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Share Name Share Symbol Market Type Share ISIN Share Description
Tp Icap Group Plc LSE:TCAP London Ordinary Share JE00BMDZN391 ORD 25P
  Price Change % Change Share Price Bid Price Offer Price High Price Low Price Open Price Shares Traded Last Trade
  -1.50 -0.69% 217.00 216.90 217.00 220.50 216.60 220.50 502,353 16:29:21
Industry Sector Turnover (m) Profit (m) EPS - Basic PE Ratio Market Cap (m)
General Financial 1,794.0 129.0 17.2 12.6 1,222

TP ICAP Group PLC Annual Financial Report

26/03/2021 2:05pm

UK Regulatory (RNS & others)


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RNS Number : 6873T

TP ICAP Group PLC

26 March 2021

26 March 2021

2020 Annual Report and Notice of 2021 Annual General Meeting

TP ICAP Group plc (the 'Company') announces that the following documents have now been published:

-- the Annual Report and Accounts of TP ICAP Limited (formerly TP ICAP plc) and TP ICAP Group plc for the period ended 31 December 2020 (the "Group Accounts"); and

   --      the circular to shareholders incorporating the Notice of the 2021 Annual General Meeting. 

Both documents can be viewed at or downloaded from our website at www.tpicap.com/investors .

Copies of both of these documents will be available as soon as practicable for inspection via the National

Storage Mechanism at   https://data.fca.org.uk/#/nsm/nationalstoragemechanism . 

Given the ongoing COVID-19 related restrictions on movement and gatherings, we have again this year arranged to hold a hybrid AGM enabling shareholders to attend the meeting by electronic means. This will allow shareholders to hear from Directors, to ask questions and to vote in real time at the meeting.

The following disclosures comply with Disclosure and Transparency Rule 6.3.5. The full year results announcement released on 9 March 2021 contained a management report and condensed financial information derived from the Group Accounts. A description of risks and uncertainties, details of related party transactions and the Directors' Responsibility Statement, extracted in full unedited text from the Group Accounts, are set out below. This information should be read in conjunction with, and not as a substitute for, reading the Group Accounts. Page numbers and notes in the following appendices refer to page numbers and notes in the Group Accounts.

Appendix A: Principal Risks

The Board has conducted a robust assessment of the principal risks facing the Group, including those that would threaten its business model, future performance, solvency or liquidity, and reputation.

This assessment has been informed by a wide range of information, including reports provided by the Group Risk function and senior management, as well as key findings from the Group's various risk

assessment processes.

The Group formally reviews its risk profile on a bi-annual basis in light of its current business profile and potential changes arising from its business strategy and records these risks within the Group's

Risk Register.

The Group then formally assesses the risk profile of these risks through the Group's Risk Self-Assessment ('RSA') process against the target residual risk profile defined in the Group's risk appetite framework, by reference to both probability and severity.

The Group also undertakes stress testing and scenario analyses to enhance its understanding of its risk profile. This includes the conducting of reverse stress tests to identify those risks which could render the Group's business model unviable in an extreme scenario.

In addition to the formal reviews noted above, the Group assesses its risk profile on an ongoing basis and will update its Risk Register and risk ratings outside of the formal assessment cycle, where required to reflect any material changes. This includes any changes to risk profile identified through the Group's ongoing risk monitoring and reporting processes, as well as any new risks identified through the Group's change management framework.

The Group formally reviews its emerging risk profile as part of the risk identification and assessment process. An emerging risk, for these purposes, is defined as any new type of risk that may pose a material threat to the Group in the future and which the Group should monitor so that it is in a position to actively manage the risk if, and when, it becomes a more immediate threat to the Group.

Emerging risks are recorded in the Group's Emerging Risk Register, along with an assessment of its potential impact and an estimate of the timeframe within which it is likely to materialise.

 
 
 

1. Strategic and Business Risk

Risk

Adverse change to regulatory framework

Description

The Group is exposed to the risk of a fundamental change to the regulatory framework which has a material adverse impact on its business and economic model.

Potential impact

 
 >   Reduction in broking activity 
 >   Reduced earnings and profitability 
 >   Increases in regulatory capital requirements 
 

Change in risk exposure since 2019

No change

Mitigation

 
 >   Monitoring of regulatory developments 
 >   Involvement in consultation and rule setting processes 
 

Key risk indicator

 
 >   Status of regulatory change initiatives 
 

Related principal strategic objectives

 
 >    Electronification 
 >    Liquidity aggregation 
 >    Diversification 
  >    People, conduct and compliance 
 
 
 
 

Risk

Deterioration in the commercial environment

Description

The risk that due to adverse macro-economic conditions or geopolitical developments, market activity is suppressed leading to reduced trading volumes.

Potential impact

 
 >   Reduction in broking activity 
 >   Pressure on brokerage rates 
 >   Reduced earnings and profitability 
 

Change in risk exposure since 2019

Increased

Mitigation

 
 >   Defined business strategy that seeks to maintain client, 
      geographical and product diversification 
 

Key risk indicator

 
 >   Operating profit 
 >   Revenues by region 
 >   Trade volumes 
 >   Revenue forecast 
 >   Stress testing scenario outcomes 
 

Related principal strategic objectives

 
 >    Electronification 
  >    Liquidity aggregation 
  >    Diversification 
 
 
 
 

Risk

Failure to respond to client requirements

Description

The risk that the Group fails to respond to rapidly changing customer requirements, including the demand for enhanced electronic broking solutions for certain asset classes.

Potential impact

 
 >   Loss of market share 
 >   Reduced earnings and profitability 
 

Change in risk exposure since 2019

No change

Mitigation

 
 >   Proactive engagement with clients through customer 
      relationship management process 
 >   Clearly defined business development strategy which 
      continues to enhance the Group's service offering 
 

Key risk indicator

 
 >   Operating profit 
 >   Trade volumes 
 >   Revenues by region 
 >   New business initiatives 
 >   Client satisfaction surveys 
 

Related principal strategic objectives

 
 >    Electronification 
  >    Liquidity aggregation 
  >    Diversification 
 
 
 
 

Risk

The impact of Brexit

Description

The risk that Brexit leads to a deterioration in the commercial environment and consequential reduction in trading volumes.

The risk that the operating model implemented by the Group to comply with the loss of EU passporting rights results in a fragmentation of liquidity between UK and EU liquidity pools.

Potential impact

 
 >   Reduction in broking activity 
 >   Loss of market share 
 >   Reduced earnings and profitability 
 

Change in risk exposure since 2019

Increased

Mitigation

 
 >   Incorporation of a new EU subsidiary to hold EU-based business 
 >   Changes to operating model to maintain UK-EU liquidity and 
      regulatory compliance 
 >   Proactive engagement with European regulators and clients 
 

Key risk indicator

 
 >   Brexit revenue-at-risk 
 >   Brexit plan tracking 
 

Related principal strategic objectives

 
 >   Liquidity aggregation 
 >   People, conduct and compliance 
 
 
 
 
 

Risk

Impact of Covid-19

Description

The risk that the Group experiences a significant deterioration in business performance due to the

impact of Covid-19 on the broader global economy.

The Group is also aware of the potentially elevated operational risk arising from remote working arrangements, including: (a) Enhanced risk of operational failure, which may be exacerbated by heightened levels of market volatility; and (b) Increased conduct risk arising from remote supervision.

Potential impact

 
 >    Reduction in broking activity 
  >    Loss of market share 
  >    Reduced earnings and profitability 
 

Change in risk exposure since 2019

Increased

Mitigation

 
 >   Consideration of potential Covid-19 impact in business 
      planning and strategy process 
 >   Adoption of remote working protocols 
 

Key risk indicator

 
 >    Revenues by region 
  >    Trade volumes 
  >    Risk events 
 

Related principal strategic objectives

 
 >   People, conduct and compliance 
 
 
 
 

Risk

Acquisition of Liquidnet

Description

The Group is exposed to execution risk in relation to the Liquidnet transaction. This includes the risk that it fails to successfully integrate the acquired business into the wider TP ICAP Group or that it fails to achieve the financial targets associated with the transaction.

Potential impact

 
 >    Failure to achieve future financial targets 
  >    Damage to reputation 
 

Change in risk exposure since 2019

New risk

Mitigation

 
 >   Integration managed through a formal programme management 
      structure, overseen by a sub-committee of the TP ICAP 
      plc board. 
 >   Action taken to secure key personnel 
 

Key risk indicator

 
 >    Performance against programme milestones 
  >    Performance against financial targets 
 

Related principal strategic objectives

 
 >    Electronification 
  >    Liquidity aggregation 
  >    Diversification 
 
 
 
 

2. Operational Risk

Risk

Operational failure

Description

The Group is exposed to operational risk in nearly every facet of its role as an interdealer broker,

including from its dependence on:

> the accurate execution of a large number of processes, including those required to execute, clear and settle trades; and

>a complex IT infrastructure.

Potential impact

 
 >   Financial loss which could, in extreme cases, impact 
      the Group's solvency and liquidity 
 >   Damage to the Group's reputation as a reliable market 
      intermediary 
 

Change in risk exposure since 2019

No change

Mitigation

 
 >    Appropriate framework of systems and controls to minimise 
       the risk of operational failure 
 >    Incident and crisis management process 
 >    Business continuity plans and capability 
  >    Reverse stress test process to identify key risks that 
       could undermine the Group's viability 
 

Key risk indicator

 
 >    Risk events 
 >    Execution failure 
 >    Settlement fails 
  >    Margin calls 
  >    System outages 
 

Related principal strategic objectives

 
 >    Electronification 
  >    People, conduct and compliance 
 
 
 
 

Risk

Cyber-security and data protection

Description

The risk that the Group fails to adequately protect itself against cyber-attack and/or to adequately secure the data it holds, resulting in loss of operability as well as potential loss of critical business or client data.

Potential impact

 
 >    Loss of revenue 
 >    Remediation costs 
  >    Damage to reputation 
  >    Regulatory sanctions 
  >    Payment of damages/compensation 
 

Change in risk exposure since 2019

No change

Mitigation

 
 >   Ongoing monitoring and assessment of the cyber-threat 
      landscape 
 >   Appropriate framework of systems and controls to prevent, 
      identify and contain cyber threats 
 
 

Key risk indicator

 
 >    Cyber-security events/losses 
  >    Vulnerability monitoring 
  >    Data loss events 
 

Related principal strategic objectives

 
 >   Electronification 
 
 
 
 

Risk

Unlicensed use of proprietary data

Description

The risk that the Group fails to protect unauthorised dissemination of Group's proprietary data leading to loss of potential revenue streams.

Potential impact

 
 >   Failure to achieve future revenue growth targets due 
      to non-contractual use of our market information 
 >   Damage to reputation 
 

Change in risk exposure since 2019

No change

Mitigation

 
 >   Ongoing audit of licenses 
 >   Appropriate legal remedies incorporated within licence 
      agreements 
 

Key risk indicator

 
 >   Completion of data audit plan 
 >   Data audit findings 
 

Related principal strategic objectives

 
 >   Diversification 
 
 
 
 

Risk

Breach of legal and regulatory requirements

Description

The Group operates in a highly regulated environment and is subject to the laws and regulatory frameworks of numerous jurisdictions.

Failure to comply with applicable legal and regulatory requirements could result in enforcement action being taken.

Potential impact

 
 >   Regulatory and legal enforcement action including censure, 
      fines or loss of operating licence 
 >   Severe damage to reputation 
 

Change in risk exposure since 2019

No change

Mitigation

 
 >    Compliance function to oversee compliance with regulatory 
       obligations 
 >    Compliance monitoring and surveillance activity 
 >    Comprehensive compliance training programme to ensure 
       that staff are aware of regulatory requirements 
      Maintenance of compliance culture which fosters high 
  >    standards of employee conduct 
 

Key risk indicator

 
 >   Internal Compliance policy breaches 
 >   Regulatory breaches 
 >   Employee conduct metrics 
 
 

Related principal strategic objectives

 
 >   People, conduct and compliance 
 
 
 
 

3. Financial Risk

Risk

Counterparty credit risk

Description

The Group is exposed to counterparty credit risk arising from outstanding brokerage receivables, unsettled trades and cash deposits.

Potential impact

 
 >   Financial loss which could, in extreme cases, impact 
      the Group's solvency and liquidity 
 
 

Change in risk exposure since 2019

No change

Mitigation

 
 >   Counterparty exposures managed against thresholds calibrated 
      to reflect counterparty creditworthiness 
 >   Exposure monitoring and reporting by independent credit 
      risk function 
 

Key risk indicator

 
 >    Portfolio exposure 
 >    Client exposure 
  >    Aged debt 
 

Related principal strategic objectives

 
 >   Diversification 
 
 
 
 

Risk

FX exposure

Description

There is a risk that the Group suffers loss as a result of a movement in FX rates whether through transaction risk or translation risk.

Potential impact

 
 >   Financial loss which could, in extreme cases, impact 
      the Group's solvency and liquidity 
 

Change in risk exposure since 2019

No change

Mitigation

 
 >   Ongoing monitoring of Group's FX positions 
 

Key risk indicator

 
 >   FX translation exposure 
 >   FX transaction exposure 
 

Related principal strategic objectives

 
 >   Diversification 
 
 
 
 

Risk

Liquidity risk

Description

The Group is exposed to potential margin calls from clearing houses and correspondent clearers. The Group also faces liquidity risk through being required to fund matched principal trades which fail to settle on settlement date.

Potential impact

 
 >   Reduction in the Group's liquidity resources which 
      could, in extreme cases, impact the Group's liquidity 
 

Change in risk exposure since 2019

No change

Mitigation

 
 >    Margin call and trade funding profile monitored against 
  >    defined limits 
       Group maintains liquidity resources in each operating 
  >    centre to provide immediate access to funds 
       Committed GBP270m and JPY 10bn (c.GBP71m) revolving 
       credit facilities ('RCF') 
 

Key risk indicator

 
 >    Margin call profile 
 >    Settlement fail - funding requirements 
 >    Unplanned intra-Group funding calls 
  >    RCF draw-down 
 

Related principal strategic objectives

 
 >   Diversification 
 
 
 
 

Appendix B: Related party transactions

Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in this Note.

The total amounts owed to and from associates and joint ventures at 31 December 2020, which also represent the value of transactions during the year, are set out below:

 
                        Amounts owed by      Amounts owed to 
                         related parties      related parties 
                            2020      2019        2020     2019 
                            GBPm      GBPm        GBPm     GBPm 
                       ---------  --------  ----------  ------- 
 Associates                    5         3           -        - 
  Joint Ventures               -         -         (3)      (3) 
  Loans from related 
   parties                     -         -        (28)        - 
                       ---------  --------  ----------  ------- 
 

In August 2020, the Group entered into a 10 billion Yen (GBP71 million) committed facility with the Tokyo Tanshi Co., Ltd, a related party, that matures in February 2023. The loan for related parties is conducted on an arm's length basis. At 31 December 2020, GBP28m of the facility was drawn down.

The amounts outstanding are unsecured and will be settled in cash. No guarantees have been given or received. No provisions have been made for doubtful debts in respect of the amounts owed by related parties.

During the year, less than GBP1m of interest was paid on loans from related parties.

Directors

Costs in respect of the Directors who were the key management personnel of the Group during the year are set out below in aggregate for each of the categories specified in IAS 24 'Related Party Disclosures'. Further information about the individual Directors is provided in the audited part of the Report on Directors' Remuneration on pages 87 to 93.

 
                           2020    2019 
                           GBPm    GBPm 
 Short term benefits          5       6 
                         ------  ------ 
 Social security costs        1       1 
                         ------  ------ 
                              6       7 
                         ------  ------ 
 

Appendix C: Directors' Responsibility Statement

The Directors confirm that to the best of their knowledge that:

 
 >   the Financial Statements, prepared in accordance with 
      the relevant financial reporting framework, give a 
      true and fair view of the assets, liabilities, financial 
      position and profit or loss of the Company and the 
      undertakings included in the consolidation taken as 
      a whole; 
 >   the Strategic report includes a fair review of the 
      development and performance of the business and the 
      position of the Company and the undertakings included 
      in the consolidation taken as a whole, together with 
      a description of the principal risks and uncertainties 
      that it faces; and 
 >   the Annual Report and Financial Statements, taken as 
      a whole, are fair, balanced and understandable and 
      provide the information necessary for shareholders 
      to assess the Company's position, performance, business 
      model and strategy. 
 
S

Enquiries:

Richard Cordeschi

Group Company Secretary

Richard.Cordeschi@tpicap.com

+44 (0) 7580 851104

For media enquiries please contact:

William Baldwin-Charles

Group Media Relations Director

William.Baldwin-Charles@tpicap.com

+44 (0) 7834 524 833

For investor enquiries please contact:

Al Alevizakos

Head of Investor Relations and FP&A

Alevizos.Alevizakos@tpicap.com

+44 (0) 7999 912 672

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