TP ICAP registers slight rise in revenues in 2021
TP ICAP Group plc (LON:TCAP) today posted its financial and preliminary management report for the year ended 31 December 2021.
Against a backdrop of challenging and uncertain market conditions, Group revenue in 2021 of £1,865m was 4% ahead of the prior year on a reported basis (8% ahead in constant currency), driven by the acquisition of Liquidnet. Excluding Liquidnet, revenue was 5% below the prior year on a reported basis (1% lower in constant currency).
The Group’s revenue and EBIT margin was further impacted by FX headwinds with GBP strengthening 7%, on average, against the USD year-on-year.
Adjusted operating costs of £1,642m were 7% higher on a reported basis (11% higher in constant currency). Operating expenses, after significant items, were £1,778m, 9% higher on a reported basis.
During the first half of the year the continuing impact of COVID-19, Brexit and low interest rates, coupled with government pandemic support programmes, resulted in subdued levels of both volatility and wholesale trading activity, which impacted TP ICAP’s broking businesses in particular and revenue was down 7% (excluding Liquidnet, in constant currency) compared with the first half of 2020. Trading conditions improved in the second half leading to revenue increasing by 6% year-on-year.
TP ICAP has successfully completed its cost saving programme to deliver £35m of annualised savings and is targeting further savings in 2022. In addition, TP ICAP delivered Liquidnet cost synergies ahead of plan and is increasing its overall target. The programme to reduce the Group’s property footprint is also making good progress, while the successful debt refinancing exercise in November 2021 will reduce net finance costs from 2022 onwards.
Excluding Liquidnet, front office costs, which vary with revenue, were in line with the prior year (in constant currency), reflecting a revenue shift within Global Broking towards asset classes with lower contribution margins, the additional costs acquired with the acquisition of Louis Capital Markets (‘LCM’) and increased front office investment in COEX and Parameta Solutions.
These were partially offset by the benefits of TP ICAP’s cost saving programme and the resulting contribution margin was 37.2% for 2021 compared with 37.9% in 2020, with total contribution that was £20m lower year-on-year.
Liquidnet revenue of £159m delivered a contribution of £68m (at a contribution margin of 42.8%), which, after management and support costs of £70m resulted in an adjusted EBIT loss of £2m. TP ICAP remains confident in its growth strategy for Liquidnet and is making good progress in both Equities and Fixed Income.
The Group incurred significant items of £143m after tax in its reported earnings (2020: £87m). While it continues to amortise intangible assets arising on the acquisition of ICAP and now Liquidnet, it has incurred additional costs in 2021 that will enable the Group to reduce its future cost base.
The increased volatility and secondary market activity in the second half of 2021 has continued in 2022. Group revenue in the year to date until 11 March 2022, excluding Liquidnet, was approximately 4% higher than the corresponding period in 2021, in constant currency (16% higher including Liquidnet).
The average number of shares used for the basic EPS calculation of 759.3m reflects the 563.3m shares in issue at 31 December 2020, increased by 225.4m shares issued under the rights issue, less 9.1m shares held by the TP ICAP plc Employee Benefit Trust (‘EBT’) at the end of the period, less the time apportionment impact of the rights issue of 20.6m, offset by the time apportioned movements in shares held by the EBT used to settle deferred share awards of 0.3m.
The reported Basic EPS for 2021 was 0.7p (2020: 15.4p), and adjusted Basic EPS for 2021 was 19.5p (2020 restated: 29.3p).
The Board is recommending a final dividend for 2021 of 5.5p, which, when added to the interim dividend of 4p, results in a total dividend for the year of 9.5p. This is in line with the Group’s dividend policy which targets a dividend cover of approximately 2x adjusted post-tax earnings. The final dividend will be paid on 17 May 2022 to shareholders on the register at close of business on 8 April 2022. The ex-dividend date will be 7 April 2022.
The Company offers a Dividend Reinvestment Plan (‘DRIP’), where dividends can be reinvested in further TP ICAP Group plc shares. The DRIP election cut-off date will be 25 April 2022.