------------------------------- ------------------ ------ ------------------
Exceptional items before tax
Transaction costs - discontinued operations (22) -
Onerous lease release - continuing operations 5 -
Legal expenses insurance claim - continuing
operations 3 -
Total exceptional items before tax (14) -
Tax 1 -
--------------------------------------------- ------------------ ------ ------------------
Total exceptional items after tax (13) -
--------------------------------------------- ------------------ ------ ------------------
Attributable to:
Continuing operations 6 -
Discontinued operations (note 4) (19) -
--------------------------------------------- ------------------ ------ ------------------
The discontinued exceptional items of GBP22 million represent
Transaction-related costs arising from the impending disposal
of IGBB, including costs to sale and separation costs that
were incurred and provided as at 30 September 2016. Continuing
exceptional items consist of income of GBP3 million which relates
to a legal expenses insurance claim and income of GBP5 million
which relates to the release of an onerous lease provision.
---------------------------------------------------------------------------------------------
4 Discontinued operations and held for sale assets and liabilities
==================================================================
On 11 November 2015, the Group signed an SPA with Tullett Prebon for the disposal of its IGBB business at which point it met IFRS5 criteria to be classified as held for sale.
The disposal is subject to approvals from regulatory authorities across multiple jurisdictions.
The results of the IGBB business, subject to certain provisions in the SPA, are presented as discontinued operations as the sale is a single co-ordinated plan to dispose of a separate major line of business. The assets and liabilities attributable to IGBB, also subject to certain provisions in the SPA, are presented as held for sale assets and liabilities on the face of the balance sheet. These assets and liabilities were transferred to held for sale at carrying value.
a) Results of operations
Half year to 30 September
2016
-------------------------------------- --------- ------------------------- ------------- -------
Acquisition Exceptional
and disposal items
Trading costs GBPm Total
GBPm GBPm GBPm GBPm
-------------------------------------- --------- ------------------------- ------------- -------
Revenue 386 - - 386
Operating expenses (333) - (22) (355)
Other income 2 - - 2
--------------------------------------- --------- ------------------------- ------------- -------
Operating profit from discontinued
operations 55 - (22) 33
Net finance income 1 - - 1
Share of profits of associates
and joint ventures after
tax 3 - - 3
--------------------------------------- --------- ------------------------- ------------- -------
Profit before tax from discontinued
operations 59 - (22) 37
Tax (13) - 3 (10)
--------------------------------------- --------- ------------------------- ------------- -------
Profit for the period from
discontinued operations 46 - (19) 27
--------------------------------------- --------- ------------------------- ------------- -------
Attributable to:
Owners of the Company 47 - (19) 28
Non-controlling interests (1) - - (1)
--------------------------------------- --------- ------------------------- ------------- -------
46 - (19) 27
-------------------------------------- --------- ------------------------- -------------
Half year to 30 September
2015
Acquisition
and disposal Exceptional
Trading costs items Total
(restated) GBPm GBPm GBPm GBPm
Revenue 366 - - 366
Operating expenses (324) - - (324)
Other income 1 - - 1
---------------------------------------
Operating profit from discontinued
operations 43 - - 43
Net finance income - - - -
Share of profits of associates
and joint ventures after
tax 3 - - 3
---------------------------------------
Profit before tax from discontinued
operations 46 - - 46
Tax (9) - - (9)
Profit for the period from
discontinued operations 37 - - 37
Attributable to:
Owners of the Company 39 - - 39
Non-controlling interests (2) - - (2)
37 - - 37
b) Breakdown of assets held for sale
As at 30 As at 31
September March
2016 2016
GBPm GBPm
Non-current assets
Goodwill and other intangibles arising on
consolidation 85 83
Other 126 129
Current assets
Trade and other receivables 19,320 20,789
Cash and cash equivalents 319 359
Restricted funds 55 33
Total held for sale assets 19,905 21,393
Current liabilities
Trade and other payables (19,258) (20,738)
Overdraft (16) (81)
Provisions (12) (12)
Other - (4)
Non-current liabilities
Trade and other payables - (4)
Provisions - (3)
Other (7) (19)
Total held for sale liabilities (19,293) (20,861)
Net assets held for sale 612 532
5 Earnings per share
Group presents trading earnings per share measurement ratios as it believes that this is the most appropriate measurement since it better reflects the Group's underlying cash earnings.
Earnings per share
Half year to 30 September Half year to 30 September
2016 2015
Trading basic Earnings Earnings
and Earnings Shares per share Earnings Shares per share
diluted GBPm millions pence GBPm millions pence
Trading basic 89 [x 650 13.7 84 648 13.0
Dilutive effect
of
share options - 12 (0.3) - 12 (0.3)
Trading diluted 89 662 13.4 84 660 12.7
Half year to 30 September Half year to 30 September
2016 2015
Earnings Earnings
Basic and Earnings Shares per share Earnings Shares per share
diluted GBPm millions pence GBPm millions pence
Basic 86 650 13.2 78 648 12.0
Dilutive effect
of
share options - 12 (0.2) - 12 (0.2)
Diluted 86 662 13.0 78 660 11.8
6 Dividends
GBPm Half year to Half year
30 September to 30 September
2016 2015
Amounts recognised as distributions to
equity holders in the period
Final dividend for the year ended 31
March 2016 of 15.40p per share (2015
- 15.40p) 100 99
The final dividend for the year ended 31 March 2016 was satisfied with a cash payment of GBP100 million.
On 16 November 2016, the board approved an interim dividend for the half year ended 30 September 2016 of 6.6p per share (30 September 2015 - 6.6p). The dividend will be satisfied in cash.
7 Tax
Tax charged to the income statement in the period:
GBPm Half year to
30 September
2015
Half year to
30 September
2016 (restated)
Current tax
Current period 14 14
Adjustment to prior periods (3) (4)
11 10
Deferred tax
Current period 7 (5)
Adjustments to prior periods (1) -
6 (5)
Total tax charged to consolidated income
statement 17 5
Attributable to:
Continuing operations 7 (4)
Discontinued operations (note 4) 10 9
The Group's share of profit of joint ventures and associates in the income statement is shown net of tax of GBP0.5 million (30 September 2015 - GBP2 million).
The standard rate of Corporation Tax in the UK will change from 20% to 19% with effect from 1 April 2017 and 17% with effect from 1 April 2020.
GBPm Half year to
30 September
2015
Half year
to 30 September
2016 (restated)
Tax on trading profit
Total tax charged to the consolidated
income statement 17 5
Tax credit on acquisition and disposal
costs 3 12
Tax credit on exceptional items 1 -
Total tax charged on trading profit 21 17
Attributable to:
Continuing operations 8 8
Discontinued operations (note 4) 13 9
The Group's ETR on trading profit for the half year to 30 September 2016 was 19% (half year to 30 September 2015 - 17%). The Group's trading ETR is lower than the applicable statutory rate in the UK, reflecting the impact of prior period tax adjustments in the current period.
8 Borrowings
a) Long-term borrowings
GBPm As at 30 As at 31 As at 30
September March September
2016 2016 2015
Five-year senior notes repayable 2019 301 276 257
RCF repayable 2019 146 108 173
Retail bond repayable 2018 125 124 124
Ten-year senior notes repayable 2023 13 11 10
585 519 564
No new debt was issued during the period.
Drawings under the RCF included a $25 million (GBP19 million) swingline drawing (31 March 2016 - GBPnil) together with GBP129 million other drawings (31 March 2016 - GBP110 million) less fees of GBP2 million (31 March 2016 - GBP2 million). The swingline drawing arose due to short-term timing differences from unsettled matched principal trades which reversed subsequently. On completion of the Transaction with Tullett Prebon, the RCF will reduce in size from GBP425 million to GBP300 million. In October 2016, the maturity date of the GBP300 million was extended by one year to March 2019.
EUR100 million of the 5 year EUR350 million senior notes and EUR15 million of the 10 year senior notes are designated as net investment hedges. The remaining foreign currency debt is swapped to GBP using a combination of long-term and short-term FX contracts.
b) Short-term borrowings
GBPm As at 30 As at 31 As at 30
September March September
2016 2016 2015
Japanese yen loan 137 62 55
Overdrafts 16 83 7
153 145 62
For several years, the Group has entered into a series of yen term loans with Tokyo Tanshi Co Limited, borrowing each for a term of up to six months. These loans have been refinanced either immediately on maturity or a few days thereafter with similar terms. In April 2016, an additional yen 8bn was borrowed, taking the total loans outstanding to yen 18bn.
GBP16 million (31 March 2016 - GBP81 million) of the overdrafts arose due to short-term timing differences from unsettled matched principal trades which reversed subsequently. This GBP16 million (31 March 2016 - GBP81 million) is presented in held for sale liabilities on the balance sheet (note 4).
9 Cash
a) Reconciliation of profit before tax to net cash flow from operating activities
GBPm Half year
to 30 September
2015
Half year to
30 September
2016 (restated)
Profit before tax from continuing operations 66 37
Profit before tax from discontinued
operations (note 4) 37 46
Operating exceptional items 14 -
Share of profit of associates after
tax (2) (2)
Share of profit of joint ventures after
tax (1) (2)
Amortisation of intangible assets arising
on consolidation 12 20
Amortisation and impairment of intangible assets arising from development expenditure 21 18 Depreciation and impairment of property and equipment 8 7 Gain on equity interest (19) - Other acquisition and disposal costs - (2) Share-based payments (trading) 5 3 Net finance expense 15 13 Increase in provisions 2 1 Operating cash flows before movements in working capital 158 139 Decrease in trade and other payables (22) (49) (Increase)/decrease in trade and other receivables (29) 3 Timing differences on unsettled matched principal trades 41 27 (Increase)/decrease in restricted funds (40) 9 Cash generated by operations before exceptional items paid 108 129 Operating exceptional items paid (11) (4) Cash generated by operations 97 125 Interest received 1 1 Interest paid (12) (11) Tax paid (22) (18) Cash flow from operating activities 64 97
The movement in trade and other receivables and trade and other payables excludes the impact of the gross-up of matched principal trades as permitted by IAS7 'Statement of cash flows'. The gross-up has no impact on the cash flow or net assets of the Group.
b) Cash information by business
GBPm As at 30 As at 31 As at 30
September March September
2016 2016 2015
Cash and cash equivalents 493 516 493
Overdrafts (16) (83) (7)
Net cash and cash equivalents 477 433 486
Restricted funds 100 59 34
Total Cash 577 492 520
Discontinued operations hold GBP319 million of cash (31 March 2016 - GBP359 million), GBP55 million of restricted funds (31 March 2016 - GBP33 million) and GBP16 million of overdrafts (31 March 2016 - GBP81 million) (note 4).
10 Intangible assets arising on consolidation
GBPm Goodwill Other Total
Cost
As at 1 April 2016 999 625 1,624
Additions 69 19 88
Exchange adjustments 77 3 80
As at 30 September 2016 1,145 647 1,792
Amortisation and impairment
As at 1 April 2016 188 610 798
Amortisation charge for the period - 12 12
As at 30 September 2016 188 622 810
Net book value
As at 30 September 2016 957 25 982
GBPm Goodwill Other Total
Cost
As at 1 April 2015 1,062 625 1,687
Additions 5 - 5
Transfer to held for sale (92) - (92)
Exchange adjustments 24 - 24
As at 31 March 2016 999 625 1,624
Amortisation and impairment
As at 1 April 2015 185 572 757
Amortisation charge for the year - 38 38
Write off 3 - 3
As at 31 March 2016 188 610 798
Net book value
As at 31 March 2016 811 15 826
GBPm Goodwill Other Total
Cost
As at 1 April 2015 1,062 625 1,687
Exchange adjustments (11) (1) (12)
As at 30 September 2015 1,051 624 1,675
Amortisation and impairment
As at 1 April 2015 185 572 757
Amortisation charge for the year - 20 20
As at 30 September 2015 185 592 777
Net book value
As at 30 September 2015 866 32 898
The Group recognises GBP982 million of intangible assets arising on consolidation (31 March 2016 - GBP826 million), with GBP957 million relating to goodwill (31 March 2016 - GBP811 million) and GBP25 million relating to other intangible assets (31 March 2016 - GBP15 million). The other intangible assets mainly represent customer relationships, and have varying remaining amortisation periods across Cash Generating Units (CGUs).
The GBP982 million of intangible assets excludes goodwill and other intangible assets of GBP85 million (31 March 2016 - GBP92 million) primarily relating to IGBB which were reclassified to held for sale assets (note 4). There was no impairment recognised in relation to IGBB (31 March 2016 - GBPnil). In the year ended 31 March 2016, following the reclassification of the shipping business to held for sale, an impairment charge of GBP9 million was recognised.
Additions of GBP88 million relate to the acquisition of ENSO, of which GBP69 million is goodwill and GBP19 million is other intangible assets.
11 Contingent liabilities
The Company and its subsidiaries continue to co-operate with the government agencies in Europe and the US relating to their investigations into the setting of yen Libor. The Company was dismissed from initial US civil litigation against various yen Libor and euroyen Tibor setting banks. However, the plaintiff in that litigation was given permission by the court to add ICAP Europe Limited (IEL) as a defendant, and an amended complaint doing so was filed on 29 February 2016. IEL filed a motion to dismiss the amended complaint on 16 May 2016 and, following briefing on the motion, oral argument took place on 25 October 2016. The court expects to render a decision sometime in late January 2017.
On 24 July 2015, a new litigation was filed on behalf of two additional plaintiffs in the same court based on similar allegations. The new litigation includes claims against ICAP plc and IEL, both of which have filed motions to dismiss for lack of personal jurisdiction and have joined co-defendants' motion to dismiss for failure to state a claim. Oral argument on these motions was heard on 5 May 2016, and the court's decision on the motions remains pending. Plaintiffs in the Euribor civil litigation named ICAP plc and IEL on 13 August 2015 as parties to that pre-existing litigation. ICAP plc and IEL have joined the other defendants in filing motions to dismiss for lack of personal jurisdiction and for failure to state a claim. These motions are fully briefed and the parties are awaiting scheduling of oral argument. Plaintiffs in one of the US dollar Libor civil litigations sought permission to add the Company and IEL as defendants in that case. On 15 April 2016, the court denied the plaintiffs' request on the grounds that it lacked personal jurisdiction over the Company and IEL, with the result that neither company will be added to the litigation. It is not practicable to predict the ultimate outcome of these inquiries or the litigations. As a result it is not possible to provide an estimate of any potential financial impact on the Group.
ICAP continues to co-operate with inquiries by the US government agencies into the setting of USD ISDAFIX rates. In 2014, civil lawsuits were filed in the US against USD ISDAFIX setting banks, where a subsidiary of the Company was originally a named, but was subsequently replaced by ICAP Capital Markets LLC, as a defendant. Those suits have now been consolidated into a single action, which is in the discovery stage. The Company intends to defend these litigation claims vigorously. It is not practicable to predict the ultimate outcome of these inquiries or the litigation. As a result it is not possible to provide a reliable estimate of any potential financial impact on the Group.
From 25 November 2015 through present, ICAP Capital Markets LLC has been named as a defendant, along with a number of banks and Tradeweb Markets LLC, in ten civil lawsuits relating to the interest rates swaps market. Eight of the lawsuits are class actions by alleged investors in the market, and the other two are single plaintiff cases brought by failed competitors. All of the suits make allegations that defendants together colluded to prevent buy side customers from accessing the interest rates swaps market on electronic, exchange-like platforms, including the boycott of any platform offering all-to-all trading. The actions generally assert claims of violation of antitrust laws and unjust enrichment. The cases have been consolidated and are being managed by the United States District Court for the Southern District of New York. Defendants intend to file a motion to dismiss for failure to state a claim. The consolidated litigation is in the early case management stage, and all defendants filed motions to dismiss the complaints for failure to state a claim on 4 November 2016. Plaintiffs now have until 9 December 2016 to either file briefs in opposition to the motions, or to file amended complaints. Discovery is presently suspended. It is not possible to predict the outcome of these litigations or to provide an estimate of any potential liability or financial impact on the Group.
From time to time the Group is engaged in litigation in relation to a variety of matters, and is also required to provide information to regulators and other government agencies as part of informal and formal inquiries or market reviews.
12 Related party transactions
The nature of the various services provided to some of the Group's joint ventures and associates are similar to those for the year ended 31 March 2016 and there have been no material transactions or changes during the period to 30 September 2016.
The basis of remuneration of key management personnel remains consistent with that disclosed in the 2016 Annual Report.
13 Post balance sheet events
On 3 October 2016, initial completion documents were signed to transfer ICAP's London-based desks responsible for providing broking services in relation to fuel oil, crude oil, middle distillates, oil futures and options, along with ancillary New York-based and Singapore-based desks to INTL FCStone Ltd. Final completion is expected by the end of the year.
On 12 October 2016, ICAP Post Trade Holdings Limited increased its stake in Abide to 84.67%, having previously made its first investment in Abide in July 2015. Abide will become a subsidiary of ICAP's PTRI division.
Independent review report of ICAP plc
Report on the condensed consolidated financial statements
Our conclusion
We have reviewed ICAP plc's condensed consolidated interim financial statements (the "interim financial statements") in the Half-Yearly Financial Report of ICAP plc for the 6 month period ended 30 September 2016. Based on our review, nothing has come to our attention that causes us to believe that the interim financial statements are not prepared, in all material respects, in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union and the Disclosure Rules and Transparency Rules of the United Kingdom's Financial Conduct Authority.
What we have reviewed
The interim financial statements comprise:
-- the Consolidated balance sheet as at 30 September 2016;
-- the Consolidated income statement and consolidated statement of comprehensive income for the period then ended;
-- the Consolidated statement of cash flows for the period then ended; -- the Consolidated statement of changes in equity for the period then ended; and -- the explanatory notes to the interim financial statements.
The interim financial statements included in the Half-Yearly Financial Report have been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union and the Disclosure Rules and Transparency Rules of the United Kingdom's Financial Conduct Authority.
As disclosed in note 1 to the interim financial statements, the financial reporting framework that has been applied in the preparation of the full annual financial statements of the Group is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union.
Responsibilities for the interim financial statements and the review
Our responsibilities and those of the directors
The Half-Yearly Financial Report, including the interim financial statements, is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the Half-Yearly Financial Report in accordance with the Disclosure Rules and Transparency Rules of the United Kingdom's Financial Conduct Authority.
Our responsibility is to express a conclusion on the interim financial statements in the Half-Yearly Financial Report based on our review. This report, including the conclusion, has been prepared for and only for the company for the purpose of complying with the Disclosure Rules and Transparency Rules of the United Kingdom's Financial Conduct Authority and for no other purpose. We do not, in giving this conclusion, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.
What a review of interim financial statements involves
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures.
A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and, consequently, does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Independent review report of ICAP plc continued
We have read the other information contained in the Half-Yearly Financial Report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the interim financial statements.
PricewaterhouseCoopers LLP
Chartered Accountants
London
16 November 2016
a) The maintenance and integrity of the ICAP plc website is the responsibility of the directors; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the interim financial statements since they were initially presented on the website.
b) Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR ZMMMMLKRGVZM
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November 16, 2016 02:00 ET (07:00 GMT)
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